The Wisdom of Finance: Discovering Humanity in the World of Risk and Return

by Mihir Desai

Overview

“Entertaining and informative. Desai takes us on a journey through the fundamentals of finance, from asset pricing to risk and risk management, via options, mergers, debt, and bankruptcy."- John Lanchester, The New Yorker

"A fascinating new perspective on modern finance," —Oliver Hart, 2016 Nobel Laureate in Economics

"Lucid, witty and delightfully erudite...From the French revolution to film noir, from the history of probability to Jane Austen and The Simpsons, this is an astonishing intellectual feast." —Sebastian Mallaby, author of The Man Who Knew: The Life and Times of Alan Greenspan

Longlisted for 2017 Financial Times/McKinsey Business Book of the Year 

A 2017 AMAZON PICK IN BUSINESS & LEADERSHIP

A WealthManagement.com BEST BUSINESS BOOK OF 2017

In 1688, essayist Josef de la Vega described finance as both “the fairest and most deceitful business . . . the noblest and the most infamous in the world, the finest and most vulgar on earth.”

The characterization of finance as deceitful, infamous, and vulgar still rings true today – particularly in the wake of the 2008 financial crisis. But, what happened to the fairest, noblest, and finest profession that de la Vega saw? 

De la Vega hit on an essential truth that has been forgotten: finance can be just as principled, life-affirming, and worthy as it can be fraught with questionable practices.  Today, finance is shrouded in mystery for outsiders, while many insiders are uneasy with the disrepute of their profession.  How can finance become more accessible and also recover its nobility?

Harvard Business School professor Mihir Desai, in his “last lecture” to the graduating Harvard MBA class of 2015, took up the cause of restoring humanity to finance. With incisive wit and irony, his lecture drew upon a rich knowledge of literature, film, history, and philosophy to explain the inner workings of finance in a manner that has never been seen before.

This book captures Desai’s lucid exploration of the ideas of finance as seen through the unusual prism of the humanities. Through this novel, creative approach, Desai shows that outsiders can access the underlying ideas easily and insiders can reacquaint themselves with the core humanity of their profession.

The mix of finance and the humanities creates unusual pairings: Jane Austen and Anthony Trollope are guides to risk management; Jeff Koons becomes an advocate of leverage; and Mel Brooks’s The Producers teaches us about fiduciary responsibility. In Desai’s vision, the principles of finance also provide answers to critical questions in our lives. Among many surprising parallels, bankruptcy teaches us how to react to failure, the lessons of mergers apply to marriages, and the Capital Asset Pricing Model demonstrates the true value of relationships.
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.    

Product Details

ISBN-13:	9798874798024
Publisher:	HarperCollins
Publication date:	06/11/2024
Product dimensions:	5.20(w) x 5.70(h) x (d)
Age Range:	18 Years

About the Author

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. His scholarship on corporate finance, international finance, and tax policy has prompted several invitations to testify before the US Congress and serves as the basis of his advisory role to leading global companies and organizations.

Table of Contents

Author's Note xi

Introduction: Finance and the Good Life 1

Chapter 1 The Wheel of Fortune 11

The Fliteraft Parable

The Quincunx

From Bottomry to Tontines

We Are All Insurance Companies

Wallace Stevens and Ideas of Order

Chapter 2 Risky Business 35

Lizzy Bennet as Risk Manager

If Isaac Newton Had Worked at Goldman Sachs

I Would Prefer Not To

Stephen Curry, Stringer Bell, and the Only Free Lunch in Finance

The Negative Betas of Your Life

Chapter 3 On Value 58

The Parable of the Talents

The Cruel Logic of Value Creation

Is Education Worth It?

Your Terminal Values

The Talents of Samuel Johnson and John Milton

Alpha-Beta Soup

Have You Financed?

Chapter 4 Becoming a Producer 75

Biafystock and Bloom on Corporate Governance

Apple and Tootsie Roll

A Daisy Chain of Principals and Agents

Vyse vs. Emerson

Mel Brooks on Freud

A Blank Sheet of Paper

Chapter 5 Romance Without Finance 97

Working Girl

The Dowry Fund of Renaissance Italy

The M&A Pages

A May-December Romance

Mergers and Marriages Gone Wrong

General Motors and Fisher Body

Romance Without Finance

Chapter 6 Living the Dream 120

Adam Smith vs. Jeremy Bentham on Leverage

The Hooks of Gratitude and Obligation

Jeff Koons vs. George Orwell on Leverage

Mr. Stevens and Debt Overhang

The Power of Commitments

Popeye in Las Vegas

Chapter 7 Failing Forward 142

The Man Who Could Have Been on the $10 Bill

The Bankruptcy Act of 1800

An Automatic Slay

A Strategic Bankruptcy at American Airlines

Agamemnon, Arjuna, Hecuba, and Bankruptcy

Chapter 8 Why Everyone Hates Finance 161

The Temptation of Pakhom

The Lobster and the Squid

More and More Is Less and Less

The Asshole Theory of Finance

Alexandra Bergson as Finance Hero

Afterword 175

Acknowledgments 179

Notes 182

Illustration Credits 215

Index 216

Editorial Reviews

02/27/2017
In this slender but erudite treatise, law and finance professor Desai (International Finance: A Casebook) proposes that humanity, rather than the hot-button issue of income inequality, lies at the center of finance. To do this, he calls upon none other than Jane Austen and John Milton, among others. Desai gives humanists explanations of basic financial principles, such as value creation and leverage, with nary a numeral. For number crunchers, Desai provides a fresh way of viewing basic ideas. A scene from Dashiell Hammett’s novel The Maltese Falcon is used to explain randomness and chance. The contemporary artist Jeff Koons is invoked to illustrate the power of financial leverage. Other analogies work less well: the description of the Time Warner–AOL merger as a May-December romance seems both strained and precious. Nonetheless, this book does valuable work toward demystifying finance for laypeople and deepening the art for practitioners. Desai’s approach will broaden and enrich any perspective. Agent: Jay Mandel, William Morris Endeavor. (June)

