Money is Just Information

I love that quote. I love it because it takes the mystery out of money’s value. And that mystery needs to be taken out of our daily lives. Why? Because if we think money is value — rather than just information about value — we are distracted from where value comes from. We fight for money instead of fighting to add value.

This doesn’t matter that much when money looks like value. Like when you get a salary and can exchange your money for stuff that you like and need. Then the distinction is not so important.

As an aside, this is similar to the imprecision that Newtonian gravitational measurements led to. The lack of precision was not important, except when it came to vast distances. Einstein came up with a more precise model that we appreciate more as we think about and work in that space.

So why would the distinction between money and value become important? Simple. It is expensive to offer people jobs. To employ them at a salary. It is also expensive for people to accept jobs and get locked into schedules and command and control structures. We do it all the time without thinking about how expensive it is. But the expenses are there.

It is far cheaper for people to connect with each other informally. And if they can do this in ways that add value on a consistent basis, they don’t need jobs. So some folks already look at the world of employment as a relic of the past. But what about the rest of us?

The rest of us need to be able to create value more easily too. And to do that, we need a more precise measurement of what is valuable and what is not. With that greater precision, we can take more informed risks about how to work with others.  We can prosper doing micro-projects.

But if we do these micro-projects for money, we start bumping into transaction costs. For example, getting micro-payments. The cost of the transaction makes many types of transactions less feasible. Get it? Money is just information about value — it is not the value added itself.

So, if we had a more efficient way to exchange information about value added that, for example, avoids transaction costs, we expand the type of transactions that become feasible. We widen the possibilities for adding value.

Is there such a thing? It is evolving. And it is bitcoin.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s