So, how shall I begin?

This is the blurb for the course, the blurb that's been in
the Yale catalog for a long time. This is a course on finance. It has the word,
"markets," in the name, which suggest that it's about trading, but I think it's a
broad course in finance. So the blurb says, "Financial institutions are a pillar of
civilized society, directing resources across space and time to their best uses."
So this sounds broader. I guess the course is broader. I wrote the title of the
course many years ago when I created this course, and it's been a title for
about... To me, this course is about is how we get things done in our society.
That's how we incentivize people to do things. Now, most of us are in our lives,
thinking about ourselves – that's human nature – and about our particular place in
the life cycle. So, you may be a young person who's thinking about getting started
in life. But when you join a enterprise or an organization, you have to do things
for the organization and you have to take a different perspective. You have to help
manage a productive venture that involves many people. So there aren't that many
things that you can do as an individual that are useful, you have to join an
organization. This is a fundamental principle of human life. So this is a course
about understanding how the institutions work and how we can predict what will
happen. And things are rapidly changing in the Information Age that we live in now,
so that's what this course is about. I don't consider this a vocational course
because I think it should be of interest to anybody who is interested in how things
work. On the other hand, this course comes across as more vocational than most Yale
courses. And in some sense, I pride myself on that, although I consider myself an
intellectual. But, this is a relevant course, all right? It's not about how to make
money. You might say it is, I suppose. But, it's about making things work. These
are the topics in this course. So, risk Insurance, diversification, history of
finance, innovation, efficient markets, behavioral finance. Actually, behavioral
finance is a little bit more prominent than you might think from its appearance as
number seven on this list. Behavioral finance is the application of psychology,
sociology, other social sciences to understanding financial events. It's a
revolution in finance that I have watched over the whole course of it because I
have organized conferences on behavioral finance starting in 1991, working with
Richard Thaler at University of Chicago. We've been doing that for 25 years, but we
just bequeathed that there are regular seminars of professors too, Nick Barberis
here at the Yale School of Management. But we'll talk about it because I kind of
believe in a unity of knowledge. So this course will differ from many other finance
courses in that I want to talk about real people and how things really work. Then
we'll talk about debt, the stock market, the real estate market, regulation. Oh by
the way, regulation is an interest of mine too, more so than most people who teach
finance because I think that the markets need to be regulated. Human beings have a
tendency to be manipulative and tricky, and finance is used to trick people. That's
why we need regulators. So you shouldn't assume that I want to send you off to Wall
Street. I think that you might go to be a member of the right like the Securities
and Exchange Commission or something else as a job and be proud of it. OK? It's
important. And then banking, futures – futures market has a special meaning in
finance, monetary policy, endowment management, investment banking, option, money
managers, exchanges, public finance, nonprofits, and finally, that last lecture
will be on the purpose of all this. So that's this course. So, I wanted also to
just reflect on the relative. I said this course looks more vocational in a way,
but I don't consider this vocational school. This is, I like to say, useful. One
thought, perspective I wanted to give you was how important is finance anyway.
Unless you go into academia, you will get a job somewhere in the real world. So
where are the jobs? Well, I looked up on the Bureau of Labor Statistics – it was a
publication of the U.S. government. On their website, they have data on just how
many people are in different professions in the United States; and they also have a
forecast. So what I'm showing – the latest data is for the year 2014, and it has
the number of people in thousands. And then also on there we have the projection
for 2024. So, you note that at the top I've got finance – these are specific
finance profession, not all finance professions. Financial analysts, financial
managers, personal financial advisors, they all have hundreds of thousands of
people. But I wanted you to note, what about the other majors that you have here?
I'm not diminishing them. But economics, economists, not so many. But you might
also be interested in astronomy – I actually love astronomy. When I was a kid, I
thought I'd be an astronomer. But I had to reach reality – there's lots of exciting
fields where there are almost no jobs. How many astronomers are there,
sociologists, political scientist, or mathematicians? This is not to diminish your
majoring in this field, but you just don't expect to get a job in those fields. I
also put down at the bottom massage therapist, OK? I didn't know that was a
profession, but there is projected to be about 200,000 massage therapists in the
United States in 2024. So we don't have a massage therapy major here, but that's a
sign of how the market makes things important. Now run up, Farahar might be right
about this. There's something wrong with having so many finance people – maybe we
need more massage therapists than finance people. But there's a sense of reality
that I think that part of the reason that there's so many of them is that they deal
with important issues that can't be quickly, they can't be more easily solved; we
need all these people. That's why I take some pride in this course in being
connected to the real world. There are real job opportunities in finance. And there
also I think in the new Industrial Revolution period, they will still be. I think
this is one of the fields that is not going to be totally replaced by a computer.
The problem with finance is a high inequality in this field. Some people make a lot
of money, but on the other hand, you have to give it away. This is another thing
about this course. If you make a lot of money in finance, it's a game, you enjoyed
it, now give most of it away – that's going to be a theme.