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Is Going Into Finance Good for Society?

Whatever banking’s post-recession connotations may be, the historian William Goetzmann argues that monetary innovations have always played a critical role in developing civilization.



The title of the financial historian William Goetzmann’s new book is hard to argue with: Money Changes Everything.

In his book, Goetzmann, a professor of finance and the director of the International Center for Finance at the Yale School of Management, has documented how financial innovations—from the invention of money to capital markets—have always played a critical role in developing every culture around the world. In the fallout from the Great Recession, it’s been commonplace to vilify those working in the financial-services industry. But Goetzmann argues that finance is a worthwhile endeavor, beyond just earning a ton of money: Its innovations have made the growth of human civilization possible.

I recently spoke with Goetzmann about his new book and the role of financiers in human societies past and present. A lightly edited transcript of our conversation follows.


Bourree Lam: Can you make a case for why it’s a good (or bad) idea to go into finance or to take part in financial innovation? For example, how would a career in investment banking further our civilization?

William Goetzmann: For a long time, students—particularly MBA students—went into investment banking in droves. So the question I would ask my students over the years is: Why are you doing it? What I was hoping is that they would think about the benefits to society. So the answer is pretty clear, if you take a look at the role that investment banking has played in concentrating capital into enterprises—essentially helping to raise money for businesses.

Finance is just a tool. There are different businesses to raise money for. But if you think of the enormous technological revolution that we've gone through over the last 20 years, it has helped channel funds into important companies like Apple and Google on the tech side—but also other kinds of innovative enterprises that wouldn't have been able to source capital in other kinds of ways. Investment bankers played this intermediary role between people that need to save, or organizations that want to invest money, and the companies that have a value proposition and need the capital. That's the important role that they play.

What you see in history is that if you go back in time, there were very few corporations and there wasn't much enterprise. So it was really when capital markets opened up that investment bankers could get money to build railroads around the world, canals, help raise money to electrify cities, and so on. So, that's the way I think about the benefits of that intermediary role.

Lam: Is whether it’s worthwhile to go into finance a question your students struggle with?

Goetzmann: You know, I don't think so. What I found, particularly for my MBA students, is that they get very excited by thinking about these larger social roles that business plays. The students that take my classes opt in because they're curious about the humanities side and the history side. I've been told that for students who go back into things like hedge funds or Wall Street, it’s helped them think about the meaning of finance and what they're doing.

Read the full interview.