Heroes and Villains of Finance. Baldwin Adam

p>A Baldwin

      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

HEROES & VILLAINS OF FINANCE: THE 50 MOST COLOURFUL CHARACTERS IN THE HISTORY OF FINANCEA BALDWIN

      This edition first published 2015

      © 2015 A Baldwin

      Registered office

      John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom

      For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com.

      The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988

      All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher.

      Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

      Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book.

      Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with the respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom. If professional advice or other expert assistance is required, the services of a competent professional should be sought.

      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.”

ECONOMIST JOHN KENNETH GALBRAITH, 1908-2006

      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