Saturday, December 5, 2015

The value of money and "fuck you money"

What is money? Have you ever stopped to think about it?
Today we take money for granted - we know that more is better, that there are always taxes, that you can take a loan and then pay it back with interest, that there's inflation of prices which sucks and that in general you should think about money in the back of your head whenever considering life choices. 

Let's start with a fun, short, somewhat biased but fairly accurate description of the origin of money:

Nowadays money has a very different "personality" than the original tool that was meant to simplify trade. It became a measure of social status, a goal to strive for in it's own merit (the "score" in the game we call life). 
In modern western society money is closely associated with capitalism. Part of the premise of capitalism is the view that money represents value. The way to earn money is to create a product / provide a service that others find valuable for them - a full correlation between merit and money. The theory of the free market supports this idea - people will only buy your product if its value in their eyes is higher than the price you ask for - so the product better be good if you wish to make a profit. You get rewarded for creating value for others, for making their lives better. It's a beautiful idea - on paper. Much like communism, the theory greatly differs from reality - but that's a subject for another day.

Hidden in the last paragraph is an important observation: value is subjective. Unlike the popular assumption that things have an approximately fixed price - "the value of a bread loaf is about 2$ because that's what they charge at the supermarket" - in reality different people in different situations might value the same bread extremely differently.
A starving man would pay much more than 2$, while an affluent man that just had a meal wouldn't take your bread even for free. A starving man in most parts of Africa would perhaps value the bread very highly but couldn't pay 2$ for it - because 2$ is a substantial percentage of his total capital - while Donald Trump wouldn't notice 2$ in his bank account even if he tried. Value can even turn negative: some people pay for the privilege of sky-diving, while others would pay for the privilege of staying on the ground...

So the value of money is just the value of our experiences that we can buy using that money. That's, presumably, the reason people are trying so hard to get more money. But is it worth it? 

Time for some math:
Let's say you want to go for a month-long dream vacation on some exotic Caribbean island - assume it costs 10K$. Let's say you earn 3K$ (after taxes) of which you save 500$. A quick calculation will show that this endeavour would take 25 months of your life: 20 to save for the trip, 1 for the trip and 4 to save enough for rent/bills/etc. while you're gone and not working (I assumed 2K$ expenses instead of the normal 2.5K$ since you're not there). 
Alternatively, let's say your hobby is substantially less flamboyant - for example: PC gaming. Since you already own a computer and pay for the apartment in anycase - you have no additional costs except for living. You could split the same 25 months into 21 months work, 4 months vacation and still have money to spare. You essentially use your money to buy back time.
What's better? I have no idea. Value is subjective. Personally, I suspect I'd grow bored on the hypothetical exotic beach after the 3rd day, but that's just me. For my interests and goals in life the limiting factor is usually time - not money, so perhaps the best way for me to maximize my money's value is actually to earn less (at least in the standard 9-to-5 sense). In other words, sell less of my time for money

A third alternative could be 25 months work, and that's it. Earn the extra money and just save it. Perhaps invest in something safe on the stock market. But didn't we just say that it misses the point? That we are rational people and don't buy into the blind capitalist rat race of endlessly earning more "score" money? That money should be spent in exchange for experiences? 
That's all true. But savings have a very tangible experience-value: freedom. Even if you have just a little bit saved up for a rainy day - you already feel much safer. If you saved up a little more, you might be more picky about choosing a job - since you can survive a few months without a salary - hence more freedom of employment. Save even more and perhaps you're free to change your career path - go buy some more education or just take an entry level job in a new field - you don't feel like you are forced to stay on a career path you hate. Save enough to buy a house and you don't have a landlord to answer to. Each step buys you a little more independence, a little more freedom.
The final form of this concept is "fuck you money":

Until next time, may you use money - instead of it using you.


{Thanks to Inbar Duek, Esti Hait and Dikla Oren for reading and commenting on earlier versions}

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1 comment:

  1. Good post, Michael. I agree wholeheartedly.

    I would like to offer another perspective on money, though: money as power.
    Got 2.5 million dollars? Good. That's "fuck you" money.
    Got 2.5 billion dollars? Good. Now you can change the world.

    Of course, it's possible to change the world without being rich, but some doors are more easily opened when you are (and honestly, money is many times a byproduct of changing the world). See for example Bill Gates, Elon Musk and Mark Zuckerberg: their technology and philanthropy has an impact that's almost beyond measure.

    At some point I said to myself - I'm just 23 and already have enough to live a happy, normal life. Now what? Freedom is an important stepping stone to achieve, but it's what you do with it that counts. I'll soon expand on this in a blog post of my own.