This week we are enjoying another ride with finance lessons by Professor Arturo Bris. He kindly took the time to talk to me about the relevance and democratization of finance beyond the corporate world and within an average life.
A democratized finance world
Some years ago, finance was mostly done by someone with a swanky suit, silk tie and a top-notch degree. Now, we can trade Tesla shares with our smart refrigerator. Multiply this by thousands and you get a market that has been democratized, open to anyone. And to be able to survive gracefully and successfully on the upcoming years, finance knowledge is a must. But why?
The impact of finance goes beyond the investment world. As mentioned in Arturo’s book, “Flex or Fail: What is the future of work and pay?”, the future estimates that people will have, on average, seven sources of income. These will range from the typical permanent job salary to crypto assets. If we keep thinking around a single source of income, we will be quickly left behind. Even more so if we do not know how to manage the different sources of cash flow.
An international landscape
In a world that is changing more rapidly than ever, we are also facing a generalized focus on life quality improvement. This pandemic era has boosted remote working. In some cases, this will include an increase within the international landscape. We will be able to work remotely from the beaches of Sahel, Egypt while earning a salary from a Headquarter in Basel. This entails more global customers, suppliers, and employers. Consequently, it will be imperative for us to better understand different economies, the relevance of exchange rates, the factors that affect it, and the mechanisms to protect ourselves against the risks.
Other implications include understanding the variety of assets at our disposition, whether real estate, fintech, art, or intellectual property. As well as understanding the changes in the banking world. A key example of this is the recent change from the LIBOR rate, commonly used as a reference in our personal loan contracts, that is being substituted for options like Secured Overnight Finance Rate (Sofr).
To do all this we need to increase our financial literacy and adequate planification. These need to become part of our everyday life if they are to smooth our journey in this world. We are fortunately or unfortunately, embedded in a world attached to the democratization of finance. And we must face it with interest and curiosity, since despite being complex, it also provides great rides. Just ask the people from Robinhood.