Paul L. Caron

Tuesday, June 27, 2017

Desai:  The Wisdom of Finance — Discovering Humanity In The World of Risk And Return

HarvardMihir A. Desai  (Harvard), The Wisdom of Finance: Discovering Humanity in the World of Risk and Return (2017):

This book is not about the latest study that will help you make money in the stock market or that will nudge you into saving more.

And it’s not about the optimal allocation of your retirement assets.

This book is about humanizing finance by bridging the divide between finance and literature, history, philosophy, music, movies, and religion.

This book is about how the philosopher Charles Sanders Peirce and the poet Wallace Stevens are insightful guides to the ideas of risk and insurance, and how Lizzie Bennet of Pride and Prejudice and Violet Effingham of Phineas Finn are masterful risk managers. This book looks to the parable of the talents and John Milton for insight on value creation and valuation; to the financing of dowries in Renaissance Florence and the movie Working Girl for insight on mergers; to the epic downfall of the richest man in the American colonies and to the Greek tragedies for insight on bankruptcy and financial distress; and to Jeff Koons’s career and Mr. Stevens of Remains of the Day for insight on the power and peril of leverage.

In short, this book is about how the humanities can illuminate the central ideas of finance. But, this book is also about how the ideas of finance provide surprising insight on common aspects of our humanity.

So, this book is also about how understanding insurance can help us make sense of and confront the disorder of the world; how understanding the Capital Asset Pricing Model can allow us to realize the value of relationships and the nature of unconditional love; how understanding value creation can help us live a meaningful life; how understanding bankruptcy can help us react to failure; and how appreciating theories of leverage can teach us about the value of commitments. ...

[T]his book endeavors to improve the practice of finance by rediscovering the humanity of the core ideas of finance. The demonization of finance is counterproductive, and regulation, while helpful, holds only limited promise for addressing the transformation of finance into an extractive, rather than a value-creating, industry. Perhaps we can all find our way back to a more noble profession by enlivening the ideas of finance through stories that illuminate our lives and our work.

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