Other People's Money: The Real Business of Finance

Other People's Money: The Real Business of Finance

John Kay / Sep 28, 2020
Other People s Money The Real Business of Finance A Financial Times Book of the Year An Economist Best Book of the Year A Bloomberg Best Book of the Year The finance sector of Western economies is too large and attracts too many of th
  • Title: Other People's Money: The Real Business of Finance
  • Author: John Kay
  • ISBN: 9781610396035
  • Page: 370
  • Format: Hardcover
  • A Financial Times Book of the Year, 2015An Economist Best Book of the Year, 2015A Bloomberg Best Book of the Year, 2015 The finance sector of Western economies is too large and attracts too many of the smartest college graduates Financialization over the past three decades has created a structure that lacks resilience and supports absurd volumes of trading The finance seA Financial Times Book of the Year, 2015An Economist Best Book of the Year, 2015A Bloomberg Best Book of the Year, 2015 The finance sector of Western economies is too large and attracts too many of the smartest college graduates Financialization over the past three decades has created a structure that lacks resilience and supports absurd volumes of trading The finance sector devotes too little attention to the search for new investment opportunities and the stewardship of existing ones, and far too much to secondary market dealing in existing assets Regulation has contributed to the problems than the solutions.Why What is finance for John Kay, with wide practical and academic experience in the world of finance, understands the operation of the financial sector better than most He believes in good banks and effective asset managers, but good banks and effective asset managers are not what he sees.In a dazzling and revelatory tour of the financial world as it has emerged from the wreckage of the 2008 crisis, Kay does not flinch in his criticism we do need some of the things that Citigroup and Goldman Sachs do, but we do not need Citigroup and Goldman to do them And many of the things done by Citigroup and Goldman do not need to be done at all The finance sector needs to be reminded of its primary purpose to manage other people s money for the benefit of businesses and households It is an aberration when the some of the finest mathematical and scientific minds are tasked with devising algorithms for the sole purpose of exploiting the weakness of other algorithms for computerized trading in securities To travel further down that road leads to ruin.
    • [AZW] ☆ Other People's Money: The Real Business of Finance | By Û John Kay
      370 John Kay
    • thumbnail Title: [AZW] ☆ Other People's Money: The Real Business of Finance | By Û John Kay
      Posted by:John Kay
      Published :2020-06-24T20:52:43+00:00

    About "John Kay"

      • John Kay

        I was born in Edinburgh, Scotland in 1948, and completed my schooling and undergraduate education in that city I am fortunate to have lived most of my life in beautiful places I went to the University of Edinburgh to study mathematics But, after taking a subsidiary course in economics, I decided that I wanted to be an economist The notion that one might understand society better through the application of rigorous and logical analysis excited me and it still does After graduating from Edinburgh, I went to Nuffield College, Oxford I worked there under James Mirrlees, who was in due course to win the Nobel Prize for his contributions to economic theory.On Mirrlees s advice, I applied for and to my astonishment got a permanent teaching post in the University of Oxford at the embarrassingly early age of 21 Oxford is a collegiate university members of the faculty generally have both University and College appointments This post carried with it a fellowship at St John s College, an association which I have maintained and enjoyed ever since Through the 1970s I developed a conventional academic career, publishing in academic journals, and writing my first book Concentration in Modern Industry with Leslie Hannah, an economic historian colleague My particular interests were in public finance and industrial organisation.But my rationale for studying economics had, from the beginning, been concerned for application My career began to change direction when I was asked to join a group to review the structure of the British tax system This group was established under the auspices of a newly established think tank, the Institute for Fiscal Studies, and was headed by James Meade, another economist who had achieved the ultimate distinction of a Nobel prize Meade s rigour was as demanding as that of Mirrlees, both delivered it with extraordinary personal charm But the most important effect of my experience with the Meade Committee was that I began to develop a taste for the popular exposition of economic concepts.In this vein, I wrote with Mervyn King, now Governor of the Bank of England a personal account of issues in taxation, The British Tax System which ran through five editions.Pursuing these interests, I moved from Oxford and joined the Institute for Fiscal Studies as its first research director Soon after I became Director of the Institute IFS developed into and remains one of Britain s leading think tanks, respected and feared by policymakers and journalists for its fiercely independent analysis of fiscal issues.After seven years, I decided it was time to move on The success of IFS had been built on serious economics accompanied by a commitment to popularisation and application If this could be done for public policy issues, could the same be done in the area of business policy This was the thinking that led me to accept a chair at the London Business School in 1986 and, at the same time, to establish a consulting company, London Economics.Over the next few years, the application of economics to business issues became my intellectual focus During this period, London Economics grew rapidly, largely on the back of the wave of privatisation and regulatory change in Britain in the 1980s By 1991, managing the company had become a major responsibility I revised my arrangements with London Business School My new contract was as Visiting Professor but my job as executive chairman of London Economics took the larger part of my time London Economics grew until, by its tenth anniversary, its annual turnover exceeded 10m with offices in three continents and assignments in over sixty countries.London Economics gave me insights into the business world These came both through consultancy work with major corporations and first hand observation of the growth and development of a small business Other activities have enriched my scholarly work by broadening the experi


    1. The charges of financialization is not a new one when it comes to critiquing the international political economy The idea that the financial sector is produces nothing of value for the economy and is, in effect, a high stakes gambling ring with other peoples money is not a unique complaint But this is not the ramblings of some Chavist apparatchik, but an Oxford educated columnist for the Financial Times.In that respect, he realizes what a financial system can and should do it serves as a system [...]

    2. John Kay is a British economist who once taught economics at Oxford and is now a professor at the London Business School and an editorial contributor to the Financial Times His 2015 book Other People s Money should be added to the long and sagging bookshelf on how the nature of the financial services industry here denoted FSI, and including both commercial banking and shadow banking institutions has been perverted from its original mission to its present sad state as a source of great benefits t [...]

    3. I never thought I d say this about John Kay, but he needs to stop writing He s no longer current He s unnecessarily running the risk of destroying what is a tremendous legacy of contribution.His heart is 100% in the right place.His grasp of the principles is as strong as ever There are tons of ideas here that are undeniably correct, first and foremost the idea that managers of businesses must be personally liable for wrongdoing I also could not agree with him when he notes that the end of Glass [...]

    4. This was a slog for me I don t think I picked up much that I didn t already know But I didn t disagree with anything Kay wrote I think it s an important message and I d recommend it to anyone trying to learn about the topic, so I can t bear to give it anything less than a three It s just overkill for anyone steeped in this industry.

    5. A large number of people suspect that most of what goes on in the finance industry is both slightly dodgy and fundamentally pointless, with very large rewards going to people who do nothing to make anyone s lives better However, not many people outside the industry have enough knowledge of what it does to make this argument this from an informed perspective John Kay is extremely rare someone who understands the industry, an insider in many ways, but also a fierce critic of most of what the indus [...]

    6. Fantastically angry and informative dissection of how financialisation ruined the economy, and what is to be done It went a bit over my head at times this stuff is pretty complicated , but sticking with it paid off Kay s very British sense of humour also helped.

    7. By Edward ChancellorIn the laissez faire world of Adam Smith, when individuals pursue their own selfish interests they unwittingly contribute to the benefit of all That may be so when people are acting for themselves, as principals in the exchange But a problem arises when they use agents to transact on their behalf Agents, of course, have their own interests at heart As John Kay shows in his new book, Other People s Money The Real Business of Finance , in the financial world when conflicts of i [...]

    8. I would have learned a ton if I paid better attention But it was kind of hard to follow since I m not familiar with banking history and regulation The main takeaways are that the finance world is greedy, impersonal, and overly complicated to the point that it s hard to regulate Bankers used to have personal relationships with the people who the took loans from and loaned to Now, bankers and financiers are playing with the money of people they don t know or feel beholden to The mentality is I ll [...]

    9. The history of financialisation John Kay mourns the era when bank managers knew their customers and schmoozed them on the golf course In the run up to the financial crisis they were replaced by intermediaries who slice up mortgages into tranches that are sold off to the highest bidder, creating a short term windfall for everyone in the business, but adds no added value Instead of a long term relationship between the butcher, the banker and the candlestick maker, which relied on internal trust, t [...]

    10. A challenging book for me since I lack an economics or finance background, but incisive and understandable when read carefully I liked how Kay took nothing for granted and always questioned why things function as they do today He never accepted that a theory or method s position on the historical timeline was a marker of its place in an evolutionary march The finance sector currently operates in unnecessary, damaging, and self serving ways that don t follow the purpose of finance to facilitate t [...]

    11. This book is readable, informative, and most importantly, it is right The author accurately describes and diagnosis some of the major issues in finance today I had a few disagreements with him especially on whether banks are indeed different than other enterprises his main point is that they are not , but I think his points are all supported by academic studies and especially by reality.

