What is money? It’s a simple question—one that former Planet Money host, Ira Glass called, “the most stoner question” he’d ever asked on his show. That’s probably true. But it’s still an interesting and important question. One that—when explored—can lead to a rabbit hole of complexity. From its origins to how the federal reserve functions to how to make more of it, money has endless roads to travel. I intend to travel those roads with you. But for today let’s start with the basics.
In 1860, a French singer named Mademoiselle Zelie went on a concert tour across the world. At one point she found herself on a small island in the South Pacific. She was quite popular there—selling 816 tickets. One problem—the people of the island didn’t use money. In a letter later found, Zelie summarizes her concert haul:
“3 pigs, 23 turkeys, 44 hens, 5,000 coconuts, 1,200 pineapples, 120 bushels of bananas, 120 pumpkins, 1,500 oranges.”
She goes on,
“I am told that a speculator from a nearby island will arrive tomorrow to make cash offers to me and my comrades. In the meantime, to keep our pigs alive, we feed them the pumpkins while the turkeys and chickens eat the bananas and oranges.”
Money solves a problem described by British economist William Jevons as the “double coincidence of wants”. The islanders had to want to attend Zelie’s concert enough to offer something for it. And Zelie had to want what the islanders were offering. Society solved this barter issue with money.
In purely technical terms, money can be broken down into three parts:
• A means of exchange
• A unit of account
• A store of value
Those may be the walls of the house but they’re not the foundation. Money was born and exists out of a shared belief in it. We decided long ago that metal coins, pieces of green paper, or the numbers on a screen have an agreed-upon value. That value can be exchanged for goods or services. It’s what makes modern society function. If that belief ends, so too does money as we know it.
All beliefs tend to change over time—money is no different. It has already changed countless times since the ancient Greeks invented the first coins in 550 BC. Just think about how much has changed in just the last 20 years. Many believe we have arrived on a new frontier of beliefs (or lack thereof) in our traditional financial and governmental institutions—paving the path for new forms of decentralized digital currencies. Those currencies seem to be here to stay—in what form or function remains to be seen.
I believe the most important aspect of money is how we position it in our lives. Money is equally as effective at increasing joy as it is at destroying it. The outcome is up to us. In my experience, there are a few ways to create a healthy money relationship:
View it as a tool—a means to an end rather than an end in itself. This will help build immunity against the syndrome of “never enough”.
Get organized and have a system. The less you have to think about it the better.
Stay away from wrapping your self-worth in with your net worth. Your bank account doesn’t define you.
When I was young I would often trade my time for money—it was a necessity of my youth. Now I’m fortunate to be able to trade my money for time. I like that trade better. It may be obvious but I have to constantly remind myself that I can always make more money—time I don’t get back.
Here’s to making money matter!