Rethinking Money (Ep498)

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A bit of a different episode where I share a process of discovery I am going through about the properties of money and how we can think about wealth and money differently.


Hey everyone, a little bit of a different episode today we’re going to be talking about rethinking money and what I mean by that. There’s these times that I have in my life where I can feel this monumental shift happening in my mind and in the way that I think about things. Sometimes they hit me like a fricking truck and my mind just changes instantly like that. I see the whole world in a new different way. Other times it’s a more slow progression to understand something that happens over the course of a period of months or even years until I get to a point where I see the world in a different way. I don’t usually share those things until they’re fully formed and I can express them. I’m making an exception today because I want to talk about this idea of rethinking money and I want to start to express this and kind of take you guys along the journey with me so we can start to flesh this out.

So this is not going to be a fully formed thought. This may go all over the place. So you’ve been prewarned bit of a different episode here, not specifically related to property, but specifically related to how we think about money and how that might affect the way that we invest, the way that we save, etc. If you don’t know me, welcome. I’m ryan. I run on dot a u. I help people find it an invest in positive cash flow properties and teach people about general property investing stuff. Help them build up their skills. Money management is something that I’ve been working on lately, but this idea has been brewing on me that money is not what we think it is. So bear with me for this one. When we grow up or even throughout life, most of us just think of money as money is money, just like it just is in our life.

Let me say, have I got some money here? Alright. So right now if you’re watching the video, I’m holding up a $10 note. If you’re listening to the podcast, you can’t see it, but it’s there. All right. I’m holding up an australian tyndall and note it’s one of those new ones with the seethrough thing. They’re really cool, but you grow up as kids and you realize that, okay, you need money to buy things. If I want to go to the corner store and buy an ice cream, then I’m going to need some money to do it, and you grow up thinking $10 is $10. That’s just what it is. It’s money. It helps you buy things. That’s what it is. You can hand it over to the man or the corner store. You can get your Ice cream and some change in return and we go through life just with that same idea that money has just always existed.

It’s just always there. We use it everyday in our life, but we don’t really think about what it means oR the properties of that money. So we think short. I’d like to have more money, but we don’t think about what money exactly is and how that affects the way we use money. So If I’ve confused you, then welcome to my world where I’m very confused as well, but I’m working through this idea of what money is. So first, let’s just admit that money is basically a construct that has been created by society in order so that we can do business with each other so it helps the world go round, that we can exchange value with each other and in the past or even today, money has been issued by the government of whichever country you’re a part of. So if we really break it down, right?

Let’s just say we stripped society away. I’ve got this $10 note and I’ve got this $5 note. All right, the two pieces of plastic. Let’s say that there is no governing body. Australia doesn’t exist, the government doesn’t exist. I’m just in the bush or something, I dunno. and I’ve got these two pieces of plastic. What are these pieces of plastic good for basically nothing, right? And then what is to say that this blUe piece of plastic that’s a $10 note is worth more than this pink piece of plastic? That’s a $5 note. Well, It’s slightly bigger, it’s a tiny bit bigger, but in actual fact it’s worthless plastic. I could take a plastic bag from woolworths and you know, it’s kind of similar. If I was in the bush, plus you back from woolworths is actually probably more useful. Can carry stuff in it, maybe still some water in it, use it to catch water, that sort of stuff.

So. So all of it’s essence. Something to first realize about money is that it’s a construct. Okay. The plastic itself is not that interesting. It’s not that valuable, but it’s the value that we believe that plastic has that is valuable. So if we can first admit that money is made up, that money is make belief that money is only what we believe it is. then that is the first step towards really understanding money and understanding the properties of money. There’s this really great tweet by vitalic. If you don’t know vitalic, he’s one of the creators of a cryptocurrency called a theorem, which is currently the second biggest cryptocurrency in the world and basically let’s not worry about crypto, but basically he’s saying arguing over what is or isn’t money or currency is pointless. It’s better to treat them as synonymous colloquialisms and talk about moe you o a n s o v.

So that’s what I’m going to be talking about right now. Moe stands from medium of exchange. Your way stands for unit of account. That’s not as important to us. And sov is store of value. So this money that we are talking about is a medium of exchange that we can use to exchange with whoever we want. So I can give this to a friend, I can give this to the man at the corner store, I can put this in my bank account, I can send it, you know, across the world basically. And I can exchange value with someone for goods and services. So that’s medium of exchange, their store of value. That’s another thing. This money is worth something to other people. And so by keeping this money, by storing it here on my desk, you know, in a super safe place, just lying down here on my desk, I am storing this value for use at a later time in the future.

