Top 3 Business Books

Reading is one of my favorite pastimes. It’s a great way to relax while feeding my brain with new information about a topic I’m interested in. I’ve read more than a few books on business, so I wanted to share a list of my top 3 business books (so far) with anyone looking for a good page-turner.

These are listed in no particular order of ranking. I think they all provide useful knowledge and can be valuable sources of information for different subjects. 

Here are my top 3 business books:

#1. Thinking, Fast and Slow – by Daniel Kahneman

A Nobel Laurette, Kahneman explains how the mind operates on two systems of thinking, which process information differently. He simply refers to these cognitive processes as system 1 and system 2. Both have distinctive features that allow us to make decisions and judgments from the abundance of stimulating information absorbed by our brains via our senses.

System 1 is the “fast”, instinctual operator that gives us a gut feeling about a situation, distilled down from numerous similar scenarios we’ve encountered. It allows us to make knee-jerk reactions in a split second, based on our past experiences and survival part of the mind.

System 2 is the “slow”, methodical operator that analyzes a more complex situation or decision by logically organizing the given information. This leads to insightful reflection and drawing conclusions based on the nuances presented for a particular decision point. 

Next, Kahneman observes the biases we have ingrained in our thought patterns, which he refers to as judgmental heuristics. The term originated from Kahneman’s work with Amos Tversky in their study of the subject, “Judgment Under Uncertainty: Heuristics and Biases”. These heuristics lead us to perceive information from a skewed point of view. This is mainly due to the overwhelming statistical computing our brains synthesize on a daily basis.

One of the heuristics I found especially intriguing was the regression to the mean concept. Essentially, our minds have a tendency to take a given event and assume the next subsequent event will be similar. By doing so we’re ignoring the historical predictability of events to revert back to the most common or average outcome.

The book mentions many other examples of how we can mistakenly draw conclusions on a regular basis without knowing. Being aware of these common biases will make you more vigilant of the heuristics you experience. Consequently, allowing you to recognize a cognitive bias and engage your brain to make better decisions. 

Having identified the heuristics in our judgments, Kahneman continues to expand upon the resulting overconfidence we exhibit from such missteps. Furthermore, how overconfidence can affect our choices. The book provides numerous examples of ways that the reality of a situation may seem to be different than how our minds perceive it. He shows the importance of dialing into these variances as they relate to our ability to make sound decisions.

Kahneman’s writing is very accessible and does an excellent job of utilizing everyday scenarios to illustrate concepts throughout the book. I think this is an excellent read about how to be more mindful of your decisions and conscientious of your thought patterns.

Check out Daniel Kahneman’s Thinking, Fast and Slow

#2. Principles: Life and Work – by Ray Dalio

Ray Dalio is the founder and co-chairman of Bridgewater Associates, the most successful and profitable hedge fund in the world. In Principles: Life and Work, he lays out his philosophies on running a business and setting up a winning organization. Dalio talks about the framework he has implemented at Bridgewater Associates that encourages its employees to perform with radical transparency and radical truth.

He believes the success of the company he has built over more than four decades is a product of being unrelentingly open and honest about ideas or opinions. The best ideas should prevail if the whole organization is sharing thoughts without fear of repercussions. Dalio terms this decision-making system as an idea meritocracy. Essentially, a survival of the fittest idea business model that eliminates the typical corporate hierarchy of top-down authoritarianism and values the best insights, whether from a newbie intern, middle manager, or a seasoned executive.

The book elaborates on the merits of implementing these concepts into your life and work, so as to fully understand how to most consistently and effectively get the results you want. Dalio mentions the importance of becoming radically open-minded in dealing with people and decision-making since we all operate differently and have a wide array of ideas to contribute to an organization.

Also, Principles delves into getting the culture right by cultivating meaningful work and meaningful relationships. This creates a superior functioning enterprise that can learn to adapt to changing external factors much quicker and more efficiently.

Dalio explains that once you have the philosophies and culture established in an organization, the next step is to evaluate the business systematically. Track metrics that provide feedback and utilize tools as resources for improving each person’s ability to make what Dalio refers to as believability-weighted decisions. 

Principles: Life and Work presents a roadmap for anyone wanting to build a successful organizational structure. One that values the merit of an individual’s ideas, rather than their title or status in the chain of command. Ray Dalio provides a fascinating take on a topic that is hard to successfully pull-off, yet vital to the perseverance of any organization. I found this to be one of my favorite books on business and life in general.

Check out Ray Dalio’s Principles: Life and Work

#3. The Intelligent Investor – by Benjamin Graham

Benjamin Graham is best-known as Warren Buffett’s mentor and professor at Columbia University. His most famous contribution to the success of Buffett was the idea of value investing. Graham literally wrote the book on valuing publicly traded companies with his textbook, “Security Analysis”. This original piece was later broken-down to a much more digestible and condensed version as The Intelligent Investor.

The book explains the difference between someone who is a spectator of stocks and someone who invests in stocks. Graham gives a warning about how most people speculate that a stock will rise or fall. He explains why truly understanding a company’s value is imperative to a long-term stock investor. In the finance world, this is referred to as a company’s intrinsic value or the actual worth of a business, based on profitability. Graham highlights the speculator’s fallacy of buying a “hot” stock because for some arbitrary reason it’s gone up recently.

Analyzing a company’s stock should be an exercise in valuing the company’s operations and management quality, rather than observing market fluctuations. When you grow an appreciation of the business, you are much more equipped to assess the likelihood of success.

The Intelligent Investor underlines the concept of a “margin of safety” within the context of investing. Essentially, if you value a company’s stock at a certain price, what is the wiggly-room inherent in the analysis. This idea is applicable to every aspect of a business because it shows the importance of having a competitive advantage in your industry.

Graham’s book goes into detail about the intricacies of value investing, which I think can be applied to wisely allocating capital in any marketplace. His examples may seem dated, however, the concepts are still very relevant to today’s business environment. The tried-and-true methods laid out in this fascinating book lend extraordinary practical guidance to leaders and decision-makers.

Check out Benjamin Graham’s The Intelligent Investor

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