The Psychology of Money: Understanding its Impact on Humanity
Discover the intricate relationship between humanity and money in this insightful video exploring the three primary functions of money: a medium of exchange, a store of value, and a unit of account. Unravel the psychological aspects of money's influence on individual and collective behavior.
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For a special offer, go to Keeps.com slash pursuit of wonder or click the link in the description.
A coin, a piece of paper, a digit on a screen, a symbol of value, power, freedom.
Money is one of humanity's most impressive inventions.
It is also one of its most illusory and counterintuitive.
Whether we care about money or not, whether we want to care about money or not, we are all affected by it.
On both the collective and individual scale, nearly all of humanity is propelled by money's
intangible current.
What is money?
Plainly, money is defined by three primary functions.
A medium of exchange, a store of value, and a unit of account.
As a medium of exchange, money can be exchanged for goods and services.
As a store of value, it holds its value over time so it can be exchanged for goods and services
in the future.
And as a unit of account, it provides a common measure of value to compare and discern
reasonable, consistent pricing across goods and services.
Before money, there was bartering, the direct trade of goods and services for other goods
and services.
This had many problems.
Mainly, bartering was highly susceptible to a frequent asymmetry in trade needs.
What is known as the double coincidence of wants is the condition in which two parties
in the same place both have items or services that the other party wants at the same time.
The fundamental problem with this is that this condition rarely occurred.
For example, if one party was looking to trade cattle and another party was looking to trade
baskets, the party looking to trade cattle would also need to want baskets and the party
with baskets would need to want cattle for a trade to occur between the two.
Since the sort of perfect alignment would rarely be the case, other intermediate trades would
often become necessary.
For example, let's say the party with surplus cattle actually wanted fabric.
In order to get fabric, they might have needed to trade cattle for baskets and then baskets
for fabric with someone else who wanted baskets.
Naturally, this would result in crude exchanges, inefficiencies, and imbalances across the
socio-economic landscape.
Money of course solves this problem.
At bottom, money retains its function and value because we all agree that it's valuable
and we all participate in its functions.
The philosophy of money.
The way each of us handles money provides interesting and important insights into who we are.
More importantly, money can be used to discover and optimize these insights.
The way an individual treats money is affected by their values.
If everything is in alignment, how one handles money should illuminate and enhance one's
values.
Of course, this is not always the case.
And if it isn't for us, arguably, the goal is to work toward creating this alignment,
finding the equilibrium of one's wants, better understanding oneself, controlling one's impulses,
and actualizing one's unique image of life. Beyond money's primary functions,
its secondary functions can include and should include one possible, a means of clarity,
focus, discipline, and control. This, of course, comes with many challenges.
Firstly, we are all born into different circumstances. We are each born in certain places in the world,
with certain genetics, the certain parents with certain values and resources, and certain times in history.
