Another brilliant episode of Masters in Business: Interview with Robert Shiller, by Barry Ritholtz:
S: We really don’t know the future, that’s the scary thing, and since we don’t…finance and insurance are really about an uncertain future, it’s about managing it, sharing your risks, hedging your risks, people forget that that’s a core element, it’s not about beating the market necessarily, it’s about managing risks in such a way that we can be a productive society and we can achieve our goals..
R: I’m going to repeat what you’ve just said – the future is unknowable, there are risks inherent to that, it’s our responsibility to manage those risks, and how successfully we manage those risks will determine how successful we are financially, is that a fair restatement?
S: This is one of the messages of my financial market’s course, there’s an important technology that finance represents, and it’s a technology of financing activities and doing it in such a way that people can undertake activities that would have been too risky for them…venture capitalists will support a young firm whose probability of succeeding might be 20%, but it’s not going to be devastating because they’ll spread that risk over many investors..
S: ..and that’s what our civilisation is built on, we’re doing amazing things..
Do listen to the entire interview here: