Why Study Finance?

How many people get rich by buying stocks? How many in your families? Then why we spend so much time studying investment and finance? Besides the obvious reason many people do make a living on jobs in finance industry, such as banks, there could be other reasons.

The first is that finance offers a broad perspective. Financial market is the barometer of the society. A keen observer of financial market may have a good sense where opportunities are. For example, Jeff Bezos, the founder of amazon.com was a financial analyst. Being a financial analyst, he was keenly aware of the opportunities in internet businesses. Instead of analyzing why others are so rich, he set up an internet company and got rich himself. In 2005, six of the top ten most profitable companies are oil companies. This may suggest the age of resource shortage is very close to us.

The second is that finance offers good training about the cores of businesses. People trained in finance often have a good understanding about the key features in various businesses. For example, the no. 2 and no. 3 persons in Oracle, an IT business, both worked for Wall Street not long ago.

Third, finance, being highly practical and relatively new, often offers refuge for fiercely independent minds, such as Fischer Black. Many people who are not successful in more established fields often find their talents appreciated in the dynamic financial world.

Fourth, it is usually in simple subjects that original insights and methodologies are developed and applied with great effectiveness. Modern science was germinated from astronomy, which Wiener termed as “an ideally simple science”. Finance, which studies prices changes under uncertainty abstracted from all the intrigues of social and organizational complexities, is indeed an ideally simple social science. A new foundation of finance has been established recently, which signals the beginning of a new a scientific revolution.