A Financial Times Book of the Year, 2015
An Economist Best Book of the Year, 2015
A Bloomberg Best Book of the Year, 2015
The finance sector of Western economies is too large and attracts too many of the smartest college graduates. Financialization over the past three decades has created a structure that lacks resilience and supports absurd volumes of trading. The finance sector devotes too little attention to the search for new investment opportunities and the stewardship of existing ones, and far too much to secondary-market dealing in existing assets. Regulation has contributed more to the problems than the solutions.
Why? What is finance for? John Kay, with wide practical and academic experience in the world of finance, understands the operation of the financial sector better than most. He believes in good banks and effective asset managers, but good banks and effective asset managers are not what he sees.
In a dazzling and revelatory tour of the financial world as it has emerged from the wreckage of the 2008 crisis, Kay does not flinch in his criticism: we do need some of the things that Citigroup and Goldman Sachs do, but we do not need Citigroup and Goldman to do them. And many of the things done by Citigroup and Goldman do not need to be done at all. The finance sector needs to be reminded of its primary purpose: to manage other people's money for the benefit of businesses and households. It is an aberration when the some of the finest mathematical and scientific minds are tasked with devising algorithms for the sole purpose of exploiting the weakness of other algorithms for computerized trading in securities. To travel further down that road leads to ruin.
About the Author
John Kay is a visiting professor at the London School of Economics and a Fellow of St John's College, Oxford. He is a director of several public companies and contributes a weekly column to the Financial Times. He chaired the UK government review of equity markets which reported in 2012 recommending substantial reforms. He is the author of many books including The Truth about Markets (2003), The Long and the Short of It (2009) and Obliquity (2010), all published by Profile Books.
Industry Reviews
"Other People's Money is not merely another broadside content to denounce finance's dysfunction, but rather a masterly attempt to locate its various origins and connect them with analytical and theoretical rigor. Kay provides by way of context a panoptic overview of the history, evolution and structure of the financial system in the United States and Britain, one that is impressive in its ability to weave together a comprehensive range of material, from the mechanics of banking to the Gaussian copula, in elegant, jargon-free prose."
New York Times Book Review
"Mr. Kay is a brilliant writer with an ability to explain the role in the 2007-08 financial crisis of such concepts as credit default swaps, collateralized debt obligations and moral hazard... [He] is at his best in reminding us that the financial system is still fragile and in explaining that more regulation is not the answer... We can applaud his call for a cultural change that will enhance ethical standards and put the customer first."
Wall Street Journal
"[Other People's Money] should be read by everyone concerned with preventing the next crisis...[Kay] skewers the pretensions of the finance sector and questions whether its high rewards reflect its true economic contribution. Barely a page goes by without an acute observation or pithy aphorism. ... Above all, the finance sector should be judged on the same basis as other industries; if an activity is unprofitable without taxpayer support, it should not occur. 'Our willingness to accept uncritically the proposition that finance has a unique status has done much damage,' the author wisely says. Let us hope those in authority will listen."
The Economist
"Kay's insistence on stepping back, on judging finance by the humdrum standards of any other industry, with its self-serving mystique and aura of inevitability stripped away, makes Other People's Money one of the best two or three books I've read on the crash."
Clive Crook, Bloomberg View
