What Jane Austen and Mel Brooks Can Teach Us About Finance

 
 
New Book: A new book by Mihir Desai links the fundamentals of finance to several centuries of literature, history, philosophy, music, visual arts, theater, and comedy to make the subject seem less mystifying—and more humanizing—to a broad audience of non-financiers.
  • Author Interview

What Finance Teaches Us About Humanity, and Vice Versa

Interview by Carmen Nobel

If you don’t yet associate Jane Austen and Wallace Stevens with finance, then you clearly haven’t read Mihir Desai’s new book, The Wisdom of Finance: Discovering Humanity in the World of Risk and Return.

The book links the fundamentals of finance to several centuries of literature, history, philosophy, music, visual arts, theater, and comedy in order to make the subject seem less mystifying—more humanizing—to a broad audience of non-financiers.

"The best hope for fixing finance is to reconnect practitioners to the humanity of the underlying ideas of finance"

Readers learn how Jeff Koons and George Orwell represent different attitudes toward leverage, how marital dowries played a big part in financing 15th-century Florence, how Anthony Trollope’s novel Phineas Finn offers useful lessons on risk management…and the list goes on.

“Demystification is critical, as finance is being demonized by many people who don’t fully understand the underlying ideas,” says Desai, the Mizuho Financial Group Professor of Finance at Harvard Business School. “That demonization is quite counterproductive, as finance is too important to society to be caricatured in simplistic ways. And, the easiest way into these ideas is through stories. At the same time, the best hope for fixing finance is to reconnect practitioners to the humanity of the underlying ideas of finance.”

Harvard Business School Working Knowledge reached out to Desai to discuss the book via an e-mail interview. An edited version of the conversation follows:

Carmen Nobel: In your introduction, you explain that the book “takes the unorthodox position that viewing finance through the prism of the humanities will help us restore humanity to finance.” How can the humanities help humanize finance?

Mihir Desai: One of the problems today is that the questions and solutions of finance are not always viewed through a moral prism. Literature, history, and philosophy—the humanities in general—force us to ask questions about how to behave in problematic situations. Anchoring the ideas of finance in stories drawn from the humanities holds the promise of making the ideas more accessible and resonant and hopefully avoids the blinders that some people in finance have.

The 329-year-old Confusion de Confusiones features literary, metaphorical descriptions of stock market activity. (Source: Penso de la Vega, Josef. Confusion de Confusiones, Amsterdam, 1688. Kress Collection, Baker Library.)(Photo by Cliff Moreland)

So, thinking about debt overhang with Kazuo Ishiguro’s Remains of the Day, or using Saul Bellow’s Seize the Day to talk about optionality, or using Agamemnon [the king of Argos in Greek mythology] to talk about bankruptcy might just help us understand finance more deeply and also help us think hard about the consequences of our actions in finance. A good example of that is the [2011] American Airlines bankruptcy decision; by integrating the story of the AA bankruptcy with a discussion of Greek tragedies, we see the bankruptcy decision in a whole new way.

Nobel: Humor is often an effective tool for bridging communication gaps. Could you share some humorous references to finance in literature and pop culture, and the lessons they impart?

Desai: The two cheekiest parts of the book are the discussion of marriages and mergers and the discussion of Mel Brooks’s [musical comedy] The Producers. On the latter, it turns out Brooks is a deep intellect, and he becomes a great guide to the principal-agent problem.

The plotline of The Producers goes to this deep question in finance of what happens when ownership and control are separated, and there are opportunistic managers who can’t be monitored perfectly. That’s the problem of corporate governance and the defining problem of modern capitalism, and it’s also the central plotline of The Producers featuring [lead characters Max] Bialystock and [Leopold] Bloom.

Brooks also provides the ability to take that principal-agent frame and use it more broadly when we think about our life. The story of Brooks and Anne Bancroft that ends that chapter is one my favorite stories in the whole book. Bancroft comes home late one night from rehearsal and is complaining to Brooks about how difficult the acting life is. Brooks responds by picking up a blank sheet up paper, holding it in front of her, and saying, ‘That’s what’s hard.’ As hard as being an agent/actor is, Brooks is saying that it’s much harder to be a principal/author—in the movies and in life.

The chapter titled “No Romance without Finance” is an effort to think through the links between two topics that are usually held apart—love and finance. After outlining how marriages have been infused with economics for the last millennia, I take the folklore around mergers to talk about marriages. It’s fun and surprising to take the lessons of mergers gone wrong—synergies are overestimated, integration planning is underdone, serial acquirers end up hollow shells, execution is everything—and apply them to thinking about marriages. It’s a little tongue in cheek, but it works surprisingly well.

I think our classrooms work best when laughter accompanies learning, and I think that’s true for books as well. Humor has this incredible way of disarming people and making the lessons more memorable. The ideas of finance need to work past people’s cynicism about finance and need to survive more than a few hours in a classroom. Humor can help with that. And, besides, I couldn’t resist working Mel Brooks into the book.

Nobel: What’s your advice for those who are looking to “cross into the terrain between finance and humanities?”

Desai: I think as finance has become more specialized, more abstract, and more quantitative, we’ve lost touch with the concerns of most people. And, I think the humanities have lost touch with many people by deriding commerce and finance. The gulf between the two is a loss to all; people in finance have lost the richness of the humanities, and humanists are spending too much time talking to themselves and not to broader audiences. There’s just an enormous opportunity in bringing those back in touch with each other.

