Only a few business books stand the test of time: the companies they examine fade away, the economic circumstances they analyse change, and the people they idolise turn out to have fatal flaws.
Whether a book’s insights will endure is one criterion for the FT and McKinsey Business Book of the Year. To launch the 2016 award, open for submissions from April 11, FT columnists pick one business book they believe is worth rereading.
Martin Wolf, chief economic commentator: Parkinson’s Law: The Pursuit of Progress, by Cyril Northcote Parkinson (1958)
Why do companies fail? Part of the answer is that they are bureaucracies. Indeed, they are supposed to be bureaucracies. As the late Nobel-laureate economist Ronald Coase pointed out, we have companies because command-and-control is frequently more efficient than markets. Broadly, that is the case where the transaction costs created by the latter are higher than the costs of control inherent in the former.
Parkinson’s law — based on the idea that “work expands so as to fill the time available for its completion” — explains why the solution Coase correctly identifies creates its own difficulties. Bureaucracies have malignant tendencies: not least, noted Parkinson, because “an official wants to multiply subordinates, not rivals” and “officials make work for each other”.
To these should be added the natural tendency towards conservatism of all successful organisations.
These are among the iron laws of bureaucracy. Managers should read — and beware.
John Thornhill, innovation editor: Andrew Carnegie, by David Nasaw (2006)
There are two reasons to read David Nasaw’s monumental, 800-plus page biography of Andrew Carnegie.
First, it provides fabulous insights into the practices of one of the greatest business geniuses of all time. For good and bad, every executive can learn something from the ruthless way Carnegie invested early in promising technologies, created and exploited new markets and crushed the competition.
Second, Nasaw deftly tells the riveting human tale of how an immigrant Scottish boy became the richest man in the world and then gave away his vast wealth, more or less inventing modern philanthropy. Business history on this scale is hard to beat.
Gillian Tett, US managing editor: When Genius Failed: The Rise and Fall of Long-Term Capital Management, by Roger Lowenstein (2000)
Fifteen years ago, I spent hours scouring business classics, seeking inspiration for what made a good business book “work”, as I was attempting to write my own.
One piece of work stood out. When Genius Failed provides a compelling account of how Long-Term Capital Management collapsed, drawing on painstaking research. It turns this otherwise dry tale of derivatives into a character-filled drama. But what is most impressive is Lowenstein’s ability to take complex topics that matter enormously to the world (but are often ignored because of their geekiness) and make them easy to understand.
Better still, Lowenstein’s book was one of the first to illuminate a crucial truth that haunts markets today: namely that seemingly unrelated asset classes can be correlated if they are owned by the same people. If you understand that, you understand the story of LTCM’s collapse — and many of the big market mysteries today.
Andrew Hill, management editor: The Wisdom of Crowds: Why the Many are Smarter than the Few, by James Surowiecki (2004)
The idea that strategy should be set from the top down by a few people, under a strong CEO or transformational leader, dominated organisational thinking at the turn of the century — and to a large extent still does.
Surowiecki’s thoughtful and thought-provoking book challenged this. Drawing on examples from psychology, behavioural economics and popular culture, he showed that the combined views of many independent, diverse people were often more accurate and effective than the judgments of small, consensual groups of experts.
The book’s prescience has been underlined since, with the emergence of crowdfunding and crowdsourcing. The growth of social networks have allowed movements to be measured and marshalled. It remains a highly readable manifesto for greater diversity and collaboration in decision-making.
Sarah Gordon, business editor: Lords of Finance, by Liaquat Ahmed
As a financial journalist, I have often found historical biographies are the best prism through which to interpret important events. High Financier, Niall Ferguson’s biography of Siegmund Warburg, founder of the eponymous bank, delivers fascinating insights into why the US banking sector looks like it does today.
But the book I found the most helpful in understanding the 2008-2012 financial crisis was not written about that period at all. It was instead Lords of Finance by Liaquat Ahmed, a biography of the four central bankers in Germany, Britain, France and the US who worked before and during the Wall Street Crash of 1929 and the subsequent Great Depression of the 1930s. It is not banks, or governments that create economic crises, but people, and if you ever need a reminder that individuals, their personalities, and how they interact with others, are what shape history, this book provides it. It is also a ripping read.
The 2016 award will be announced on November 22