School of Greatness Podcast: Interview with Mihir Desai

Introduction

• Speaker: Mihir Desai, Harvard Professor
• Topic: Importance of Debt and Finance
• Book: The Wisdom of Finance: Discovering Humanity in the World of Risk and Return
• Fields of Teaching: Finance, Entrepreneurship, Business, Law

Key Points on Debt

• Debt as Opportunity
  • Allows access to unachievable opportunities (housing, education)
  • Historically demonized but can be liberating
• Dangers of Debt
  • Important to recognize commitment and potential for overwhelming debt
  • Concept of 'debt overhang' where excessive debt prevents effective financial decisions

Financial Education and Literacy

• Lack of Early Education
  • Financial literacy is low; not effectively taught in schools
  • Need to start financial education with children
• Comparison to 'Rich Dad Poor Dad'
  • Aims to provide a more advanced and comprehensive understanding
  • Encourages better financial understanding and ethics in finance

Challenges and Goals of Writing the Book

• Challenges
  • Transitioning from academic writing to storytelling
  • Aims for the book to be accessible and demystify finance
• Goals
  • Demystify finance and highlight its importance
  • Address broken elements of the finance industry

Common Financial Misunderstandings

• Borrowing and Debt
  • Misunderstood as inherently bad; can be beneficial if managed well
  • Importance of understanding both virtues and dangers
• Distinguishing Skill from Luck
  • Hard to separate skill from luck in short-term financial successes
  • Long-term consistency is key to identifying true financial skill

Personal Financial Advice

• Saving Strategies
  • Save more than you think you need
  • Utilize tax-advantaged accounts (IRAs, Roth IRAs, pensions, etc.)
• Investment Strategies
  • Avoid high management fees
  • Invest in government bonds and equity index funds
  • Reserve a small portion for high-risk investments
• Managing Investments
  • Indexation as a reliable long-term strategy
  • Be cautious with so-called expert managed funds

Concepts from 'The Wisdom of Finance'

• Risk Management
  • Explained through Jane Austen's Pride and Prejudice
• Bankruptcy and Failure
  • Historical perspectives on bankruptcy and its evolution
  • Emphasis on learning and restarting after failure
• Leverage and Commitment
  • Leverage allows for significant investments otherwise unattainable
  • Personal commitments enhance one's abilities to achieve goals

Lessons from the Classroom

• Humility and Empathy
  • Teaching as an act of empathy, seeing from the student's perspective
• Encouragement Over Judgment
  • Importance of encouraging students rather than judging their capacities
• Diverse Success Stories
  • Different paths to success (entrepreneurs, government service, authors)

Final Messages and Definition of Greatness

• Immediate Investment in Environmental Concerns
  • Urgent need to address environmental issues
• Kindness and Generosity
  • Underestimated virtues with significant impact
• Greatness
  • Making the most of one's given talents and opportunities

Additional Resources

• Personal Website: mihirdesai.org
• Social Media: Active on Twitter and LinkedIn