The Mysteries of Money

by Venkat on June 20, 2012

There was a brief period early in the life of ribbonfarm when I thought the blog was about business. But I was never quite comfortable with that idea, though I do write a lot about business matters.

I finally realized where I was going wrong: businesses, markets, products, even society, culture and civilization itself: these are all clumsy constructs that revolve around money. Money is the most basic stuff in this universe of consensual fictions that we call civilized life.

I am terrible at making money, but I have never understood people who don’t take money seriously, and have even managed to develop a disdain for it. I suspect it is sour grapes, pure and simple. Which is a pity, since money is absolutely fascinating stuff even if you don’t have enough of it to appreciate close-up or swim around in, like Scrooge McDuck. It is the fabric of social reality — stuff that is real because we collectively believe in it — the way space-time is the fabric of physical reality.

So with that bit of purple prose, I give you: the fourth and last sequence through the ribbonfarm archives, 2007-2012.

Money is more fascinating than the products that earn it, the violence it causes inside and outside our heads, the things it buys, and yes, the relationships it makes and breaks.  Not because it is great to have it (though it certainly is), but because it reveals so much about everything it touches, while itself remaining ineffable. More ineffable than even its closest cousins, like information and risk. You can get to roughly equivalent results in thinking about social realities by following the principles: follow the money, follow the information and follow the risk. But follow the money tends to be the most tractable heuristic.

This realization led to one of my personal all-time favorite posts, and the first one in this sequence, Ancient Rivers of Money. I think I understood something about money for the first time in my life with this post, in 2010, at age 36. It ceased to be a completely impenetrable mystery to me. It is now merely 99.999% impenetrable. I am still terrible at making money, but I am starting to slowly appreciate it. Maybe the making will follow.

I now see money as the implicit organizing concept for all of my writing about social reality.  Organizing along those lines, I have broken down this sequence into posts about money itself, posts about organizations (understood as things that move money around), posts about markets (understood as fields of money) and finally, civilization itself (understood as the space where money matters).  Barbarian or exiled states of being, and possible post-civilizational futures, are best understood as the negative space of social reality. Their common salient feature is a vastly attentuated role for money, broadly understood. These states never quite rise above shared, communal, interpersonal realities to shared, impersonal, social realities.

Money

  1. Ancient Rivers of Money
  2. Fools and their Money Metaphors
  3. Time and Money: Separated at Birth?

Moving Money

  1. The Eight Metaphors of Organization
  2. The Lords of Strategy by Walter Kiechel
  3. A Brief History of the Corporation: 1600 to 2100

Fields of Money

  1. Marketing, Innovation and the Creation of Customers
  2. The Milo Criterion
  3. Ubiquity Illusions and the Chicken-Egg Problem
  4. The Seven Dimensions of Positioning
  5. Coloring the Whole Egg: Fixing Integrated Marketing
  6. How to Draw and Judge Quadrant Diagrams
  7. The Gollum Effect
  8. Peak Attention and the Colonization of Subcultures

Life Outside Money

  1. Acting Dead, Trading Up and Leaving the Middle Class
  2. Can Hydras Eat Unknown-Unknowns for Lunch?
  3. The Return of the Barbarian

Next week, I’ll do a wrap-up of the wrap-ups and attempt to construct a big-picture view of what this blog is ultimately about, and situate the two crucial keystone pieces required for making sense of ribbonfarm. I expect a few of you can guess what those two pieces are. They haven’t been included in any of these sequences.

A free copy of Tempo for the first person to correctly identify the two missing pieces via a comment.

Nathaniel June 20, 2012 at 8:09 pm

Isn’t it probable that anyone capable of identifying said pieces already owns a copy of Tempo?

Venkat June 20, 2012 at 8:17 pm

They can always gift the extra copy to a friend. Or an enemy, come to think of it.

Xianhang Zhang June 20, 2012 at 8:11 pm

I’ve long thought that a lot of the confusion around the disdain for money arises from how the word money means two very different things; “the act of earning money” and “the act of spending money”. In our modern economy, these two acts are almost inseparably linked. The only way to earn a dollar and not spend it is to take the physical cash and manually destroy it. It’s actually impossible to go to a bank and ask them to destroy $1000 for you from your bank account.

The result of this state of affairs is that, because one action must necessarily lead to the other, we have confused this into thinking that these two are the *same* thing and use the same label to describe them.

I don’t know many reasonable people, except via some kind of strict ideological purity, who regard earning money as an intrinsically bad thing. Sure, if the action required to earn the money is morally repugnant, then the money itself becomes tainted but earning money does not automatically taint an activity by association.

On the other hand, I know many reasonable people who regard spending money with a healthy degree of caution which I find best analogized as the same degree of caution one might find around eating food. Too little food is bad & food of bad quality is bad but food can also be an addiction and a vice and one must take care to moderate consumption of food. Similarly, spending money, even when one has sufficient quantities of it, can become a vice and the accumulation of too many goods can make you feel sluggish in the same way being overweight does.

