Review by Choice Review
Written by a leading financial journalist, Smart Money is a welcome and inspiring counterargument to the post-2008 vilification of the finance industry. Interesting and well-written, the book shines a light on the virtues of financial innovation. Part 1, "Lessons Badly Learned," sets the stage with three chapters that trace the extensive history of the industry in meeting the needs of individuals. Part 2, "A Force for Good," comprises six chapters that include numerous examples of creative financial ideas aimed at benefiting society, including social impact bonds that channel private funds for prisoner rehabilitation and a drug-development "mega-fund" that raises capital for anticancer drugs. Palmer traveled to the centers of finance around the world and then wrote an enlightening book that provides a new perspective on an important and timely issue: banking is capable of doing good, and the industry offers a powerful means for solving intractable social problems. Summing Up: Highly recommended. All readers. --Julie Fitzpatrick, SUNY Fredonia
Copyright American Library Association, used with permission.
Review by New York Times Review
IN 2012, The Economist published a 14-page special report on financial innovation entitled "Playing With Fire." It opened with the line "Financial innovation has a dreadful image these days." The goal: rehabilitate that image. The report's author, Andrew Palmer, then the magazine's finance editor, attempted to shift focus away from the infamous subprime mortgage bets that nearly brought down the financial system. Instead, he pointed to several new deals bubbling up in unexpected corners of the markets. Palmer began in Peterborough, England, site of the first-ever "socialimpact bond," a novel - and humanitarian - transaction that sought to reduce recidivism among prisoners. Prison reform is not typically in the same paragraph as financial derivatives, but Palmer argued that the Peterborough deal did what financial innovation is supposed to do: match the needs of different people and institutions, so that all can be better off. Investors in the Peterborough social-impact bonds paid cash into a prisoner training program; in exchange, they received a promise of future payments from Britain's Ministry of Justice if the prisoners committed fewer crimes than did other groups. The deal promised a winwin-win: Prisoners would learn life skills and a trade, government would spend less money on prisons, and investors would earn an attractive return. Palmer raved about the tripartite deal: "Here, surely, is a financial innovation that even the industry's critics would agree is worth trying." The Peterborough pilot program deserved more than a brief mention in a magazine piece, and it now anchors the second half of Palmer's fascinating book. Palmer is a muscular, efficient writer; he relates in-person interviews and statistical evidence with ease and humor. The chapter on social-impact bonds tracks one man who, after being in and out of prisons for decades, "turned his initial work placement into a full-time job at a builders' merchant. He was in work, in accommodation, paying his own bills.... His life had improved because of a dose of financial creativity." There are now social-impact bonds that direct money to various social needs: finding and supporting adoptive parents for hard-to-place children, keeping children out of foster care, getting homeless "rough sleepers" off the streets. With the first American social-impact bond, investors are financing a rehabilitation program for adolescents at the Rikers Island correctional facility, and will be paid back, with interest, if reduced recidivism goals are met. Palmer connects the Peterborough story to other ways finance can be "a force for good." Novel insurance-like policies help biotechnology firms raise funds for risky clinical trials. "Human-capital contracts" enable college students to obtain money for school without borrowing, by committing to pay a fixed percentage of their income after they graduate. Online lenders, such as Kabbage and OnDeck, use mathematical algorithms to assess the health of small businesses, and provide capital when big banks will not. The first half of the book is also provocative, but lacks the original reporting of the second half and is smug in its sweeping, often unsupported conclusions. The opening sentence of Chapter 1 promises much: "The history of financial innovation is also the story of human advance." But what follows is lined with unsubstantiated assertions and cherry-picked history. The rhetoric in the early pages reminded me of claims by Merton Miller, a Nobel laureate economist at the University of Chicago, who was in many ways the father of financial innovation. Miller praised complex financial instruments, in large part because they helped institutions avoid the law. He applauded bankers for cleverly avoiding government attempts to interfere with markets. Yet Palmer does not address Miller's arguments, or even cite him. It is a material omission - like a book on sonnets that does not mention Shakespeare - particularly because Palmer's ultimate point is the opposite of Miller's: that financial innovation is beneficial because it addresses broad social needs, not narrow private ones. Fortunately, the second half of the book rehabilitates the first. Palmer's vignettes show how innovation can, and should, involve more than bankers getting rich, playing games and dodging rules. Today, upstart companies are nipping at the heels of the major banks, seeking to profit by doing good. That is the right kind of smart money. FRANK PARTNOY, a law and finance professor at the University of San Diego, is the author of "Wait: The Art and Science of Delay."
