Boombustology
Spotting Financial Bubbles Before They Burst
By: Vikram Mansharamani
March 8, 2011
Format: Hardcover, 272 pages
ISBN-10: 9780470879467
ISBN-13: 978-0470879467
Publisher: John Wiley & Sons,Inc.
"The world is in the midst of an accelerating sequence of boom and bust cycles, and despite these developments, no organized, multidisciplinary framework exists in thinking about them. This book hopes to provide that framework", writes experienced global equity investor, venture capitalist, management consultant, and lecturer at Yale University, Vikram Mansharamani, in his brilliant and thought provoking book Boombustology: Spotting Financial Bubbles Before They Burst. The author provides a unique, and multifaceted approach to the context in which investment decisions and economic philosophies are created and put into action.
Vikram Mansharamani offers a three pronged approach to the phenomena of economic bubbles and their subsequent burst. To fully understand why bubbles occur, the author recognizes that both macro-economic and micro-economic forces are at work. In the first of the three prongs, Vikram Mansharamani points out that only a multidisciplinary study will uncover the many forces that create booms, bubbles, and crashes. In the second step, the author examines the historical context and conditions that created past bubbles and crashes. In the third prong, Vikram Mansharamani creates a forward looking framework that identifies future bubbles and downturns. Since the author examines the extreme events of the economy, the system is designed to locate, isolate, understand, and then forecast the cycles in real time. The overall goal that Vikram Mansharamani seeks to address is the actual prediction of bubbles and crashes based on his groundbreaking methodology.
Vikram Mansharamani (photo left) emphasizes the multidimensional approach to understanding the nature of booms and busts. As a result, the format of the book itself is designed to implement the holistic methodology presented by the author. The various chapters focus on:
* Microeconomics of booms and busts focusing on prices
* Credit cycles and and financial instability
* Cognitive biases in human decision making
* Politics of property rights and societal means of value determination
* Emergent perspective based on biology influence on human actions
* Historical analysis of past and recent bubbles and collapses
* The five lenses and how to identify emerging bubbles
* Using the methodology to assess the economy of China
The result is a panoramic overview of the world of economics from fiscal, monetary, behavioral, biological, and historical points of view.
For me, the power of the book is how Vikram Mansharamani creates a holistic and multidisciplinary methodology intended to forecast the development of unsustainable bubbles and their subsequent collapse. While most economic theories of bubble and bust cycles consider only the financial and economic aspects of the booms and their usually tragic aftermath, the author adds the crucial social and cultural clues to bubble creation. For the author, bubbles are just as much a social herding phenomenon as they are a financial or economic phenomenon. Vikram Mansharamani challenges successfully and forcefully the very flawed rational economic markets theory as inadequate for explaining the rise of bubble creation and psychology.
Vikram Mansharamani offers a fascinating methodology for pinpointing potentially unstable bubbles as they appear; even in their very earliest stages of development. Not content with simply espousing a theory, the author utilizes it to analyze the bubble aspects, and potential bust, of the Chinese economy. By setting the model to studying a real world example, Vikram Mansharamani risks failure, but that is the only real way to test the methodology. For that courage, the author is to be commended, and if successful, the framework can be applied to other potential bubbles as they begin to expand in any economy. The book isn't a truly economic theory so much as its a brilliant methodology for pinpointing the causes and growth of unsustainable financial bubbles and their attendant social, cultural, and psychological underpinnings.
I highly recopmmend the engaging and well presented book Boombustology: Spotting Financial Bubbles Before They Burst by Vikram Mansharamani, to anyone seeking a deeper understanding of how unsustainable bubbles form and take over the culture and society in which they form. This book provides a context based approach to the extremes of pricing and behavioral economics.
Read the important and fascinating book Boombustology: Spotting Financial Bubbles Before They Burst by Vikram Mansharamani, and discover how unstable bubbles really form in any economy and how to spot them early so as to benefit financially from their expansion. At the same time, the author points out how to understand when a bubble becomes unsustainable and facing a collapse so as to protect one's own investment. Should the author's methodology prove accurate and reliable in a real world economic context, this book will become a classic, and a must read for decades to come.
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