What is Money?

One of the challenges of trying to read wide and deep I’ve found is ensuring active engagement with the content. Without that, it’s difficult to take away the author’s key message and to assimilate that into my mental models. It is an important enough problem faced by people who like to read that Shane wrote a great post describing how to take notes while reading.

I’ve tried various techniques in the past and in this post, I’ll highlight a technique I’m experimenting with, using mind maps to summarise my understanding of the content.

The image below is from the beginning of Felix Martin’s so-far excellent book “Money: The unauthorised biography”

We think of money in terms of the currency we hold, either physically or digitally and it’s utility as a medium of exchange that evolved from basic forms of exchange like barter. Felix effectively challenges this traditional notion and proposes a different perspective. That money is “social technology”, a centralised ledger of credit and debt balances between individuals and entities where the obligations are transferable to 3rd parties.

He emphasises the utility of money as a system of information than physical currency by highlighting how during the Irish Bank Closure in 1970, the Irish economy continued to function and grow despite no mechanism to deposit cheques. The “currency” then shifted from traditional currency to IOUs between individuals and entities with the credit-worthiness of participants assessed by nodes of information, i.e. the local pub.

What is Money?

The Calm Investor | What is Money

Source: Money: The unauthorised biography by Felix Martin

You can check out the book here.

Can’t wait to get to the rest of the book, and if as compulsive as the beginning, will summarize here.

What do you think?