The Wisdom Of Finance Free Review By Mihir Desai

The guy who failed an entire accounting class, but then had to walk it back after the students complained. Given the odd premise , I went into this book with rather low expectations. As someone who has struggled for some time to pierce the veil of complexity surrounding the financial world, this book has helped eur immeasurably in helping me to understand it, and in an oft entertaining way. It felt like I was engrossed in his Harvard Business School class and left wiser from it. His ability to use literary classics to explain finance is so impressive. This might be one of the wisest and interesting books I’ve ever read.

In this sweeping, thought-provoking look at money and human endeavor, he illustrates the concepts of finance and applies them to everyday situations, drawing on literary and historical examples as well as his own experiences. Though some of the parallels that Desai draws between finance and life may seem a bit labored, you will find yourself nodding in agreement with most of his perceptive observations. Asset pricing provides a powerful perspective on risk and value—but does so by ignoring much of the messiness of life. Indeed, a founding myth of asset pricing is a story of individuals on islands who own trees that produce fruit and must exchange fruit with each other. That messiness is what most of us experience every day, and that is the subject of corporate finance. This book takes the unorthodox position that viewing finance through the prism of the humanities will help us restore humanity to finance.

And of course in the end of the book you will find who is the real financial hero for the Mihir. Similarly, in life it’s important to understand the critical role of failure.

The tree must be felled, milled, and the lumber turned into a table. At each stage (not to mention transportation between!) value is added by labor. Desai’s meditation on mergers includes assertions that proper valuations have to be always based on projections of an asset’s value will be in the future–mist enveloped—indeed necessarily so. The author echoes my feelings that, rather than being at odds , the humanities and sciences – finance in particular – are in fact complimentary and intertwined in ways that few today appreciate. The author is clearly well-read and has thought deeply about the subject, which is reflected in the quality of the writing. At a time when bashing the financial industry is all the rage, it was refreshing to read such a lucid defense of the field.

Insurance: Author Dashiell Hammett; Philosopher

‘Wisdom of Finance’ was a book that really punched me with fresh ideas; it’s been a while since I experienced this level of ‘new ideas flow’ from reading. It doesn’t have anything to do with me working in finance (maybe a little, like 5%). Even though it contains multitude of cases happened in the finance world, the book itself is not about finance – it’s about values, relationships, commitments, and many more. Mihir Desai takes basic ideas about risk and return, capital asset pricing model etc and turns them into remarkably deep and authentic lessons we can apply to thinking about the world and our lives.

Certainly this book would be great to own though my edition was from the library. You will like this book if you have a checking account or a loan or have ever made a commitment to yourself or others – pretty much everyone. But today I am dealing with the moral quandary of what to do in a pandemic that will accord with my personal ethics, and the dictates of business. How much loyalty as a businessman I owe to my employees vs my family and their sacrifices on the road to building a viable business.

With the foundations of risk and insurance well laid, the next chapter addresses how risk corresponds to return and how that relationship dictates the conditions for creating value in the world. Here, John Milton, Samuel Johnson, and the parable of the talents serve as our guides. The first three chapters consider the foundational question of asset pricing—how does one deal with the omnipresence of risk in the world? While many analogize finance to physics, the better analogy is to biology. There is a branch that, like molecular biology, precisely focuses on the most essential building blocks of life. And there is a branch called corporate finance that is akin to sociobiology, interested in all the contingencies and messiness of the world that we actually observe.

I suppose it is worth noting that this is a book that I really wanted to love. Simply recognizing that finance is a topic inextricably linked to everything we do in life is a valuable enterprise to undertake. I only wish that that the entire volume had risen to that level. More troubling, though, are the places in the book where the author also gets the economics wrong. First, the discussion of high-beta assets being “…not highly valued because of their limited diversification value” is simply not correct. As a measure of an asset’s systematic risk, beta is calculated as the ratio of the total volatility of the asset and the total volatility of the market, which is then multiplied by the correlation between them. That is, an asset can only have a high beta (i.e., greater than 1.0) if its volatility ratio exceeds 1.0, irrespective of its correlation level.

Book Preview

Similarly leveraging skill, understanding, opportunity, relationship is crucial to pursue and archive meaningful objectives in life. If appropriately leveraged, the results can be significant, but if leveraged without much understanding & effort, it can result into unfavorable situations. In the world of finance, options represent freedom and opportunity. Options allow buying a share at a predetermined price at some point in the future for a relatively small price today. By perusing education and skill in our life, we tend to increase the option value as more degrees means more options & opportunities in the world to live a meaningful life. After all, it’s hard to fix what’s broke if you have no real understanding of the machine. Desai knew he needed a catchy title and thus The Wisdom of Finance but his real thesis is discovering humanity in finance and thus the rest of the title.

