The Wisdom of Finance: Discovering Humanity in the World of Risk and Return by Mihir A. Desai

In a 2009 interview with The Times of London, Lloyd Blankfein, then CEO of Goldman Sachs, made a quip about bankers “just doing God’s work.” Inevitably, his comments were widely mocked. This was too much from the head of a firm a 2010 Rolling Stone article referred to as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

To be fair, bankers…commercial, retail, investment, or otherwise have, for decades if not centuries, earned our reputations of doing less than God’s work. My use of the word “our” isn’t a typo, as I’ve worked in finance and banking for more than 20 years now. I know of that which I speak and, at times, we do jam our blood funnels into anything that smells like money. Some of us are good at that and others like to talk about how good they are, but as in high school locker rooms everywhere, those that are talking about it probably aren’t getting any. But I digress…

The finance industry probably has attracted more than its fair share of bad actors, simply because the rewards can be so monstrously, embarrassingly great. And yet, I love the finance industry. 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. Some bankers are doing God’s work even if Mr. Blankfein may not have been one of them.

And so, I come to the book The Wisdom of Finance by Mihir Desai. Desai is currently the Mizuho Financial Group Professor of Finance at Harvard Business School and a Professor at Harvard Law School. With degrees in history and economics, as well as an MBA, Dr. Desai has written a book best described as something between a paean and an apologetic of the discipline of finance. In his own words,

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

I suppose this book really is for those of us in the industry or those who wish they were, but seems unlikely to convince those who have already made up their minds about finance and its role in the world, of our virtue or utility.

For those readers engaged in finance deeply, the book holds one final promise. Your endeavors are routinely maligned today, and it can be difficult to make sense of one’s life when your work is characterized in such a negative way. But there is great value – and there are great values – in finance.

I do recommend this book, but as Desai has made clear, its for those of us in the trenches. No one feels sorry for us in finance. They just don’t and I know that. We all do. But it can be lonely and discouraging at times. I remember years ago when my wife worked on Duke Energy’s trading floor in the same town, doing much the same (legal and legitimate) work as Enron. But they all got painted with the same brush. “We’re not like that,” I remember them saying but at that time, being an energy trader in Houston led many people to assume you were a snake oil salesman if not an outright fraud. Similarly, there are many, many good bankers out there painted with Angelo Mozilo’s brush. Community bankers who help their friends and neighbors start and build businesses. Commercial bankers who help our economy grow and counsel CEOs and CFOs about how much is too much. Even equity, bond, and derivative traders who come to work every day dedicated to their craft, trying to trade fairly and protect the interests of those around them.

Many highly educated individuals are deeply engaged in markets and concern themselves with financial matters for most of their time on this earth. By suggesting that finance has not positive values embedded in it, we encourage these individuals to live a professional life without values and to separate their personal, moral selves from their work. That compartmentalization is difficult and often untenable. Can you engage in a life’s work that is bereft of wisdom and values and hope to live a good life?

To that question I would say unequivocally, yes. But it is hard. It is tiring. It is lonely.

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.

We are all fragile creatures, all teetering on the edges of bankruptcy, struggling to navigate between competing obligations that arise when we care deeply about things in our lives. The mistake is to reject uncertainty – just as the philosopher Charles Sanders Pierce suggested – by not caring deeply enough to feel those competing obligations.

This is good, but his connections of finance to literature, music, and even scripture are where Desai has written something unique and worth reading. Finance, it turns out, really does connect to everything and for those of us who really have given our lives to it, The Wisdom of Finance is encouraging, even if preaching to the choir.

In the end, it’s the last chapter, “Why Everyone Hates Finance,” that should be required reading for not only Desai’s MBA students, but all aspiring finance undergrads, because these tend to be people who share certain traits. Finance people, it turns out, often harbor similar drives and attributes, particularly early in their careers, and many of us would do well to heed Desai’s warning,

The game of accumulation is one that will leave one less and less satisfied as one gains more and more. To search for ever-greater satisfaction through accumulation is folly. That is the bedrock idea in finance. And it runs completely counter to how individuals in finance often act and how they are perceived.

This is a situation that, at this stage of my career, I think about often. How much is enough? Would I know it when I got there? What drives men like Ken Griffin, Steven Cohen, or Ray Dalio? How is it that John Arnold broke free of the gravitation pull of money and walked away?

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. I hope it will be read by those of us struggling under the weight of our own egos, knowing we were made for this but trying to retain some semblance of our humanity along the way.

Financial markets, with their patina of quantitative accuracy, let loose our desire to link our outcomes with our character. Consider this the asshole theory of finance. It’s not finance that’s bad. It’s not the people who finance attracts who are bad. It’s just that finance fuels ego and ambition in an unusually powerful way.

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3 thoughts on “The Wisdom of Finance: Discovering Humanity in the World of Risk and Return by Mihir A. Desai

  1. Peirce would have made a very fine structured finance professional… and he would have spun out of the industry in a combination of disgust, boredom, and unfinished curiousity long before he reached the hedge fundy heights of wealth. Glad you made the reference… now where do we go from here?

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