Friday, March 13, 2015

Keynes Way to Wealth: Timeless Investment Lessons from the Great Economist

by John F. Wasik

No doubt you have heard of John Maynard Keynes (1883 – 1946), the famous British economist and father of Keynesian economics. Some may not realize, however, to what extent his ideas on investing have become key concepts, used by portfolio managers and individual investors worldwide. Investors can thank Keynes for “inventing” and developing such concepts as “opposing risks” within a portfolio; “risk premium”; and the “book value” of a company – a core principle of value investing.

Wasik’s book, Keynes’s Way to Wealth, follows Keynes (the son of a Cambridge don of modest income) from his beginnings as a student on scholarship at Eton and King’s College, Cambridge, where he especially excelled in mathematics. From there he entered the India Office as a clerk, and collected material for his first book on economics, Indian Currency and Finance. After returning to Cambridge to teach, he went to work for the British Treasury Office, and by 1919 was the British Treasury’s principal officer at the Treaty of Versailles. That year his book, Economic Consequences of the Peace, was published, in which he condemned the severe reparation measures imposed on Germany, and showed why Germany would turn to fascism.

Against this backdrop, Keynes began investing his own and his family’s money around 1911 (age 28), using the “dollar-cost averaging” method. By the start of   World War I, he was developing his theories – for example, the probability of a stock going up or down – and these were published in his next book, A Treatise on Probability, in 1921.

Wasik takes a logical, chronological approach to revealing what an investor can learn from Keynes’s methods. At key points, he provides detailed examinations of how Keynes succeeded as an investor, and how he became wiser and more successful from lessons learned through losing money, and how he then went on to further develop his investment strategies for creating wealth while minimizing risk.

The chapter, “The Birth of Value”, may prove of particular interest to investors. Referring to Keynes’s seminal work published in 1936, The General Theory of Employment, Interest, and Money, Wasik presents the crux of Keynes’s insights in two brief sections. He devotes one concise paragraph to each key point, itself expressed in one short, bolded, sentence for further emphasis and clarity. As an investment guidebook, this makes for an easy read; as a biography, the inspirational personality of Keynes himself engages the reader, cover to cover.

John C. Bogle, the renowned economist and investment manager, says in the Foreword, Wasik’s book is “a true gem – fascinating, carefully researched, and ... snappy and eminently readable”.  This is high praise, but well deserved – few books on investing or economists are this worthwhile or enjoyable to read.

Find this title in the library catalogue. 

This book review was first published in The Business Bridge, the eNewsletter of the Central Library Sciences and Business Department. To read the latest book reviews on business and related topics, why not sign up for The Business Bridge, at:

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