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The Trouble with Optionality | Opinion | Commencement 2017 | The Harvard Crimson
By MIHIR A. DESAI May 25, 2017

This emphasis on creating optionality can backfire in surprising ways. Instead of enabling young people to take on risks and make choices, acquiring options becomes habitual. You can never create enough option value—and the longer you spend acquiring options, the harder it is to stop. The Yale undergraduate goes to work at McK for two years, then comes to HBS, then graduates and goes to work Goldman Sachs and leaves after several years to work at Blackstone. Optionality abounds!

This individual has merely acquired stamps of approval and has acquired safety net upon safety net. These safety nets don’t end up enabling big risk-taking—individuals just become habitual acquirers of safety nets. The comfort of a high-paying job at a prestigious firm surrounded by smart people is simply too much to give up. When that happens, the dreams that those options were meant to enable slowly recede into the background. For a few, those destinations are in fact their dreams come true—but for every one of those, there are ten entrepreneurs, artists, and restaurateurs that get trapped in those institutions......optionality is a means to an end.
....The shortest distance between two points is reliably a straight line. If your dreams are apparent to you, pursue them. Creating optionality and buying lottery tickets are not way stations on the road to pursuing your dreamy outcomes. They are dangerous diversions that will change you....By emphasizing optionality...students ignore the most important life lesson from finance: the pursuit of alpha. Alpha is the macho finance shorthand for an exemplary life. It is the excess return earned beyond the return required given risks assumed. It is finance nirvana.

But what do we know about alpha? In short, it is very hard to attain in a sustainable way and the only path to alpha is hard work and a disciplined dedication to a core set of beliefs. ....one never even knows if one has attained alpha......Ultimately, finding a pursuit that can sustain that illusion of alpha is all we can ask for in a life’s work.....So, give up on optionality and lottery tickets and go for alpha. Our elite graduates need to understand that they’ve already been winners in the lottery of life—and they certainly don’t need any more safety nets.
optionality  Mihir_Desai  drawbacks  safety_nets  alpha  straight-lines  hard_work  self-discipline  life_lessons 
december 2017 by jerryking
‘The Wisdom of Finance’, by Mihir Desai
Review by Gillian Tett

JULY 17, 2017
The Wisdom of Finance offers a thoughtful explanation of how money works that recognises how perverted the industry can be, but which also argues that “there is great value — and there are great values — in finance”.

Desai does this by using a clever and unusual device: literature. Most notably, he explains how money works by citing stories ranging from Chaucer to Jane Austen to the 1988 film Working Girl. He knows that stories are a powerful narrative device. But the wider philosophical point is, Desai argues, that one of the great failings of our modern world is a “chasm” between the arts and science, and between finance and humanities. This prevents financiers from understanding the social context in which they operate. It also means that non-financiers do not understand how finance drives our world, or the fact that money encapsulates and crystallises social patterns and values. “
books  book_reviews  finance  Gillian_Tett  humanities  Mihir_Desai  non-financial  storytelling 
december 2017 by jerryking
Business Book of the Year 2017 — the longlist
AUGUST 13, 2017 by: Andrew Hill.

One question for the judges is how durable they think the authors’ analyses of 2017’s shifting technological landscape will prove to be. The jury is expected to give preference to those books “whose insights and influence are most likely to stand the test of time”.

* Tom Friedman, whose bestseller on globalisation was the first Business Book of the Year in 2005. Thank You For Being Late, his latest, extends the thesis, linking personal stories to an analysis of the state of business, innovation, economics and world politics.
* Satya Nadella’s Hit Refresh (written with Greg Shaw and Jill Tracie Nichols) is an upbeat, first-hand account of his effort to devise a successful second act for Microsoft — almost unprecedented in the world of big technology — after the software company missed the mobile revolution.
* Brian Merchant’s The One Device dives deep into the making of Apple’s iPhone, on its 10th anniversary.
* Brad Stone’s The Upstarts, about Airbnb and Uber, narrowly missed this year’s longlist.
* Wild Ride, Adam Lashinsky’s lively analysis of Uber’s rise.
* Self-driving cars — one of the technologies being explored by Uber — feature in Vivek Wadhwa’s The Driver in the Driverless Car (written with Alex Salkever).
* Ellen Pao’s Reset (out next month) tackles the red-hot topic of diversity in Silicon Valley — or lack of it — recounting her experience as venture capitalist and chief executive of Reddit, the social platform.
* Jonathan Taplin’s Move Fast and Break Things, which examines the “monopoly platforms” built by Facebook, Google, Amazon and others and how they have “cornered culture”.
* Near-misses for the longlist included: Franklin Foer’s soon to be published critique of the tech sector World Without Mind; Machine, Platform, Crowd (the latest from 2014 shortlisted authors Erik Brynjolfsson and Andrew McAfee); and The Fuzzy and the Techie by Scott Hartley. Mr Hartley’s book on the relevance of the liberal arts in a tech-led world was born from a proposal that made the final of last year’s Bracken Bower Prize for budding younger authors.
* The Wisdom of Finance by Mihir Desai, which uses literature, history, movies and philosophy to shed light on dry financial theories.
* A Man for All Markets, by Edward Thorp, a mathematician who applied his skills, from Las Vegas to Wall Street, from the blackjack tables to the world of hedge funds.
* Andrew Lo’s Adaptive Markets, a critique of the “efficient markets hypothesis”
* Sheelah Kolhatkar’s Black Edgedescribes how Steven Cohen’s former hedge fund, SAC Capital, built its Wall Street dominance before facing insider trading charges.
* David Enrich’s The Spider Network offers a comprehensive account of the Libor rate-rigging scandal.
* Janesville, by journalist Amy Goldstein, which explores the deeper social — and political — impact of business decisions on ordinary working people. She digs into what happened to people in a small Wisconsin city when General Motors stopped producing cars, overturning the residents’ lives.
* With the exception of Nadella’s Hit Refresh, books about management and leadership fared poorly this year, though Fast/Forward by Julian Birkinshaw and Jonas Ridderstrale, and Freek Vermeulen’s forthcoming Breaking Bad Habits, about what happens when best practice goes bad, came close.
* Economics for the Common Good, by French winner of the Nobel economics prize Jean Tirole, due out in October in English. It makes the case for economics as a positive force on the everyday existence of people and businesses.
* Stephen King’s Grave New World underlines that globalisation is under unprecedented threat.
* Kate Raworth, in Doughnut Economics, makes the case for a new economic model that pays more attention to human and environmental pressures.
* Walter Scheidel’s The Great Leveler, is a sobering history of inequality. Scheidel emphasizes the unavoidable importance of violent events — from plague to revolution — in redressing the economic balance. “All of us who prize greater economic equality would do well to remember that with the rarest of exceptions, it was only ever brought forth in sorrow,” he warns in his conclusion. “Be careful what you wish for.”
best_of  books  booklists  Edward_Thorp  FT  gambling  Las_Vegas  mathematics  Mihir_Desai  Satya_Nadella  Sheelah_Kolhatkar  Tom_Friedman 
august 2017 by jerryking

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