A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation.  Speed read in 1 hr.

Most of the book explains, from personal account, the details and intricacies of many recent financial crisis and meltdowns.

Key notion is that the system, due to increase complexity and tight coupling, also allows for market players who leverage at increasing risks.

Near the end is his classification of hedge funds using 5 characteristics, among them the long-short ratio, geography, etc.

His paper on evolutionary biology showed that cockaroaches adapt, precisely by using sub-optimal strategy of avoiding puff of air, and ignore everything else.  Human do the same, using heuristics that allow them to focus on a limited amount of information, (and thus leaving many inefficient opportunities, just as $20 bills all over the sidewalk, for the hedgefunds to benefit).

Finally, to address the risk involved in the new financial instruments, he mentioned the rise of Brasilian Jiu Jitsu, which unlike traditional techniques that stay within the realm of safety fighting, dare to explore one dangerous move at a time, so that they are able to control the risk of injury, and expand the possibilities in their fighting style.

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