Comment by scuff3d
6 months ago
No related to this conversation, but I just started reading some books on finance and I actually know what most of those terms mean now! Lol
6 months ago
No related to this conversation, but I just started reading some books on finance and I actually know what most of those terms mean now! Lol
Good for you! It’s fun when you realize it’s a constructed language that also tends towards precision. While accounting is not my favorite, financial models as a whole are incredibly powerful reasoning tools. On par, for me, with engineering or physics based first-principles reasoning.
Which financial models best describe reality in your opinion?
I'd always wanted to view affairs from a different lens, though I often feel the people who think everything revolves around bond rates or inflation numbers can miss the social picture of why things happen.
> Which financial models best describe reality in your opinion?
That’s a subject that fills many volumes on accounting, finance and economics. I don’t think you should be looking for one best theory, because there are valid differences of opinion in all these fields.
> I'd always wanted to view affairs from a different lens, though I often feel the people who think everything revolves around bond rates or inflation numbers can miss the social picture of why things happen.
The ‘social picture’ is what’s called welfare economics, which is a whole field in itself. I wouldn’t jump straight into welfare economics though, you’ll probably need to start with introductory economics to understand the basic terminology.
https://en.wikipedia.org/wiki/Welfare_economics
> Which financial models best describe reality in your opinion?
The most-powerful ones for individuals are the micreconomic mechanisms. Understanding how leverage, tranching and moving risk (and reward) across stakeholders and time, work, for instance. The necessary mechanisms and tradeoffs one must make, as well as the ones one should.
If you're looking for a formal model, it's the balance sheet. But not the accountant's. The financier's. Sources and uses, and uses and sources. Payments in, payments out. How do they balance over time; how do they change exposures to different layers of economic and legal control.
The primitives of these models are transactions and people. When you look through them, they're defining human wants and ambitions, faults and fears, patience and mortality.
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Nicely done! When I started moving up from being an individual contributor to corporate management years ago, the brass would casually say things like "P&L" or "EDITDA" and I had no idea what they meant. I read textbooks, took online classes, and it was a big deal when I finally could lead a conversation related to our finances.
It's such common language in business that I didn't even realize I was writing so much jargon. I hope you inspired some people to look up the terms. It's really not that hard to understand.... Even CEOs can do it.
With the way I've seen some companies run, I'm not so sure CEOs can lol.
It's been interesting so far. The tough part for me is a the literature is all wrapped in "make your company more successful and profitable", and to be honest I couldn't give a shit about it that. I'm doing this for me, and because (especially on the age of AI) understanding this stuff is more important than ever.
They can, but they might not. Richard Branson famously said he didn't know the difference between gross and net even though he was at the head of Virgin Records.
Any recommendations ?
I'm just stating out on this, so I haven't gotten through everything I want to read yet.
Right now I'm reading Financial Intelligence by Karen Berman and and Joe Knight. There's different versions, but I choose the one "for managers". So far it's done a good job making the material understandable for someone who doesn't have a degree in finance. This the one that's more relevant to the post and will help you start understanding how companies operate at a financial level.
For personal finance I have read
I Will Teach You To Be Rich by Ramit Sethi and A Random Walk Down Wallstreet by Burton G. Malkiel. The first sounds "click-batey" but that's because "I will teach you the boring effective way to manage you're finances" doesn't sell. The latter gets more into the weeds on investing. Bother are great (though Random Walk has been edited many times and the beginning of the book has become bloated, so I'd recommend skimming it a bit since it's just history on epic financial crashes).
I'm planning to read:
7 Powers — Hamilton Helmer
Good Strategy/Bad Strategy — Richard Rumelt
The Outsiders — William N. Thorndike Jr.
The Intelligent Investor — Benjamin Graham
The Psychology of Money — Morgan Housel
Thank you.
I have a bachelor from a school of business and I have no clue.
What did you read that worked?
I'm going to copy/paste a reply I left for another commentor, so I don't have to retype everything lol
I'm just stating out on this, so I haven't gotten through everything I want to read yet. Right now I'm reading Financial Intelligence by Karen Berman and and Joe Knight. There's different versions, but I choose the one "for managers". So far it's done a good job making the material understandable for someone who doesn't have a degree in finance. This the one that's more relevant to the post and will help you start understanding how companies operate at a financial level.
For personal finance I have read
I Will Teach You To Be Rich by Ramit Sethi and A Random Walk Down Wallstreet by Burton G. Malkiel. The first sounds "click-batey" but that's because "I will teach you the boring effective way to manage you're finances" doesn't sell. The latter gets more into the weeds on investing. Bother are great (though Random Walk has been edited many times and the beginning of the book has become bloated, so I'd recommend skimming it a bit since it's just history on epic financial crashes).
I'm planning to read:
7 Powers — Hamilton Helmer
Good Strategy/Bad Strategy — Richard Rumelt
The Outsiders — William N. Thorndike Jr.
The Intelligent Investor — Benjamin Graham
The Psychology of Money — Morgan Housel
The Art of Deception.
You do not need to study anything else. You can even be very successful in every stages of your life with it.