Tag Archives: notes

Notes – Best Practices in Deal Flow Origination (#investing, @dteten)

These notes are from an article entitled “Where Are The Deals?” by David Teten. He also has resources on adding value to portfolio companies which are worth browsing. For notes on a related topic, check out the “Notes – Stanford Graduate School of Business Search Fund Primer” post.

  • the median investor in private companies had to review 80 companies in order to close one transaction
  • investments sourced through personal and professional networks have been shown to yield better results
  • in order to train your relationships, it is important that you provide them with simple, clear investing criteria, not lengthy checklists; provide them a narrowly defined niche of interest (“Retail brands with $50M in annual revenues”)
  • on average it can take 1-2 years between the first meeting with a target CEO sourced through a network and the close of the deal
  • market mapping, identifying key macro and micro drivers of an industry and creating a database of all key companies; identify those with greatest growth potential or competitive white space
  • specialization enhances deal origination through deeper knowledge base, ability to add value through enhanced network and likelihood of being top of mind to key deal sources
  •  monitor target sector for cyclical opportunities and structure shifts; M&A creates orphan divisions and downturns cause strategy refocuses; 30-46% of PE returns over last 30 years driven by EBIT arbitrage (market timing)
  • other valuable sources of deal flow:
    • regional surveys
    • “fastest growing company” lists
    • trade association membership lists
    • commercial vendors
      • Amadeus
      • Capital IQ
      • Dun & Bradstreet
      • Hoover’s
      • InfoUSA
      • Lexis-Nexis
      • Thomson-Reuters
      • OneSource
  • set up alerts in a blog reader based on key words important to your target or industry focus
  • “A large portion of my deal flow comes from people I have rejected in the past.” be kind to everyone, even those you don’t do a deal with
  • consider having a dedicated, SEO-optimized website and blog for your acquisition fund/team that explains what you’re looking for, why, what you bring to the table, etc.; many VCs and most PE investors are not using basic internet marketing techniques (competitive advantage opportunity)
  • Accel Partners and Khosla Ventures post detailed analyses of their target investment sectors; blogging and posting of internal analyses is the “VC freemium model”
  • PE investing is a relationship business and the most important relationships are with LPs, entrepreneurs, executives and intermediaries which are relatively few in number
  • blogging is the best tool for VC investing according to one experienced observer; helps investor gain information, credibility and relationships through improved visibility
  • look for access to secondary interests through directly approaching funds (particularly distressed), markets for secondary interests (SecondMarket, NYPPEX, PORTAL Alliance) and approaching ibanks specializing in secondary interests (Cogent Partners, Probitas, Triago, UBS)
  • service providers such as accountants, lawyers, etc., are typically not good sources of deal flow because they require too much education and often have a fiduciary responsibility to their client; on the other hand, connecting with service providers in a specialized domain that is being targeted can be a good source of insight
  • trawl the Q&A portion of sites such as LinkedIn to identify domain experts for further outreach
  • measure your deal origination efforts with activity measures, deal flow by source, pipeline analytics and industry benchmarking measures
  • many professional services firms do not use a global CRM system such as Salesforce.com, Act, Saleslogix, Microsoft Access or Angelsoft (angel/VC network)
  • Key data sources for CRM systems include employee networks (ContactNet Enterprise Relationship Management), business cards (Cardscan, IRIS, Neat, Presto), data from email and files (eGrabber, Gwabbit, Grab-Text, Broadlook), the “cloud” (LinkedIn, Spoke, Plaxo) and direct from target companies’ websites, media, etc.