    12. An insightful description of values that are predominant in the modern financial industry What do these people do for living How does it affect us A highly interesting title Complements the Big Short movie.

    13. It s a very good overview of why the business of banking has become a burden to modern economy, forgetting about its original raison d etre of allocating financial resources for economic activity.

    14. The 2008 09 global credit crunch has created a boom in books about High Finance Making money out of money fascinates and infuriates us and often reaches a peak of interest following the downturn of the business cycle Indeed, those millionaires that got rich speculating on commodities and share prices once basked in the glory of being a stabilising influence on the world economy Then came the 2007 sub prime crisis, the Lehman Brothers collapse of 2008 and the 2009 recession For one brief summer g [...]

    15. Kay s experience as a banker straddles the period of the Mr Mainwaring local manager whose join was to make loans to people who he knew could afford to pay them back, and the super smart trader who relies on the figures that flash on a screen to make the deal He does not regard the path of this evolution as progress.The heart of his critique as to what is wrong with our modern system of managing finance is a view of the real interests that need to be served by the banking system In his view it s [...]

    16. The book is a deep reflection on the role of finance in the economy and society at large what it is meant to be, what it has become, and how we can bridge the gap between the two It is not an empirically heavy driven book, but it offers a rich array of ideas and analytical lenses Given the breadth of the subject and wealth of Kay s perspectives, I found it quite challenging to provide a very brief summary However, there are three key insights to the book 1 First, we should be concerned about fin [...]

    17. Kay s big theme is that the banking financial sector has lost sight of its purpose in actually providing something valuable to the real economy in its modern manifestation, it instead mostly serves to shift around assets for its own enrichment He frequently says that there s too much of a good thing there are too many bankers drawing too many resources whether monetary, regulatory, or, given the increasing tendency for the finance sector to hire quantitative analysts who are among the most sophi [...]

    18. John Kay is plainly an angry man His fury is directed at the financial profession, and its greed, manipulation, dishonesty and numerous other sins that Mr Kay believes have led to bringing capitalism close to collapse In this somewhat overlong book he takes aim at the modern finance industry with its complex set of products based on debt and derived long term value, and blames it for impoverishing us all He harks back to a golden age of the bank manager knowing his clients individually, and maki [...]

    19. Excellent analysis and passionate call for change.Employing fewer people than the coal industry did thirty years ago, investment banking dominates our economy and warps our society This forensic assessment of the benefits of an effective banking system and the cynicism of current practice goes some way to answering the usual rebuttal of cries for change Maybe we shall see the return of Captain Manwerring if banking starts to serve society rather than the other way round.

    20. Need to build resilience in the financial market and rethink a model for mankind.Operating a business for the sole interest of shareholders Sounds like a recipe for disaster from a full ecosystem perspective reference to the ESS concept Cough.

    21. A good insight into what is happening in the financial sector It was a little difficult to get his main idea though.

    22. Definitely a challenging book to understand often times dry with financial terms, but the intentions throughout the book are very important to keep note of.

    23. Surprisingly good book since I was initially expecting another book that casts blame on the greedy banks and crusades the need for government regulations Kay understands the proper role of the financial system and its crucial need in a capitalistic society, AND he is also disillusioned by the effectiveness of increasing regulations to solve the problems He gave good accounts of how regulations were in fact the facilitator of developments of CDS and other derivatives as a means of regulatory arb [...]

    24. A thoughtful and biting critique of the financial services system today Felt high level and theoretical than pragmatic in its proposed solutions, but his opinions gave much food for thought Kay is master of the analogy he uses some great metaphors to make his point The most memorable was the parable of the ox right upfront in the prologue.

    25. A rare book that focusses on first principles and structural causes than on fictionalizing key events personalities of 2008 financial crisis This makes it at times a dry reading focusing on concepts rather than colourful personalities, but a joy if you prefer substance over form and rewards you with some unconventional insights and deeper understanding of why how far the financial services industry has drifted from its core utility to economy and how difficult and unlikely the reform is going to [...]

    26. A kind of dry but good argument that the problem with finance is it is now doing things that are not really what we need of it A few notes quotes that stood out for use later A good quote from Jed Rakoff, a former judge for southern district of NY about SEC s policy of negotiating fines with corporations Just going after the company is also booth technically and morally suspect It is technically suspect because under the law, you should not indict or threaten to indict a company unless you can p [...]

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