Venkat June 20, 2012 at 8:25 pm

Hmm… that’s part of it. But even on the earning front, once you get away from the EFF type people, you still get this vague sense that money is ‘dirty’ somehow. For instance, entrepreneurs (arguably the people who are least ambivalent about making money) viewing the money side (VCs etc.) as the Dark Side. It seems to go beyond basic beliefs about the corruption around money in its pure state in finance to a looser suspicion. It comes out in such statements as “don’t worry about money, just focus on a great product/customers/relationships/happiness” as if money is somehow the opposite of all those things.

Perhaps a more basic distinction is between appreciative (economics) and manipulative (finance) aspects of money. I wouldn’t know, since I am incompetent around both aspects.

Dorian Taylor June 20, 2012 at 10:15 pm

Hate to get semantic on you Venkat (actually that’s a lie, I love getting semantic), but I feel the urge to air some pondering I did some time ago around the phrase “making money”. It occurred to me that the only way to “make” money—as we know it—is either to print it or lend it out of a fractional reserve. All other times, we’re just moving it around.

Anyway, I’m sure you’re aware of this, but I just wanted to let you know that my experience of rephrasing the question “how do I make money?” to “how do I acquire existing money?” raised a bunch of other interesting questions for me.

Venkat June 21, 2012 at 3:04 pm

Hmm… that’s a very fascinating reframe. Have you written anything about it? (‘how to acquire existing money’?).

‘Make money’ as a textbook case of expanding currency base to reflect actual new wealth and realistic expectations of future wealth creation (as opposed to what politicians actually do, passing debt down-generation)… it is interesting to think about the lag between the creation and monetary reflection. Though money creation most often leads actual wealth creation, in some cases of exponential, localized explosion of new wealth, there is effective deflation locally because the creators have nowhere to ‘take’ the money from in the short term.

So cheap/free videoconferencing from Google Hangout effectively is being subsidized by Google while the equation is settle (net new wealth = unleashed potential from hangouts minus lost wealth in travel sector minus wealth already on the books representing cheap bandwidth capacity).

This is deeply confusing when you try to figure out the math, though it seems simple in terms of conceptual principles. No wonder I can’t do economics. I don’t get how people actually model all this through all the noise, confounding and hidden subtleties.

Patrick Vlaskovits (@Pv) June 21, 2012 at 8:36 pm

Dorian’s reframe of “how do I acquire existing money?” is spot-on. That is very similar to how A-player salespeople think about “making” sales.

A very telling (verbatim) quote from a friend who has sold hundreds of millions of dollars of products/services in his career on his mind-set:

“What do I have to say or do to get the buyer to hand over the suitcases of money with my name on them?”

Unpacking his deterministic narrative is interesting. It pre-supposes:

1) The money already exists.
2) There is a lot of it.
3) It rightfully/naturally ‘belongs’ to him.
4) There is an element of fun in figuring out how to acquire it.

Alex R June 20, 2012 at 11:23 pm

I’ll venture a guess as to the two keystones…I gave my copy of tempo away and I’m too far outside the money economy to buy another ;)

1. morality & moral hazard : sociopathy, manipulation, power, and what we learn from experiencing these over a lifetime.

2. mysticism: following the intuitive before it is transformed (in order to transform it?) into the rational.

Venkat June 20, 2012 at 11:30 pm

You’re over thinking it. It’s two posts I haven’t yet included in any list.

Jamie A. Thom June 21, 2012 at 3:33 am

Missing from the list are the following, perhaps?
The Discovery of Money
and
The Las Vegas Rules I: The Slightly Malevolent Universe

Alexander Boland June 21, 2012 at 8:12 am

Cliched guesses, but since I have a tendency to overthink I’ll try them on for size:

1) The Gervais Principle
2) How the World Works

Sam J June 21, 2012 at 9:21 am

My guesses:

A big little idea called illegibility
Boundary conditions thinking

The first and more obvious pick, I think, distills the essential class of subjects on ribbonfarm. The second describes the main method of approach.

Sam J June 21, 2012 at 9:25 am

Ah, noticed Boundary conditions thinking is already included. I’ll substitute in Where the wild thoughts are.

Julian Bond June 21, 2012 at 9:38 am

Neal Stephenson – System of the World talks a lot about this and makes two connections that resonate for me. Money being called currency because it represents the water that makes up the current in the river flow of trade. And secondly, that one of the better games around money is to situate yourself where the current is strongest and derive power from the flow. The metaphor being toll gates, lock gates and water mills and the reality being places like the City of London.

@Dorian Taylor. It’s not a zero sum game. Wealth creation produces a corresponding adjustment in the money supply. (I think. That’s def not any kind of formal economic theory).

Kevin June 21, 2012 at 9:08 pm

I’ve been reading ribbonfarm (religiously) for a year now and I still cannot describe “what this blog is ultimately about” – which makes it near impossible to recommend to anyone, since that is usually what people ask after I recommend it. Saying “nearly everything” just doesn’t seem to cut it as an answer. I look forward to having a “big picture landing page” to send them too after next week.

Kay June 22, 2012 at 12:20 pm

I think I understood something about money for the first time in my life with this post, in 2010, at age 36. It ceased to be a completely impenetrable mystery to me. It is now merely 99.999% impenetrable.