Key attributes of top originators in order of importance

  1. persistence (every no gets you closer to a yes)
  2. personality (people do business with those they like)
  3. business and financial judgment
  4. adequate financial sophistication
  5. seniority and appropriate title (decision-maker)
  6. internal authority to get transaction executed
  7. creativity

Important deal signals when identifying targets (utilize commercial databases, social media, data mining and targeted phone research to uncover)

  • Status of the major equity owner
    • PE funds motivated to sell due to fully invested, raising next fund or current fund has aged beyond 5-7 years
    • Large corp raising cash by selling subsidiaries
    • Time limited tax incentives
    • Family in midst of succession battle
    • Death, disease and divorce (“three Ds”)
  • Status of CEO
    • retirement
    • age
    • acknowledgement of limited competence
  • Corporate performance
    • growth too rapid for self-funding
    • underperforming/distressed
  • Industry/economic trends
    • industry consolidation
      • competitive pressure
      • seeing competitors liquidating equity for large gains
    • competitors raising capital; pressure to maintain parity
    • growth sector

Top considerations for deal intermediaries in directing deal flow

  1. Possibility of future revenue
  2. Integrity
  3. Timely responses
  4. “Fair” treatment of sellers
  5. Experience with the industry or owner type
  6. High certainty to close
  7. Friendship
  8. Feedback and referrals
  9. Maintaining a single point of contact

Most valued aspects of acquiring companies by the acquired

  1. Added operational value
  2. No extra costs
  3. Fair treatment of employees post-transaction
  4. Brand
  5. Long holding periods (no buy-to-flip)

Leading databases of institutional investors (use principles of SEO to optimize your profile here)

  • Galante’s
  • Grey House
  • VentureXpert
  • PE funds
    • Eurekahedge
    • Pitchbook
  • VC funds
    • Angelsoft
    • CrunchBase
    • PWC MoneyTree
    • TheFunded
    • VentureDeal

Market Mapping steps

  1. choose industries and geographies of initial interest
  2. define your proprietary point of view
  3. translate into investment theme (industries/geographies of interest)
  4. list major players in target industry/geography
  5. improve market map with feedback from industry contacts and investment targets
  6. determine which activities offer the highest return and outsource the rest
  7. identify areas of future growth
  8. asses fit with your overall strategy
  9. regularly update the market map with additional feedback and lessons

10 Simple Steps to Improve Your Origination

  1. Analyze your network
  2. Use market mapping to develop deep, proprietary insights about your target
  3. Monitor target ecosystem for cyclical/structural opportunities
  4. Align internal interests
  5. Divide and conquer
  6. Centralize data and become an information sponge
  7. Develop a network with limited overlap
  8. Take control of your virtual presence (marketing)
  9. Join the in-person and virtual communities of your target market
  10. Take a leadership role; find a way to stand out and attract others to you

Notes – How To Win The Pitch (#marketing)

The following notes come from a presentation delivered by marketing gurus Tom Patty and John Pietro at a CEO Forum speaker event:

  • “the desire” is key to improving your pitch
  • getting better at the pitch means getting more business; we’re all pitching, all the time
  • 2 ways to grow business
    • get more customers
    • do more business with existing customers
  • the pitch is when you persuade someone to give something to you, and it usually involves competition with others trying to do the same
  • 7 things you must do to win the pitch
    • know your client; if you don’t know much about them, you’ll probably lose
    • know your competition; do you know who you’re competing against, including the alternative of “No.” or “Not interested.”?
    • know how your client perceives you; look them in the eyes to see how they’re responding to you, engage quickly or the story is over
    • know your client’s business; what do they do well, poorly? “feet on the street”
    • know how their customer’s perceive them; show what you’ve learned from their customers
    • have a great pitch team; look in the mirror, don’t be the “behind the counter manager”
    • be lucky; “the harder I work, the luckier I get” attributed to Lincoln
  • why do winners win? because they make a connection; they know what the other person is thinking all the time
  • 8 strategies for connecting
    • humor
    • common interest
    • common values
    • common friends
    • common beliefs
    • sincere interest in the other
    • ask questions
    • common enemies
  • how to connect: shift the goal from “making a sale” to “making a connection with the other person”
  • how to connect
    • know about their business
    • know what’s important to them
    • know who is important to them
    • know how and where they make their money
    • demonstrate that you honestly care about their business
  • the simple business model; identify these elements in the client’s business
    • the offering
    • the passion
    • the profit
  • Bobby Knight, “Anyone can have the will to win, you have to prepare to win.”

