The Illusion of Control

Why Financial Crises Happen, and What We Can (and Can't) Do About It

By: Jon Danielsson

Narrated by: Bruce Mann

A challenge to the conventional wisdom surrounding financial risk, providing insight into why easy solutions to control the financial system are doomed to fail

Finance plays a key role in the prosperity of the modern world—but it also brings grave dangers. We seek to manage those threats with a vast array of sophisticated mathematical tools and techniques of financial risk management. Too often, though, we fail to address the greatest risk—the peril posed by our own behavior.

Jon Danielsson argues that critical risk is generated from within, through the interactions of individuals and perpetuated by their beliefs, objectives, abilities, and prejudices. He asserts that the widespread belief that risk originates outside the financial system frustrates our ability to measure and manage it, and the likely consequences of new regulations will help alleviate small-scale risks but, perversely, encourage excessive risk taking. Danielsson uses lessons from past and recent crises to show that diversity is the best way to safeguard our financial system.

©2022 Jón Daníelsson (P)2022 Tantor

Excellent

Should be required reading for all in the investing space, fund managers, asset allocators and senior managers.