I also see the phalanx of asshole traders and policy makers that have unearned, unaccountable, and unscrutinized influence over all aspects of society. I get the impression Desai believes economics to be a “hard” science, though he only once mentions this. He dismisses a common critique of finance as erroneously factual as misguided. As his book demonstrates repeatedly, despite its patters, “laws” and formulas, finance never exists in a social and political vacuum. In other words, economics is a social science (go ahead, use the term “behavioral” if you prefer. I don’t see what that adds). The understanding of financial concepts and its correlation/analogy with daily life scenarios will definitely enrich our understanding and decision making to live a meaningful life creating tons of value in the society. Appropriate Financial structure is extremely important for the growth of the economy.

Desai indeed humanizes finance throughout, and readers within that discipline, and outside of it will benefit from reading the book, which is relatively brief , but packed with interesting material. A major point is that finance is not just about numbers, goals Retail foreign exchange trading and deals, but about the human creativity, thoughts, emotions and motivations behind what we see in the headlines; or numbers in stock tables. He believes that the demonization so many people feel for the financial sector is unwarranted and unhelpful.

I wish he had done more here in teaching the finance types about ethics and bringing in those human values into their lives and models. To give one example that illustrates the astonishing range of Desai’s understanding, consider his illustration of leverage by comparing George Orwell (who went into semi-seclusion for years to write 1984) to Jeff Koons . He uses this not just to understand the role of leverage in the financial system but also to introspect about his own life where he is on the Orwell-Koons spectrum, and how that relates to happiness. THE WISDOM OF FINANCE is a wholly unique book, offering a refreshing new perspective on one of the world’s most complex and misunderstood professions. Though I loved the anecdotes and the excerpts from classic literature, the real purpose of the book was lost on me….may be, the title is a misnomer.

Advances In Financial Machine Learning

Moreover, the book’s humanity approach to finance helps to give many personable reasons to why strategies such as “Leverage” is useful or painful. At the end he wonders why the world has such a low opinion of finance, but fails to find a compelling answer. I suggest it is the know-it-all elitism that extends to economics as a whole.

The artist Jeff Koons and William Shakespeare’s The Merchant of Venice allow us to map the commitments of borrowing to a much more personal setting. And Kazuo Ishiguro’s The Remains of the Day, the fall of the richest man in colonial America, and the wisdom of finance a case study of the American Airlines bankruptcy teach us about the risks of excessive borrowing and the rewards of conflicting obligations. Soon I began to find finance in literature, in philosophy, in history, and even in popular culture.

Who Would I Recommend The Wisdom Of Finance Summary To?

I think that’s probably a very risky move, and I think it’s probably not going to happen. You might recall, the underlying story is a governance story. Having procrastinated for a while, I initially retreated to familiar territory and decided to give a talk about recent financial developments in American corporations. It would be titled The Slow-Motion LBO of America and it would describe how the current share repurchase craze should be understood and reversed. I had something concrete to say, it would be provocative, and, to make myself feel even more superior, I rationalized that it was meatier than the puffery that is usually offered in these settings. This website uses cookies to improve your experience while you navigate through the website.

If I were forced to put wisdom on a numerical scale with finance as 1, then humanity might be a 100, and the ignorance of humanity might be 10,000. This is once again one of those books that I wished I had access to when I was younger. It is genuinely a must read if we find ourselves at the crossroads of risk and rewards, as we all do on a daily basis.

  • As time wears on and the family grows older, parents and children get to enjoy more of a friendship relationship.
  • By reconnecting to that value—and those values—perhaps you can understand your life’s work as a meaningful extension of the values you hold dear.
  • Obviously, nobody knows his name anymore, and the reason why is, he turned down that job.
  • I think what sets the book apart is the intersection of economics, politics and history to explain the evolution of finance and it’s main concepts.
  • But in order for DeFi to fulfill its promise, “now is the time to evaluate its benefits and dangers,” write Kevin Werbach and David Gogel.
  • This book captures Desai’s lucid exploration of the ideas of finance as seen through the unusual prism of the humanities.

The societal stigma associated with failure needs to be rewired, and treating failure as an undeniable aspect of life is crucial. Similarly, in our life, if we take decisions with the perspective of valuation and value creation, it will significantly improve our allocation of time, energy, resources to fulfill our objective and live a meaningful life.

He humanizes and speaks of the profession as ‘ennobling’, while acknowledging those who tarnished it. I was not only reading the book with pleasure but watched some movies like Double Indemnity & Working Girl, for which book was perfect illustrator of their use. Valuation and value creation is extremely important aspect of finance and investing. It always looks forward in terms of value creation by the company or a project in the future, and the measurement of valuation is both qualitative & quantitative.

More From The Author

It’s only after that initial sacrifice that parents get to relive life through their children’s eyes. As time wears on and the family grows older, parents and children get to enjoy more of a friendship relationship. As it grows, it eventually becomes the kind that is emotionally fulfilling throughout the rest of their lives. As the market crashed, people lost their jobs and in just months their lives were ruined. It’s become normal to think of the greedy financial system as the originator of problems like this one. These concepts are only a sampling of the great ones contained in this book.

And their omnipresence could be found not only in business, but in literature, movies and even art. The largest individual investor of Apple is Tim Cook who owns 0.02 % of the company. The largest institutional investor of Apple owns less than 10% of the company. There are millions of investors in Apple, they have delegated the job of managing the company to professionals, and the investors expect that the managers will take decisions in the best interest of the company and shareholders. The conflict of Principal-Agent Problem is central to Corporate Governance. Shareholders/investors are principal, and managers are agents of the corporation.

I assume the main audience for The Wisdom of Finance is people who relate to finance and not the people who read classic literary fiction. Now the problem is that if you haven’t read ‘The Pride and the Prejudice’, ‘The Maltese Falcon’, ‘The Financier’, ‘O Pioneers! That said, credit goes to Mihir Desai for deciphering every piece of classic fiction so that a non-reader could also relate to them. I don’t have any misgivings about the breadth of Mihir Desai’s intellect.

Inside The Book

The book follows a conceptual arc that is divided roughly between those two branches. For students or practitioners Retail foreign exchange trading of finance, this book allows them to revisit the big ideas of finance in a fresh, different way.

For readers unfamiliar with, but curious about, finance, this book attempts to outline the main ideas of finance without a single equation or graph—and only with stories. I’m always struck by how intimidating finance is to many of my students. There’s a reason for this—some people in finance want to intimidate other people. By attaching stories to the ideas of Retail foreign exchange trading finance, previously intimidating material will hopefully become accessible and fun. For concerned citizens or aspiring professionals, finance has never been more important—and ignorance of it has never been more costly. At a minimum, when someone you know starts going on about options, leverage, or alpha generation, you’ll know what they’re talking about.

Authors Note

Many practitioners of finance I see in my classroom were taught finance in a mechanistic way that has led to a fragile understanding of the fundamental ideas. When I probe them for the underlying intuitions, their understanding of the formulae helps little, and they can struggle to relay the conceptual underpinnings of what they do. By seeing these same ideas in a completely different way than you’re used to, you will deepen your understanding and, most importantly, your intuitions. Mihir A. Desai was born in India and raised in Hong Kong and New Jersey. As a professor and award-winning teacher at Harvard Business School and Harvard Law School, Desai teaches finance, tax law, entrepreneurship and has recently developed an online finance course for the HBX platform.

Share in
Tagged in