The personal finance system is rigged for you to fail

Subscribe to enjoy similar stories. Once in a while, a book comes along that articulates exactly what you have been thinking for years. Why Personal Finance is Broken and How to Fix It by John Campbell and Tarun Ramadorai, two distinguished academics with deep knowledge of both Western and Indian financial systems, is precisely such a book.

Reading it felt like encountering a rigorous academic validation of the principles on which I founded Value Research three decades ago and have been advocating ever since. The authors have done the hard work of compiling evidence from many countries, including India, to demonstrate what observant investors already suspect: The personal finance system is not an accident; it is designed that way. The book's title contains a clever double meaning.

Personal finance is "fixed" in the sense of being broken, but also "fixed" in the sense of being rigged. The authors argue, with substantial evidence, that the financial services industry does not profit despite your mistakes—it profits because of them. This is not a conspiracy theory but simply the logical outcome of how markets respond to demand.

Here is the sad truth: Capitalism, the best engine of prosperity in human history, responds to what people want, not to what they need. When customers accurately understand quality and price, competition delivers excellent products at reasonable costs. But when customers are confused about benefits and blind to costs, the same competitive forces deliver exactly what confused customers think they want—products with exaggerated benefits and hidden fees.