On Money

ahmedUncategorizedLeave a Comment

Here, I put down all my thoughts and principles around money.

These are principles I wish someone had taught me.

Money

  • Money is a resource; a made up one.
  • Money doesn’t exist in nature. It is a tool we developed to make it easier to transfer value while conducting trade.
  • Instead of trading items and services directly, we get to store, lend, divide, and transfer value in the form of money.
  • Money is a concept, and currency is its unit.

Market

  • The sum of trade transactions and their pricing is referred to as the market.
  • The market is a natural system. It came before money was invented, and is as old as two archaic men exchanging meat with fruit.
  • The market is decentralized and cannot be┬ácontrolled┬áby any single entity.
    • It can be influenced by regulation, both positively and negatively, but never controlled.
  • “The market always decides”; meaning that the nodes in the market collectively decide what happens to it with their economic activity.
    • The nodes in any market economy are based of supply and demand; sellers and buyers.
      • The buyer always sets the price. In theory, assuming no monopoly, if a seller doesn’t serve the buyer well, another better seller would emerge.
  • Central entities regulate their market by printing more cash when it’s needed, while ensuring the market isn’t flooded with cash.
    • If people have a lot of cash, pricing inflation happens in the market, and sellers charge higher prices because buyers can afford it.
      • Inflation almost helps no one in the long run, because every person will need more money to buy the same things, making the currency unit less valuable.

Making Money

  • You can make money in an infinite number of ways.
  • The single common denominator for all of these methods is that another human with money finds what you’re doing worthy of monetary reward.
    • If you do something, and someone with money likes the service, likes you, or likes both, then they’re likely to give you some money.
      • If you reach to a lot of people like that, then you get to make a lot of money.
  • The service or product doesn’t matter. If there’s a buyer, a seller is likely to emerge.
  • Different people naturally have different genetic capabilities (physical, cognitive, creative)
    • The best way to make money is to use your unfair genetic advantages.
  • Some people are born with more money than others from their families.
    • If such people don’t use their money productively, they will lose it.
    • Thinking “why does this person have more money” or “this person didn’t work for their money” is a waste of time, and an act of envy which leads nowhere but to dissatisfaction and resentment of others.
  • Every natural system has unfairness, and trying to eliminate unfairness can be catastrophic.
    • Having hierarchies of competence incentivizes taking risks to reach to higher ranks in the hierarchy, which promotes innovation and healthy competition.
      • The only way one can make more money is by providing a better service than others.
  • The market allows for a hierarchy of competence; the more skilled one gets at a task, the higher the market usually rewards them.
    • This is due to the market’s rule of supply and demand; the more scarce the supply is, the higher the price the demand is willing to pay.
    • If there’s an abundance in supply, the price goes down.
  • Everyone has an opinion on how money should be spent.
  • One only has a say in how they spend their own money. Nobody has a say in how someone else should spend their money.
    • Any act of doing so stems from envy, or is an act of intrusion.
  • Incentives influence how people usually spend their money.
  • There are 3 types of incentives: economic, social, and moral.

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