Follow the Money
“Nowadays people know the price of everything and the value of nothing.” — Oscar Wilde, The Picture of Dorian Gray
“Money often costs too much.” — Ralph Waldo Emerson, The Conduct of Life
When I was a kid, I thought adults understood the world.
That might have been my first mistake.
I assumed somebody knew what was going on.
The politicians knew how government worked.
The bankers understood money.
The doctors understood health.
The teachers understood education.
The economists understood the economy.
The scientists understood nature.
The experts understood their fields.
And somewhere above all of them, I imagined there must be a group of very serious adults making sure the whole thing made sense.
Then I grew up.
And the world started looking strange.
We can grow enough food to feed enormous populations, yet people go hungry.
We built machines that communicate across the planet instantly, yet loneliness is everywhere.
We invented technology specifically to save labor, yet people constantly complain that they have no time.
We produce more wealth than previous civilizations could have imagined, yet families can work for decades and still feel one emergency away from collapse.
We can photograph galaxies millions of light-years away, but somebody can spend three hours arguing with an insurance company about a medical bill nobody can explain.
We have scientists capable of editing genes and engineers landing rockets vertically...
while parents struggle to find somebody they trust to watch their children for an afternoon.
Something felt backward.
Not everything.
Civilization has accomplished extraordinary things.
I like electricity.
Antibiotics are useful.
Indoor plumbing was a fantastic idea.
The internet is nearly magic.
Markets have created incredible innovation.
Governments have built infrastructure, protected rights and coordinated projects individuals could never build alone.
Science has expanded our understanding of reality beyond anything our ancestors could have imagined.
This is not a book about pretending civilization failed.
It is about noticing something more uncomfortable.
A civilization can be incredibly successful and still be badly designed in places.
And the more I looked, the more the same thing kept appearing.
Money.
The Thread
Look at politics.
Money.
Healthcare.
Money.
Housing.
Money.
Food.
Money.
Media.
Money.
Education.
Money.
War.
Money.
Technology.
Money.
The environment.
Money.
Crime.
Justice.
Law.
Research.
Work.
Retirement.
Family.
Time.
Again and again, somewhere inside the machinery, there it was.
That does not mean money causes everything.
That would be ridiculous.
Humans were jealous before money.
Humans fought before money.
Humans lied before money.
Humans loved, shared, murdered, cooperated, competed, protected their children and betrayed one another long before anybody printed a dollar.
Money did not invent human nature.
But money became connected to almost everything human nature wants.
Food.
Shelter.
Security.
Status.
Sex.
Power.
Freedom.
Comfort.
Prestige.
Opportunity.
Time.
The ability to say yes.
The ability to say no.
The ability to leave.
The ability to survive.
Money became one of the most powerful general-purpose tools our species ever invented.
Which means we should probably understand what it is doing to us.
What Is Money?
That question sounds too simple.
Everyone knows what money is.
Right?
You work.
You get paid.
You buy things.
Except money gets weird very quickly once you start asking basic questions.
Where does it come from?
Who creates it?
Why can some institutions create forms of money while ordinary people cannot?
Why does borrowing create purchasing power?
Why does money appear to multiply through financial systems?
Why do some forms of work attract enormous amounts of money while others humans desperately need barely pay at all?
Why can something with enormous value have almost no price?
Why can something with an enormous price have questionable value?
Who decides what money is worth?
Why does its value change?
Why do nations owe trillions of units of currencies they themselves define?
Why do governments tax money after helping define and issue the monetary system in the first place?
Why does almost everybody need money...
but so few people understand the machinery producing it?
The questions kept multiplying.
And eventually I realized something.
Maybe money isn't merely something we use inside civilization.
Maybe money is part of the operating system of civilization itself.
The Measuring Stick
Imagine you build a table.
You pull out a measuring stick.
The table is six feet long.
Useful information.
Now imagine the measuring stick begins telling you:
how beautiful the table is,
whether your family enjoys eating around it,
whether it will survive fifty years,
whether cutting down the tree was worthwhile,
whether the carpenter enjoyed building it,
whether making the table improved anyone's life.
It can't.
That is not what the ruler measures.
Money has a similar problem.
Money is astonishingly good at measuring certain things.
Price.
Exchange.
Financial return.
Purchasing power.
Debt.
Assets.
Costs that enter transactions.
But we often make a subtle mistake.
We assume that because something has a precise monetary number attached to it, the number captures its actual value.
It doesn't.
A mother comforting a terrified child at three in the morning may produce no financial transaction whatsoever.
A hedge-fund trade executed in milliseconds might move millions of dollars.
Which produced more human value?
The monetary system cannot answer that question.
It was never designed to.
Money measures price remarkably well. It does not necessarily measure value remarkably well.
That distinction became one of the first cracks in the wall.
The Invisible Things
Once you notice it, invisible value appears everywhere.
Parents raising children.
Grandparents helping families.
