from Patrick McKenzie | by Patrick McKenzie

Patrick McKenzie


11 months ago

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Finance has a reputation for making some concepts harder to understand than they should be, and sometimes that is intentional or semi-intentional. One of them: leverage.

Leverage is a useful tool. Debt makes the world go round, in a lot of ways. Leverage also increases risk. This often means that leverage will be made out to be the bad guy in any of a variety of unfortunate scenarios for financial institutions.

I think tools and simple math are generally pretty morally neutral, but am greatly in favor of teaching people about the predictable consequences of using tools under a variety of scenarios, and not treating simple math as the secret knowledge of a secular priesthood.

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