What exactly is finance?
The true face of the financial industry may be far more complex and nuanced than most people understand, and the views of those in the industry and those outside the industry can vary greatly.
Author: GUDORDI | 2023-04-21
How do giants who have been involved in the financial industry for many years observe the operating model of their own industry? (Shutterstock)
Continuing from the above: 〈What did JP Morgan see on the road to finance? 〉
Path dependence is a concept in economics and social sciences, referring to processes where past events or decisions constrain later events or decisions.──Wikipedia
Today, finance seems to have become an indispensable part of modern life. Countless things that modern people do every day seem to be related to finance. On the other hand, financial centers also seem to be the goal pursued by many cities. Once upon a time, almost every major city in the country had ambitions to become a financial center. This makes people ask, how can we become a financial center? Will there be many financial centers in the country? Can Hong Kong continue to be an international financial center? This will lead us to explore a more fundamental question in the city, which is what exactly is finance?
At first glance, this sounds like a question that an ignorant child would ask. Some people’s immediate reaction to this question may be: Do I need to ask it? This is understandable, but the fact is that in the history of human thought, many important breakthroughs originated from child-like questions. For example, Isaac Newton once asked why apples fall from trees? Plato once asked why there is a government in the world? These examples illustrate that childlike curiosity can create a paradigm shift in human understanding of the world.
The financial industry through the eyes of predators
George Soros, who is called a “financial tycoon” by many mass media, once wrote a book – ” The Alchemy of Finance” . From his perspective, finance and alchemy seem to be somewhat similar. In any case, in this book, Soros puts forward many ideas that are very different from the textbooks and are thought-provoking.
In the preface at the beginning of this book, Soros writes:
The scientific method is about understanding the truth; but alchemy is purely about bringing about something desirable. In other words, the main goal of science is truth, but the goal of alchemy is only operational success.
Scientific method seeks to understand things as they are, while alchemy seeks to bring about a desired state of affairs. To put in another way, the primary objective of science is truth, that of alchemy, operational success.
Basically, “The Alchemy of Finance” is a controversial book. The author believes that one of the reasons for the controversy is that Soros sometimes regards himself as a philosopher. He also often emphasizes that he is a student of the philosophical master Karl Popper (Karl Popper) mentioned in this column (see “Man’s plan, God’s success”) ), which may cause some people to view this book from a philosophical theoretical perspective. The author doesn’t think we necessarily have to look at it this way. From the above preface, it seems that Soros’s pursuit of truth seems a bit disapproving. What he focuses on may only be the so-called “operational success.”
The author feels that Soros’s book seems to be pervaded by a thought, that is, in the financial market, the truth is that the winner takes all, and other things do not need to be ignored at all. Soros also mentioned in the book that holding wrong views on the financial market is not actually a problem, as long as there are still people who accept it!
From an academic point of view, Soros’s views undoubtedly may not have sufficient basis and research, but if we only regard his ideas as the personal experiences of industry insiders, then there will be no problem. In any case, this work shows that the true face of finance may be much more complicated than what textbooks say and most people understand.
Where is the client's yacht?
Let the author talk about another book “Where is the Client’s Yacht?” “( Where are the customers’ yachts? ), this is a book written by Shweder, a broker who has worked on Wall Street for many years, after leaving Wall Street. This rather special title comes from a story, and this book begins with this story. The content is roughly as follows:
One day, a foreign visitor was taken to the pier to view the beauty of the American Financial District. The visitor saw many beautiful and pleasing yachts and asked who owned those yachts. The guide’s answer depends on which big broker or bank. The naive visitor then asked, where are their customers?
This book is not an academic work. Much of the content is derived from the author’s observations on Wall Street, and is written in a very humorous style. Here are some examples:
“Wall Street is not in the business of making you money, it’s in the business of generating transactions.”
“The burnt customer certainly prefers to believe that he has been robbed rather than that he has been a fool on.
” the advice of fools.)
It is worth noting that the stock god Buffett recommended this book as one of the most worth-read investment books in history, and once described it as “It’s wisdom and humor are truly priceless.” . The author mentioned these two books mainly to emphasize that the true face of the financial industry may be far more complex and subtle than most people understand. The opinions of people in the industry and those outside the industry can be very different, and the development of financial centers There are also many path-dependent factors pointed out at the beginning of the article. Talk to you next time.
“Hong Kong’s Legendary Future” Series 30
Contact the author: Gudordi@proton.me
