What I learned about finance from watching movies
A few weeks ago, I explained to you how I had realized, thanks to my record collection, that I had become an investor without knowing it. The most attentive of you, and especially those with a very good memory, might remember that in addition to my compulsive vinyl buying habit, I have the same obsession with DVDs. Yes, I'm one of those rare people who still watch movies on physical media and don't just rely on streaming services like Netflix or Amazon Prime (by the way, did you know that you're entitled to cashbacks if you pay for them with your Vivid account).
Though the collection is mostly made up of comedies and documentaries, I realized there were also a significant number of finance films there.
Going back to this category, I realized how some of these films carry messages that can be useful in the everyday life of every investor. So here is a list of my three favorite movies about the world of finance and what you can learn from them.
Inside Job
The movie
Winner of the 2011 Academy Award for Best Documentary, the film recounts in five breathtaking chapters the before, during and after the collapse of the financial system in 2008. In a very realistic way, this film narrated by Matt Damon investigates the relationships between politicians, journalists and other professionals linked to the financial markets. It explains the involvement of each of them and the steps that led to the crisis.
What you learn from it
Obviously, the first thing you think of when you watch Inside Job is the ultra-precise and didactic way in which the film exposes some of the mechanisms of international finance and their intertwining that led to the financial crisis of 2008.
But, for the neophytes of the financial world, this film has another merit: it explains clearly and in a complete way some concepts useful to any investor. If you want to understand what derivatives, securitization or the deregulation of financial markets are, I can only recommend this fascinating documentary.
The Wolf of Wall Street
The movie
Who said you couldn’t make an exciting film at 71? In any case, Martin Scorsese did not listen to this person, because his movie Wolf of Wall Street is one of his most dynamic and successful works. A film to be ranked with Casino and Goodfellas. Almost everyone knows what happens, but I'll summarize it briefly for you just in case. Inspired by a real story, the film shows the rise to fame and fortune of a shady and unscrupulous stockbroker: Jordan Belfort (Leonardo DiCaprio).
What you learn from it
Okay, so maybe this one, like Inside Job, doesn’t really inspire much confidence in Wall Street and the world of finance. Nevertheless, there are a few lessons to be learned from Scorsese's film. The most obvious is that while it can sometimes be tempting to take shortcuts, it can come back to bite you at some point. There is a reason why financial markets are regulated and why financial regulators such as the AMF, BAFIN or the SEC exist.
One of the other messages of the film is that sometimes it's better to stop when you’re ahead. At one point in the film, Jordan could have paid a $2 million fine and only be barred from the financial sector, allowing him to retire for life if he so chose. Instead, he continued and received a colossal punishment in comparison. It's the same thing with financial investments, sometimes you have to accept a loss rather than be stubborn and lose even more money.
The Big Short
The movie
Supported by an all-star cast (Christian Bale, Brad Pitt, Ryan Gosling and many others), The Big Short tells the story of a handful of outsiders who, in 2005, took advantage of the generalized blindness of investment banks, governments and the media to anticipate the explosion of the subprime bubble. Shot in the style of a documentary, The Big Short distinguishes itself by its funny, dynamic writing that constantly takes the viewer by surprise.
What you learn from it
The main strength of The Big Short is perhaps the film's clever way of explaining the most sophisticated financial instruments to the general public. Isn’t it more fun to have Selena Gomez at a poker table explaining what synthetic CDOs, or watching Margot Robbie in a bathtub with a glass of champagne explaining how mortgage-backed bonds work, than having a greying, full-bellied university professor do it for you?