Friends checking on each other.
Volunteers.
Neighbors.
Public parks.
Clean air.
Trust.
Open-source software.
Scientific knowledge shared freely.
A teacher changing the trajectory of a child's life.
Someone preventing a problem that therefore never happens.
A forest quietly regulating an ecosystem without sending anyone an invoice.
Civilization depends on things its financial ledgers often struggle to see.
Meanwhile, other activities can generate enormous amounts of money while producing costs that appear somewhere else.
Pollution.
Addiction.
Illness.
Debt.
Attention capture.
Waste.
Political division.
Those costs do not disappear because they sit outside the transaction.
Reality keeps its own ledger.
The Game Behind the Game
Then another question appeared.
What if money isn't really the deepest issue?
What if the deeper issue is the game surrounding money?
Every game has rules.
Who can play?
How do you score?
What gets rewarded?
What gets punished?
Who owns the board?
Who writes the rules?
Who enforces them?
Can the winner change them?
What happens to the loser?
Can you try again?
Can you leave?
Can you challenge the referee?
Money moves through a game built from:
laws,
banks,
markets,
governments,
contracts,
property,
taxes,
corporations,
institutions,
technologies,
social expectations.
And humans respond to those rules.
That does not eliminate personal responsibility.
It explains why changing players often fails to change outcomes.
Fire every banker.
Replace every politician.
Replace every CEO.
Replace every voter.
If the same rewards and constraints remain...
how much behavior eventually comes back?
That question bothered me.
Because it meant our favorite political story might be incomplete.
Maybe the world is not simply divided into good people and bad people.
Maybe decent people can produce terrible outcomes inside badly designed games.
And terrible people can sometimes be constrained by well-designed ones.
Incentives
There is a sentence we will return to throughout this book:
Show me what a civilization rewards, and I will show you what it is training people to become.
Pay for clicks.
People chase clicks.
Reward outrage.
Outrage grows.
Reward quarterly profit above everything else.
Organizations learn to optimize quarterly profit.
Reward politicians for winning elections.
They learn how to win elections.
Reward schools for one narrow metric.
The metric begins shaping the school.
Reward hospitals primarily when people become sick enough to require expensive treatment and money naturally flows toward treatment.
None of this requires everyone involved to be evil.
That is what makes incentives so powerful.
The machine can emerge even when nobody designed the entire machine.
Each person makes a decision that makes sense from where they are standing.
The banker.
The politician.
The investor.
The employee.
The consumer.
The advertiser.
The bureaucrat.
The corporation.
The voter.
Then billions of individually understandable decisions combine into something nobody remembers choosing.
The Civilization Nobody Ordered
Ask a room full of people:
Who wants children addicted to screens?
Who wants rivers contaminated?
Who wants politicians controlled by donors?
Who wants medical care nobody can afford?
Who wants young families unable to buy homes?
Who wants lonely elderly people?
Who wants endless war?
Who wants children graduating without understanding money?
Who wants parents constantly exhausted?
Who wants neighborhoods nobody knows how to repair?
Who wants algorithms deliberately making people angrier?
Probably not many hands.
And yet societies can produce those outcomes anyway.
That may be one of the central mysteries of civilization:
How can millions of people who want reasonably decent lives collectively produce systems so many of them dislike?
One answer is incentives.
Another is power.
Another is human psychology.
Another is history.
Another is technology.
Another is that systems accumulate.
Nobody sat down one morning and designed modern civilization from scratch.
We inherited it.
Piece by piece.
Law by law.
Institution by institution.
Crisis by crisis.
Technology by technology.
Generation by generation.
We are living inside layers of experiments conducted by people who are dead.
Some worked brilliantly.
Some made sense for conditions that no longer exist.
Some were compromises.
Some were corrupt.
Some were emergency measures.
Some were accidents.
Some became sacred merely because we got used to them.
Zoom Out
This is where I want to do something throughout this book.
Zoom out.
Far out.
Imagine leaving Earth.
Keep going.
Past the Moon.
Past Mars.
Past the Sun.
Look backward.
Eventually there is no America.
No China.
No Republican Party.
No Democratic Party.
No capitalism.
No socialism.
No Federal Reserve.
No dollar.
No Bitcoin.
No corporations.
No borders visible from space.
There is a tiny planet carrying billions of unusually clever primates through the universe.
Every monetary system disappears.
Every political slogan disappears.
Every ideology disappears.
Reality remains.
Food still requires energy.
Bodies still require water.
Children still need care.
Disease still damages organisms.
Humans still need relationships.
Resources still have physical limits.
Actions still have consequences.
The universe does not care what our economic theory says should happen.
Reality wins every argument eventually.
That gives us a place to stand outside the systems we inherited.
Then Zoom Back In
Now return to Earth.
A human wakes up.
Their alarm sounds.
They look at a phone.
Maybe before speaking to another person, an algorithm has already started deciding what information reaches them.