O.K. but what is the question? I don’t even know what you mean by words like “understanding” or “mystery” and you don’t ask any questions.

So I don’t know whether there is a mystery and an initiation into this mystery or not because I don’t even know why you are fascinated/puzzled about social relationships established or triggered by money, relationships which have caused a certain disdain against money and as a matter of fact people looked for alternative relationships and still do.

Maybe the reason why you are “bad at making money” is that you are not interested in money enough but only enjoy its mystifications?

Venkat June 22, 2012 at 12:29 pm

If it were easy to define it would be a puzzle or problem, not a mystery. To me, ‘mystery’ means strange phenomena that attract my attention but do not yield obvious starting points for deliberate action.

Making/taking money is one traditional starting point for understanding money (though few do it or that intellectual reason; most just have an unreconstructed interest in making the stuff, which is fine), but many people seem to get very good at that in instrumental ways without touching upon the mysteries.

Alexander Boland June 25, 2012 at 10:39 am

Off the topic of this post, but I’ve been re-reading Tempo and getting addicted to playing with archetypes.

One of the things about a Ribbonfarm forum that would be beneficial is people collaborating and expanding on the exercises from Tempo. I’m glad I have a friend who’s currently reading it who I can share my ideas with.

Jesse M June 27, 2012 at 1:12 am

I am horrible at understanding the technical apparatus that wealth is built on, and though I’m fascinated by the role of wealth (concrete valuation) as a bridge between value (quantifiable experience) and meaning (non-quantifiable experience), I do feel completely cold when the topic of “money” itself comes up. Still, I have to think about it, because it’s what my whole world is made out of, right down to the bedrock of autonomy and survival. To me, the only cultural niche that can successfully “disregard” money is one that’s been socialized entirely outside it, through a pure subsistence model of productivity. In the rest of the capitalist world, money is either something to be loved, or something to be feared (and willfully ignoring it, in a bourgeois rich way, is a form of fearing it). It seems to me that it’s never something to be disregarded.

britt July 5, 2012 at 10:09 pm

Funny thing- I’d stated reading your blog because I was trying to understand the history of corporations. And I was doing that because I read a book called life, inc. By Douglas Rushkoff. It traces the history of the idea of incorporating . His conclusion is that money is a medium.have you read it?

Venkat July 6, 2012 at 1:59 pm

Rushkoff is on my radar but I haven’t yet read him. Thanks for the nudge.

Jordan Peacock July 13, 2012 at 10:24 am

It’s a so-so read, I can give you the Cliff Notes sometime. It’s a good companion to Debt by Graeber and Satoshi’s Bitcoin whitepaper in muddying the “what is money” waters.

Kris July 7, 2012 at 1:44 am

Hello Venkat,

I’m rather late to this post. I’m a long time reader of ribbonfarm.com and found your book to be nearly impenitrable, but challenging and therefore rewarding. Now, in talking about money, you have motivated me to comment for the first time.

As a start, money is not theoretical. Money is not smart. Smartness can lead to money, but smartness is neither necessary nor sufficent. In the end, money flows to those who offer surplus value when satisfying human wants. As “value” and “human wants” are mental constructs, there is nothing scientific about money either.

There seems to be a relationship between “useful” and “scare” which ties into money. There also seems to be a “social score keeping” function to money. But this “score keeping” is almost the inverse of money’s “security” function. Perhaps money is a complex, adaptive system for social regulation. Given how late in human developement money apppeared (approx. 5,000 BC), it’s clear that human society can function without money. So why did it appear, spread, and come to dominate nearly all societies? To my mind, we’re back to that “useful” concept.

So, how can we operationalize the “useful” concept to encourage the accumulation of money? Well, that’s the $64k question, isn’t it. Applied probability has a roll, if your wiling to be a gambler and out “casino” the casino. Alternatively, innovation has a roll if you can harness the archetyple “entrepaneurial spirit” and have access to deep wells of credit. But if you’re like the vast majority of us mere mortals, you find a skill which an organization values.

As we return to “value” hard lessons are found. These lessons are more like what’s learned from “focusing on the breath” and less about what is axiomatically true.

Jordan Peacock July 13, 2012 at 1:26 pm

“Quicksilver is the elementary form of all things fusible; for all things fusible, when melted, are changed into it, and it mingles with them because it is of the same substance with them . . .”

“Who said that?” Sterling asked-keeping an eye on his little brother, who was showing signs of instability.

“Some damned Alchemist,” Daniel answered. “I have given up hope, tonight, of ever understanding money.”

“It’s simple really . . .”

“And yet it’s not simple at all,” Daniel said. “It follows simple rules-it obeys logic-and so Natural Philosophy should understand it, encompass it-and I, who know and understand more than almost anyone in the Royal Society, should comprehend it. But I don’t. I never will . . . if money is a science, then it is a dark science, darker than Alchemy. It split away from Natural Philosophy millennia ago, and has gone on developing ever since, by its own rulse. . .”

– Neal Stephenson, Quicksilver

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