So we’ve got medium of exchange. We can easily exchange it with people. You’ve got gold, right? Gold is great at storing value, but it’s heavy, it’s awkward to use. It’s hard to exchange because it’s so valuable. You would need such small amounts to be able to exchange it. So it’s a poor medium of exchange, but it can be a good store of value. So that’s what we mean with medium of exchange. Store value. Unit of account is a bit more, it’s less applicable to us. Unit of account is talking about how you can compare everything in the world that’s a value. And you can use money as an account to see how valuable something is. So let’s say, and this is an example that I’m stealing from andreas antonopoulos, but let’s say that you give haircuts. If you live in a small society, then you can barter and you can trade.

And so let’s say you trade your haircut for some vegan sausages or some tofu so you can trade with someone for some food, right? Or you could trade your haircut for a car service, etc. But that means you also need to keep track of what’s the exchange rate between haircuts and food and car servicing and all of these other different things. So by Having money you can use that as a unit of count of account. And so you can say a haircut is worth $30 and then you can say a car service is worth $300 and show you’ve got this unit of account that you put everything against, you know, 10 haircuts is one car service. So that’s all what we’re talking about. We want to focus on medium of exchange in store of value. How this is going to affect us as we’re saving, as we’re budgeting, as we’re investing.

As you can see, this is not a fully formed idea. We’re just going with it. So money is a great unit of exchange money that is issued by the government. It’s an amazing unit of exchange. Medium of exchange. Sorry, so it’s really easy to trade value between people, everyone in Australia except australian dollars, so it’s a great medium of exchange. it fits in your wallet. We’ve got online banking now, so you don’t even have to carry cash around. In fact, who carries cash around? Anyway, I saw people pull out a $200 cash to pay for something the other day. I was like, who has $200 cash in their wallet, but you know, some people do. That’s just not soMething we do, but anyway, it’s a really great medium of exchange, but it’s not a great store of value. So money is inflationary because it’s issued by the government.

We trust the government to issue this money and that it’s backed and that everyone in the country will use it. It’s fungible, all this good stuff. So the government makes it as an amazIng medium of exchange within our country, which is really good. But the trade off of that is it’s not a great store of value because the government can print money. It’s not actually really backed by anything so they can print as much as they want. We have inflation and so that means that overtime, this $10 that I’m holding right now becomes less and less valuable. In fact I can, which means I can buy less and less with this money. Do you hear stories of your parents or your grandparents and how they used to go to the store and they would have half penny, so half a cent and they’d be able to buy all these lollies with half a cent or with a penny or with ten cents.

You know, the stuff that people used to be able to buy with such small amounts of money is crazy. And so with inflation at about around two percent or something like that, this $10 in 30 years, half of the value of this $10 will be gone. So if I leave this $10 in the super secure place on my table were really. It could just blow away by the wind if I’m honest, but let’s say I just leave it there. it’s going to sit there for 30 years or I put it in a drawer or whatever. In 30 years time, that’s actually lost half of its value and so that’s not a very good store of value if you still value, you want something that is going to hold its full value or ideally appreciate in value and so when we’re saving, we need to think about these things because money is great as a medium of exchange to if we want to exchange things with people.

Money is perfect, but if we’re storing value, longterm, money is actually really terrible. Even if we take this money and give it to the banks and the banks and the pays interest, they’re only paying what two percent if that at the moment, and so we might be holding our value over time, but it’s not appreciating in value or working for us, and if we want to achieve financial freedom and needs to be appreciating in value, needs to be working for us, ideally generating cashflow, that’d be. That’d be the best. I’m going to show you this example. I play this game competitively called super smash brothers melee. If you haven’t checked it out, you’re missing out on life, which is put it out there. It’s again from 2001 on the nintendo gamecube, if you’re old enough to remember that this is an easy sport. It’s one of the top 10.

Any sports in the world. Um, I played competitively with my friends here in queensland. So this is the controller that we play on, which is called a gamecube controller. This controller that I’m holding up right now is called aj p white. And so these were issued in Japan. Primarily. It’s got a three meter cord as compared to a two meter of the original ones. Uh, it’s white obviously, but these controllers are quite popular among the gaming community. Who plays this game? Now, here’s the thing, I own 17 controller’s, not all jp white, some of them are silver. I actually have a gold one. So this jp wide, I think I bought for about $40. This gold one, I paid about $200 for it. It’S not legit gold, it’s just a gold color. So I’ve got 17 controllers all up, but here’s the deal. Malay, super smash brothers.

