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20 of 20 people found the following review helpful
4.0 out of 5 stars Business Risk and the Global Economy
Risk is an inherent part of business and anyone who has managed a business at any level knows that risk comes into play on a daily basis. In today's modern, global economy, the risks are greater than before and are often more difficult to predict. The Fat Tail is a book that discusses many of these unique risks, offering some ideas for spotting these risks and taking the...
Published on March 27, 2009 by Bryan Carey

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13 of 18 people found the following review helpful
2.0 out of 5 stars A Book in Search of an Audience
First of all, it is not at all clear to me what audience this book was written for. While the book's subtitle is "The Power of Political Knowledge for Strategic Investing." there is little or nothing that individual investors can garner from this book to guide their investing. For the most part, this book states general principles that can be employed to analyze the...
Published on March 23, 2009 by David Ross


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20 of 20 people found the following review helpful
4.0 out of 5 stars Business Risk and the Global Economy, March 27, 2009
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Risk is an inherent part of business and anyone who has managed a business at any level knows that risk comes into play on a daily basis. In today's modern, global economy, the risks are greater than before and are often more difficult to predict. The Fat Tail is a book that discusses many of these unique risks, offering some ideas for spotting these risks and taking the proper precautions to make sure the effects are minimized.

I have worked for many years in management and I am fully aware of these additional risks. It would be nice if risk was limited to supply/demand issues or employee retention but, unfortunately, risk is much more widespread than in the past and we have the global economy to thank for much of this. Some precautions can be taken, but there are some risks that cannot be controlled as well as others. A civil war, excessive regulation, foreign currency exchange issues, expropriation, and many other unforeseen events can cause a drastic change to the business climate and thus have a dramatic effect on business. The Fat Tail discusses these many different types of risk that we, as managers, face in the new century and I can relate directly to what much of it says.

To backup its key points, The Fat Tail offers many examples from history that show how an unexpected event led to complete turmoil in every facet of life. In the past, revolutions and the lack of sufficient warnings were often cited among the many reasons why businesses suffered extraordinary losses. Today, certain countries of the world are known for their political instability and information regarding instability is more easily obtained, thanks to the information age in which we live. However, there are new risks today that are not always easy to predict, such as state failure, terrorism, expropriation, and more. And the fact that nothing has happened yet in a particular country is one of the main reasons why the potential for business disaster is so great. Like The Fat Tail points out, management personnel tends to get too relaxed when nothing bad has happened for a period of time and because of this, they are likely to let their guard down. Thus, when a political problem arises, many businesses will be trapped in a no- win predicament that could cost millions and could possibly even bankrupt the company.

The Fat Tail is written in a very academic way. The authors write this book like graduate- level university students composing a long research paper. They forgo creative writing skill in favor of the facts. They want you, the middle or upper manager of a business, to know the potential problems that await you if you do not take foreign risks more seriously. They offer historic examples that show what can happen if you develop the dangerous attitude that says "it can't happen to us". They want companies to be prepared for the worst and they offer some advice on ways to stay alert and protect one's business interests.

Risk is all around us and its complexity is greater than ever before. Management personnel in the United States are fully aware of the problems that can result due to terrorism but terrorism is only one of many potential disasters that businesses face each day. Refusing to recognize these threats and failing to take any precautions could lead to serious problems down the road and The Fat Tail wants to make sure that businesses, as well as individual investors, are prepared for the worst.
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16 of 18 people found the following review helpful
4.0 out of 5 stars A helpful look at how global politics can affect investing, February 9, 2009
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I've read many books on investing. But none of them covered this topic - how global politics can affect investing. As the book's title suggests, political risks often fall into a "fat tail," the spot on a bell curve where you would expect the probability to tail off, but where it instead remains high or "fat."

That means political risks should be given close attention, since they can mean more than we might otherwise think. They often turn out to be Nassim Nicholas Taleb's "black swans" that are unsuspected until they are spotted. The "unknown unknowns" that Donald Rumsfeld famously talked about. The more we can learn about these risks, the less risk we will take.

The book's authors make their living at the Eurasia Group, which does this type of political risk analysis for companies for a fee. So they try to hard to show that "political risk matters" (the first sentence in the book). They do a pretty good job of making their case, with a slew of stories from history that show how political risks have turned good investments bad.

