Heroes & Villains of Finance: The 50 Most Colourful Characters in the History of Finance
“Heroes and Villains of Finance provides a fascinating and insightful guide to the personalities and developments that have transformed finance and continue to do so. Anyone trying to understand where finance is now, how it got there and where it might go should read this book.”
Dr Stephen Davies, Institute of Economic Affairs
“An exciting, informative ride through the big ideas and even bigger personalities that have shaped the world of finance.”
Sam Bowman, The Adam Smith Institute
“This delightful book provides a punchy reminder that, whilst we should rightly celebrate the longevity of the vision of the heroes of finance like Adam Smith, the potential downsides of financial innovation have always been with us which we are inclined to forget.”
Professor Mike Wright, Professor of Entrepreneurship at Imperial College London and ranked #1 worldwide for publications in academic entrepreneurship
This edition first published 2015
© 2015 A Baldwin
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Library of Congress Cataloging-in-Publication Data
Baldwin, A.,
Heroes and villains of finance: the 50 most colourful characters in the history of finance/A. Baldwin.
pages cm
Includes bibliographical references.
ISBN 978-1-119-03899-3 (paperback)
1. Finance – History. I. Title.
HG171.B36 2015
332.092′2 – dc23
2015006402
A catalogue record for this book is available from the British Library.
ISBN 978-1-119-03899-3 (paperback) ISBN 978-1-119-03901-3 (ebk)
ISBN 978-1-119-03900-6 (ebk) ISBN 978-1-119-03902-0 (obk)
Cover design: Wiley
Cover image: © Ollyy/Shutterstock
“I AM WORRIED ABOUT OUR TENDENCY TO OVER INVEST IN THINGS AND UNDER INVEST IN PEOPLE.”
01 THALES OF MILETUS
c.624–546 BC
Bertrand Russell once famously said that “Western philosophy begins with Thales”. Does Western finance also? Although more renowned for his philosophy and mathematics, the pre-Socratic Greek philosopher Thales was an active figure in business in his town of Miletus. Known as one of the seven sages of Greece Thales of Miletus provides us with the earliest known example of what we now know as options trading. .
.. One autumn, Thales predicted that favourable weather the following year would result in an above average harvest and so during the winter he negotiated with local olive press owners for the option to exercise the right to use a number of olive presses in Miletus the following year. When spring arrived, his weather forecast proved correct, upon which he exercised his ‘options' before proceeding to rent out the olive presses at a much higher price than what he paid.
With this, the ‘option' was born.
Whilst today, the ‘option' industry has developed into a vast, complex market, its underlying reasoning remains the same as it was when Thales conceived it: an instrument that grants the holder the right (but not the obligation) to engage in a specific transaction, at a specific time, for a specific price.
“…FOR THEY SAY THAT HE [THALES], PERCEIVING BY HIS SKILL IN ASTROLOGY THAT THERE WOULD BE GREAT PLENTY OF OLIVES THAT YEAR, WHILE IT WAS YET WINTER, HAVING GOT A LITTLE MONEY, HE GAVE EARNEST FOR ALL THE OIL WORKS THAT WERE IN MILETUS AND CHIOS, WHICH HE HIRED AT A LOW PRICE, THERE BEING NO ONE TO BID AGAINST HIM…
…BUT WHEN THE SEASON CAME FOR MAKING OIL, MANY PERSONS WANTING THEM, HE ALL AT ONCE LET THEM UPON WHAT TERMS HE PLEASED; AND RAISING A LARGE SUM OF MONEY BY THAT MEANS, CONVINCED THEM THAT IT WAS EASY FOR PHILOSOPHERS TO BE RICH IF THEY CHOSE IT.”
ARISTOTLE ON THALES, FROM THE POLITICS OF ARISTOTLE
02 CHANAKYA
c.370–283 BC
As the ‘pioneer economist of India', Chanakya was one of the earliest and greatest contributors ever to the development of economics and political science. Living c. 370–283 BC, Chanakya was a professor of political science at the Takshashila University, and was later to become the chief architect of the Mauryan empire.
Often referred to as the ‘Indian Machiavelli', Chanakya compiled many of his economic and political ideas into his book Arthashashtra, which due to its harsh political pragmatism is widely considered a precursor to Machiavelli's The Prince. Standing as arguably the first systematic book on economics, the Arthashashtra discusses numerous theories, such as monetary and fiscal policies, welfare and ethics, economic management, international relations and war strategies. Many of the topics that Chanakya introduced in the book are still prevalent in modern economics.
Chanakya believed in the power of an autocracy for effective management of an economy, with a solid legal system needing to be observed in order for an economy to thrive.
Perhaps the first person to visualize the concept of a ‘nation', Chanakya's teachings offer a bureaucratic framework for the management of a society. Chanakya taught that ‘artha' (sound economies) has paramount