It's time for my first annual DeBord Report Awards for business books. The winners for 2011 are:

"Models. Behaving. Badly: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life" by Emanuel Derman

I wrote a Rather Short Review of this book, by a former Goldman Sachs "quant," earlier this year. Here's what I had to say:

"It's an incredibly erudite and humane book. Maybe not the most informative, blow-by-blow account of how Wall Street nearly ruined the world. But an impressive effort in soul-searching combined with real thinking. Derman is what I now think of as an "old-school human": widely versed in the various troves of human expression and inquiry, from philosophy to literature to science, and not afraid to show us what he's got." 

Since then, I haven't been able to get the book out of my head. It isn't just one of the best business books I've read in a long while — it's one of the best self-help books! By which I mean it's a business book that I can imagine reading and re-reading many times.

"Lost Decades: The Making of America's Debt Crisis and the Long Recovery" by Menzie D. Chinn and Jeffry A. Frieden

Emanuel Derman may not have produced the most informative blow-by-blow of the financial crisis, but Chinn and Frieden certainly have. Highly readable but not at all a pop history of the Wall Street meltdown, "Lost Decades" explains in alarmingly clear language what went wrong, why, and what we can do to prevent it from happening again.

"Pricing the Future: Finance, Physics, and the 300-year Journey to the Black-Scholes Equation" by George G. Szpiro

The best book I've ever read about options pricing, which is the unified field theory of finance. The Black-Scholes equation solved a problem that everyone thought was fundamentally unsolvable. The story of how the equation came about is lively intellectual history, involving centuries of slow and steady lock-picking until the code was finally cracked. In a sense, Szpiro's storytelling is a kind of narrative Black-Scholes equation: it makes something very hard both easy to follow and exciting if not downright fun to read about.

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