A Brief History and Understanding of Money (and Gold)

“Money is one of those things that’s completely familiar and completely mysterious” – James Surowiecki, “The Financial Page” column for The New Yorker.

With that thought in mind, here are two well presented posts on money and its history, found via Kotte. The first post is reply on reddit in response to someone wondering where all the money in the world has gone. The result is an enlightening walk-through of how we got to money and what money is.

From www.reddit.com:

It’s hard to explain this to a five-year-old, because there are some fairly abstract concepts involved, but here goes…

All actual “money” is debt. All of it, including monetary gold, etc. (Don’t argue with me yet, I’ll get to that.)
Imagine a pretend world with no money, some kind of primitive villiage or something. Now let’s invent paper money. You can’t just print a bunch of paper that says people have to give you stuff, because nobody would honor it. But you could print IOUs. Let’s walk through this…

  • Let’s say you’re an apple-farmer and I’m a hunter. You want some meat but haven’t harvested your crops yet. You say to me, “hey, go hunt me some meat and I’ll give you 1/10th of my apple harvest in the fall”. Fair enough, I give you meat, you owe me apples. There’s probably a lot of this kind of stuff going on, in addition to normal barter. In time, standard “prices” start to emerge: a deer haunch is worth a bushel of apples, or whatever.

The second article comes from one of my favorite magazines, IEEE Spectrum1, by way of the afore quoted James Surowiecki who gives a brief history of money and some of its effects:

From spectrum.ieee.org:

Money’s decline in feudal times is worth noting for what it reveals about money’s essential nature. For one thing, money is impersonal. With it, you can cut a deal with, say, a guy named Jeff Bezos, whom you don’t know and will probably never meet–and that’s okay. As long as your money and his products are good, you two can do business. Similarly, money fosters a curious kind of equality: As long as you have sufficient cash, all doors are open to you. Finally, money seems to encourage people to value things solely in terms of their market value, to reduce their worth to a single number.”©

These characteristics make money invaluable to modern financial systems: They encourage trade and the division of labor, they reduce transaction costs–that is, the cost incurred in executing an economic exchange–and they make economies more efficient and productive. These same qualities, though, are why money tends to corrode traditional social orders, and why it is commonly believed that when money enters the picture, economic relationships trump all other kinds.”©

It’s unsurprising, then, that feudal lords had little use for the stuff. In their world, maintaining the social hierarchy was far more important than economic growth (or, for that matter, economic freedom or social mobility). The widespread use of money, with its impersonal transactions, its equalizing effect, and its calculated values, would have upended that order.”©

Both of these articles got me thinking about an episode of NPR’s Planet Money I listened to a while back on why we use gold as a de facto base unit of currency. It boils down to this: of all the basic elements on the periodic table that meet these basic requirements:

  • Not a gas
  • Doesn’t corrode
  • Doesn’t burst into flames
  • Doesn’t kill you
  • Is rare, but not too rare
  • Easier for pre-industrial people to forge

…gold is the element that fits the bill best.


  1. Fair Disclosure: I am a member of IEEE 

What Science Knows and What Businesses Do

This post was originally just going to be a link to a video. Then I started doing some more research and some more digging and this post is what I’ve come up with. I think this is a testament to the magnitude of the idea I’m going to be passing on. Thus, whatever you are doing, stop now and pay attention.

“There’s a mismatch between what science knows and what business does.” – Dan Pink

Dan Pink will describe in 10 short minutes (along with an awesome animation) the truth about what actually motivates us. Surprisingly (or not), money is not what motivates us (generally speaking). Instead, the three factors that lead to better performance & personal satisfaction are:

  • autonomy
  • mastery
  • purpose

Not only that, but we have the research1 and data2 to back this up.

The following animation is adapted from Dan Pink’s talk at the RSA3:

Note: you may need to click through if you can’t see the video above.

Dan has a book that recently came out, Drive: The Surprising Truth About What Motivates Us, that I believe goes into more depth. I already had Drive on my book list, but after watching that video I’ve moved it to the top. One of the research papers Dan talks about was completed by behavior economist Dan Ariely, who also wrote Predictably Irrational: The Hidden Forces That Shape Our Decisions and the follow up The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home4.

This all leads to a point.

As much as like doing what I do, I also feel like I’m being stifled, especially as a result of old-fashioned nine-to-five, carrot-and-stick incentives. Thus, when I think about wanting to work at a small company, it’s not because I don’t like people or want to work with fewer people, it’s because there is more freedom to do what I want, more freedom to explore, to freedom to innovate, and that’s what I want.

To be clear, this isn’t about working less, it’s about working best. If I can get done in six hours what you think should take eight hours, why can’t I go home early? Am I being paid to be available to solve problems or to actually solve problems? Work that requires even marginal amount of thinking should5 be Results-Only Work Environments, not Presenteeism Work Environments.

All the money in the world can’t buy happiness and I’d rather being making $10k (or whatever) less and truly enjoy what I do; and this is the problem.

From experiencefreak.com:

Currency for motivation is becoming more intangible. … [A] fun/surprising reward can be more motivating than a functional cash incentive or discount. A competitive, peer interaction and temporal element drives motivation. Case in point look at how 4Square drives engagement.

I think the current generation of engineers6 gets this idea. We aren’t as tied to money as we are tied to autonomy, mastery, and purpose. I like purpose, it makes me feel like I’ve actually done something useful. And I like mastery, because I’m sort of anal like that. And I like autonomy, because I’ve found ways of doing things that work really, really well for me and get the job done. And money can’t buy any of that.

I see this at play in my own life in literally everything outside of work (i.e. my seven-to-three job): writing plugins for WordPress, running a triathlon, leading a Bible study, taking photographs. These are the things that make me happy. Engineering makes me happy too, but not as much as I think it could; which I believe has to do with the current method that I practice it.

See also:

Update:
From www.acceleratingfuture.com:

Why Intelligent People Fail
Content from Sternberg, R. (1994). In search of the human mind. New York: Harcourt Brace.

  1. Lack of motivation. A talent is irrelevant if a person is not motivated to use it. Motivation may be external (for example, social approval) or internal (satisfaction from a job well-done, for instance). External sources tend to be transient, while internal sources tend to produce more consistent performance.

via Kottke


  1. Large Stakes and Big Mistakes 

  2. “A long history of research has demonstrated that rewards can decrease motivation and attitudes (Festinger & Carlsmith, 1959), alter self-perception (Bem, 1965), increase overjustification (Lepper et al., 1973), and turn feelings of competence into feelings of being controlled (Deci & Ryan, 1985).” Source: Effort for Payment: A Tale of Two Markets 

  3. The original talk is about 40 minutes long and is pretty much an expanded version of the talk Dan Pink gave at TED on motivation 

  4. these two books are also on my reading list 

  5. generally; there are, of course, exceptions to the rule 

  6. et alii 

The Money Party

From www.smirkingchimp.com:

It is not about Republicans versus Democrats. Right now, the Republicans do a better job taking money than the Democrats. But The Money Party is an equal opportunity employer. They have no permanent friends or enemies, just permanent interests. Democrats are as welcome as Republicans to this party.

Late at night, when I can’t get to sleep, I start thinking about ways that our country could be better. I think that elections would be better if all candidates had a government supplied, fixed campaign money pot. In order to run for a position, you’d have to get a certain amount of signatures. Yes, there are flaws with this system (mainly “non-affiliated” support groups), but I think it would be a good start.

via Wil Wheaton’s Link Blog