Spies, economists, and gamblers: A reading list

The spy story, “Homeric” by at least one account, became a case study for Richards J. Heuer Jr., a decades-long CIA employee and author of Psychology of Intelligence Analysis (1999), a compendium of articles written between 1978 and 1986 for use within the CIA.

“Analysts (people) typically form a picture first and then select the pieces to fit,” Heuer wrote.

There are parallels among the cognitive biases that complicate intelligence-gathering and analysis, the efforts of investors and their advisors to untangle often-competing reasons for optimism or pessimism, and the ability to select and stick with an investment strategy, said Chris Tidmore, a senior manager in Vanguard’s Investment Advisor Research Center who recommends the book.

Among the takeaways that Tidmore gleaned are the need “to understand yourself before you can understand others” and that “one should look for information that refutes their theories, not for information that confirms them.”

Fiona Greig, global head of Investor Research and Policy, sought an inspirational story to listen to while running or cycling. She found it in Yellen: The Trailblazing Economist Who Navigated an Era of Upheaval (2022), by Jon Hilsenrath, a senior writer for the Wall Street Journal.

“I’m fascinated by female economists who end up having extraordinary careers,” Greig said. “Historically, economics was not a great professional home for women. After obtaining a PhD from Yale, Yellen worked as an assistant professor at Harvard, but she didn’t get tenure. It’s captivating to learn how she navigated and ascended in her career.”

Yellen is the only person to have held the top three economic roles in government: She has served as chair of the White House Council of Economic Advisers (1997–1999), chair of the Federal Reserve (2014–2018), and since January 2021, she is the 77th successor to Alexander Hamilton as secretary of the U.S. Treasury. She is the first woman to hold two of these roles.   

Yellen’s intellectual footprint on the world is vast. She first argued for the 2% inflation target, now widely adopted. She elevated the importance of labor market dynamics and unemployment in monetary policy making.

“Women ask different research questions,” Greig said. “They think differently about the world, and it really matters that they’re in positions of leadership and economic policymaking.”

Yellen is married to George Akerlof, a Nobel prize-winning economist; this power couple also seems to have split family work down the middle and equally supported their two careers through multiple cross-country moves. “It’s awe-inspiring, what they have accomplished—especially in combination with their status as a model for dual-career families,” Greig said.

As Vanguard approaches its 50th anniversary—the firm started operations in 1975—it could be easy to view it, in the United States, at least, as an “enduring great company.” Assets under management were over $8 trillion as of July 31, 2023, making Vanguard the world’s second-largest asset manager. We have some 50 million clients.

But far more important than our size is our history of unrelenting investor-centricity that’s been credited with benefiting investors—even non-Vanguard investors—in markets far removed from our suburban Philadelphia headquarters.

Considering our size and our impact, it may strike some as surprising that Vanguard Chief Investment Officer Greg Davis has been reading and recommends BE 2.0 (Beyond Entrepreneurship 2.0): Turning Your Business into an Enduring Great Company (2020) by Jim Collins and Bill Lazier. The book is aimed at the operators of small and mid-sized businesses.

Davis, a Vanguard veteran of nearly 25 years, sees no contradiction.

“Very successful companies fail,” he said. “Among the concepts in the book, two stand out to me. The first is ’productive paranoia’, or how the leaders of lasting enterprises are constantly asking ‘what if’ while they preserve the core of what made them successful and seek to stimulate progress. The second is ‘facing brutal facts’: Enduring great companies need to continuously face reality, even if it’s painful, to refine the path that they are traveling on. At Vanguard, we’re more interested in giving our clients the best chance for investment success and focusing on how we make it easier for them to succeed tomorrow, and less interested in celebrating our past.” 

“Idiot.” “Dumbest call in Super Bowl history.” “Worst play call in NFL history.”

Football fans and the media were not kind to Pete Carroll, head coach of the Seattle Seahawks, after he directed his team, while near their opponent’s goal line with a chance to take the lead in the waning seconds of Super Bowl XLIX, to pass the ball. The New England Patriots intercepted the pass and won the game, leaving countless onlookers to say the ball obviously should have been handed off to Marshawn Lynch, one of the league’s premier running backs.

At the outset of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts (2018), author Annie Duke, with supporting statistics in tow, contends that Carroll made a fine decision but that he was undone by chance—the influence of which we underestimate. In doing so, she highlights our tendency to judge the quality of decisions by the outcomes that follow, as opposed to the processes we take to arrive at our decisions.

A student of cognitive psychology and a former professional poker player, Duke describes decision-making as beset by biases and imperfect information and argues that good, unemotional decision-making processes can improve both the speed and the quality of our choices.

The book is recommended by Sara Devereux, who leads Vanguard Fixed Income Group, which manages more than $2 trillion across index and active funds as of July 31, 2023. “The bond markets in which our team invests on behalf of shareholders overflow with choice,” she said. “Our job is to look constantly for ways to make smarter, faster decisions, because they can create real value for our shareholders.” 

• Keeping up with your summer reading (article, issued July 2023)
• The power of different perspectives (0:42 video, issued January 2023)
• Catch up on commentary from leaders, investment partners (article, issued December 2022)