Category Archives: Books

Review: Infectious Greed

Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
by Frank Partnoy is a fascinating book. Partnoy describes how the ever raising performance-related bonuses for brokerage bankers in the 1980s lead the brokers to create a succession of schemes to inflate bonuses.

The early waves of this phenomenon was in the dervatives business. Derivatives are financial instruments the payoff of which is determined by other factors. The stated purpose of a derivative is to sell the risk related to something to someone who is better prepared to handle it.

Dervatives can be linked to everything like from the price of a stock (options), the future price of a commodity (futures), the relative exchange rates of two currencies, or interest rates. Derivatives can even be linked to things like the weather. Now, weather derivatives may sound like nothing more than gambling, but in fact, industries like hydro power plants, farming, and travel depend critically upon the weather.

The real problem comes from the fact that when you sell risk, it is very hard to find someone who is really in a better position to handle it. As all derivatives are null-sum games, this means that it is in practice a gamble that big financial insitutions are allowed to make with the money they hold. Examples include mutual fonds, pension fonds, insurance fonds, and municipal authorities.

Around 1990, derivatives were made more and more complex. Buyers of derivatives were making money, but no one could predict how changes in for example the federal interest rate would affect people. Around 1992, the tables turned, and many investors learned the hard lesson of gambling: The house always wins. The house was the brokerage banks. The losers included for example Orange County, California, which went bankrupt from its investments in derivatives linked to the federal interest rate.

So, in the mid-90s, investors were scared off of derivates, and the brokers needed a new scheme to get their multi-million bonuses. What had made derivatives good was this: It was extremely difficult to assess their risk and value. Investors considered the only safe bets to be in stocks. So, the brokers wanted stocks whose value and risk was very hard to assess. Enter .com.

Partnoy provides a convincing explaination of the .com-phenomenon, which is very sobering to technologists: No-one never believed we could produce the values we thought they believed in. No-one never believed in us. We were just pieces in the game to deceive investors with financial instruments whose risk and value were hard to assess.

The book is depressing, sobering, and upsetting. The attitudes Partnoy describes are disturbing and sickening. The book is very well written, and reads easily. I guess the moral of the story is: There is no such thing as a free lunch. You always pay in the end.

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Ellen Ullman: “The Bug: A Novel”

Ullman’s book describes the lives of two people related to a large software development project in the early 80s. Ethan Levin is the programmer who is judged responsible for the bug. As it proves to be impossible to reproduce reliably his life seems to spiral down into dispair, loneliness, and depression.

Ullman is a master at describing the almost hypnotizing urge to “just fix this last problem before” when programming. The dysfunctional team and people in the novel are more dysfunctional than anyone I have ever met, but they are perfect carricatures (I hope!) of a software team gone really, really bad.

“I’m leaving!”, [Ethan] said.

“I mean now. Are you leaving now?”

“I’m leaving, I’m leaving,” he said again, but vacantly, automatically, because despite himself, his eyes had been drawn back to the screen, to the irregular pulse of the messages as they appeared: Warning. Warning.

“Hello? Are you there?”

“Yeah, yeah. I’m here,” he said, just as the compiler suddenly displayed the message “Fatal error.: MAXWINSIZE not defined,” and came to a stop.

“Shit!” Ethan Levin muttered under his breath.

“Ethan! You’re compiling! I know it!”

I really enjoyed this book. In fact, I often burst out laughing audibly as Ullman describes some of the absurdities of programming I know so well. The technology in the book is realistic and recognizable, and the bug, in the end, turns out to be something that very well could have evaded a team after a year of searching.

If you are involved in software development, you will enjoy recognizing the themes and character, at the same time as you will thank god they are carricatures.

If you are not involved in software development, this book may bring you some understanding of the addictive captivation of the computer and the source of the weirdness that seems to be so much a part of your programming friends’ personality.

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Book: “Testing Extreme Programming” by Lisa Crispin and Tip House

This book talks about the role of a tester in an XP project. So it is about acceptance testing, not unit testing (see Test-Driven Development by Kent Beck for that).

The long and short of it is that I would really like to run an XP project with people who have read, understand, and become excited about this book. My experience is that a project suffers from not having someone who’s job is 100% quality. Programmers (myself included) will sadly have too much at stake to be effective at testing their own code. Having someone who is dedicated to acceptance testing on the team will also be a good way of keeping the iteration cycle short while delivering software of good quality.

I did notice a few weird things about the book, though. The choice of webART as an example of a web acceptance testing tool seemed to me to be a bad one. My impression from the book is that webART is a rather verbose language. The book also suggest estimating down to hours (and in some cases, below that). Personally, I don’t have enough predicability in my progress to do this, but I guess your milage may vary.

All in all, a very good book. I hope to get a tester who works with the mindset the book describes on my next project.

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Top 5 software development manifests

  1. The Psychology of Computer Programming (Jerry Weinberg)
  2. The Pragmatic Programmer (Andrew Hunt and Dave Thomas) – from Journeyman to Master (the view of the software professional as a craftman is the only thing that will save the business!)
  3. PeopleWare (Tom DeMarco and Tim Lister)
  4. Extreme Programming Explained (Kent Beck)
  5. After the Gold Rush (Steve McConnell)
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Kent Beck: Test-Driven Development

Test-Driven Development describes in detail this technique from Extreme Programming. In addition, the author spends some time teaching the reader a useful set of mental tools for writing better code. TDD is a very fast read, but it is full of useful information. If I wanted my developers to only read one small book about software development, this would be it.

Note: The back of the book lists it as “Software Engineering/Testing”. This is incorrect. Test-Driven Development is not about testing, it is about programming.

Highly recommended.

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Steven Pinker: How the Mind Works

Brilliant book. “How the Mind Works” is a tour de force over many of the puzzling aspects of the human mind:

  • Why can our eyes be fooled by optical illusions?

  • Why would we evolve emotions?

  • Why would we evolve behaviour that makes us unable to fully control ourselves, like rage?

The book puts forth theories for all these questions and more.

The best part of the book, however, is the style in which it is written. Steven Pinker is a master at keeping the text interesting.

The main value of the book is not that it deals with these specific issues, but that teaches the reader a framework that can be used to understand the human mind: Evolutionary Psychology.


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