JUSTINE UNDERHILL: In this week's How I Got My Start in Finance, you'll hear from acclaimed Financial Historian Niall Ferguson. He tells Larry McDonald how he developed his unique perspective analyzing the history of money and contemporary issues today.
NIALL FERGUSON: Well, I grew up in Glasgow. I guess we have Scottish roots in common.
LARRY MCDONALD: Yes.
NIALL FERGUSON: And as a boy, I was an avid reader and, I suppose, was inclining towards literature until I read Tolstoy's War on Peace. I think I was about 15. And there was really much less to do for young people in those days, especially in Scotland where it rains all the time. So you're either playing soccer or reading War on Peace, that was the choice. And on a rainy day, I was reading War on Peace. And at the end of War on Peace, Tolstoy reflects on the lessons of this extraordinary novel and, indeed, the lessons of history. He ends the book with a kind of philosophical essay on the nature of historical determinism.
And this really grabbed my attention. And it made me think more seriously about history as an option. I came from a rather scientific family. My mother was a physicist and my father, a doctor. My sister is a physicist. I'm the black sheep of the family. But history appealed to me from then on, because I found the study of human particles, human particles with consciousness, somehow more appealing than the study of, well, particles, the kind of things that physicists do.
And so, I was lucky to have a very inspiring history teacher who encouraged me to pursue my interest, which at that time was in the 30 Years' War, deep into the inner recesses of the Mitchell Library in Glasgow. And I set my heart on studying history at Oxford. I'm unusual amongst historians because I'm interested in history mainly for what it teaches us about the present and future. The historian I most admired as a boy was AJP Taylor, a wonderful writer, who not only produced an extraordinary history books but was also happy to be on television and write for the newspapers and opine about the events of the day.
So I suppose, at some point, I took it into my full head to be an AJP Taylor, to be a historian who used history to think about contemporary problems. And I kind of have chased that. I've chased that vision, or that dog perhaps, ever since my late teens.
LARRY MCDONALD: That's the key to relating to the masses, and that's the key to the bestsellers. Out of all your amazing pieces of work, from Civilization to Ascent, what do you think is really the most compelling book moving forward that readers should look at for the next, say, 3 to 5 to 10 years?
NIALL FERGUSON: Well, earlier, you mentioned financial acumen. I mean, if your viewers are mainly interested in finance, they should probably read The Ascent of Money because, of all the books I've written, that's the one that aspires to tell the history of the world in financial terms. And as it so happens, I've just produced a new edition--
LARRY MCDONALD: Beautiful.
NIALL FERGUSON: --of The Ascent of Money with two new chapters that take the story up-to-date. The book was published in 2008, just a matter of a few weeks before the bankruptcy of Lehman Brothers. But it was written with the expectation of a financial crisis in mind, so it seemed appropriate after 10 years to update it. And I think that's the right starting point for understanding my approach to the past, which has always given finance a relatively high priority.
My feeling, as I was going through university at Oxford, was that most historians underestimated the importance of financial markets. Maybe as a Scotsman who was relatively numerate and quite good at math, I was sort of shocked by English contemporaries at Oxford, because they thought history was about kings and queens and, yeah, maybe the odd general. But it seemed to me that bankers were just as interesting, actually, as those people, especially in the modern era. But even in the Renaissance, the Medici weren't originally interested in politics. They were originally forex traders, as it happens.
LARRY MCDONALD: Yes.
NIALL FERGUSON: So I suppose I started off thinking, hm, I could maybe have an edge in this history game if I emphasize financial history. So I did a lot of my early work on obscure stuff like the 19th century bond market and how World War I functioned in financial terms. I wrote a history of the Rothschild family and banks, a massive two-volume history. By the time I wrote The Ascent of Money, my goal was to try to give financial history a larger audience. It was also a 6-part PBS series.
And the goal I had was very simple, to explain the financial system to people and the financial crisis by showing them where it all came from. Because I think if you try and explain the financial system with some kind of flow chart or, even worse, a mathematical model, most people are just baffled. But if you tell them the story of why we have banks, why money is mostly bank money, or why there is a bond market, what the stock market is and where it came from, then it all starts becoming more intelligible.
So I greatly believe in financial education. I think a chronic problem we have in the United States, and indeed in most countries, is financial illiteracy. The Ascent of Money was designed to make the whole financial system seem more intelligible by just telling its story.
JUSTINE UNDERHILL: Niall Ferguson has developed a unique view of history and markets. For Ferguson, that became a successful career as one of the market's premier financial historians. For Real Vision, I'm Justine Underhill.