This is a quick description of some of the Financial Research I have been working on…
So I just finished a video series on the Core Concepts of Finance. That was 42 videos talking about the main ideas in Finance. So I thought it would be fun make a video about my own research in Finance. So my previous videos cover concepts that are all generally accepted ideas in academia and the business world. What I am about to talk about is my own research. And I want to be clear about this. What I am about to say in this video is controversial. You will not hear about this in business school or read about it in textbooks. But I believe this is the future of finance.
There is a paradox in business today, that nobody talks about. Finance is based on a very simple economic idea. The best financial decisions are made by evaluating your options and selecting the one with the highest utility. It sounds simple. You are selecting the financial choices that make you the most money. That is the very definition of “selfishness.” In fact, I can sum up what you learn in business school with that one word “selfishness.” All the 42 videos I just made are based on this idea. It is using equations to make decisions that make you the most money. That is selfishness. Now I’m not saying that’s bad, but that is what it is.
Now this brings us to the paradox. Because we know that selfish decisions do not always end up generating the best economic outcomes. That is why in leadership classes they teach things like ethics, community service, integrity, corporate governance, working with industry-wide organizations. So here you are on one-side you are supposed to make financial choices based on selfishness, and on the other side you are supposed to make financial choices based on stakeholder analysis. That is the paradox, and I will give you a very concrete example of this.
There is a famous economics example called the “Tragedy of the Commons” and there has been numerous studies on this. The Tragedy of the Commons looks at situations like grazing rights for ranchers or fishing rights for fisherman. So there is a limited resource, and if everyone acted selfishly and used as much of the resource possible, it would deplete that resource and everyone would be worse off. So here is a situation where the selfish choice is actually the wrong business decision.
So we know the selfish choice is not always the best business decision. And yet, all our financial equations are based on that idea. In fact, the entire global financial system is based on these equations, based on the idea of selfishness. Now, just to be clear. I am not saying there is anything wrong with our global financial system, and there is nothing wrong with our financial equations. In fact, I think all these financial equations are genius. You can probably tell from my videos that I think these equations are genius and they are very useful in business. But this paradox still exists.
The reason why I am bringing all this up, is because I have a solution. I believe there is a missing financial equation. And this equation resolves the paradox of selfishness in business. And I am going to explain how this works.
The problem with financial equations as they exist today, is they evaluate financial decisions from one perspective. It is always one person, looking at their financial alternatives and making a decision from one perspective. Here’s what the new equation does. Instead of looking at financial decisions from one perspective it looks at them from two perspectives. And here is why this approach is so useful. Because you don’t have to change any of the existing financial equations. You just layer this new equation on top. The reason why this is so important, is because every financial decision always involves at least two people. There is always two people in every transaction. We all exist within a social network of relationships. And when you start modeling your financial decisions to reflect the relationships in that social network, instead of just looking from one perspective, you get more accurate financial equations. And if you have better financial information, that will lead to better decisions, which will have better outcomes.
So I will leave you with this thought. I have found this missing equation. I call it “The Theory of Credit Markets.” And if you want to know more, I have published my equation and a summary of my research in my book “On Wolves and Finance.” You can purchase it on Amazon HERE. I hope you check it out. The reason why I do all of this, is because I believe this can have a huge positive effect on the Financial world. So check out the book, and also write a comment down below. Let me know what you think. Do you agree with my ideas? Do you disagree? I want to hear from you. So I hope you like hearing about some of my work. I use these ideas in business every day, and I think it is a very powerful way to resolve one of the greatest paradoxes in business.
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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.