As good as the stories are, from the initial conquest of India in 1757 by a private army hired by a British corporation to the Russian government's default in 1998 on its debt, the quotations heading each chapter were also gems. Like Alfred Hitchcock's "There is no terror in a bang, only in the anticipation of it" heads Chapter 6: Terrorism. And citing rules like "buy when there is blood in the streets" brings powerful images to the often staid world of investing.

Just one caution about the book. Its original subtitle was "The Power of Political Knowledge in an Uncertain World." That's more what the book is about. The subtitle later chosen - "The Power of Political Knowledge for Strategic Investing" - seems a bit off focus. This is a book about minimizing risk, not maximizing return, as the later subtitle suggests.

This book takes a look at history from an interesting, and rather unique, angle. I enjoyed reading it.
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8 of 8 people found the following review helpful
5.0 out of 5 stars Political risk may affect your investments, August 12, 2009
By 
Mariusz Skonieczny "Author" (classicvalueinvestors com) - See all my reviews
(REAL NAME)   
Investors may evaluate the current state of the economy and read the financial statements of individual companies, but few ever consider the political issues in their investment decisions. The authors of this book argue that the political climate is important to investing. Remember when Russia defaulted on its debt? This single event started the collapse of Long Term Capital Management, which almost brought the entire financial system to ruin.

The authors say because world trade is becoming more global, it is becoming more important than ever not to ignore political risk. I thought this book was worth reading.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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6 of 6 people found the following review helpful
5.0 out of 5 stars Fascinating must read book for news junkies, June 18, 2009
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I did not come to this book to be surprised. I understood the basic concept before I even opened the book: Politics and economics are interrelated. They use the simple aphorism "political risk matters.'

I knew that. What I did not understand was HOW

This book did not make me an expert in the interaction of economics(local, national, and world) on economics (same scopes), but it did give me a framework in which to examine and evaluate world events. Anybody who has taken a business stat course knows that risk = damage X probability. This book evaluates that risk in terms of the unforseen risks, what former Secretary of Defense Rumsfeld called "unknown unknowns.' There are those unexapcted events whose occurence change everything. How do people evaluate risk in terms of those unforseen political events?

That is what this book is about. It is concise. It is easy to read. The authors describe their principles, and explain them in layman's terms. They cite historical examples and explain them in detail.

It's an interesting book for news junkies. If you're one of those people who always has to watch multiple news reports and reads the news and the editorials before the sports and the comics, then you will enjoy this book. It will give you tools that you WILL use.
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5 of 5 people found the following review helpful
4.0 out of 5 stars Political risk outside the bell curve, March 29, 2009
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This book examines the political risks to investments outside the normal risk in a standard world seen as a bell curve. As the bell curve exists there are "Bumps" in its flow or "Fat Tails" of unimagined occurrences. Some of these were the Russian bond default that brought down Long Term Capital Management and the 1998 Asian Financial crises. While these are one in a hundred years events it only takes one to destroy a company if risk is not managed properly. Much like the old White Swan theory that believed with no doubt that swans were always white, it only took one black swan in Australia to prove the belief to be 100% wrong even though it was thought of as fact.
This book describes how to deal with uncertainty. The role Geopolitics play in investing. The political risk that exists in countries based on their social discontent and leadership. You will see the impact domestic instability, revolution, civil war, and state failure has effected investments in the past. How terrorism could effect businesses in the future based on the past. You will see how to detect the inherent dangers of expropriation in socialist and communist countries.
A very interesting examination of a dynamic of risk that is so much over looked in our modern world of great hopes for the BRIC countries. Serious risks still exist in the world in our modern time, and this book will show you how to see patterns emerging to safeguard yourself.
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5 of 5 people found the following review helpful
5.0 out of 5 stars Necessary For The Investor And Student of Political Science, March 5, 2009
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Review of "The Fat Tail" by Ian Bremmer and Preston Keat.

For anyone interested in military history, political science, or strategic investing and risk management this is the book to read.

