How Finance Works The HBR Guide to Thinking Smart about the Numbers

For many, nance is cloaked in mystery and quite intimidating. This unfortunate outcome is no coincidence. Many in nance like to shroud what they do in order to intimidate outsiders. But if you want to pro gress in your career, you’ll need to engage deeply in nance—it is the language of business, the lifeblood of the economy, and increasingly a dominant force in capitalism. So neglecting nance and hoping to survive meetings by thoughtfully nodding your head is an increasingly untenable choice.

Fortunately, you can learn the central intuitions of nance without mastering the intricacies of spreadsheet modeling or the pricing of derivatives. This book aims to provide you with the most central intuitions of nance so that you will never nd nance intimidating again. Mastering the intuitions won’t make you a nancial engineer— there are likely more than enough of those. Instead, internalizing these intuitions will provide the foundation for addressing nancial issues with condence and curiosity for the rest of your life. The book emerged from my efforts to teach nance to MBA students, law students, executives, and undergraduates with a wide variety of backgrounds. During the last two decades of teaching, I’ve emphasized diagrams, graphs, and real- world examples over equations and Mickey Mouse numerical examples in an effort to preserve relevance while also shearing off unneeded complexity. In the pro cess, I’ve found that it’s pos si ble to maintain rigor without being overly precise. I’ll try to do the same in the pages that follow.