Become a Master of Finance with Harvard Professor Mihir Desai (with Lewis Howes)

Summary

In this enlightening episode of the School of Greatness podcast, Harvard professor Mihir Desai demystifies the world of finance, highlighting its potential as a force for empowerment and its inherent risks. Desai discusses the transformative power of debt for accessing opportunities, the importance of financial literacy, and the need for a more ethical financial system. Through his book 'The Wisdom of Finance', Desai aims to humanize finance by drawing parallels between financial concepts and human experiences, using stories from literature and history. He emphasizes the importance of kindness, generosity, and making the most of one's talents, urging for a collective effort to address environmental challenges and advocate for a greater good.

Takeaways

• 📚 Debt can be a tool for liberation and opportunity, especially for those without access to certain resources.
• 🏦 Understanding the dangers and responsibilities of borrowing is crucial to avoid financial traps.
• 🎓 Investing in education is often a wise choice, but it's important to weigh the potential return against the debt incurred.
• 🔍 Financial literacy is severely lacking, leading to significant life-altering mistakes with debt management.
• 💡 The value of finance extends beyond monetary gains; it plays a crucial role in personal and societal advancement.
• 🧐 Distinguishing between luck and skill in financial success is difficult, emphasizing the importance of cautious investment strategies.
• 💼 Saving more than you think you need and understanding tax advantages are key strategies for financial health.
• 🤝 Commitments and leveraging personal and financial resources can lead to unprecedented opportunities and success.
• 🌍 Addressing environmental challenges and promoting kindness and generosity are paramount for future well-being.
• 📖 Stories and narratives are powerful tools for learning, understanding, and remembering complex financial concepts.

Q & A

What is the main argument made by Mihir Desai in favor of debt?

Mihir Desai argues that debt is fantastic for individuals who are poor and looking to access opportunities that they otherwise couldn't afford. It enables them to invest in education, live in houses they don't have the right to, and is viewed as a liberating aspect of finance.

What are the two primary objectives Mihir Desai wanted to address in his book 'The Wisdom of Finance'?

Desai aimed to demystify finance because he believes it's too important for people to not understand, and to address the issues within finance, advocating for improvement especially after the financial crisis.

According to Mihir Desai, how should one approach borrowing and understanding debt?

Desai emphasizes that while borrowing and debt can be empowering and provide opportunities, it's crucial to understand the serious commitment it entails and the potential dangers of debt overhang, which can limit one's ability to make beneficial decisions.

What does Mihir Desai say about the difficulty in distinguishing between luck and skill in finance?

Desai mentions that it's almost impossible to differentiate between luck and skill in finance, except over the long term. Many might attribute financial success to skill when it could merely be the result of favorable market conditions or luck.

What are Mihir Desai's recommendations for managing personal finance?

Desai suggests saving more than you think is necessary, taking advantage of tax-advantaged saving options like IRAs and pensions, minimizing fees paid for money management, and creating a fun budget for riskier investments with the understanding that it's more about enjoyment than serious investing.

How does Mihir Desai use stories and analogies in 'The Wisdom of Finance'?

Desai uses stories and analogies, such as Jane Austen's characters and their dilemmas, to explain complex financial concepts like risk management, options, and diversification in an accessible and relatable manner.

What lesson does Mihir Desai draw from the biblical parable of the talents in relation to finance?

Desai relates the parable of the talents to the concept of value creation in finance, emphasizing the importance of utilizing one's given resources or talents to their fullest potential rather than wasting or not leveraging them.

What does Mihir Desai believe is the most powerful lever in life, according to Thomas Jefferson?

Desai cites Thomas Jefferson's view that one's reputation is the most powerful lever in life. A good reputation can enable individuals to achieve things they otherwise wouldn't be able to, similar to how leverage works in finance.

What critical lesson on teaching and student potential has Mihir Desai learned from his years as a professor?

Desai has learned the importance of humility and encouragement in teaching, recognizing that every student has a unique capacity for greatness and that judging them prematurely or harshly can be counterproductive.

What would Mihir Desai's final lesson to the world be if he had one last opportunity to teach?

Desai would emphasize the urgency of addressing environmental issues and advocate for kindness and generosity as fundamentally underestimated powers that can significantly impact the future.