The authors take the world as it is and identify the wide ranging political risks to investment. They put forth an effective way to analyze, evaluate, and predict those risks and thus warn potential investors and offer guidance how to manage those potential risks.

Grounded in historical and contemporary examples and replete with numerous footnotes to bolster their contentions the authors cover the ground dealing with uncertainty in the financial and future markets; geopolitics; political risk; domestic instability, revolution, civil wars, & state failures around the globe; terrorism; expropriation; and regulatory risks.

Well done. An ancillary benefit is the outlining of western business interests and thus an understanding of our nation's own financial predicament. Clear, concise, and understandable by the layperson at 240 pages I rate it at five stars without reservation.

JP
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5 of 5 people found the following review helpful
5.0 out of 5 stars Valuable insights, well organized primer, March 3, 2009
By 
Jonathan Brown (Fair Oaks,, CA USA) - See all my reviews
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The Fat Tail: The Power of Political Knowledge for Strategic Investing
We live in an increasingly inter-connected world. The benefits from those connections are huge. But there are also costs. Ian Bremmer and Preston Keat have put together an excellent primer on how to anticipate those unexpected events that political and increasingly economic players around the world need to think about strategically.

The book opens with three chapters on dealing with uncertainty including a brief introduction to geopolitics and the relationship of political risks to capital markets. It then goes through discussions on domestic instability, terrorism, expropriation and regulatory risk. Each of the chapters explain the issues and then present some useful examples of the risk and some alternative ways of thinking about the problem.

The concluding chapter argues that players in the international arena need to think carefully about how to gain information and to discover warning signals.

All that is crammed into a highly readable book of less than 200 pages. There are areas where I wish the authors would have expanded a bit on their explanations or knowledge but as an excellent sourcebook to get policy makers and investors to think about dealing with uncertainties in the world it is an excellent first step.
I could see the book being used in college classrooms on international business and international relations. I could also see it being used in a corporate setting for giving corporate leaders a good basic understanding of risk management in this area.
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5 of 5 people found the following review helpful
5.0 out of 5 stars An Excellent Sequel, February 25, 2009
By 
Amazon Customer "nycbrian" (Brooklyn, NY United States) - See all my reviews
What happens to a business whose product is misused by their home nation's geopolitical rival? This issue is tackled with the nuance and the necessary context to illustrate the importance that political risk plays in volatile markets. Without taking the time to invest in the proper insurance, the investors in Ingersoll Rand would have been left to incur much more significant damage then they ultimately had to. (2009, 56)

Anyone who reads Bremmer's blog on ForeignPolicy.com ([...] ) realizes that even the most mundane political occurrences have effects that ripple across markets. Bremmer's J-Curve (also recommended) detailed how different societies go through democratization and how these transformations and the differences in regimes represent different levels of stability. I was excited to see he produced a book more focused on the economic ramifications of political unpredictability. My bias for Geopolitics is coming through b/c another example comes from his excellent chapter on the subject in regards to the "Iran Premium." (2009, 59) After it became clear Iran was stalling for a time and the evasive language President Bush used to not withdraw the right to use military force it seemed like a diplomatic problem was going to transform into an armed one. Of course the Strait of Hormuz only magnified the problem that a second OPEC nation might become involved in a military conflict with the United States. This anecdote shows the importance that political risk and instability plays in global markets and how understanding these nuances can assist investing. As is detailed later on in the book even if one knows when a détente is reached using that information profitably is another matter, but without the first part of that equation the second is compounded even more.

His summary of the main schools of IR is excellent, coming from a former student who has had to expand on them in seemingly every IR course he took. For anyone interested in his series about the Great Game here's the link to his Davos event: [...] Also, I would suggest a book Bremmer edited with Ray Taras, "Nations and Politics in the Soviet Successor States."

One characteristic of good books (at least in IR, not so much in fiction) is copious citations from respected journals and other literature in the field. At 42 pages the Notes section includes journals such as International Organization, Financial History Review, International Security, and Niall Ferguson's seminal history about the Rothschild Banking House. (His "Ascent of Money," "Pity of War," and "Empire," are also all excellent) Heavy use of Taleb's "The Black Swan" has prompted me to purchase that book, as well. My only complaint is that the endnotes weren't footnotes, but no one else seems to care about this but me. (Long live Chicago Style!) Good thing Border's gives out two receipts with every purchase!

