I just read The Origins of Money by Nick Szabo, a fascinating essay.
Here's a quick summary.
Tribes used collectibles as money long before precious metals. The true value of creating money was its ability to transfer wealth from one generation to another.
Here's a quick summary.
Tribes used collectibles as money long before precious metals. The true value of creating money was its ability to transfer wealth from one generation to another.
2/ Because marriage, dispute resolutions and inheritance predate trade, transferring wealth was more urgent than trade and was the primary reason why money was created.
Paleo tribes created collectibles as money to trade with other local tribes.
Paleo tribes created collectibles as money to trade with other local tribes.
3/ Tribes specialized in hunting one species, which migrated and was therefore seasonal.
Collectibles used as money could literally double the available meat to a tribe, and be the difference between life and death.
Collectibles used as money could literally double the available meat to a tribe, and be the difference between life and death.
4/ It was important that the chosen money be durable (wealth didn’t have expiry date) and acceptable, meaning it could be generally distributed with the widest number of tribes.
5/ Money and Settlements
Money was commonly used (80% of cases) to compensate for value mismatch between bride and groom in marriages, almost always from groom to bride as women were more valuable between clans.
Money was commonly used (80% of cases) to compensate for value mismatch between bride and groom in marriages, almost always from groom to bride as women were more valuable between clans.
6/ War was common and winners of battles would take payments in form of collectibles or primitive money that ended need for war. This benefitted both the victor (who could increase their wealth and tax the defeated) and the defeated (who could preserve life).
7/ Fun Idea
Szabos postulates we have desire to collect cause evolutionary evolved to feel pleasure.
That we have a collection instinct of sorts. This in part explains our urge to reach down and pick up a beautiful shell and then paint or decorate them to increase their value.
Szabos postulates we have desire to collect cause evolutionary evolved to feel pleasure.
That we have a collection instinct of sorts. This in part explains our urge to reach down and pick up a beautiful shell and then paint or decorate them to increase their value.
8/ Money and Coins
Coins were first made by Libyans in 700 B.C.
& allowed more trades to be made than with barter.
Low value trades became possible as small gains from trade exceeded transaction cost.
Collectibles were low velocity involved in a high value transactions.
Coins were first made by Libyans in 700 B.C.
& allowed more trades to be made than with barter.
Low value trades became possible as small gains from trade exceeded transaction cost.
Collectibles were low velocity involved in a high value transactions.
9/ Coins were high velocity money facilitating low value trades.
This was huge.
Alexander the Great essentially conquered Mesopotamia by capturing Egyptian low velocity collectibles (gold) and melting them down into coins for high velocity trade.
This was huge.
Alexander the Great essentially conquered Mesopotamia by capturing Egyptian low velocity collectibles (gold) and melting them down into coins for high velocity trade.
10/ Money and Efficiency
Homo Sapiens Sapiens (~100,000 years ago) had a 10x pop explosion despite weaker bones and no increase in brain size.
Experts believe it’s in part due to social institutions made possible by wealth transfer and language.
Homo Sapiens Sapiens (~100,000 years ago) had a 10x pop explosion despite weaker bones and no increase in brain size.
Experts believe it’s in part due to social institutions made possible by wealth transfer and language.
11/ Gold is More Efficient Money:
Money needed to satisfy these properties:
Easy to carry and hide
Hard to forge its value
Simple observations or measurements to assess value
With collectibles, it was hard to satisfy all 3 properties. Coins were essentially an evolution.
Money needed to satisfy these properties:
Easy to carry and hide
Hard to forge its value
Simple observations or measurements to assess value
With collectibles, it was hard to satisfy all 3 properties. Coins were essentially an evolution.
12/ The Future of Money
The essay ends with gold becoming the world's preferred store of value, but neglects to talk about what's next.
I've thought a lot about this, and here is my $0.02.
I'm sharing this in hopes you'll help me refine these ideas and we can seek the truth.
The essay ends with gold becoming the world's preferred store of value, but neglects to talk about what's next.
I've thought a lot about this, and here is my $0.02.
I'm sharing this in hopes you'll help me refine these ideas and we can seek the truth.
13/ If gold was a more efficient form of money than coins because it better satisfied the characteristics of money, is it possible a more efficient form of gold disrupts precious metals as the world’s preferred store of value?
14/ Does intrinsic value exist or is it just a collective fiction that humans agree upon?
Is it possible that demand or value be created, if society agrees upon a new collective fiction?
Is it possible that demand or value be created, if society agrees upon a new collective fiction?
15/ With the invention of blockchain and protocols like Bitcoin, micropayments are now possible.
When money becomes ‘streaming’ meaning it can move at the speed of technology and have virtually no transaction cost, will it revolutionize the way we transact value?
When money becomes ‘streaming’ meaning it can move at the speed of technology and have virtually no transaction cost, will it revolutionize the way we transact value?
I’ll be exploring 'The Future of Money' more in an upcoming essay I'm working on.
Subscribe to be notified when it comes available: alectorelli.com
In the meantime I'd love your thoughts here.
Shoutout thanks:
@Breedlove22 @PrestonPysh @JWilliamsFstmed @APompliano
Subscribe to be notified when it comes available: alectorelli.com
In the meantime I'd love your thoughts here.
Shoutout thanks:
@Breedlove22 @PrestonPysh @JWilliamsFstmed @APompliano
Hi @NickSzabo4 I love your work and your essay was fantastic. Thanks for sharing your knowledge.
