Ask HN: Book recommendations for understanding financial systems? • Hacker News Board

Re: Ask HN: Book recommendations for understanding financial systems?

#171

Post by jonahbenton » Sat, Mar 14, 2020, 6:53 PM UTC

majos wrote: post #131

jonahbenton wrote: post #113

Earlier quoted context omitted.

Yeah, I would make a distinction between learning about the financial system for investment purposes- which as a non-professional in that space I think is pointless- vs learning about to understand what's happening in the world. Whatever domain you're in, whatever interests you have- having something of a model of the financial machinery that basically underlies all human activity, both in the small and in the large,…

> Whatever domain you're in, whatever interests you have- having something of a model of the financial machinery that basically underlies all human activity, both in the small and in the large, I would argue is super valuable. What’s strange is I’m generally in favor of “staying informed”. But I typically skip most financial news. For example, looking at last week’s issue of The Economist, there are several articles…

Hear you- it sounds like you have a sufficiently rich mental model that the reports "make sense"- some semantics/meaning are conveyed. They might even "sound obvious"- why is X even news? Etc.

That's a tough place to be- on the usual models of learning curves for a practitioner that's right at the edge of transitioning out of beginner. A lot of people who are "book smart" are here.

In order to learn more, to actually get out of beginner stage, brains need to practice. They need to DO. You would need to find a problem to work on that causes you to produce not just consume.

Does that make sense? Hope that's helpful and not offensive, all comments intended to be positive/growth mindset/supportive.

Re: Ask HN: Book recommendations for understanding financial systems?

#172

Post by nell » Sat, Mar 14, 2020, 7:12 PM UTC

pergadad wrote: post #29

evjan wrote: post #20

Earlier quoted context omitted.

The entire Incerto book series by Taleb (which includes Fooled by Randomness and The Black Swan) are awesome and they are talking about big catastrophic events like the current one. This pandemic is a classic Black Swan event: it's a surprise, it has a major impact and lots of experts will try to say that it was easily foreseeable in hindsight.

It's not a black swan, a pandemic was long on the horizon (think SATS, MERS, Ebola, ...). Just to add: I found taleb pretty opionated and had trouble distinguishing his own opinions from facts/theories.. I'd not recommend his books.

Disagree on Taleb. He has been a major influence in how I see the world. Here are a few things he brings up often

- Value of grandmother's wisdom

- lindy effect - Most new tech will replace the tech that came before it and rarely centuries-old tech.

- Being skeptical of what we read in newspapers

- Recognize that domain experts could be idiots in other domains

Re: Ask HN: Book recommendations for understanding financial systems?

#173

Post by anthony_doan » Sat, Mar 14, 2020, 7:16 PM UTC

evjan wrote: post #20

yalooze wrote: post #16

For a slightly different take, Fooled By Randomness and The Black Swan by Nassim Taleb. I would read some of the more direct recommendations here and then read Taleb to remind you that not everything is predictable or easily explainable.

The entire Incerto book series by Taleb (which includes Fooled by Randomness and The Black Swan) are awesome and they are talking about big catastrophic events like the current one. This pandemic is a classic Black Swan event: it's a surprise, it has a major impact and lots of experts will try to say that it was easily foreseeable in hindsight.

This isn't black swan. Taleb is really condescending when he try to make his point.

He really tweet fight over other statisticians about the concept of black swan when it's in the statistic. I can understand if he wants more emphasis on it but he makes it as if statistic does not take this into account.

Black swan is something that is never seen. Seeing how there were many similar viruses coming out of China and one in the middle east already means this is not a unseen or will blind side.

Re: Ask HN: Book recommendations for understanding financial systems?

#174

Post by jonahbenton » Sat, Mar 14, 2020, 7:49 PM UTC

PaulDavisThe1st wrote: post #154

jonahbenton wrote: post #93

Huge, huge topic. You will have to pick a path through the enormous jungle. The starting point I would recommend is bottom up, through accounting and financial statements. Core knowledge, of both practical and intellectual value. Tons of books here, I particularly like Thomas Ittelson - Financial Statements Accessible, straightforward, friendly. After that, any of the collections of Warren Buffett's Letters to Shareh…

If Graeber's Debt didn't help you build understanding, then I'd respectfully suggest that you weren't trying to build a deep enough understanding. Debt (the book) is not about our contemporary system (much) - it's an incredible work about the most basic elements of "financial systems" and how debt has shaped our cultures, economies and political systems over thousands of years. Put differently, perhaps, it's a book a…

Agree completely that it is an important work and enlightening- in terms of perspective. The socio/anthropological history of Debt is a very useful lens for the modern world.

That said, in terms of understanding- with all respect, I find it insufficient (MHO). Perspective, as Alan Kay says, is worth a lot of IQ points, but on its own is insufficient. The modern financial world is full of machines (both software and people processes). Much of what happens is a result of mechanical inertia. The universe of sensible changes from a policy perspective is limited by the ergonomics and sympathies of the existing machines.

