Good Investors Make Money. Great Investors Create Value.

The finance sector often lives up to its bad reputation, but here's how a 2000-year-old piece of wisdom can help rehabilitate the way people and corporations think about money.

People have a bad impression of finance, and that's mostly worrying because its often justified, says Harvard Business School professor Mihir Desai. The sector is in dire need of rehabilitation, and there are several ways it can be done. The first is to realize that turning money into more money is a shortsighted investment. To play the long game, the system needs to focus on and reward value creation, which drives innovation and the economy. The second is to demystify finance (which is what Desai's new book The Wisdom of Finance is all about). Desai explains that finance got into its current state because it's more complicated than it needs to be, which makes it harder to control, given the general lack of understanding among the public. To remedy that, Desai taps into the brain's own strengths: humans process stories much better than they process logic, so narratives from history, literature and philosophy can be used to teach and demystify finance. As an example, the The Parable of the Talents from the Bible teaches value creation as well as a finance textbook can. The philosophy of Charles Sanders Peirce can teach risk management and insurance. Mel Brooks can teach fiduciary responsibility. Finance has become demonized, but it's not a system that we can live without. It's becoming more pressing than ever to make reforms that increase value in society, rather than wealth. Mihir Desai's most recent book is The Wisdom of Finance: Discovering Humanity in the World of Risk and Return.

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