Final comments: John Pietro relates a story about a successful pitch to the Wynn Group on behalf of his client, Coca-Cola. Coca-Cola had been the vendor for the Wynn casinos for many years but they decided to put the contract up for bid with Pepsi-Cola. As John and his client prepared for the final pitch to the group, word came through the grapevine that Wynn’s CFO and another lead decision maker had been informed by Pepsi that they could bid the contract much lower than Coca-Cola which likely made the decision a lock. Not ready to give up, and knowing that Coca-Cola HQ in Atlanta wasn’t willing to budge on their bid price and was confident they’d still win, John and the Coca-Cola VP got to work on a new strategy.

The Coca-Cola VP was good friends with Steve Wynn and his wife and had supported them in various local charity endeavors. They also knew that Steve was a great art lover and was particularly fond of “La Reve” by Picasso, which Steve had recently acquired for his collection at great cost. They decided to produce a special Coca-Cola bottle with the painting reproduced on the label of the bottle, laid inside a velvet case in a specialty wooden box.

After making their pitch covering dollars and cents, product offerings, etc. over a period of several hours, and knowing they were 2nd to present on the final day and Steve Wynn was completely zoned out and bored with the whole process, they finished their presentation by having the Coca-Cola VP walk over to Steve and offer him the box, informing him that he was extremely grateful for their personal and business relationship.

Steve Wynn opened the box, pulled out the bottle and began to tear up as he admired it. On the spot, he announced, “Coca-Cola has won our business.” And like that, the decision was made.

Or so the story goes, but it’s an interesting idea of the principles of the pitch in action to the extent that it is true. It’s also a great example of developing a competitive advantage by some means other than price.

Notes – Edward Tufte’s “Presenting Data and Information” (@EdwardTufte, #display, #data, #visualization, #design, #statistics)

Edward Tufte is a Yale-connected academic who conducts several private seminars around the country each year promoting his view of visual design for the display of quantitative information and statistics. He has published multiple books through his own publishing mark such as The Visual Display of Quantitative Information, Beautiful Evidence, Envisioning Information and  Visual Explanations. His personal website which contains articles, research papers, examples of his work and principles and other information is at EdwardTufte.com. A friend who is a fan has blogged some notes about the man and his seminar courses.

If I were to summarize Tufte’s philosophy of information design into a single sentence, which is certainly a crude way to approach the nuanced and thoughtful lifework of a person, I’d say this– beautiful design means creating the highest density information display the resolution of your medium will allow. This stands in stark contrast to the reigning paradigm of “less is more” and sacrificing much of the available real estate of an information display for white/empty space, navigational or UI elements and “inference assists” (my term) such as arrows, boxes and non-data lines which are supposed to draw the viewer’s attention to what’s important or where to focus their eyes.

In Tufte’s own words, he summarized the philosophy with the pithy, “The information is the interface; maximize content reasoning time; minimize design decoding time.” [Note: on my hand-written notes written in a darkened room early in the morning at the start of his seminar, I think I mistakenly wrote “maximize design decoding time” but meant to write “minimize”.] Even more pithy, and in Tufte’s own words:

The purpose of information display is to assist thinking about its content.

I attended his seminar in San Diego, CA in February. Below I am posting my notes which may or may not be useful to a person unfamiliar with his work or the content of the seminar. Tufte, who introduces himself as “ET”, likes to circulate amongst his audience before, during and after the session and introduce himself– clearly he enjoys what he does and appreciates the people who have taken an interest in his work which is a good professional example for others to follow.