Stories abound in literature and the arts about short-sighted, callous and grasping characters in the financial world. Desai’s book reminds us though, that finance is inextricably linked to all the best parts of our lives. He begins with an overview of what finance is and how it works, explaining the concepts of risk management, derivatives, and alpha, among others. The finance industry probably has attracted more than its fair share of bad actors, simply because the rewards can be so monstrously, embarrassingly great. The capital markets can set my heart racing like almost nothing else. I can see bank balance sheets in my head in three dimensions, knowing almost intuitively how they will change given changes in specified variables. The flow of money around the world truly is the lifeblood of our global economies.

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• But by 2009, after years of frustration, the two officially separated.
• Most ambitiously, this book endeavors to improve the practice of finance by rediscovering the humanity of the core ideas of finance.
• Some people, like the American Airlines CEO, say, “I’ll never declare bankruptcy.
• Overall, the book was well done and enjoyable to me, more enjoyable than I initially expected.

Since completing his studies, Desai has been working as a professor for the university. He is the Mizuho Financial Group Professor of Finance at Harvard Business eur School and a Professor of Law at Harvard Law School. The values and principles of author’s approach to finance is totally shared by myself and fully supported.

The common advice when starting a company is that you need venture capital to get it off the ground. You need to buy stock, hire employees, and pay all sorts of other costs. Unless you come from riches, you’re going to need financial help. When AOL and Time Warner merged in 2001, venture capitalists considered it “the single most transformational event” in the history of business in the US. But by 2009, after years of frustration, the two officially separated. I worried that if I ever wanted more if it then that would make me a bad person.

Mergers And Acquisitions: A Journey To the Center Of The Renaissance, Fifteenth

Arts, history, films, literature, etc. makes part of the stories of this book. I got a way deeper understanding of the insurance business and his importance in the economy. If you want to understand more about economics, finance and this chaotic world in which we live, this book will help you a lot. Most ambitiously, this 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.

It’s just that finance fuels ego and ambition in an unusually powerful way. In the end, The Wisdom of Finance by Mihir Desai will probably not be read by enough of the right people or even enough of the wrong people. Those of us in the industry comfortable with our choices won’t need it, while those searching for the next place to jam their blood funnel won’t bother. It will only be read by those of us in the middle, questioning our choices, loving our work but feeling the weight of society’s ire, who will read it…just like we’ve read some of Charles Sanders Pierce.

Ideally, the reader is unconsciously taking a course in finance and emerging with the intuitions of finance, but only by enjoying stories. Rather than dryly articulating the nature of those markets, he told a story—a conversation between a merchant, a philosopher, and a shareholder. The merchant and the philosopher are archetypes of the doer and the thinker.

Books By Language

‘, the book imports characters from classic texts who have a financial lesson to teach the reader. In the later chapters, Mihir does talk about the malice that we associate the wisdom of finance with finance, but in a very conciliatory tone. We ask experts to recommend the five best books in their subject and explain their selection in an interview.

Desai gets at some of this in his chapter about the problem of agency, whether managers are really working for shareholders, or customers, or their employees, or just themselves. What Prof. Rosen taught me — and our relationship wasn’t the easiest — was that numbers masked lies as often as they told the truth, perhaps moreso. And the reason he taught this to his accounting students was that the evolution of accounting was the evolution of storytelling. forex it seems is a primer on the moral hazards undergraduate and more so graduate business students can expect to find once they leave the academy and join Wall Street.

And it did provide me with some new concepts and perspectives, but ultimately, I feel as ambivalent about this book as I do my job. It just didn’t convince me the way I had hoped to be convinced. 1) How complex it is you can easily perceive just by looking at the number of variables needed to be considered before any investment decision and how this number is changing from industry to industry and asset class. But I must explain to you how all this mistaken idea of denouncing pleasure and praising pain was born and I will give you a complete account of the system, and expound the actual teachings of the great explorer of the truth. My favorite chapter from The Wisdom of Finance is ‘Living the dream’. Mihir summons the 18th-century philosophers – Jeremy Bentham and Adam Smith to kick off the discussion on leverage. From Flitcraft and his doppelganger Charles Pierce of Dashiell Hammett‘s detective novel ‘The Maltese Falcon‘ to Alexandra Bergson of Willa Cather’s ‘O Pioneers!

The Failure Of Risk Management

In the past, borrowers who could not service their debts were treated as moral failures and harsh penalties were associated with it. The lack of bankruptcy structure i.e. appropriately dealing with business failure curtailed the risk appetitive of the society. When it was realized that failure is as critical aspects of life as success, and it also plays an important role in the society, bankruptcy structure to appropriately deal business failures were introduced.