I just finished Mihir Desai’s delightful The Wisdom of Finance. He takes on a big challenge: making finance intelligible to the general public by using stories from the humanities to make the points that financial economists do through mathematical formulations and dense articles in academic journals. It’s an enjoyable take on risk and return, leverage, and other key concepts that investors should understand intuitively even if they can not or do not want to be compelled to understand it mathematically.
Desai’s goal is to make modern finance understandable. My goal in GBTB leans more in the direction of debunking those very same concepts, at least to the extent that they have become hard and fast rules in the form of Modern Portfolio Theory.
But there is some overlap. In his analysis of Jane Austen, The Producers, Robert Morris, Tolstoy’s great short story (How much land does a man need?), and many, many others, Desai necessarily emphasizes the big picture, not the degree to which the characters are maximizing their marginal utility to the third decimal point. Their decision making under conditions of uncertainty is not quantified or precisely quantifiable, and that is fine.
Regular investors would do well to understand that success in investment involves getting those big picture answers correct, not guessing some price target or earnings revision figure down to the penny.