As I researched the book, I came to realize how many great humanists were steeped in finance. The composer Charles Ives began and ran the largest insurance agency in the United States; T. S. Eliot remained a banker at Lloyd’s even as Ezra Pound mocked him for doing so; Wallace Stevens never left The Hartford even though Harvard offered him a tenured professorship; Jeff Koons began as a cotton futures trader and still uses finance in his art; Richard Wright drew on his work in selling insurance in his literature, and so on. However, this collision between the humanities and finance seems to happen less and less.

Oddly, one of the things I’m most proud of in the book is the annotated references section. Because I sacrificed so many academic instincts in writing the book (e.g., footnotes), I really wanted the references section to be more than just a list. It’s the best guide I could create for humanists wanting to learn about finance and people in finance wanting to learn about the humanities. So, hopefully, the references (and the book more generally) serves as an invitation for people from finance and the humanities to learn more about each other.

Related Reading:

That's Classic: Modern-Day Business Lessons from Ancient Rome
Why Leaders Need Great Books
Teaching The Moral Leader

What do you think?

Can the humanities learn from the world of finance? Perhaps great art can influence finance. Add your comment to this story below.

  • Book Excerpt

The Romance of Finance

from: The Wisdom of Finance: Discovering Humanity in the World of Risk and Return
by Mihir A. Desai

For the truest depiction of Wall Street on film, I think you have to go way back before The Big Short and The Wolf of Wall Street. Mike Nichols’s 1988 film Working Girl vividly captures most of the best and worst of Wall Street—the sexism, the snobbery, the self-indulgence are all there, but so is the emphasis on talent, the competition, and the joy of solving problems. Besides, you get younger versions of Melanie Griffith, Harrison Ford, Sigourney Weaver, and Alec Baldwin—all with clothes and hairstyles that only made sense in the 1980s.

Tess (Melanie Griffith) is a secretary from Staten Island anxious to make it in the high-stakes game of mergers and acquisitions. Her boss, Katharine (Sigourney Weaver), is the archetypal investment banker—preppy, brash, selfish, and deceitful. Katharine is in a relationship with Jack (Harrison Ford), the good-guy investment banker who works hard and wants to solve problems for his clients. When Katharine injures herself in Europe, Tess begins acting in Katharine’s stead and advises her client, Trask Industries, to merge with a radio station owned by Jack’s client. Jack meets Tess without realizing that she’s Katharine’s secretary, and as they work together on the merger, they fall for each other. Katharine returns and tries to disrupt the mergers, but Trask and the radio station, and Tess and Jack, are already beholden to each other.

In one of the most memorable scenes, Tess is hiding in the closet as Katharine is trying to seduce an unwilling Jack. Katharine gives voice to her romantic sentiments in a way that only an investment banker could. Tired of waiting for Jack to propose, Katharine pulls at Jack and says: “I’ve been thinking—let’s merge, you and I. Think of it, darling: Mr. and Mrs. Fabulously Happy!” While it is one of the least romantic proposals you can imagine (rivaling the proposal of Mr. Collins), the proposal hints at the parallels between the process of merging companies and the process of combining lives in a marriage.

Is it just obsessive investment bankers who see romance and finance as intimately linked? After leaving the Art Tatum Trio, guitarist Tiny Grimes ventured off on his own and partnered with Charlie Parker in 1944 to create one of the classics of bebop jazz, “Romance Without Finance.” Grimes’s conclusion was unequivocal—romance without finance just didn’t make any sense. Without a hint of irony, Grimes sings, “You ain’t got no money you can’t be mine . . . Romance without finance is a nuisance.” Charlie Parker and his bandmates repeatedly affirm the sentiment by shouting in the background, “You ain’t kidding brother!” and “It’s a drag!”

Fifty years later, the rock band Little Feat released a song with the same title but reversed the Tiny Grimes message, providing a more typically romantic view. Little Feat challenged the Tiny Grimes logic directly with these considerably more anodyne lyrics: “What’s money got to do with love? . . . I’ll take romance over finance every time.”

A similar contrast emerges from the first hits of Ray Charles and Kanye West. For his first hit in 1954, Ray Charles sampled a popular devotional song, “It Must Be Jesus,” to create “I Got a Woman,” and mixed the sacred and profane in new ways. In that song, he praised a woman for the purity of her love and sang, “She gives me money, when I’m in need. Yeah, she’s a kind of friend indeed.” Fifty years later, Kanye West, like Little Feat, reversed that original, romantic sentiment by sampling Ray Charles’s first hit.

The prelude to the song has Jamie Foxx imitating Ray Charles, but this time he’s providing a more cautionary tale by substituting key words. Foxx sings, “She take my money, when I’m in need, Yeah, she’s a trifling friend indeed.” Fortunately, Kanye turns out to not be quite that cynical. He then goes on to combine the two opposing views of the relationship between love and money in the rest of the song. He repeatedly overlays the sweet sentiment of Ray Charles’s “I Got a Woman” with his own more cautionary advice. Just as Jamie Foxx / Ray Charles is lovingly telling us, in the original lyrics, that she gives him money when he’s in need, Kanye is adding his own cautionary tale about how she may well be a “gold digger.”

At certain times, we might choose to believe the sweet sentiments of Ray Charles and Little Feat. But the pragmatism of Tiny Grimes and Kanye West also resonates. History would seem to be on the side of Grimes and West regarding the deep links between finance and romance. From the financing of Renaissance Florence to the rise of the Rothschilds to the creation of the automobile industry to the early days of the internet, finance and romance have been inextricably linked—and the accumulated financial folklore and wisdom about mergers can provide some hardheaded insight into what makes romantic relationships work.

Excerpted from The Wisdom of Finance by Mihir Desai. Copyright © 2017 by Mihir Desai. Reprinted by permission of Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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