It has been a long time since I last read Debt but I remember feeling frustrated by an absence of coverage of the machines. My perception of his advocacy in recent years has been that he has been less effective than he might have been had he stronger command of the machines, and not just the policy.

One of my recs- Sarah Quinn- while like Graeber is also deep in the world of the sociology of money, is stronger technically. Her PhD thesis is an extremely helpful dive into the mortgage securitization world- the largest debt market in the world other than Treasuries- and my rec (American Bonds) so far is a popularization of that work.

I completely forgot, another excellent book on important machines that shape the modern financial world is

Payment Systems in the US - Carol Coye Benson

Re: Ask HN: Book recommendations for understanding financial systems?

#175

Post by petrocrat » Sat, Mar 14, 2020, 8:01 PM UTC

reddit.com/r/mmt_economics

Not a book, I know but there are a lot of articles and resources in the sidebar, including a list of academic papers on the inner workings of money/monetary systems. Search for "MMT Foundations" within that subreddit to find those.

Re: Ask HN: Book recommendations for understanding financial systems?

#176

Post by goodcanadian » Sat, Mar 14, 2020, 8:08 PM UTC

I think the best way to understand it all is to understand the history of how it came to be. I would start with something like:

Money: Whence it Came, Where it Went by John Kenneth Galbraith

The Ascent of Money: A Financial History of the World by Niall Ferguson

Re: Ask HN: Book recommendations for understanding financial systems?

#177

Post by anaphor » Sat, Mar 14, 2020, 8:17 PM UTC

"Borrow: The American Way of Debt" by Louis Hyman

It's basically a historical study of debt in the United States over the past 100 years or so. Very interesting and educational.

Re: Ask HN: Book recommendations for understanding financial systems?

#178

Post by HenryBemis » Sat, Mar 14, 2020, 8:49 PM UTC

rupert1234 wrote: post #168

6gvONxR4sf7o wrote: post #143

Earlier quoted context omitted.

You can say the same about any field. Nobody understands all of physics. Or biology. Or finance. That shouldn't prevent us from giving them clear places to start and giving them overviews.

This is wrong. Just spend some time in finance, then spend some time in a field which is closer to a hard science and you'll realize it. As an example, most theories in physics are pretty darn good - ie you can use them to predict the outcome of something. Most theories in finance and economics are pretty darn bad - ie you can't use them to do anything useful.

This!

There is a joke that goes like this: Economist is the one that will tell you tomorrow why their prediction was wrong yesterday!

Re: Ask HN: Book recommendations for understanding financial systems?

#179

Post by soVeryTired » Sat, Mar 14, 2020, 8:51 PM UTC

hogFeast wrote: post #159

soVeryTired wrote: post #72

Earlier quoted context omitted.

I recommend against Mankiw, and to be honest, macroeconomics as a whole. But particularly undergrad macroeconomics. Undergrad macro textbooks are more or less designed to teach you how to work a model, and how to prove theorems about a model. But when all is said and done, macro tends not to go the distance and demonstrate how the model relates to the real world. They also get important details wrong. Most of the wes…

I agree but painting the whole of macro with the same brush as undergrad is a mistake. Yes, undergrad textbooks are tedious and the content varies between the misleading and wrong (and I definitely agree about learning accounting and how the plumbing works). But it is also true that past the level of undergrad, it does get more useful. There is still a lot of dubious stuff going on, and you have zealots engaging in t…

> But there is also some pretty good research that helps you understand the economy.

I'd love to see some. I looked quite hard into two topics, gravity models of trade and the Philips curve, and I never found much I thought was convincing.

I think the culture of academic macro doesn't appreciate just how hard it is to thoroughly test a model. It's not as simple as writing down some dynamics, estimating via maximum likelihood, and drawing conclusions based on the parameters that pop out.

Re: Ask HN: Book recommendations for understanding financial systems?

#180

Post by pgwhalen » Sat, Mar 14, 2020, 8:53 PM UTC

fanzhang wrote: post #110

maest wrote: post #64

I have almost 10 years in the finance industry, both buyside and sellside and my take is that, while there are some fundamental principles at play, the world of finance is too messy and complicated for any one book to describe it. An even stronger statement I am willing to make is that no one person correctly and fully understands the financial system. So, once you accept that there is no "correct" answer to how the…

Agreed that Money Stuff generally technically accurate. The only gripe I have about it is that it has a bias in the direction of "everything is so messed up / comical". This is an irreducible bias as it's the job of the journalist to make a topic seem engaging and interesting. However, if you take the theme of Levine's articles too literally/thematically, you'll think that finance is filled with quirky rules that pro…

I'm a daily reader of Matt Levine for probably four years now and I have to admit I've come to precisely the opposite conclusion about how he writes. He points out quirky situations that may appear superficially stupid, but in reality are somewhat justified given the way the system exists. And he does a superb job in pointing out the humor of these situations while still breaking them down to show why things are not as simple as they seem.