Thread by @dunkhippo33

I’ve been listening to the audiobook Sapiens, by Yuval Harari. I’m not finished yet but it lives up to the hype.

Today’s tweet thread is about a few interesting tidbits about the topic of debt that I learned from the audiobook.

Read on >>

1) First, what is the book?

Sapiens: A Brief History of Humankind amazon.com/dp/0062316095/

It’s basically about the history of mankind through the ages.

Harari starts w the evolution of people and follows the history of ppl to agrarian societies & conquests, etc

2) Today’s thread will just focus on the segment where he discusses debt.

Money and debt are actually really complex when you think about it.

3) For a long time there was a coordination & trust problem - that ppl would be willing to earn something that wasn’t a utility.

Instead of trading services for apples you can eat, there’s a lot of trust to trade for stones that could be used elsewhere but was otherwise useless

4) But in addition, debt was even more complex.

If you give a baker money to buy ingredients to make food to sell and pay you back plus more, then there’s a lot of trust and belief that the business will do well in the future.

5) Not only that, in the earlier centuries, people had a much more zero-sum mentality that

a) money is only made by taking it from someone else
b) you see few ppl get rich so you have less trust that you can make money w other ppl

6) In fact, few believed society could get better. And for a long time, ppl didn’t focus on technological improvement or process improvement because they just didn’t believe things could be better.

7) He talks about the vicious cycle of what happens if no one funds the baker, then the business doesn’t do well and no one makes money. That then serves as “proof” that there was no money to made in it in the first place which makes ppl further reluctant to lend.

8) As an investor myself, this is a spot on observation and I think at this pt we actually now have strong data on how investing (at least w a portfolio approach) makes money for you and others who then go on to do the same for others yet, jumpstarting economies and ecosystems.

9) And we observe the opposite in play as well. When ecosystems (whether geographic or demographic) don’t get funded and then they don’t make money, ppl say they were not good investments in the first place even though that is a result of lack of investment.

10) It was just interesting to hear this phenomenon played out across history in the book.

He dives into where debt did work well and where it didn’t.

11) In the Renaissance era-ish, he compares and contrasts Spain and the Netherlands.

Both had governments and private companies who took on debt from wealthy people.

12) In Spain, the gov was constantly spending money on wars but these never seemed to pay off.

Moreover the monarch would threaten investors if they didn’t invest more.

13) In the Netherlands, they shied away from wars & funded private endeavors incl New World conquests (and slavery :( ) which were immensely profitable. They paid investors back + interest on time. And they pioneered the joint stock corporate structure + shareholders did well.

14) Ppl flocked from places like Spain to invest into Amsterdam.

shareholders went on to invest in more stock of other private Dutch entities and this is how the Dutch were able to rise to power. (Though eventually they did decline when they ended up in a bunch of wars)

15) Notably, the French gov also raised a lot of debt to fund their wars which were also not good investments.

By the time Louis the 16th took the throne, a big part of his woes that the French gov was so in debt that he couldn’t pay it.

16) I had always thought that his issue was that he was just out of touch w his ppl but I didn’t realize until this audiobook just how much debt played a role in the decline of nations during this era.

Government bonds were just not trustworthy. Esp to wade into wars.

17) Will probably do another thread on this book later since there are so many fascinating components.