I came across this book review via Cory Doctorow’s blog. It’s a review of, I think, two different books relating to finance. I find I am not that interested in reading either of these books, but the first six or so paragraphs of the review have a pretty cogent explanation of why finance is utterly useless: finance is just gambling. Very little of what happens in the finance sector has to do with getting money from the people who have it but aren’t using it, to the people who can use it but don’t have it. Mostly it’s about betting on whether the value of an asset will go up or down. If you’re right, you get money; if you’re wrong, you lose money. Nothing of value is done.
It reminds me a bit of a joke I first heard on Planet Money (back when I listened to that).
Two economists are walking down the road when they come across a pile of horse shit. The first economist says, “if you eat it, I will give you $20,000.” And the second economist, he runs his optimization problem and he figures out he’s better off eating it. So he does and he collects his money.
They keep walking along the road, and they come across another pile of horse shit. Now the second economist, the one with the cash in his pocket, says, “if you eat this, I will give you $20,000.” The first economist evaluates the proposal, says “ok, I’ll eat it.” So he eats it, he gets the money. And they go on.
Now that second economist starts thinking. He says, “you know, we both have the same amount of money we had when we started, but we also both ate horse shit. I don’t see how this makes us better off.”
And the first economist says, “well, yeah that’s true, but you overlook the fact that the economy just grew by $40,000.”
The book review also offers an explanation for why rich finance bros are so into philanthropy: their profession is so completely devoid of any meaning that they must seek meaning elsewhere, hence philanthropy. It’s a perspective I hadn’t considered before. I mainly think of philanthropy as a socially acceptable way for the rich to wield power and to launder their image a bit. But, as the saying goes, por qué no los dos?
Anyway, the first six-ish paragraphs of that review is worth reading. Actually, I read the entire review and didn’t regret it, but the introduction is the reason I thought it was worth sharing. Or you can read Cory Doctorow’s article, which basically just recapitulates it.