So I’ve been concerned
because finance has become demonized
in last several years and a decade or two.
And in part it’s for good reason,
which is the practice of finance broken.
We see a lot of activity that is value extracting
as opposed to value creating,
and that is really disturbing.
而且 你知道的 那不仅是金融业的危机
And, you know, that’s not just the financial crisis,
but we see it in various parts of finance
某种程度上而言 还包括分析管理部门 银行
in analysis management to some degree, in banking.
And so, it is really worrisome that is
A: people have such a terrible impression of finance,
and B: that we sometimes live up to it.
But the truth is that we can’t live without finance,
and we need to rehabilitate finance.
And the reason we can’t is because
it is so central to the modern economy.
So I think even people who are reallyupset about finance
have to acknowledge that it’s really central,
and we have to make it better.
It is the fundamental mechanismby which companies grow,
we save, we allow ourselves to potentially borrow to go to college,
we save for our retirement.
And innovation in general has to be funded.
So finance is really central.
What we have to try to figure out is
how and why it’s become so extractive
as opposed to creating value.
How do you know whether you’re creating value,
and what is the recipe for creating value?
所以 你知道 这些听起来会太专业
So, you know that sounds very financy.
In fact I use The Parable of the Talents,
which is a very odd parable from the bible,
a very harsh parable in the bible,
which effectively captures the logic of
value creation straight out of a finance textbook.
By that I mean it tells the story of these three servants,
two of whom actually use what they’re given well
and one of whom buries his talents.
People don’t often know that the word talent
is actually historically money.
It is now—the modern notion is
what we now think of as an ability.
But the neat thing about that story is,
it maps to the basic recipe for value creation and finance
which is, just to be a little technical,
you beat your cost to capital.
You surpass people’s expectations.
You do it for a very long period of time
and you continue to grow.
So that’s how companies create value.
You know that a little recipe for value creation,
my show is exactly what is in the The Parable of the Talents.
And, in fact, John Wesley Mitchell,
who is the founder of Methodism,
in his essay on The Parable of the Talents,
basically says almost the exact recipe for value creation
that kind of comes out of a textbook
which is you know, beat your cost to capital,
类似的 你知道 回报要大于付出
which is very same, you know, give back more than you take
as long as you can
to as many people as you can,
and so on and so forth.
So it’s actually kind of neat in the sensethat The Parable of the Talents,
that recipe for value creation actually
maps to the recipe for a reasonably good life.
So that’s one example, but there’slike the book is littered with
kind of basically examples like that.
So one of the mechanisms by which financehas kind of gone wrong is
they’ve made it more complex than it needs to be.
And so what I try to do in the book is tell these stories
这些来自文学 哲学 历史学的故事
from literature and philosophy and history
that actually make the ideas really quite intuitive.
So ideally you take a look at the book and
you kind of get a host of ideas,
the core ideas of finance but just by reading stories.
And I think that’s a much more powerful wayfor people to understand finance.
And in that process of demystificationwhat I hope will happen
is people will feel empowered, you know.
They’ll understand what finance is.
They’ll understand what finance is doing
and so they’ll A: be more appreciative of the underlying functions
even if it is broken today.
But also feel more empowered to talkabout it and think about it and
confront people when they’re faced with it.
There are a bunch of different ideasthat are kind of core to finance.
The most important one is risk and insurance
which is just to really try to understandthe omnipresence of risk
and then to think about how all thekinds of things that pay off in life,
really the way they’re priced are a functionof those risks that they address
and how they are associated with those risks.
So that’s a really big idea in finance
that underlies the way we think about securities and how they’re priced.
the way we think about chunks of corporate finance.
And that’s a really core idea.
所以 比如说 为了解释风险和保险
So, for example, to think about risk and insurance
and to think about the omnipresence of risk
I use these two folks who are really fun:
this philosopherCharles Sanders Peirce
and this poet Wallace Stevens.
So by using people like that,
people who actually really deeplyappreciated risk and insurance
but people who you would neverexpect to be in a finance book,
I think you can actually explore the idea of risk
and insurance in a different kind of way.
There are various misconceptions.
So the first about risk is somehowthat it is complete randomness.
Actually risk is something that can be understood.
There are patterns and it can be managed.
So, in fact, that is what finance is.
Finance is all about those patterns,about those regularities and
then figuring out how to manage in that world.
So risk is not really randomness.
Risk is: you don’t know what a particularoutcome is going to be,
but there can be all these patterns in life
that can actually help us navigatewhat seems like chaos.
And in fact, that is exactlywhat insurance companies do,
and that’s what a lot of people in finance dois try to make sense of
the chaos of the world by exploring those regularities.
And, in fact, that’s exactly why Charles Sanders Peirce,
who is this philosopher I mentioned, actually
said near the end of his life, he justkept walking around everywhere
saying, “We are all insurance companies.”
Because we are all insurance companies.
We are all make the sense of chaos.
and he was the founder of pragmatism.
And so his recipe for figuring out the chaos was:
去体验 去尝试 尝试一切
you sample, you try, you try everything
which is a pragmatic approach to life.
It’s also the approach that insurance companies take.
Once you kind of come to termswith the omnipresence of risk
then you have to kind of think about
风险管控 尤其是 风险对冲
risk management and, in particular, hedging.
And one of the counterintuitive pieces of this is
there are these things that help you manage risks.
Things like diversification, things like options.
People get a little confused about that
because they thinkthey’re an end in and of itself.
Like you’re just trying to preventrisks from affecting you.
You know in reality those are instruments
which allow you to take bigger risks.
So you can take, you can buy a little insurance and
then that allows you to take the bigger bets in life.
So, for example, in options
人们认为期权 也就是金融期权 是一种赌博
people think options as in financial options are gambles.
You know they can be.
But in reality the way we typically think about using options in finance
is as insurance and as protection.
And that protection allows you to take bigger
kind of idiosyncratic bets because you have
these options that allow you some protection.
So risk management is actually a hugechunk of finance
because it allows you to taking bigger risks than you might otherwise.