Another reviewer suggested that the book posited a defense of the Bush Doctrine (so famously summarized by Sarah Palin). Hardly. The book offers two examples of preemption, one of which was successful, Israel in 1967, and one of which is more ambivalent, US involvement in Iraq. These occurrences show that quick judgments of political activities are often vacuous and can lead to disastrous results for investors.

A final note: I've never seen a book reviewed by Nouriel Roubini ("Dr. Doom"), Robert Kagan, and Thomas Pickering. Hear, hear!
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7 of 8 people found the following review helpful
5.0 out of 5 stars A Devastating Critique of Professional Economics, April 4, 2009
By 
Junglies (Morrisville, NC United States) - See all my reviews
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I became interested in this book because of the announced intent to look at a feature of statistics oft-overlooked: the so-called fat tail. One of the most criticised books of recent years was the Bell Curve The Bell Curve: Intelligence and Class Structure in American Life.This work promoted the notion of conformity to a statistical feature which is often assumed to provide a model upon which to base social policies and which purports that much of society conforms to that feature.

Although the premise of this book is essentially that for strategic investment purposes the standard distribution model has limited applicability, it actually undermines a lot of the tools provided for strategic investment by the economics community. In that regard it has much in common with some other books which have found popular acclaim in recent years i.e. The Death of Economics,Butterfly Economics: A New General Theory of Social and Economic Behavior,Why Most Things Fail: Evolution, Extinction and Economics.

In a fascinating examination of the problems facing strategic investments, the authors include a chapter on the notion of uncertainty. Despite the pretensions of economics to be a science, if one examies the history of the subject one finds that it is littered with failed models and predictions. The recent credit crisis is a situation marked by few predictions of it's impending occurrence. One of the big scientific ideas of the past few decades is the ideas of Chaos and Anti-Chaos, popularised by James Gleick Chaos: Making a New Science. Here the notion of interconnectedness having feedback effects which mangify to affect a whole system is given much prominence. Uncertainty and chaotic effects place economics per se in a difficult predicament. The models it uses are based on past events and predict a future based on those events and are thus unable to cope with novel situations.

If this were not enough, the subsequent chapters together deflate much of the economics which supports the decisions which go into current strategic investments and show, successfuly in my view, how econimcs is clearly subordinated by politics in coming to better decisions enabling more successful outcomes. I find much in common with ideas found in another text The Living Companywhich combine to provide an alternative prospective for a broader framework of analysis to support strategic investment decisions.

Although the purpose of the book is not to shake the foundations of the economics profession as we know it, it does more than just weaken the superstructure of formal mathermatical modelling which characterises much of what is generally accepted as economics per se. With the economic and financial crisis facing the world today, a reappraisal of the subject is more than justified. Although currently there is a resurgence in the ideas of Maynard keynes, I believe that books such as these will generate interest in alternative prospectuses of economics other than those standards which have been taught in so many universities for so long.

This is an excellent book which I would highly recommend.
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7 of 8 people found the following review helpful
5.0 out of 5 stars Wisdom, Marrying Geopolitical Concerns to Strategic Investments, March 15, 2009
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Whenever I am at a business conference I seek out people from Eurasia Group, as they are usually the smartest people in the room (besides our team!).

As head of a consulting firm which offers strategic advice to various constituencies, I need to not only keep abreast of current affairs but more important I need to be able to read a situation based on limited facts and come out with a relevant conclusion. For years I have sought out material from the Eurasia Group, and specifically from Ian Bremmer. I am a student of history, and I sturdy history to understand how particular events in the present create a certain future. Bremmer and Preston Keat `teach a man how to fish,' in the words of that old proverb. Such insight is needed in uncertain times.

Another reviewer mentioned that the material covered in this volume is by its very nature outdated when printed, and that one should seek out Foreign Affairs magazine for similar information. As respectful as I am of Foreign Affairs, he misses the point: Bremmer offers insight into particular situations and wisdom as to how the world works, relevant six month ago as well as five years from now.
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The Fat Tail: The Power of Political Knowledge in an Uncertain World (with a New Preface)
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