  • The information is the interface.
  • Idea: maximize content reasoning time; minimize [maximize? see above] design decoding time
    • design decode effort/time is wasteful as the pattern for design is often not repeated in the future
  • Graphics are only useful when there is a lot of data, not a little bit of data
  • Design should encourage scanning, scrolling and choosing
  • Increases in resolution allows for spatial adjacency [note: this is the idea of putting lots of information side-by-side versus having to change mediums, windows, displays, repeatedly to compare and contrast blocks of information]
  • Digital display screen resolution is finally approaching “P.A.P.E.R. technology” (paper) resolution
  • Simple, clear conventional design with rich, complex data is preferable to complicated design devoid of content; many designers invest too much effort in display relative to content quality
  • NYT, WSJ are highly trafficked websites high in information density (many links, many pieces of data and text) which demonstrate this approach is desirable for design of corporate sites
  • Names have reputations, put your name on your work
  • Reasoning on a flat surface means all viewers can go at their own pace; a slideshow makes most people wait; think “documents” not “decks”
  • Listing sources for data provides credibility and reasons to believe
  • Look at sources, start points, end points, rates of change, to examine whether a chart establishes a relationship between evidence and conclusion
  • Annotations help explain all data by providing specific information about one data point captured in the graphic
  • Look at “excellence in the wild” to contrast your own efforts against the pros
    • Use Word, not PowerPoint
    • Be web-based
  • Order data tables by performance, not by alphabet; performance often tells a story
  • ESPN.com demonstrates that even complex data can be appreciated by lesser intellects (!)
  • Dashboards are idiotic and no way to operate a business or institution
  • How to Make A Presentation, some tips:
    • show up early (head off problems, ensure equipment works, room not double-booked, etc.)
    • talk to people
    • give them a document for discussion; don’t give it in advance of the meeting, no homework
    • begin meetings with study hall, people can read faster than you talk
    • the document addresses the principles of individualism and personalization as people can take what information from it they deem important
    • PPT disappears as you go higher up an org chart, the top execs have no time for the “long and winding road” (Steve Ballmer anecdote); submit ideas to discuss as written documents
    • provide intellectual leadership about content, stop discussing production methodology
    • finish early, your audience will thank you
    • Remember “Problem, Relevance, Solution”, three necessary components of any good presentation
  • How does Jeff Bezos run a meeting? Read the Forbes article or watch this Charlie Rose interview:
  • Applied presentation tip– provide notes/documents of medical concerns for a doctor to read during your doctor visit; this is what they’re trained to do and they’ll pay more attention to the information if you give them something to read
  • Check out The Public Library of Science and its templates for ideas on content rich documents
  • You can copy the source code from EdwardTufte.com and use the CSS to apply style ideas to your own blog or website
  • Real reading entails looting and hacking the valuable materials useful for later efforts, liberating them from the text; always read with an awareness for context (what came before this, what comes after, why did the author write it?); this echoes the idea of “making the work your own” of Mortimer Adler
  • Refer to “Beautiful Evidence”, pg. 78-79, using diagram trees appropriately (annotated linking lines)
    • links need to convey causality and action
    • replace generic lines with words and numbers– annotate!
  • Turn fundamental principles of analytical thinking into design decisions
  • The purpose of information display is to assist thinking about its content
  • Don’t pre-specify a data display method, use whatever method the job requires
  • Look at Google Maps and ask IT why you can’t achieve similar design capabilities; their maps are rich, colorful, multi-dimensional, varied fonts and orientation of information, etc.
  • Refer to “Visual Explanations”, pg. 90-91
  • Refer to “Beautiful Evidence”, pgs. 82-83, 114-115; exploring words, numbers and images together
  • Today’s computer interfaces separate and segregate information based on the method of production
  • Statistical graphics can be anywhere a number or letter can be
  • Statistical graphics can have the same resolution as topography
  • Refer to “Beautiful Evidence”, pg. 46-47, “sparklines” method for creating text-sized data graphics, embedded within text (inspired by Galileo’s revelation of Saturn)
  • “Nature” magazine has some of the best data-driven graphical displays, good place to look for examples of the possible
  • Why aren’t all data displays excellent? Tufte suggests there is a profit-driven bias and the dominance of Microsoft combined with the lack of scientific rigor of many data designers results in a failure of the “public spirit” principle; color me skeptical about profit and “public spirit” being at odds!
  • Excel, Google Analytics can both produce sparklines
  • Refer to “Beautiful Evidence”, pg. 58, for the famed Swiss mountain maps, or see this video (YouTube):
  • The human eye-brain optic system operates at 20mb/s in 16-bit color, digital displays don’t come close to this much data and resolution
  • Content and credibility are the keys to presenting and spectatorship
    • have the sources been credible in the past?
    • demonstrate your understanding of detail and mastery of verbs, not nouns (not who is who, but who does what to whom?)
    • threats to credibility: lying, cherry-picking (evidence vs. evidence selection), over-polished, hidden or absent sources (“proprietary”, “legal liability”, “violate federal law”, etc.)
  • Know your content, not your audience; maintain respect for your audience
    • “know your audience” leads to pandering
    • use presentations as a teaching moment to inform people of your content
  • Scan lots of material and drill down where you see discrepancies for superior economization on large volumes of data to achieve relevance
  • Investigate how data was measured; go out, walk around, see the process producing the data
    • people can not keep their own score; the metric is gamed as soon as it becomes important
    • eg, Google words are gamed by SEO, so use Google Images to search
  • Refer to “Beautiful Evidence”, pg. 32-33 for “small multiples” concept; use the need to learn a repetitious format to get people to focus on the content
  • Universality and “forever ideas”; Galileo was the supreme data designer; why should the “best thing ever” have occurred recently versus long ago?
  • Personal curiosity– why are US internet pipelines significantly slower than other developed nations?
  • Spatial adjacency versus temporal stacking (hi-res vs. low-res)
  • Different modes of display are not competitors, they are co-operators in communicating information; no one display is optimal

