The Money Game

The Money Game

I read an extract of this book somewhere or other and thought it was hilarious. Then I lost the reference to it and found I couldn't remember the title or the author - it had got so mixed up in my mind with similar books that weren't as good. Recently a friend mentioned that he was reading this brilliant book about finance from the 1960s and the penny dropped.

The Money Game by Adam Smith, but not The Adam Smith, is a fantastic introduction to the world of high finance. It is getting on for 50 years old so obviously parts of the book read more like history than commentary. The chapters on the introduction of computerised trading, for instance, are very much from another time and another place.

However, the book stands up, not just as a curiosity but as a study of the drivers at play within the market.

"Adam Smith" is a nom de plume, the writer is a longstanding Wall St insider called George J.W. Goodman, but the name is the only thing that comes across as fake. His writing style is punchy and direct: it's like reading about finance in the pages of a Dashiell Hammett thriller. The chapter headlines are catchy and fun - like Identity And Anxiety, Is The Market Really A Crowd? and What Are They In It For?

In the first half of the book he sets out his arguments over how the market works: how people follow one another into things and how this inevitably leads to bulls and bears. There's a hilarious series of anecdotes which he claims are compiled after a psychiatrist friend of his set him up with interviews with his clients ("All my patients are in the markets"). These are terrific, timeless portraits of the kinds of people who play with shares and why, though written in that politically incorrect style we now associate with Mad Men etc.

My favourite anecdote though remains the one I first read as an extract somewhere else: Timing And Diversion, The Cocoa Game. Here, Smith and his investment buddies, lead by The Great Winfield, put their money into cocoa, without having the first clue about where the cocoa comes from and what will really effect the price.

In the end they send someone to Ghana dressed in a white safari suit, who gets lost in the wilderness and ends up thinking he's going to get eaten by cannibals. Not the sort of tale you could tell now, in 2011, but given the context and Smith's dry as a bone narrative style, it left me laughing on the floor.