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The Wisdom of Finance
Book

The Wisdom of Finance

Discovering Humanity in the World of Risk and Return

Mihir Desai
Houghton Mifflin Harcourt, 2017
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Editorial Rating

9

Qualities

  • Applicable
  • Eye Opening
  • Engaging

Recommendation

Finance keeps the wheels of the economy turning, but it gets a bad rap in the popular imagination. The 2008 crisis only magnified that perception. But finance is a double-edged sword in professor Mihir A. Desai’s nuanced perspective of the field’s socially useful functions. He illustrates the concepts of finance and applies them to everyday situations, drawing on literary and historical examples as well as his own experiences, to show how people can use financial tenets to improve their lives. In this sweeping and thought-provoking look at money and human endeavor, he invites readers to open their minds and draw new insights from “the wisdom of finance.”

Summary

Finance is rooted in human nature, and it facilitates life for people in all segments of society.

In spite of all the ways in which people apply its basic principles to their daily lives, the subject of finance draws consistently negative reactions around the world. Stories abound in literature and the arts about short-sighted, callous and grasping characters in the financial world. For instance, Leo Tolstoy’s tale about Pakhom the peasant’s effective use of financing to secure real estate and enrich himself shows how greed – goaded by the devil – made Pakhom’s desire for even more land the cause of his death. The infamous banker Gordon Gekko in the film Wall Street is also cast as a modern-day villain, extolling the virtues of avarice. 

But rather than being evil, finance is in fact rooted in human nature, and it facilitates life for individuals across all segments of society. Finance provides a way for people to deal with a risk-filled environment, especially when they face choices requiring trade-offs between enjoyments today and gains in the future. The modern topics of asset pricing, risk management, options, diversification, ...

About the Author

Mihir A. Desai is a political economist and professor at Harvard Business School and Harvard Law School.

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