Notes – The Snowball, By Alice Schroeder: Part V, Chap. 43-52

The following are reading notes for The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder (buy on Amazon.com). This post covers Part V: The King of Wall Street, Chap. 43-52

[These notes were never published on time. They may be incomplete as posted now.]

The modern Buffett

In Part V of the Snowball, we see Buffett’s transformation from the early, cigar butt-picking, Grahamian value-minded Buffett, through the filter of his Fisherite partner, Charlie Munger, into the mega cap conglomerator and franchise-buyer Buffett who is popularly known to investors and the public the world round.

It is in this part that we also see Buffett make one of his biggest missteps, a stumble which almost turns into a fall and which either way appears to shock and humble the maturing Buffett. It is in this era of his investing life that we see Buffett make some of his biggest rationalizations, become entangled in numerous scandals he never would’ve tolerated in his past and dive ever deeper into the world of “elephant bumping” and gross philanthropy, partly under the tutelage of his new best friend and Microsoft-founder, Bill Gates.

The lesson

Buffett made a series of poor investments but ultimately survived them all because of MoS. There will be challenges, struggles, and stress. But after the storm, comes the calm.

The keys to the fortress

From the late seventies until the late nineties, despite numerous economic and financial cycles Buffett’s fortune grew relentlessly under a seemingly unstoppable torrent of new capital:

Much of the money used for Buffett’s late seventies spending spree came from a bonanza of float from insurance and trading stamps

This “float” (negative working capital which was paid to Buffett’s companies in advance of services rendered, which he was able to invest at a profit in the meantime) was market agnostic, meaning that its volume was not much affected by the financial market booming or crashing. For example, if you owe premiums on your homeowner’s insurance, you don’t get to suspend payment on your coverage just because the Dow Jones has sold off or the economy is officially in a recession.

The growth in Buffett’s fortune, the wilting of his family

Between 1978 and the end of 1983, the Buffetts’ net worth had increased by a stunning amount, from $89 million to $680 million

Meanwhile Buffett proves he’s ever the worthless parent:

he handed the kids their Berkshire stock without stressing how important it might be to them someday, explaining compounding, or mentioning that they could borrow against the stock without selling it

Buffett had once written to a friend when his children were toddlers that he wanted to see “what the tree has produced” before deciding what to do about giving them money

(he didn’t actively parent though)

Buffett’s private equity shop

Another tool in Buffett’s investment arsenal was to purchase small private companies with dominant franchises and little need for capital reinvestment whose excess earnings could be siphoned off and used to make other investments in the public financial markets.

