The Importance of Trust in Investment

[This is one of the finalists in the 2023 book review contest, written by an ACX reader who will remain anonymous until after voting is done. I’ll be posting about one of these a week for several months. When you’ve read them all, I’ll ask you to vote for a favorite, so remember which ones you liked]

You can't really understand the exception without understanding the rule.  In order for him to understand why it was remarkable that the Titanic sank, you would first have to explain to the caveman how it was that a 52,310 ton vessel not only existed, but was able to float.

This is the gift that Dan Davies gives us in Lying For Money.  Despite taking econ classes in college, and spending years as a business owner who has had to do things like raise money from investors, my understanding of how the modern economy operates often feels about as complete as a caveman's understanding of how a cruise ship floats. The book delivers on the promise implied by its subtitle, How Legendary Frauds Reveal the Workings of Our World.  Financial instruments (and other aspects of the economy) are things that are best understood in the breach: in the process of teaching us the various ways in which financial systems can break, Davies also teaches us how they work.