I always tell myself that if cable wasn’t free for me, I wouldn’t have it. But then I would miss out on the James Bond movie marathons that run 2-3 times a year. A month or so ago a network ran a marathon like this and I saw Casino Royale for just the second time. I should watch it again because I like it more and more each time.
If you haven’t seen it don’t worry, I don’t spoil the film. But before I talk about the financial lessons learned from the movie I must review the plot in 3 sentences.
The villain is a terrorist banker and he used terrorist money to make an investment for personal gain. He lost the money and stages a poker tournament to win his money back. Bond is tasked to beat him so he’ll share his terrorist contacts in exchange for protection when those terrorists want their money.
1) Sometimes you got to spend money to make money. In the poker tournament, Bond purposefully makes bad bets so that he can gauge when the villain is bluffing or not. These small investments in knowledge can pay off with a big win for a poker player. In businesses, finance managers know that any significant project won’t pay off without an upfront investment. Putting Bond’s bets into a corporate finance spreadsheet would yield a good project.
2) $150 million is a lot to some, but a little to others. Bond receives some help from a CIA operative when the situation gets tense during the poker game. Bond asks the agent if he wants the winnings if he wins ($150 million), and the agent replies, “does it look like we need the money?” Of course the irony is the US could have used that to pay down some debt but whatever. $150 million seemed like a lot to Bond, or any individual for that matter, but to a government it’s practically nothing.
3) Shorting stocks is risky. The villain makes his money by taking terrorist money and shorting companies on the market. He commits illegal acts to sabotage the company and then when the stock tanks he makes a fortune. But when you short stocks, you can lose all your investment quickly; the loss can even be more than your investment. Especially when your bet is based on blowing up a prototype plane and James Bond is on the scene to protect.
4) Don’t put all your eggs in one basket. Diversify, diversify, diversify! Even if you’re a villain shorting stocks with terrorist money. If you put all your eggs in one basket, you’re bound to get burned, or shot in the face.
5) When you’re spending someone else’s money, you’re going to take more risks. The Great Recession has taught us many things, one of them is when you give someone your money, they’re probably going to take some risks with it unless you tell them otherwise. Surprisingly, or not, when it’s someone else’s money we don’t fear the downside as much. It’s just unfortunate for the villain that his risks had such a hard downside. We do the same thing if we gamble and win. We’re likely to take bigger risks because we feel like we’re just betting house money. There are a lot of examples of this but let’s just move on to #6.
6) #5 is actually a two-for, but the lesson is so important that it should be said again in different words: when someone else has your money, they’re likely to be a lot less careful with it. Bond’s love interest is a tag-along from the British government responsible for making sure he doesn’t waste too much of the taxpayer’s money, can we get one of those for the US Defense Department? Anyway, after Bond quickly burns through his allotment at the poker table and a disagreement ensues as to whether he’ll be allowed to buy back in. Whether it’s the government, a bank, a mutual fund, or your kids with your credit card, if you give someone your money it’s your job to make sure it’s being spent responsibly
James Bond is known for his thriftiness extravagance and expensive tastes. We needn’t worry about our government agents acting like this, because even in the real world the CIA is going to burn through money like that. Money is wasted all the time, but not on Dom Perignon ‘52
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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