What is finance and why do we need it?
Finance is, in its essence, a technology. It is the driving force behind getting people to do things.
Organizations
In the world of finance - that is: in our world - we can not achieve much as individuals. This is a fundamental principle of life. To make a change in this world, we need to build connections and become part of a collective. We call these collectives of people organizations. They will help us accomplish much greater things than we could by doing everything by ourselves.
Topics in Finance
Finance covers a broad range of topics. When people hear the word “finance” they typically think about the stockmarket, real estate, or banking. It actually composes far more than that. In finance we deal with risk assessment, debt management, insurance, diversification of assets, regulation of markets, trading futures, public finance, and behavioural finance. The latter is related to studying the psychology of how people make financial decisions. There are many more topics not covered, but these represent a broad overview of what finance really deals with.
Finance as a technology
It is important to understand that finance is not just a theory or a field of study. It is a technology, like a computer. We can use a computer to perform certain tasks; similarly with finance. Like any technology, finance can be used for good or for evil. Philantropism is an example of good finance - it involves people who have accumulated a lot of wealth, spending their hard-earned money for the benefit of society. Greedily hoarding money and passing it down one’s own lineage is the opposite of philanthropism and represents the evil side of finance.
However, there are some types of finance that have good intentions but unintended outcomes. Foreign aid, for example, is the support of developing nations by providing them with money. Yet, obtaining money is not the main interest of developing nations. Primarily, they are interested in our financial technologies, that is, they want to understand what principles they need to establish, to model the financial success of Russia, China, Germany, or the USA.
Ethics of Finance
Finally, there are the morals of finance. People who will become wealthy, are people who have a “natural, practical talent”. The business world essentially selects people based on their skills - this happens naturally. People who want to do good things for the world have a mindset which will lead them to success. They will find ways to obtain & amass wealth as to obtain their goals. However, they will be obligated to spend their wealth for the benefit of society - not on their (spoiled) children!
Money without purpose is evil money. According to Andrew Carnegie, the second stage of life of an wealth person is to retire early and become a philanthropist. By mastering the principles underlying finance, anyone can become wealthy and help society succeed in its pursuit for knowledge, power, and technology.