- Hardcover: 304 pages
- Publisher: Basic Books (April 14, 2015)
- Language: English
- ISBN-10: 0465064728
- ISBN-13: 978-0465064724
- Product Dimensions: 6.5 x 1 x 9.6 inches
- Shipping Weight: 1 pounds (View shipping rates and policies)
- Average Customer Review: 10 customer reviews
- Amazon Best Sellers Rank: #1,119,312 in Books (See Top 100 in Books)
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Smart Money: How High-Stakes Financial Innovation is Reshaping Our WorldFor the Better Hardcover – April 14, 2015
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The Amazon Book Review
Author interviews, book reviews, editors picks, and more. Read it now
Careful and sensible As someone who was thrown into the deep end of business reporting at the onset of the global financial crisis, [Palmer] is acutely aware of just how dangerous finance can be.”
Robert Shiller, author of Finance and the Good Society
Smart Money is an entrancing story about what is new and excitingbut almost invisible for most of usin twenty-first century finance. A real inspiration for idealistic entrepreneurs, and for members of the finance and insurance profession who have felt humiliated by the financial crisis.”
Edward Glaeser, author of Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier
This engaging and informative book provides a much needed rebuttal to the post-2007 hostility toward all forms of financial innovation. Andrew Palmer takes us on a tour of today's financial innovations, from social impact bonds to peer-to-peer lending, that illustrates the upside of creative finance. This book is crucial (and fun) reading for anyone who wants to understand both sides of the argument about financial regulation.”
Fascinating Palmer is a muscular, efficient writer; he relates in-person interviews and statistical evidence with ease and humor. [His] vignettes show how innovation can, and should, involve more than bankers getting rich, playing games and dodging rules.”
Wall Street Journal
A scintillating brief for financial invention a cheerful and lucid Cook's tour.”
[Palmer's] optimistic perspective is refreshing a welcome corrective to the prevailing conventional wisdom.”
A welcome and inspiring counterargument to the post-2008 vilification of the finance industry. Interesting and well-written, the book shines a light on the virtues of financial innovation.”
This book will satisfy the general reader and investor who wants to see the other side of the coin as it relates to financial innovation.”
[An] eloquent manifesto.... This intelligent, balanced study of current innovations in finance does much to exorcise its recent demonization.”
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Palmer is balanced enough, however, to recognize finance’s short-comings. His analysis of how the finance system is set up, so that successful innovative solutions give way to standardization and one-size fits all analysis to cope with ever increasing volumes, resulting ultimately in mis-priced risk, does bear thinking about. The discipline of constant re-assessment certainly needs to find its place in this system, so as to ensure it has the right safety-valves built in.
But the conclusion of the book – that we need more financial innovation, not less of it, to solve the problems we face – is something that all those who work in the financial services industry should be proud of and which society as a whole should recognize.
Palmer does a great job of looking at new ways that access to capital is improving people’s lives, from student debt to venture financing to peer-to-peer lending. The ideas are refreshing bold and lucidly argued. Compelling stories keep the pace of the action zipping ahead, and the writing at times is very witty.
What’s most special about the book is the intellectual courage that undergirds it. Frankly, it’s easy to beat up on financiers (and some might deserve it), but it’s more challenging and insightful to critique the shortcomings of financial innovation while praising its amazing accomplishments. Palmer found the right balance, and did a great job unveiling the nascent trends in finance.
Andrew Palmer’s “Smart Money” takes on the lonely task of presenting the case for the defence. Palmer is a journalist for The Economist, which has a knack for making provocative and at times contrarian arguments. His optimistic perspective is refreshing, but never wholly persuasive.
This short book starts by cantering through the history of financial progress. It reminds us how services we now take for granted were once inventions that solved fundamental social problems. Banks evolved to turn short-term savings into long-term loans. The Great Fire of London spurred the growth of insurance. And though derivatives now have a bad name, traders have been using similar instruments to manage risk for centuries.
Palmer stretches the argument further when discussing the 2008 crisis. Far from condemning innovation, he makes the case that the blame for the meltdown rests with the lack of creativity in real estate finance. The toxic soup of securitisation, collateralised debt obligations, structured investment vehicles and credit default swaps had a common ingredient: the humble mortgage. If the money men had come up with more flexible ways of funding housing purchases, some of the damage might have been avoided.
There is growing agreement that the sector has become unhealthily preoccupied with financing the purchase of real estate assets, rather than funding new businesses. But if this is bad, then what does the industry do that is good? Palmer reels off a list of new, “socially useful” ideas. He describes social impact bonds that pay investors if ex-convicts commit fewer offences; student loans that vary according to future income; securitisation of possible new drugs; and companies that match start-ups with investors online.
Interviews with driven, idealistic entrepreneurs make a refreshing change from the rogue’s gallery of greedy, myopic traders blowing up the economy or conspiring to hoodwink the public. Though Palmer mercifully avoids the language of disruption, his case studies are infused with the change-the-world ethos of Silicon Valley, where many of the companies are based. The implication is clear: if phones, televisions, watches and even cars can be made smarter with technology, then why not financial services?
The book is stuffed with statistics and striking observations. One of my favourites is that, adjusted for inflation, the price of a property on Amsterdam’s Herengracht was the same in 1992 as in 1646. Yet the taxonomy of innovation is strangely incomplete. The explosion of exchange-traded funds, arguably one of the biggest changes in capital markets of the past decade, is hardly mentioned. There is nothing on ‘contingent convertibles’, novel bonds that banks have started to issue so that they are better able to withstand the next crisis. China, which has been a petri dish for online originality, receives little attention. Bitcoin is ignored.
Meanwhile, in its eagerness to present the case for invention, the book at times strays into cheerleading. The reader is left wondering whether the new companies Palmer describes are genuinely novel, or just using technology to deliver existing business models more efficiently. Those who worry that peer-to-peer lending hides excessive risks, or rests on regulatory arbitrage, will find little to soothe their concerns. A lengthy discussion of the ideas of Robert Merton, the celebrated economist, contains only a glancing reference to his involvement in Long-Term Capital Management, the once-innovative hedge fund that collapsed in 1998.
Financial innovation is worth defending. At a time when other industries are seeing so many upstarts, it would be a mistake to assume that finance is not capable of coming up with fresh ideas. In that sense, “Smart Money” is a welcome corrective to the prevailing conventional wisdom. But not all business models that claim to be ground-breaking are genuinely new. And even new ideas are capable of building up old risks.
- Peter Thal Larsen