Melee is growing in popularity, which means more and more people are playing it as you play with these controllers, they get worn out and they get broken and so they die over time. But nintendo is not making any more controllers anymore. So the game’s growing in popularity. More people are playing, but there’s no more controllers being paid. And so while I bought this for $40 about a year ago, this has actually been appreciating in value over time and if we assume that nintendo aren’t going to make any more, which they could make more, uh, but they may not, then this is actually this controller and my 16 other controllers, a currently a better store of value over time. Then this australian $10 note or any australian money for that matter because overtime this is becoming more and more valuable compared to money compared to haircuts compared to car servicing, etc.

So this is a better store of value than money. So When you start thinking about money as what properties does money have. So rather than just thinking, money is a thing in our life, it’s just their money is $10 is $10, I use money to buy things. Just accepting that money exists is not going to be enough for us. But if we can start looking at the properties of money, then we can start changing the way we see money and the way we see investing. So if we need something to do a medium of exchange with someone else, then we can choose to use a shine dollars for that. So we’re choosing to use that. It’s a great medium of exchange. But if we want to store value over the long term, then money is probably not going to be the best thing to do that.

So if we recognize that our goal is to store value than we can think, is money going to the the best tool to store that value and the answer’s probably going to be no, there’s better tools this or that value. That’s probably why in interest in property, because property is a better store of value and it has actually gone up in value over time as well as delivers cashflow. So to continually delivers you value every single year, but property isn’t a good medium of exchange. It’s hard to exchange property with people. it’s very expensive. You can’t take your deeds to your house, down to your local corner store to buy an ice cream or anything like that. So property, terrible medium of exchange, great store of value. So whether you’re saving a deposit, whether you’re investing in property, investing in other things, have a think about medium of exchange, have a think about store of value and the properties of money.

And then you can look in your life and you can see everyday objects. Like this controller that I have that I spent $40 on, this was previously, I just saw it as it was a controller. I saw that I was slightly addicted to my hobby, that I have 17 controllers. It’s pretty excessive. I’m not going to deny it. Um, but now I can look around my world and I can see stores of value or I can see medium mediums of exchange and so I can see that currently this is actually a good store of value and better than money. So I really like keeping them. It’s a good store of value. So I’m going to go ahead and keep them until that changes. So this idea that money has properties that you can design and that other things in your world have the same properties of money, but do them even better.

That that idea is life changing and I can’t express it properly. We’re still working this out. I’m still working this out, but just that idea that we don’t need to focus on money, but we need to focus on medium of exchange. We need to focus on store of value. Then we can make such better decisions because we’re not after more money, we’re after more value that we can store. And so this is just going to change the way that I see personal finance and the way that I see money and interaction. And when you look at cryptocurrencies or when you look at game cube controllers, you can see the store of value and you can look into the future. We can try to. Obviously we can’t predict anything, but you can see these stores of value, these medium of exchange and we haven’t even touched on cashflow yet, which is another thing.

But yeah, stop saying money as just money as a thing that is start saying the properties that exist within money and then go out and choose things that have the properties you want and that do it better than money currently. There’s no better meaning an exchange. The money with the exception in some circumstances of you know there’ll be other things, but most cases money is the best medium of exchange, but it’s not the best store of value. So have a Look in your life are things that can store value, better properties, one, but obviously property is extremely expensive and so you don’t have to wait until you’ve got $100,000 to store value. You can store value in smaller things like a $40 gamecube controller. I’m not suggesting you buy that, that’s not financial advice, but you can stIll value in other areas of your life as well.

My websites for example, or a store of value, they generate traffic, they generate income, they’re worth a certain amount of money so they’re still value and that goes up or down over time depending on how they go, how I invest in them, what I put into it, and so yeah, there’s all these things in your life that have the same properties of money but do it better and so as we can open our eyes to that, as we can start to see the world differently, we can start seeing more opportunities to find great stores of value and then we’re going to increase our wealth as well. So I hope that this has been helpful. Again, a little different. Not completely a formed thought in my mind, but I hope that you enjoyed this anyway, and I hope that this has kind of gotten new thinking about what exactly is money and what things in your life can have the same of money, but do them better.

That’s it from me today, guys. Until next time, stay positive. I want to thank you guys so much for watching this episode, especially when I put the disclaimer at the front that said, I don’t really know what I’m talking about. Then I’ve just kind of working out, so I just want to really thank you for sticking with me through this. I think it’s a really important concept and so thanks heaps. If you’re still here, I do recommend that you go and check out this episode that I did with ben everingham on four properties to financial freedom. It’s a really simple strategy that can help you achieve financial freedom and that’s probably what you’re looking for if you’re listening to me, so go ahead and check out that video. If you’re listening to the podcast that’s on forward slash four 88, go ahead, check that out and don’t forget to subscribe.

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