right goals wrong tools
DESCRIPTION
An aim without a method is useless. A method without an aim is dangerous. Corporate bankruptcies and financial crisis couldn't have been explained better than these words by Deming,TRANSCRIPT
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Right Goal, Right Goal, Wrong ToolsWrong Tools
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Jim Yong Kim,World Bank Group
President
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
“Our new approach calls for individuals and institutions to shift shift
from being ‘crisis fighters’ to from being ‘crisis fighters’ to proactive and systematic risk proactive and systematic risk
managers.managers. Doing so will help build resilience, protect hard-won protect hard-won
development gainsdevelopment gains,, and move us closer to achieving the World Bank Group’s goals of ending extreme
poverty and boosting shared prosperity.”
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Kaushik Basu,World Bank Chief
Economist and Sr. Vice President
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
“This World Development Report shows human decision-making falters most human decision-making falters most
where risk is involvedwhere risk is involved – for this reason, risk creates special challenges for development policy. As globalized nations contend with fluctuations between good and bad outcomes,
there is at times a propensity to shy away from development and
globalization, when in fact doing so is to opt for the bad outcome in
perpetuity.”
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Norman Loayza,Director, World Bank - World Development
Report
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
“Although people’s own efforts, initiative, and
responsibility are essential to manage risk, their success –
in terms of resilience and prosperity – will be limited will be limited
without a supportive without a supportive environment.”environment.”
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
““An aim without a An aim without a method is useless. A method is useless. A
method without an aim method without an aim is dangerous.”is dangerous.”
- W. Edwards Deming
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
““No problem can be No problem can be solved from the same solved from the same level of consciousness level of consciousness
that created it.”that created it.”
- Albert Einstein
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
“ The riskiness of an investment is not is not measured by betameasured by beta but rather by the reasoned
probability of that investment causing its owner a loss of purchasing power over his
contemplated holding period.”
“Investment in productive assets, whether businesses, farms, or real estate - ideally,
should have the ability in inflationary timesinflationary times to deliver output that will retain its purchasing retain its purchasing
power valuepower value””
Berkshire Hathaway, letter to Shareholders, February 25, 2012 by Warren E. Buffett, Chairman of the
Board
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Berkshire Hathaway
Dow Jones Index
Jan,1990 to Feb,2014
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
“the opportunity cost of capital depends on the project’s depends on the project’s
betabeta. .... ...SiemensSiemens, a German , a German industrial giant, uses 16 different industrial giant, uses 16 different discount ratesdiscount rates, depending on the
riskiness of each line of its business.”
Fundamentals of Corporate Finance, 3rd edition, ISBN 0-07-553109-7, Richard A. Brealey, Stewart C. Myers, Alan J. Marcus, Stephen A. Ross, Randolph
W. Westerfield, Bradford D. Jordan, pages 421-423.
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Siemens
Feb,2004 to Feb,2014
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Corporate financial practice conflicts with
rational investor expectations, breeds
‘Financial Crisis’‘Financial Crisis’such as 2008such as 2008
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
“....we do not yet havedo not yet have complete and generally
accepted explanations for how financial marketsfinancial markets
function......Mispricing of assets may contribute to financial financial
crisescrises”- 2013 Nobel Economic Sciences
Prize Committee
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
Raises questions, ‘Financial Economics’
never asked
Answers those, ‘Financial
Economics’ never could
To prevent ‘FINANCIAL CRISIS’, and transform To prevent ‘FINANCIAL CRISIS’, and transform ‘Financial Management’ from a ‘Cultivated Art’ ‘Financial Management’ from a ‘Cultivated Art’
into a truly ‘Objective Science’ into a truly ‘Objective Science’
Copyright 2014-Rajesh D.Mudholkar, Author, 'The Timeless Essence of Financial Science', http://valueerodingfallacies.blogspot.in
http://valueerodingfallacies.blogspot.in