Publishers Weekly

"This is a charming, provocative and readable book. For non-financiers, it can be a great teaching tool; for financiers, it is a badly needed rap on the knuckles, and perhaps an inspiration." - Gillian Tett, Financial Times

"Those familiar with the world of finance will have their perspective shifted, and for the rest of us, Desai provides a welcome entry."--The Boston Globe

"Mihir Desai is a fortunate person: he is an expert economist who is also well-read. In this book he uses his skills to provide a fascinating new perspective on modern finance, showing how the main concepts have parallels in literature and the arts. Students of finance will learn literature, students of literature will learn finance, and everybody will learn something." --Oliver Hart, 2016 Nobel Laureate in Economics

"For those of us who have long believed that the field of finance was more than a way to make a good living, Mihir Desai has written a liberating book. He shows us how an understanding of the humanities can increase our effectiveness as financial practitioners and add a dimension of joy to process." --Byron R. Wien, Vice Chairman, Multi-Asset Investments, Blackstone Group

"In this lucid, witty and delightfully erudite study, Mihir Desai connects finance to philosophy, literature and the deep essence of the human condition. From the French revolution to film noir, from the history of probability to Jane Austen and The Simpsons, this is an astonishing intellectual feast." --Sebastian Mallaby, author of The Man Who Knew: The Life and Times of Alan Greenspan

"This book is startling, a stunning, erudite, fascinating look at the world as we think we know it, but it's a world where all roads lead to finance, and in particular, insurance. Highly recommended." --Seth Godin, author of Purple Cow

" The Wisdom of Finance is fascinating and delightful throughout. Desai explains the world of economics to those who love literature and the world of literature to those who are passionate about economics. And if you enjoy both -- well, then you are in for an extra-special treat. I kept shouting aloud: "I get it, I finally get it!" Here is a book that will make you richer in spirit -- and maybe in money, too." --Will Schwalbe, New York Times bestselling author of The End of Your Life Book Club and Books for Living

"The Wisdom of Finance is required reading for anyone interested in finance or in pursuing a career in the industry. Mihir eloquently traces the products, practices, and services of our modern financial system to their roots while providing literary context and illustration. It’s a refreshing approach to what can be a turgid topic, and it can provide practitioners with a new appreciation (and understanding) of their role in their companies, the industry, and in the broader economy." --Vikram Pandit, Chairman and CEO of The Orogen Group and former CEO of Citigroup.


"In The Wisdom of Finance, Mihir Desai masterfully achieves two goals - bringing great clarity to how finance works and why it is important, and shining a bright light on how the humanities helps us to better understand our lives and world." --Clayton Rose, president of Bowdoin College

"Mihir Desai brilliantly applies original lessons drawn from the world of finance to enable all of us to lead more secure, fulfilling and happier lives. Using myriad examples from historical sources and current experiences, Desai takes essential financial theories and translates them into easily understood ways to enrich and improve our lives." --Bill George, former chairman and CEO of Medtronic and author of Discover Your True North
 
"The Wisdom of Finance does for the global economy what Alain de Botton's How Proust Can Change Your Life did for French literature: it expands our idea of an obscure topic and illuminates its centrality to your everyday. This is a work of true philosophy and passion, incorporating thinkers and artists from E. O. Wilson to Jeff Koons elegantly into our understanding of how we make choices. In a chaotic world, everyone should read Mihir Desai's extraordinary debut."  --Lea Carpenter, author of Eleven Days
 
"The Wisdom of Finance is that rare book that manages to be both illuminating and truly fun to read. It puts in deeply human terms ideas that have so often become caricatured and one-dimensional. You will be glad you spent time with Mihir Desai, and you will think of several people to whom you will send this book once you’ve finished." --Gayle Lemmon, author of Ashley’s War
 
"Mihir Desai has written a thoughtful and remarkable book. It takes us not only on a functional journey about the role of finance in society, but also an ethical and social one." --Rakesh Khurana, dean of Harvard College
 
"A scholar who is equally at home with art, literature, contemporary culture and financial theory, Mihir Desai improbably brings these worlds together in an absorbing, personal narrative that has much to teach us about how they are deeply connected." --Will Goetzmann, author of Money Changes Everything; Edwin J. Beinecke Professor of Finance and Management Studies; Director, International Center for Finance, Yale School of Management
 
 “This slender but erudite treatise...does valuable work toward demystifying finance for laypeople and deepening the art for practitioners. Desai’s approach will broaden and enrich any perspective." --Publishers Weekly

From the Publisher