The Bigger Picture About What Money Is

A refreshing reminder and something good to remember whenever one is diving into the weeds of money and the financial system.

I have been (very slowly) reading Naked Money by Charles Wheelan in the past 2–3 months. Having read Basic Economics by Thomas Sowell, I wanted to read something that dives a bit deeper into economics. I also wanted to battle (either for or against) the idea of Central Banks, dive deeper into the idea of inflation/deflation (either built-in like the 2% target by the FED or those caused by human events like in Japan), and just be able to understand how money works better.

I have found Naked Money to be fascinating and challenging my preconceived notions about central banks, and on top of that Charles Wheelan is quite a funny writer.

I will be writing a more in depth blog about Naked Money as a review once I’m done (one more chapter to go). This blog is more about a paragraph that I found grounding. It was something that reminded me to go back to thinking about the bigger picture, and without further ado, here it is:

Imagine some kind of commune in which the basic tasks are shared: raking leaves, babysitting kids, making bootleg liquor. If an hour of labor has consistent value—babysitting for an hour is just as valuable as making moonshine for an hour—then money is not theoretically necessary. The hours worked could be tracked on a giant Excel spreadsheet; the laggards could be reminded periodically that they owe some work to the group. However, the spreadsheet would become a real mess when the community grows larger or when different tasks are accorded different values. (I raked for your lawn for an hour. You spent thirty minutes doing couples counseling with Fred and Angela, but couples counseling is 1.75 times more valuable than leaf raking—and so on and so forth.) Money enables us to decentralize this accounting process. Rather than trying to reconcile what we all owe each other in a giant spreadsheet, we pass tokens among ourselves as the transaction take place. As an added bonus, we no longer need to remind the laggards that they are getting more from the group than they are giving; they just run out of tokens at some point. The movement of money through the community is an implicit record of the transfer of value—a more convenient version of changing names on the stone rai or updating the ledger. Bryan writes, “Some have argued, at least as far back as the seventeenth-century philosopher John Locke, that money is merely a communication device that serves as a societal memory of someone’s production and consumption.”

Let’s break it down.

“Commune” and “Shared Tasks”

My knee jerk reaction to “commune” and “shared tasks” is to think about how everything is completely disconnected and about how we’re far from sharing tasks or being a community. I mean, I kind of have a small community of friends and family, but it’s hard to see how this can encompass all the people that share one currency—say the U.S. Dollar. However, when one industry stops working the way it’s supposed to be, it cascades and affects everyone else. We see this today with the global chip shortage which is causing game consoles like the Playstation 5 or Xbox One to either cost much much higher than at the source or to be practically unavailable. This global chip shortage is also causing reused cars to have a higher price tag if I’m not mistaken. Whether we want believe it or not, we are indeed a “community” with “shared tasks”, and when parts of the community doesn’t do their part in the shared tasks, it affects everyone.

“Different Tasks are Accorded Different Values”

We also see this in the world. Perhaps this doesn’t work as desired because the values of different tasks aren’t “accorded” different values. Instead, people bid against each other for different “tasks” and different commodities in the process of supply & demand. The conclusion in that excerpt is that the price of different things is supposed to determine the value of those things, and while the values of things could widely different in a small community, I personally believe that prices do a fair job and determining the values of things through supply and demand (as they mostly do in today’s world).

The sad reality is that not everyone will agree with the resulting value determined by prices. To pick on things that I personally don’t believe have that much value, is a Gucci bag really worth $1000’s worth of value in this global community? Is a perfume really worth $2000+’s worth of value in this global community? The following blog lists 34 expensive things that most people would agree shouldn’t be that expensive.

However, at the end of the day, money and price is a way to determine the value of different things, and currently the formula that our global community uses to determine that is supply and demand.

Photo by Andy Beales on Unsplash


This was probably the most contentious part of this excerpt, but definitely something to think about. Going back to the community at the time when everything is accorded equal value (this could be a small family or a small island for instance), laggards would simply be reminded that they are lagging and that they need to contribute more to the society. Why? Because the community wants everyone in it to contribute to a minimum in order for the community to continue surviving. If everyone became a laggard, the whole community would die. If a large enough group became laggards, it could cause serious consequences to the community as some people are more specialized in other tasks than others.

I can accept that train of that for very small community because in very small communities, most people start off from the same level and have access to the same resources and opportunities (or roughly the same—same enough to not make a difference). As you increase the size of the community, this same equal starting level and same level of access to resources and opportunities goes away. In the United States today, it’s hard to say that this is true at all. To be fair, it’s probably one of the few places in the world where we have this to the highest level (the equal opportunity part), but it’s not the best.

This is where the question of whether money really represents “someone’s production and consumption” comes to mind. My short and hot take on this is that it absolutely doesn’t as is today, but it’s something that I want to think about more. As is today, it mostly works, but it’s not perfect. While I like the idea that “running out of token” is equivalent to “getting more from the [community] than [one is] giving”, I don’t think it’s always true (and there are a lot of cases where it’s not true).

What I do like about it, from a personal point of view, is that it incentivizes me to “give” more in order to be able to get and claim the things that I want. I am a strong believer in taking personal responsibility for the outcomes of my life (and this is not to say that I want everyone else to think the same), and thinking about it this way—in the form of an incentive to “give”—motivates me and gives me the autonomy and agency to make my life better.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Robert M. Vunabandi

Robert M. Vunabandi


I’m a human, living on earth, and doing Software Engineering. I enjoy reading thoughtful posts, and I like to write! So, here we are.