Famous Financial Fiascos [Paperback]

John Train (Author), Pierre Le-Tan (Illustrator)

Book Description

Publication Date: October 1, 1995

Foreword by Professor C. Northcote Parkinson. Illustrated by Pierre Le-Tan. A classic study on different ways not to succeed. Everything from Mr. Ponzi, Tulipomania, the Kuwait Stock Exchange Explosion, Bernie Cornfeld, Ivan Krueger, and others. Shows the confusion of purpose, overgenerous investments, mistakes in timing and many other ways where investors have gone wrong. As Parkinson says, "It is better to learn from a book than to learn in a bankruptcy court.

Product Details

• Paperback: 112 pages
• Publisher: Fraser Publishing Co. (October 1, 1995)
• Language: English
• ISBN-10: 0870341200
• ISBN-13: 978-0870341205
• Product Dimensions: 8.3 x 5.6 x 0.4 inches
• Shipping Weight: 5.9 ounces
• Average Customer Review: 3.8 out of 5 stars  See all reviews (6 customer reviews)
• Amazon Best Sellers Rank: #1,833,043 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

2 of 2 people found the following review helpful:

4.0 out of 5 stars A Useful Collection of Financial Vignettes..., March 15, 2002

By 

aseclyst (New Jersey) - See all my reviews

This review is from: Famous Financial Fiascos (Paperback)

Financial fiascos are as old as the hills, but John Train has done a good job of selecting a useful cross-section of twenty of them for readers to enjoy. This book is an excellent graduation gift for an MBA, or for someone starting a new business. It's light reading, with humor leavened throughout, and the stories are memorable enough to stick with you as you make your own way in life.

The challenge and the beauty of this brief work is in the selection of which fiascos to present. Although many a reader will think of one or two scandals that were missed, there are enough of them here of various types that any one exclusion is not relevant to the presentation. This was not written to be a history of all financial scandals of all time. The organization of fiascos in the book is non-chronological, jumping between long stories and short stories in different time periods, offering different lessons.

"Fiascos" carefully dissects various overriding themes of financial scandal in its seven page afterword, which I will not repeat here. The book is also bracketed with an excellent foreword by C. Northcote Parkinson. I will just summarize that most of the scandals involve otherwise talented or intelligent people driven to do very foolish things, whether by personal ambition or under the influence of a crowd. It was noteworthy to me that three of the twenty scandals (John Law, the French Revolutionary hyperinflation and the French Panama Canal) involved France in a major way. What am I to make of this? France obviously had a difficult transition from its absolute monarchy into the modern era, and it appears to have been an environment ripe for manipulation. It may be correct to say that under authoritarian environments, whether involving governments or just corporate bureaucracies, financial weeds are more likely to grow. This suggests to me that China may be ripe for scandal as it continues its uneven road towards a modern economy (beyond those involving metals trading or banking that have already been disclosed).

In fact, the best antidote to financial fiasco appears to be complete transparency between buyers and sellers regarding what is being offered, and intelligent consideration of risks by those involved. This is what makes truth in financial accounting, to the extent it can be achieved, so critical.

One criticism I do have of Train's storytelling involves repentance, told towards the end of his description of the French Panama Canal fiasco [p.74]:

"[In the wake of the scandal] over a hundred parliamentarians were brought to trial, but a single poor naif who actually confessed was the only one found guilty.

...But there was a happy twist: on the basis of a legal technicality a higher court quashed the sentences."

Hooray for the "poor naif"! I don't know why he chose to confess when so many other guilty figures did not, but on the day that man died I'm sure his conscience was a little bit clearer for it. It's most difficult to "play by the rules" when the entire crowd goes mad, as these stories often illustrate. This dissent by the lone French parliamentarian is to be lauded, even if it could have cost him dearly as the sole bearer of guilt.

When the rest of the crowd goes against you, will you have the strength to stick to your convictions?

2 of 2 people found the following review helpful:

5.0 out of 5 stars Investor Beware!, June 29, 2001

By 

Robert Morris (Dallas, Texas) - See all my reviews
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This review is from: Famous Financial Fiascos (Paperback)

C. Northcote Parkinson provides an especially informative Foreword in which he briefly discusses the balance between investment risk and reward, noting that human error is frequently the cause of investment failure. Shifting his attention to this book, Parkinson suggests that Train "has usefully analyzed a number of these human errors and we do well to study his conclusions. Some of the worst mistakes have been made by people to whom the nature of their problem was entirely new. They lived at a time when the textbooks of economics had still to be written, at a time when the word `inflation' was applied only to balloons. There are still such people today and they can be identified, very often, as folk who have plunged into industry without any previous background in commerce." Parkinson suggests that there are many different causes of financial disasters, with the worst the result of several causes in combination, such as confusion of purpose, overgenerous investment, and a mistake in timing. To these I would add "homework" or rigorous due diligence. Train carefully examines 20 of the most famous (infamous?) "financial fiascos" which range from "Mr. Ponzi and His Scheme" to "The Putrefaction of Juan March." He also includes an excellent analysis of two which have always fascinated me: "Xerox Discovers the Computer: The S.D.S. Scandal" and "The Fine New $6 Million Sydney Opera House."

Following the brief but insightful analyses of such `fiascos", Train concludes his book with an Afterword which has special relevance to the contemporary business world. After noting that the syndrome that begets inflation and then unavailing price controls seems as old as history (e.g. Hammurabi's code in about 1745 B.C. and Diocletian's in A.D. 301), he poses a thought-provoking question: "Do we still treat inflation by controlling prices instead of government expenses and the money supply?" After all the millennia, Train suggests, an aphorism attributed to the Swedish chancellor Oxenstierna seems to remain true: "The world always wishes to be deceived: let it be deceived." Those who share my high regard for this book are urged to check out Edward Chancellor's Devil Take the Hindmost.

1 of 1 people found the following review helpful:

2.0 out of 5 stars Great stories, poorly written, July 30, 2010

By 

WM "jap38" (North America) - See all my reviews

This review is from: Famous Financial Fiascos (Paperback)

The stories in the book are delightful, starting off with Mr. Ponzi and going into other amazingly true real life stories. Without repeating what others have said, this book could have been so much better. But the writing is dull, boring, and in short, there simply MUST be another book that is more pleasant to read. I'm a lawyer, and I feel like I'm reading an informative trial brief. Great stuff inside, but not very entertaining. Just my two cents.