JUDY WOODRUFF: When it comes to Wall Street, many people think of money and greed, but a professor at Harvard Business School argues there’s a lot more to the world of finance, and he uses books and movies to make his case.
Our economics correspondent Paul Solman has the story.
It’s part of our series Making Sense, which airs every Thursday.
ACTORS: One, two, three!
(CHEERING AND APPLAUSE)
PAUL SOLMAN: The field of finance, you might say it has an image problem. Consider “The Wolf of Wall Street,” based on a real-life character.
LEONARDO DICAPRIO, Actor: If anybody here thinks I’m superficial or materialistic, go get a job at McDonald’s, because that’s where you (EXPLETIVE DELETED) belong.
(CHEERING AND APPLAUSE)
PAUL SOLMAN: Investment banker Patrick Bateman in “American Psycho” is fictional, but not entirely implausible.
CHRISTIAN BALE, Actor: I have all the characteristics of a human being, flesh, blood, skin, hair, but not a single clear, identifiable emotion, except for greed and disgust.
MICHAEL DOUGLAS, Actor: I am not a destroyer of companies.
PAUL SOLMAN: Hey, finance has had an image problem since buyout bro Gordon Gekko graced the silver screen 30 years ago.
MICHAEL DOUGLAS: The point is, ladies and gentlemen that greed, for lack of a better word, is good.
ACTOR: Big bank, small bank, I like to make money. All right?
PAUL SOLMAN: And the real events of the 2008 financial crisis only made matters worse.
ACTOR: That’s America’s housing market.
PAUL SOLMAN: But Harvard Business School’s Mihir Desai says there are two faces to finance, though he readily acknowledges the dark one to his students.
MIHIR DESAI, Harvard Business School: Many people demonize what you do, and it’s hard to live that way.
PAUL SOLMAN: And he told me he gets why that perception is so pervasive.
MIHIR DESAI: When you have real-life figures like Martin Shkreli, who was both a hedge fund trader and then took over a pharmaceutical company, jacked up prices by 5000 percent, subsequently engaged in a variety of nefarious behavior, and very proudly so, so it almost makes you feel like real life is outpacing fiction.
PAUL SOLMAN: Desai has written a book to try to balance the picture, “The Wisdom of Finance.”
MIHIR DESAI: The goal in the book is to try to demystify finance so that the people who currently demonize it will come to understand it, as opposed to simply oppose it.
And then for the people who are in finance, we have to get back to the ideas. The ideas matter.
PAUL SOLMAN: To Professor Desai, the big idea of finance is illustrated by the Quincunx machine in Boston’s Museum of Science: the ability to find order in a seemingly random, and therefore risk-forsaken, world.
MIHIR DESAI: This was a real revolution in probability, which is random things happening results in predictable patterns.
PAUL SOLMAN: Balls drop, bounce randomly left or right as they encounter the pins, and eventually hit bottom to form a bell-shaped curve.
MIHIR DESAI: Things that seem random actually end up resulting in a very orderly pattern, in fact, this bell-shaped distribution or normal distribution. And that, of course, is the foundation of finance, because you observe a lot of random things, but it ends up behaving in predictable ways.
PAUL SOLMAN: Randomness and its risks are everywhere. Finance’s job, to try to manage them. Case in point? The income plight of women throughout most of history.
ACTOR: You should consider that it is by no means certain that another offer of marriage may ever be made to you.
MIHIR DESAI: Mr. Collins, who delivers the worst proposal ever to Lizzy Bennet in “Pride and Prejudice.”
ACTOR: I am well aware that 1,000 pounds is all you may ever be entitled to, but rest assured I shall never reproach on that score when we are married.
MIHIR DESAI: You’re not that wealthy, you’re not that pretty, you have an offer on the table today from me. You would better take it.
PAUL SOLMAN: It’s the great economic…