Surf Report: Bottom dollar

Issue 30: 04.18.2021 (Free Version)

April 18, 2021

Hi everyone—I’m so glad to have you here. What a week.

Once you fall down the rabbit hole of asking the question “What is money?” it’s very difficult to come back out. The answer is slippery and involves chasing time, feeling late, going mad, and running to stand still. (To wonder is to ask questions, which I suppose is why Alice’s curiosity led her to a place called Wonderland.)

One of the Winklevii recently stated that “all money is a meme,” which given the parabolic surge of dog coins right now is completely understandable. But it’s not really correct.

Like every wrong thing there’s usually a grain of truth to be found, and in this case it has to do with the explanation that Yuval Noah Harari gave in his blockbuster best-selling book Sapiens:

“Money is the most universal and most efficient system of mutual trust ever devised.”

“There are no gods, no nations, no money and no human rights, except in our collective imagination.”

A lot of Harari’s book anchors on the idea that society is held together by little more than the collective stories we tell each other and agree to believe. But this is a bit like saying reality is nothing but a collection of subatomic quarks engaging in quantum tunneling. Okay. But there’s still some explaining to do.

Money is more than meme. It’s not simply story.

Money is an economic good: a product or service which can command a price when sold.

This is very different from a meme: an idea, behavior, style, or usage that spreads from person to person within a culture. Richard Dawkins coined the term to echo the idea of “genes” in biology, suggesting that memes get passed on in a similar way but through culture instead of biological evolution and reproduction. The word has since taken on a new life in culture to mean a very specific type of meme that Dawkins didn’t really have in mind.

Manuel Polavieja describes the distinction this way: “something becomes money when the market deems it useful as money based on its very specific properties, not based in some capricious idea.”

Money is a social institution, but in no way the thing that performs the role of money is arbitrarily selected. It is discovered through a process of trial and error where the market continually assesses how the properties of monetary goods or potential monetary goods satisfy the need for exchange. Which is economically no different from the process by which the market selects bread as useful to satisfy appetite.

Unlike memes, which are ideas, jokes, or behaviors that are passed along and copied, money is an agreement that society converges on after a process of discovery.Money is a useful fiction, as Harari says, but a meme is a different kind of fiction.

What a society uses as money ultimately ends up being the most widely acceptable thing that best satisfies the properties of money. This is why tokens at a casino or Dave & Buster’s aren’t accepted at my corner deli.

Many things can be used as money, but a society ultimately converges on the best money and agree to use it as the money.

But the rabbit hole doesn’t end there. Money works in layers, and the farther away you get from the foundation the easier it is to forget the foundation exists, and soon you start to question its importance in the stack at all. This leads to what we have today: a fiat economy. One where all the money layers are stacked on top of mere decree, not a hard-to-produce, scarce, desirable good. Which won’t be a problem until it is.

I don’t know where we go from here, and I don’t know what the bottom of the rabbit hole looks like, but we’ll get somewhere eventually. We always do.

Alice: Would you tell me, please, which way I ought to go from here?
The Cheshire Cat: That depends a good deal on where you want to get to.
Alice: I don't much care where.
The Cheshire Cat: Then it doesn't much matter which way you go.
Alice: ...So long as I get somewhere.
The Cheshire Cat: Oh, you're sure to do that, if only you walk long enough.”

Until next time 🤙,


“No one should expect that any logical argument or any experience could shake the almost religious fervor of those who believe in salvation through spending and credit expansion.” —Ludwig von Mises

Breaking 🌊

📈 Coinbase closes at $328.28 per share in Nasdaq debut, valuing crypto exchange at $85.8 billion [CNBC]

🎮 Epic Announcing a $1 Billion Funding Round to Support its Long-Term Vision for the Metaverse [Epic Games]

₿💱 Bitcoin overtook the oldest currency still in use, the Great British Pound GBP, to become the 6th largest currency in the world. [CoinMarketCap]; Bridgewater's Ray Dalio Makes Case for Diversifying Portfolios with Bitcoin [U.Today]; Bitcoin just received a strong vote of confidence from a former acting director of the Central Intelligence Agency [Forbes]; GOP House Minority Leader says those in government making policy better start understanding what [Bitcoin] means for the future." [CNBC]; AXA, the world's biggest insurance company, is now accepting Bitcoin [AXA]; Galaxy Digital Files for US Bitcoin ETF [Yahoo]; Turkey, currently undergoing a major currency crisis, bans the use of cryptocurrency in Switzerland [Bloomberg];

From The Tweetbox 🐦

"Financial independence is upstream of individual independence and ideological independence." [Tweet]

“business travel is like 80% signaling. the time waste and expense *is the point* and shows how important the meeting is to the travelers” [Tweet]

“Bernie Madoff was Chairman of the largest securities regulator in the US.
Remember that whenever someone pushes for more regulation.” [Tweet]

“"I think one of the hallmarks of truth might be that it’s transformative.
Because it’s absolute it requires *you* to change. Because it can’t change." [Tweet]

"When you work with the history of ideas there’s this really persistent thing that I call ‘conceptual inertia,’ where old ways of thinking persist into new frameworks and do so very stubbornly" [Tweet]

For The Pros 😎

Worth A Read 📃

Could Index Funds Be ‘Worse Than Marxism’? Economists and policy makers are worried that the Vanguard model of passive investment is hurting markets.

“That commitment to inertia worries the Bernstein analysts, who point out that in a world with exclusively passive investors, capital will get allocated only to the big companies and not necessarily to good, promising, or efficient companies.”

“More broadly, the Bernstein analysts, among others, worry that index-linked investing is increasing correlation, whereby the prices of stocks, bonds, and other assets move up or down or sideways together.”

World Building, by Alex Danco

“Everyone’s job is world-building, even if they don’t realize it…”

The more complex or valuable is whatever you’re trying to sell, the more important it is for you to build a world around that idea, where other people can walk in, explore, and hang out – without you having to be there with them the whole time.



Pods & Schools 🐬🐠

📚 The Drunkard's Walk: How Randomness Rules Our Lives, by Leonard Mlodinow

“We judge people and initiatives by their results, and we expect events to happen for good, understandable reason. But our clear visions of inevitability are often only illusions.”

“If events are random, we are not in control, and if we are in control of events, they are not random. There is therefore a fundamental clash between our need to feel we are in control and our ability to recognize randomness.”

🔊 BTC021 Bitcoin and Bonds w/ Greg Foss, in conversation with Preston Pysh. Highly recommend.

🏫 Principles of Finance course on Saylor Academy (Free!)

Tools of the Trade ⚒

Products I use to make money

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Nothing in this email is intended to serve as financial advice. Do your own research.