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HomePageTurnerAfterword'Wisdom of Finance' uses myth, literature and history to explain the mysteries...

‘Wisdom of Finance’ uses myth, literature and history to explain the mysteries of Wall Street

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Desai considers Elizabeth Bennet an incredible financial practitioner and would agree Madonna’s ‘Material Girl’ provides better financial advice than an average sales pitch.

Finance, overtime, has become increasingly specialized and arcane. Few people outside its fold are privy to its machinations and functioning.

Mihir Desai’s “The Wisdom of Finance” provides insight on financial operations using principles we follow in our daily lives. Terms like asset allocation, risk management, insurance and options are rendered intelligible by demonstrating their inherent links to literature, culture and poetry.

Going Beyond Wall Street

Desai very effectively demythologizes finance through the use of myths. He provides a whole new perspective on Insurance. The esoteric process of Insurance is traced through its natural development since the Roman times. By taking us through a historical evolution of annuities, which curiously started off as a measure of longevity for Swiss girls, Desai unmasks how intricately the seemingly innovative financial engineering is linked to societal codes.

Nowhere do the connections become more obvious than the linkage of Wallace Stevens’ poetry with insurance. Both, ultimately, have the same motive – making sense of the chaos that is the world.

Dig deep enough and their roots are the same

Perhaps, everyone is familiar with the term ‘risk management’. It is considered a very technical process carried out by financial experts in large corporations. It aims to mitigate the various risks they have been exposed to as a consequence of running a multinational business.

What then, one wonders does Elizabeth Bennet from ‘Pride and Prejudice’ have to do with this highly specialized skill? Desai, with his characteristic wit, goes on to establish definitive links between these two disparate topics. Elizabeth’s mate selection choices are similar to the problem of choices and allocation faced by finance practitioners.

Desai often compares choices faced by people on a regular basis to those faced by finance quants. The ‘power’ of having multiple options to choose from is normally viewed as beneficial. Desai uses this very basic human desire to reveal how the creation and possession of options is extremely coveted in both finance and our lives.

The indecisive protagonist of Saul Bellow’s ‘Seize the Day’ is his quintessential example of the vacillating man. His inability to make effective decisions in life eventually shatters his individuality. The fate of ‘options not exercised’ similarly haunts investors who lose out on successful deals because of their inability to decide.

All eggs but no one basket

We’ve all heard investment advisors telling us to diversify our portfolios since it minimizes risk. The entire mutual fund industry is based on the premise that risks go down when you invest in a lot of different things. While one person does not have the resources to diversify their funds, an entire pool of investors can join together to avail the benefits of diversification.

Desai recounts stories of successful individuals who diversified their activities and consequently magnified their skills. Logic dictates if Stephen Curry, a very successful basketball player, could reap the benefits of learning different sports, so can most people if they chose to diversify instead of specialize. Desai also makes a biblical reference to the benefits of diversification, proving that humanity has always intuitively known that it minimizes risk.

Living in a material world

Desai would probably agree that Madonna’s iconic song “Material Girl” has more financial advice than the average investors pitch. Madonna’s Material Girl who wants ‘proper credit’ from boys and prefers the ones who ‘save their pennies’ is similar to an aspiring investor. This investor, similarly, will not be confused by options and will choose the most robust and profitable one.

Marriage, society and finance are shown by Desai to be inextricably connected. The book also unravels the enigmatic functioning of the Indian marriage market. The Mergers and Acquisitions that large corporations enter into with great publicity are no different than a marriage between the children of two influential business families. The economic underbelly of both of these events is made evident.

Desai’s ‘Wisdom of Finance’ is an ambitious project. Much like Nassim Nicholas Taleb’s Incerto series, it makes instinctive connections between disparate fields of our lives. It attempts to unearth the inherent logic that connects all of them.

The logic and wisdom behind finance is as ancient as the Bible and as timeless as the Roman Empire. Desai shows that finance is not some departure or modern project, practiced behind Bloomberg terminals and stock markets; its roots are derived from our stories, our holy books and our myths.

Mukul Kashyap is a postgraduate in English Literature from the University of Delhi and is currently working in a FinTech startup.

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2 COMMENTS

  1. Review by Mukul Kashyap is such that I can’t wait to read Mihir Desai’s Wisdom of Finance. Mukul seems to have taken out the juice of the book and served it in his review. Incredible work done.

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