Why Is Business Finance So Hard To Understand? Part I

“Let’s Discuss Some Of The Challenges That Come With Trying To Figure Out How Business Financing Works”

Have you ever got a sharp pain behind your eye or gone instantly into a comma from trying to make sense of almost any information written on business finance or any finance application for that matter?

I have.

And I’m a finance guy, or at least someone formally trained in finance, and I get the same headache.

So what’s the deal with this?  Is is really so hard to understand and does it have to be so unfun to read and digest?

In fairness to my fellow egg heads, there is a fair amount of complexity to the actual math associated with finance and finance theory. Add to that the business finance disciplines like taxation, accounting, treasury & foreign exchange and you end up with some really mind blowing stuff that 99.9% of people have no interest in whatsoever.

So why bother with it all?

Well, because its essential.   Essential to us both personally and commercially.

I mean we live and work and play in a society that is based on a capitalism model which requires money for exchange of goods and services which requires finance systems to operate.

And in the business world, every single business must have some proficiently in finance, or there won’t be much of a business, certainly not a very profitable one.

So, on the one hand, everyone needs to understand and apply finance to some degree.  But on the other hand, the technicians that understand the topic frankly suck at explaining what we need to know in relevant, applicable terms.

Thus, we have a knowledge gap which starts right in the public school system.  You can graduate from high school without being shown how to write a check, balance a bank statement, or receive any basic instruction on the responsible use of credit.

If you go to secondary school, you may or may not get exposed to a whole lot more, depending on what you take.  Even if you go into a business school, or even a business masters program, the amount of directly applicable information you may receive can be quite small.  You’ll learn a lot about finance theory and accounting practices, and taxation strategies, and you’ll be provided with lots of big company examples with lots of complex corporate examples that 99% of the people would never be exposed to in their life time.

Then, when you venture out on your own, you will follow one of three paths related to finance: 1) you will get an unrelated job and learn through trial and error how to get a mortgage, a car loan, a credit card, and a line of credit; 2) you will pick a finance related discipline and learn a great deal about that particular aspect of business finance, but still be dumb to most of the rest of the subject matter; 3) you go into business and live at the mercy of your advisers (accounts, tax specialists, bankers, brokers, lawyers) who will hopefully know what their doing for what you pay them and know how to apply their knowledge to your real world baby.

Basically, we live in a world where there is an enormous gap between the technical finance knowledge holders and the rest of us making up 99.9% of the population.

While there is no shortage of information available, most of it is just not all that useful to the average person of average intelligence who does not have any special interest in finance

If it sounds like the system is broken, it is.

So what’s the solution?

Stay tuned for more in part II

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