Copyright (c) The New York Times Company [May 10, 2015]
Review by Booklist Review
Keen wants you to know that the Internet has not lived up to its early promise. Rather than fostering an environment of intellectual and social democracy, it has spawned a rule-by-mob culture, promoted narcissism and voyeurism, encouraged intolerance and exclusivity, created global monopolies, increased unemployment, and decimated whole industries. The author seems downright bitter about the way corporate behemoths like Google and Amazon promote themselves as uncompanies, as zippy alternatives to old-world corporations. Make no mistake, this is an angry book, but Keen tempers his invective with cold, hard facts (Amazon's contribution to the upheaval in the publishing and retail sectors, for example). Is this a balanced look at the benefits and drawbacks of the Internet? No. There are books that provide that, but this one is designed to give people who think of the Internet as a sort of democratic digital paradise a hard dose of reality (or one interpretation of reality). Sure to be condemned by some for its seemingly one-sided approach, the book nevertheless clearly stakes out a position in the ongoing debate over what the digital age has wrought.--Pitt, David Copyright 2015 Booklist
From Booklist, Copyright (c) American Library Association. Used with permission.
Review by Publisher's Weekly Review
As official national villain, Wall Street has recently been supplanted by other malefactors (such as the CIA, local police forces, and Ebola), yet the Great Recession has undeniably left finance with a tarnished reputation. Economist journalist Palmer hopes to burnish its image in this eloquent manifesto, highlighting current innovations in finance that promote social good. Wisely, Palmer begins by admitting Wall Street's recent sins: namely, disastrously miscalculating the risks of subprime mortgages and triggering the global financial crisis of 2007-2008. Yet, as he observes, financial crises are nothing new, dating back to 33 C.E. Palmer argues that a world without finance (and thus without loans, credit, insurance, or investments) would be far worse. He points to how the Internet now allows individuals to bypass conventional financing, gives borrowers access to lower interest rates, and lets entrepreneurs obtain capital via crowdfunding. He also discusses social-impact bonds, wherein nonprofit organizations that, say, reduce recidivism pay off investors using the money saved by the government. Palmer responsibly notes the potential risks of such brave new innovations, spotlighting a not-so-novel innovation, catastrophe modeling for insurers, which could also be valuable, specifically for modeling risk in markets. This intelligent, balanced study of current innovations in finance does much to exorcise its recent demonization. Agent: Andrew Stuart, Stuart Agency. (Apr.) © Copyright PWxyz, LLC. All rights reserved.
(c) Copyright PWxyz, LLC. All rights reserved
Review by Library Journal Review
Many blame the Great Recession on financial innovations that have created an overly complex financial system, but not journalist Palmer (The Economist). In this book, which discusses some the history of finance as well as opportunities for the future, Palmer shows how innovation has always been a part of this industry, starting with the creation of money itself. The first part of the work details some of the ways financial innovation has gone wrong, such as through collateralized debt obligations (CDOs) and high frequency trading (HFT), while the second part shows how these changes can be a force for good instead of greed. Examples include social-impact bonds (SIBs), which allow private investors to fund social programs, and peer-to-peer lending, which takes big banks out of the equation for small loans and allows individuals to borrow from and lend to one another. VERDICT This book will satisfy the general reader and investor who wants to see the other side of the coin as it relates to financial innovation.-Elizabeth Nelson, McHenry Cty. Coll. Lib., Crystal Lake, IL (c) Copyright 2015. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.
(c) Copyright Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.
Review by Kirkus Book Review
Palmer, the head of data journalism at the Economist, disagrees with those who see innovations like derivatives as responsible for recent financial bubbles and crashes, and he argues that the world needs even more financial innovation.In a survey of monetary and financial history, the author examines the development of financial products. These include advances in peer-to-peer lending, which remove banks as middlemen in transactions that are made possible, in part, by mathematized search functions related to data mining. Palmer identifies companies across the worlde.g., Lending Club, Transfer Wise and Zest Financethat are moving into areas where banks and other lenders provide either predatory or very little service to their customers. Nonleveraged methods of financing, providing cheaper short-term finance using nontraditional forms of collateral, are being developed for those qualifiede.g., student lending, payday loans, housing and retirement finance. Palmer traces these innovative methods to the tradition of financial mathematics begun as early as the 13th century with Leonardo Fibonacci. The author explores the respective pioneering contributions of both Fibonacci and 17th-century astronomer Edmond Halley. The former worked out how to calculate the " present value' of cash flowsthat is, how much a future amount of money is worth today, given that money can earn interest in the meantime," and the latter helped develop the concepts of annuities and life tables for insurers. "The problem with financial innovation is not that products have original sin," writes Palmer, "but that the financial system is programmed to change these products in ways which make them more dangerous." As examples, he points to recent high-tech and mortgage bubbles. With state institutions apparently reaching their financial limits, the author sees plenty of room for expansion of innovations. An intriguing argument that can bear further study. Copyright Kirkus Reviews, used with permission.
Copyright (c) Kirkus Reviews, used with permission.
Review by Choice Review
Review by New York Times Review
Review by Booklist Review
Review by Publisher's Weekly Review
Review by Library Journal Review
Review by Kirkus Book Review