Continuing on with his success in acquiring the See’s Candy company, Buffett’s next private equity-style buyout involved the Nebraska Furniture Mart, run by a devoted Russian immigrant named Rose Blumkin and her family. And, much like the department store chain he once bought for a song from an emotionally-motivated seller, Buffett beat out a German group offering Rose Blumkin over $90M for her company, instead settling with Buffett on $55M for 90% of the company, quite a discount for a “fair valuation” of practically an entire business in the private market, especially considering the competing bid.

An audit of the company after purchase showed that the store was worth $85M. According to Rose Blumkin, the store earned $15M a year, meaning Buffett got it for 4x earnings. But Rose had buyers remorse and she eventually opened up a competing shop across the street from the one she had sold, waging war on the NFM until Buffett offered to buy her out for $5M, including the use of her name and her lease.

One secret to Buffett’s success in the private equity field? Personality:

“She really liked and trusted me. She would make up her mind about people and that was that.”

Buffett’s special priveleges

On hiding Rose Blumkin’s financial privacy: Buffet had no worries about getting a waiver from the SEC

Buffett got special dispensation from the SEC to not disclose his trades until the end of the year “to avoid moving markets”

The gorilla escapes its cage

Another theme of Buffett’s investing in the late 1980s and 1990s was his continual role as a “gorilla” investor who could protect potential LBO-targets from hostile takeover bids. The first of these was his $517M investment for 15% of Tom Murphy-controlled Cap Cities/ABC, a media conglomerate. Buffett left the board of the Washington Post to join the board of his latest investment.

Another white knight scenario involved Buffett’s investment in Ohio conglomerate Scott Fetzer, which Berkshire purchased for $410M.

Then Buffett got into Salomon Brothers, a Wall Street arbitrage shop that was being hunted by private equity boss Ron Perelman. Buffett bought $700M of preferred stock w/ a 9% coupon that was convertible into common stock at $38/share, for a total return potential of about 15%. It even came with a put option to return it to Salomon and get his money back.

But Buffett had stepped outside of his circle of competence:

He seemed to understand little of the details of how the business was run, and adjusting to a business that wasn’t literally made of bricks-and-mortar or run like an assembly line was not easy for him… he had made the investment in Salomon purely because of Gutfreund

Buffett’s disgusting ignorance and hypocrisy

Buffett:

I would force you to give back a huge chunk to society, so that hospitals get built and kids get educated too

Buffett decides to sell the assets of Berkshire’s textile mills– on the books for $50M, he gets $163,122 at the auction. He refused to face his workers and then had the gall to say

“The market isn’t perfect. You can’t rely on the market to give every single person a decent living.”

Buffett on John Gutfreund:

an outstanding, honorable man of integrity

Assorted quotes

Peter Kiewit, a wealthy businessman from Omaha, on reputation:

A reputation is like fine china: expensive to acquire, and easily broken… If you’re not sure if something is right or wrong, consider whether you’d want it reported in the morning paper

Buffett on Wall St:

Wall Street is the only place people ride to in a Rolls-Royce to get advice from people who take the subway

Book Blog – The Great Deformation – Part I, The Blackberry Panic Of 2008

Book Blogs are notes about books I’m reading, as I read them. They may or may not be followed up by wholesale reviews in traditional format.

The Great Deformation, by David A. Stockman published 2013 (buy on Amazon.com)

I received a copy of David Stockman’s 2013 analysis of the mechanics of the 2008 financial crisis and its aftermath as a gift from a friend and sat down to read the first 50 pages, Part I.

