I thought Jerry Webman, the chief economist at Oppenheimer Funds, captured the essence of finance nicely and simply in his op/ed in the FT the other day:
At its core, finance is about linking people with savings to those that can put them to productive use. Performed correctly, it can fund retirement accounts, foster growth in emerging markets and support the technology companies that help protesters assemble in a flash. A well-functioning financial system is critical for economic growth. Investments that support worthwhile projects can build the human and physical capital that generates growth and raises standards of living around the world.
I've been negative on the finance industry and bankers in a couple recent tweets, quoting Nassim Taleb and Michael Lewis. It's good to go back to the basics, as Webman does, and be reminded of what finance is really about–when it functions correctly.
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Not to be negative again on banks — just when we were being positive! — but a point about those Goldman Sachs / Citibank magazine advertisements and pre-roll online video commercials that talk about how Goldman/Citi help communities flourish, how they empower small business owners, etc. They've been in heavy rotation ever since the '08 crisis. And they are stylistically just like the Exxon and Shell Oil commercials that claim that oil companies are leading the way in finding renewable energy.
I’ve ordered Emauel Derman’s “When we make a model involving human beings, we are trying to force the ugly stepsister’s foot into Cinderella’s pretty glass slipper.”
I didn’t read “My Life As A Quant” but I’ve been following his articles and Tweetstream. I’m expecting exceptional insight into Financial pathology.
Oops, the book title is “Models.Behaving.Badly: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life”. Copy & Paste, argh.
Oppenheimer and Vanguard have been among the “good guys” of finance over the years, who actually care about long-term value and the industry’s ethics- because, after all, banking and finance are all about trust.
I highly recommend John Bogle’s “Battle for the Soul of Capitalism”. Put it on your reading list- it gets very deep into what has gone wrong over the past three decades and what needs to be done to set it right, all from the perspective of an old-fashioned conservative Republican who knows what he’s talking about.
When you think of money as people’s life energy (we put time,effort,creativity in, and out comes money we can use to get results for what we have put in), finance is about moving around people’s life energy. It’s a shell game, and when done properly, it allows everybody to get more for their energy. When not done properly, you end up with Occupy Wall Street,
What a great definition of finance. I’ll try and get my “finances” in line now!