Reading Project Part 1: Timing is Everything

*This is the first post in a lengthy reading project I am undertaking, to read a book from every aisle in Cornell University’s Olin Library stacks. Please see the full description of the project here: https://jacobklehman.com/library-reading-project/*

The first two books that I read were on Islam, with very different perspectives. The first, “Islamic Finance and Economic Development: Risk Management, Regulation, and Corporate Governance” by Amr Mohael Tiby and Wafik Grais is an analysis of the exponential growth of Islamic Finance funds globally and their performance as compared to secular investments. Because Islamic funds are not allowed to collect interest or profit from those that do, the funds were underinvested in banks prior to the financial crisis of 2008, and therefore performed competitively (and in many cases outperformed) secular banks during the crisis. It remains to be seen whether or not the funds will be able to continue to deliver competitive returns as they grow. The global assets in such funds have increased dramatically in the Middle East, Indonesia, and even in the United States. Devon Bank, which was not far from our condo in Chicago, is apparently a small Islamic finance-compliant bank.

To the western mind, the distinction between equity (shared risk, shared reward) and debt (lower-risk, but fixed reward) is taken almost for granted, but slight changes in the default assumptions of the conditions under which capital is raised and allocated can have meaningful consequences. As one example, since Islamic finance institutions cannot charge interest, all loans are effectively secured, and even the fixed-income investments require that the lender taking an ownership interest in the underlying asset or corporation. More specifically, the effective equivalent structure to a mortgage involves the lender purchasing the asset, then selling it immediately to the borrower at a higher price, which will be paid in installments (with no interest charged on that new, higher price). Additionally surprising to me were some of the restrictions on investments. A fund is not only prohibited from interest-bearing investments or alcohol, but also film studios (presumably because of modesty concerns?) and hotels (not sure why this element). Though I don’t agree with all of the specifics, I can support “putting your money where your mouth is” and refusing to profit from activities that seem morally objectionable. Considering that one of the most adverse effects on individual investors’ returns is their tendency to sell on panic, locking in losses, holding a portfolio that feels like a statement about one’s beliefs and values (which are less likely to change rapidly) might improve one’s realized performance over casual trading, even if the underlying assets matched (or even lagged) somewhat. Interestingly, approximately three months after reading this book, I interviewed a candidate for Johnson who had experience in Islamic finance research, and he was quite surprised that I had even a passing familiarity with the subject. That is one of my aspirational outcomes of this reading project: that I be able to connect with more people, spot new and interesting connections, and find new insights as a result.

The second book was “Silent No More: Confronting America’s False Images of Islam,” written by U.S. Congressman Paul Findley, describing Muslims in America and attempting to improve Muslim political activism in America. Timing is everything: the book was published in July of 2001, and while some of Mr. Findley’s points remain valid regarding the contributions of Islamic-Americans and the perils of Islamophobia, his downplaying of the threat posed by Osama bin Laden looks incredibly short-sighted. In the fifteen years since, when an increasing number of Americans have grown at least casually familiar that a distinction exists between Sunni v. Shi’a, there are elements that read as condescending to the reader and more reflective of Findley’s own ignorance than the reader’s (e.g., “did you know that ‘Mohammedan’ is not the correct term for a Muslim, and that Muslims respect Jesus as a prophet?”). It was a quick read, and encouraged Muslim voters to make their voices heard in blocs; one of the most interesting parts was Findley’s explanation of a congressman’s schedule, and how the crush of meetings makes it harder to remember individual arguments/contentions without having policy briefs and organizational groups to organize them. In an age where some fear “creeping Shari’a” law, organized campaigns might be exposed to risks that individual constituents are not. It’s tempting to see Findley’s career as having convinced him that every problem can be solved with lobbying congress in formal, politically organized ways. The recent election outcomes suggest that a) national trends of power and thought may not align with congressional perceptions, and b) figures of power may shift local (and national behavior) as much through their statements and actions as highly visible public figures as they do through official policy. A relatively small percentage of the population has precise policy positions, but nearly all recognize the normalization of behavior when it is observed and repeated.

Summary thoughts thus far: beginning a project like this is daunting and thrilling at the same time. I have no doubt that it will test my commitment, patience, and discipline, but the mere consideration of how much I will learn over the years to come is electrifying. I hope that it will make me a more compelling writer, a more thoughtful consultant, a more nuanced fight choreographer, and a better citizen of the world. And maybe, in a small way, encourage deeper thought and conversation.

 

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