Ascent of Money

8.5 Apply Evolution to Financial Turmoil

The author likened the evolution of finance to that of biology. Induced by productivity advancements, financial instruments and institution spawned like species did during favorable environment. Then after rounds of termination very similar to the one in nature, the fittest survive, at least for a time being.

In Mr. Niall’s world, all significant historical events were directly or subtly influenced by finance. I dove directly into the center of the force that shaped our destiny. Engulfed with intriguing events throughout history, I marveled: the thing someone loves and others hate, but none can live without– money.

Mr. Niall masterfully used his prism to extract the quintessence of human history. Tireless couriers rushed from every corner of Europe to deliver the latest news to the powerful Rothschild family whose power was greater than any earthly kingship; The merchants lively played Mr. Shakespeare’s famous drama over and over again at the financial hub Venice. the tons of flours piled near Rome at its busy port waiting to be distributed; The Spanish aristocrats who eventually ruined Argentine and the industrious families who brought prosperity to the Western America; The gunships which forced China to pay for Marijuana and bloody French revolution. War and peace, fear and greed, gloom and boom can be easily epitomized into the two strings of DNA, everlasting conflict and reconcile.

The last credit crunch showed that the financial world has become so inseparable and complex that no one can afford to ignore it. Loan sharks had to charge high interest to compensate for high risk; the silver mountain Cerro Rico did little to prosper Spain; numerous attempts to corner the market were foiled by market forces; Nobel laureates and complex financial models were not sufficient to save LTCM; It was nothing but money that triggered the war. Now all the markets are interlocked with escalating dependency. The domino effect of cutting oneself from the rest of the world is unthinkable. The cost of waging war would be disastrous.

Financial models were developed to estimate the risk based on historical data. However historical data were modeled, we are only looking at one variation out of trillions of other possibilities. Unless we can travel back in time to change historical events such like the outcome of Waterloo and monitor all its outcome, we will never have adequate data to predict risk and return. Can we defy the law of uncertainty?

It is a brilliantly written book about human, finance and war yet an astonishing easy read bereft of baffling terminologies about our fascinating world history.


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