John Kay is one of Britain’s leading economists. His interests focus on the relationships between economics and business. His career has spanned academic work and think tanks, business schools, company directorships, consultancies and investment companies. For more details of John’s biography, see the About section.
John Kay chaired the Review of UK Equity Markets and Long-Term Decision-Making which reported to the Secretary of State for Business, Innovation and Skills on the 23rd July 2012. He is a visiting Professor of Economics at the London School of Economics, a Fellow of St John’s College, Oxford. He is a Fellow of the British Academy, a Fellow of the Royal Society of Edinburgh. He is a director of several public companies and contributes a weekly column to the Financial Times. He is the author of many books, including The Truth about Markets (2003) and The Long and the Short of It: finance and investment for normally intelligent people who are not in the industry (2009), Obliquity (2011) and his latest, Other People’s Money was published by Profile Books in September 2015. Some of his most influential, recent work has been on banking regulation, and you can read about his vision for the sector in his 2009 essay, Narrow Banking.
Other People’s Money: Masters of the Universe or Servants of the People?
Out now! Order your copy from the Books page. For dates of John’s book signings and talks check the NEWS section.
We all depend on the finance sector. We need it to store our money, manage our payments, finance housing stock, restore infrastructure, fund retirement and support new business. But these roles comprise only a tiny sliver of the sector’s activity: the vast majority of lending is within the finance sector. So what is it all for? What is the purpose of this activity? And why is it so profitable?
Industry insider John Kay argues that the finance world’s perceived profitability is not the creation of new wealth, but the sector’s appropriation of wealth – of other people’s money. The financial sector, he shows, has grown too large, detached itself from ordinary business and everyday life, and has become an industry that mostly trades with itself, talks to itself, and judges itself by reference to standards which it has itself generated. And the outside world has itself adopted those standards, bailing out financial institutions that have failed all of us through greed and mismanagement.
We need finance, but today we have far too much of a good thing. In Other People’s Money, John Kay shows, in his inimitable style, what has gone wrong in the dark heart of the finance sector.
“Thanks for writing this book. Only [John Kay] could have done it. This is going to be a classic.” —Frank Partnoy, Professor of Law and Finance, University of San Diego School of Law and bestselling author of F.I.A.S.C.O. and WAIT
It’s no surprise that social science professors are to the left of the general population. But I was taken aback by the magnitude of the difference, as indicated by a recent study showing 95% of academics supported Barack Obama in the 2012 election. Is this not of concern? Universities should be encouraging freedom of thought and diversity of opinion.
Uber’s superior service threatens London’s black-cab drivers, just as (my namesake) John Kay’s flying shuttle eventually led to rebellion by out-of-work Luddites in the 19th century. The losers from such innovations should in some circumstances be compensated. But restricting competition is against the public interest.
Two recent events have served to highlight the range of difficult questions raised by pharmaceuticals regulation. Last week, a man died in the French city of Rennes after a clinical trial of a painkiller went tragically wrong. In New York last month, the company controlled by former hedge fund manager Martin Shkreli, raised the price of the life-saving drug, Daraprim, from $13.50 a tablet to $750.
In cases of fraud official action inevitably damages both the business and its share price, and no agency will be right all the time. Short selling hedge funds are not right all the time either, but when they are wrong they lose their own money.