I think Stockman attempts to make several key points as a set up to the remainder of this lengthy tome:
-the mainstream/regime narrative of an incipient economic crisis catalyzed by a financial collapse originating in Wall Street credit markets controlled by major Wall Street institutions (such as Morgan Stanley and Goldman Sachs) is one part baseless lie and one part clueless ignorance of facts on the ground at the time
-there was a crisis, for these particular institutions, which was a result of years of non-value adding financial and accounting chicanery enabled by Fed Chairman Greenspan’s infamous “put” and the crisis would’ve resulted in the liquidation of these firms assets (and the termination of their managers) into abler hands which would’ve been a good thing for competitive financial markets and the capitalist economy as a whole
-this crisis was not only averted by the frantic lobbying of connected officials in Congress, the Treasury and other regulatory agencies by crony executives in the affected firms, but these same executives and officials worked in concert to turn the bailout moment into a massive payday/profit opportunity; most of the people making decisions about this in the government, particularly in the Treasury and the Fed, were inexperienced, miseducated or otherwise rankish amateurs with little understanding of the context of their decisions or their consequences beyond the immediate moment
-the scale of the bailouts in terms of pure dollars was completely without precedent or connection to actual costs and risks present in the system at the time
-memoirs of officials and executives involves in the bailout discussions published extemporaneously do not make a substantial case for their decisions based off of data available about the period years later
-much of the decision-making at the time, by concerned executives as well as captured officials, seems to be dominated by the twin desire to avoid taking responsibility for mistakes made in the past (thereby looking foolish) and to continue the illusion of the viability of the system based on these mistakes going forward

“All the rest,” as it has been said, “is illustration.”

There were parts of the narrative I found confusing to follow at times. Its possible I didn’t read clearly, but in several instances it seemed like on one page or at the beginning of a chapter Stockman would be arguing that the potential capital losses of a particular company were small enough relative to their total balance sheet that they could easily sweat the loss from a survival standpoint and then on the next page or at the end of the chapter, he seemed to suggest the same loss was so sizeable that it would threaten the viability of the enterprise itself.

I think there was a lot of question-begging in the narrative as well. Stockman builds a decent logical case for why there was no “contagion” that could spread from Wall Street (the financial markets) to Main Street (the rest of the economy) that would result in a general economic depression. But his argument always rests on the costs being shifted to various government backstop agencies and funding sources which could make things like commercial lending and payroll finance markets “money good”. It isn’t explained where these institutions would come by the required funds necessary to remain in operation without a bout of money printing (bailouts) and how this is different than the bailouts Wall Street received.

That leads to another concern I have with the overall thesis, which is that somehow, what happens on Wall Street is arbitrary and doesn’t affect greater economic outcomes. While I agree with the notion that purging the financial system of bad debts and bad business models during periods of crisis is a process of economic health rather than economic illness, I so far fail to see how the repricing and reorganization of economic capital taking place in these markets would not result in similar repricings and reorganizations of capital investment throughout the economy as a whole. Stockman details several multi billion dollar examples of ” predatory financial practices” in which members of Main Street America were able to finance lifestyles they couldn’t prudently afford the costs of and it seems like these are prime (or subprime, as it were) examples of assets that would need to be repriced and reorganized into abler hands. The gutters of both Streets would be filled with the purged excess, and it would eventually drain.

Annoyingly, Stockman repeatedly exalts “our political democracy” and even conflates its goodness and functioning with free market capitalism. For me, this is a fundamental flaw in reasoning and defining terms that throws his entire analysis into suspicion, at least from the standpoint of his analytical framework operant and his own agenda in terms of desired social outcomes. I don’t think Stockman and I are on the same page, in other words.

So far, Stockman’s book expects a lot of prior knowledge on behalf of the reader. He doesn’t begin the book outlining his economic or financial theories, nor his concept of the purpose of government. We intuit bits and pieces of it as he proclaims this bad, that person good, this event horrid, etc. But he never really says “I’m from the School of X” or gives a summary of the key principles necessary to follow his analysis. Therefore, it comes off as strenuously assertive rather than rigorously logical. And I think part of Stockman’s goal is to spread blame in a bipartisan fashion, while building bridges and giving accolades in an “independent” manner. So far, though, it seems arbitrary due to this lack of explanation about his framework.