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Capital Ideas
“The complexity and speed of
financial innovation have reached a point where it is hard to grasp what
is happening from moment to moment. Amateur investors and many
professionals are wary of space-age trading strategies and kinky
financial instruments that seem beyond their understanding. Individual
investors grumble that they are the last to receive information about
the stocks they own and the last to find buyers when security prices are
dropping. Giant financial institutions complain that security prices
are dangerously volatile There is a widely held perception
that overpaid MBAs, corporate raiders and investment managers who talk
like
astrophysicists are living in a world of their own, detached from the
realities of people who really work for a living.” CAPITAL IDEAS:
Page 1, para3
“But
that is only part of the story. The untold part, which is what this
book is about, reveals that much of this fear and resentment is
misplaced. Baffling as it may be to some, Wall Street is vital and
productive, a model for the rest of the world, including former
socialist countries seeking the path to prosperity and freedom.”
CAPITAL IDEAS: Introduction: page1&2, para4.
“The gap
in understanding between insiders and outsiders in Wall Street has
developed because today’s financial markets are the result of a recent
but obscure revolution that took root in the groves of ivy rather than
in the canyons of lower Manhattan. Its heroes were a tiny contingent of
scholars, most at the beginning of their careers, who had no direct
interest in the stock market and whose analysis of the economics of
finance began at high levels of abstraction.” CAPITAL IDEAS: The
Introduction, page 2, para5.
This
book, published in 1992, is the primer that tells how the halls of ivy
and the towers of Wall Street got together to provide the tools for the
latest financial innovations of 2002.
Peter Bernstein reports on recent correspondence from Professor William Sharpe: Dr. Sharpe states that he provided inaccurate information in the original interview he gave Mr. Bernstein in preparation for Mr. Bernstein's book, Capital Ideas (John Wiley & Sons, 1992). In the interview, Dr. Sharpe said that his manuscript on the Capital Asset Pricing Model, which subsequently earned a Nobel Prize, had been rejected by the Editor of the Journal of Finance, Professor Dudley Luckett of the University of Iowa, as stated on page 194 of Capital Ideas. In recent correspondence to Dr. Sharpe, Dr. Luckett has stated that he was not the Editor of the journal at that time. The Editor was Professor Harold G. Fraime. Dr. Sharpe has apologized for the error.
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