They go to work because they need money.
Their employer needs revenue.
The company needs customers.
Investors expect returns.
The bank expects payment.
The landlord expects rent.
The government expects taxes.
The media company needs attention.
The politician needs votes.
The advertiser needs behavior.
The insurance company calculates risk.
The algorithm calculates engagement.
Everyone is responding to something.
Follow those signals long enough...
and money appears again.
Not because money is secretly sitting behind every curtain plotting against us.
Money does not have intentions.
Humans do.
Institutions do.
But money changes the environment in which those intentions operate.
Money as Environment
A fish does not think much about water.
Humans rarely think about monetary architecture.
We think inside it.
We ask:
How do I make more money?
How do I get a better job?
How do I buy a house?
How do I retire?
How do we grow GDP?
How does this company increase revenue?
How does the government pay for this?
Important questions.
But beneath them sits another question:
Why does the system work this way in the first place?
Money is a human technology.
That means it has a design.
Designs contain assumptions.
Assumptions create rules.
Rules create incentives.
Incentives influence behavior.
Behavior repeated across millions or billions of people becomes culture.
Institutions.
Markets.
Politics.
Eventually:
civilization.
That's when money stops being boring.
This Book Is Not What You Think
This is not a book arguing that rich people are evil.
Some rich people create extraordinary value.
Some poor people are terrible.
Human character does not fit neatly onto a bank statement.
This is not a book arguing that capitalism should be destroyed.
Markets, property, entrepreneurship and competition are among humanity's most powerful coordination tools.
This is not a book arguing that socialism is the answer.
Concentrating enormous economic authority inside government creates its own ancient problems.
This is not a book arguing that cryptocurrency will automatically save humanity.
Code can concentrate power too.
This is not a book arguing that government should solve everything.
It cannot.
And perhaps most importantly:
this is not a book claiming I have discovered the final system.
I don't trust final systems.
History should have cured us of that.
The Question
The real question is simpler.
If humans invented money...
what should money be for?
If humans invented corporations...
what should corporations be for?
If humans invented governments...
what should governments be for?
If humans invented schools...
what should schools be for?
If humans invented markets...
what should markets be for?
If humans are now creating artificial intelligence...
what should artificial intelligence be for?
Eventually every tool needs a destination.
Otherwise the tool begins determining the destination for us.
The Digital Collision
And we are running out of time to avoid these questions.
For most of history, changing civilization was slow.
Now several technologies are colliding at once.
Artificial intelligence.
Robotics.
Cryptography.
Digital currencies.
Biotechnology.
Networks.
Automation.
Cheap sensors.
Digital identity.
Massive computation.
Machines are beginning to perform parts of human thought.
Other machines can increasingly perform physical work.
Our ability to coordinate, monitor, predict, persuade, automate and create is growing rapidly.
That could be extraordinary.
It could mean:
better medicine,
personal tutors,
less dangerous labor,
new science,
cheaper goods,
greater abundance,
more human time.
It could also mean:
more surveillance,
greater concentration of ownership,
industrialized persuasion,
automated warfare,
algorithmic bureaucracy,
a world where human labor becomes less necessary while humans still require money to survive.
The technology does not answer the moral question.
It multiplies our ability to act.
The game surrounding the technology determines where that power points.
The Investigation
So we're going to start somewhere deeper than politics.
Before capitalism.
Before socialism.
Before money.
Before America.
Before banks.
Before AI.
We're going back to reality.
Nature.
Evolution.
The human animal.
The mind.
The stories humans create.
The games we build.
Then we'll introduce money into the machine.
And follow it.
Through debt.
Markets.
Politics.
Institutions.
Psychology.
Power.
Hidden costs.
Technology.
Eventually we will reach the question that started this whole investigation:
What is Bad Money?
I'm not going to define it yet.
That would ruin the investigation.
First I want you to see the machine.
Then we'll flip it over.
One Request
You don't have to agree with me.
Actually, I'd rather you didn't automatically agree with me.
Question everything in this book.
Especially the ideas you like.
Especially the ideas I like.
Ask:
What evidence supports this?
What assumptions are hiding underneath it?
What happens if we run the system forward?
Who gains power?
Who loses power?
What behavior gets rewarded?
What happens under the worst leader?
What happens under the worst corporation?
What happens when somebody cheats?
What happens when the algorithm is wrong?
Can the system recover?
Can the loser try again?
Can the winner buy the rules?
And throughout the entire book, whenever the numbers become complicated and the institutions become abstract, return to one question:
What happened to the humans?
Because somewhere along the way, we built an economy.
Then we began talking as though humans existed to serve it.
We built money.
Then we began talking as though money were a law of the universe.
We built institutions.
Then we forgot they could be redesigned.
We inherited the game.
That does not mean we are required to keep every rule.
But before we change anything...
we need to understand the world underneath it.
Reality was here first.