Financial Darwinism: Create Value or Self-Destruct in a World of Risk by Leo Tilman. Wiley 2008.

Financial professionals are asking What next? How did we get where we are? Where are we going? What do we do about it? Leo Tilman offers a well organized and researched answer to these questions. An essential part of his answer is that we are seeing the result of powerful secular, rather than another cyclical, financial crisis. His new book offers an analytical framework and approach to cope with the Darwinian process underway in the financial services business.

The current financial crisis came after a long period of compressed profit margins in financial services.The response was a “vicious cycle of leverage and risk taking,” ending up in global deleveraging with cascading liquidity and solvency pressures. This very unhappy outcome has resulted as “financial institutions and investors increasingly took on systematic risks in an attempt to deliver earnings and investment returns.”

Financial Darwinism concludes the old business models failed to adjust to the changed financial industry environment. The new industry structure will include “active risk taking as opposed to market-sensitive fees or balance sheet arbitrage.” The new business models will be dynamic, in contrast to the earlier static models. The reader of Financial Darwinism will find much help in constructing new business models for survival and success in financial services.

Meet the author at "Author Series: Financial Darwinism" on March 19!