Why is Trust in Money so Important?
In this post, I would like to explain why trust in money is so important and how it allows us to specialize and prosper. I want to lay down a different way of looking at money and trust. And complement my previous post, “Why the world order just changed?”
Scaling up society
Imagine that you are the only person in society. If you wanted to survive, you would need to know a little bit about all the necessary skills. Let’s simplify by saying hunting and farming. You wouldn’t have the time to master all the skills because your time would be limited so your outcome would be mediocre.
Now imagine that you are in a two people society. You would hunt and the other person would farm. In this scenario, each of you would have more time to perfect hunting and farming. However, for this to work, we have to add one more element: trust. As a hunter (producer), you need to trust that the farmer (consumer) will deliver on their job and vice-versa. Without that trust, you would not be willing to give up learning farming because your survival would depend on it. So the more trust, the more skills we are willing to give up in order to specialize.
We could repeat the same thought process for a three-individual society, four, five, and so on.
As a fun fact, in his book “Sapiens”, Yuval Noah Harari argues that 150 individuals is the maximum amount for a community to coexist without any superior form of governance. Beyond that number, it is not possible for individuals to have enough information to trust each other. We need other tools to solve the scalability of society.
How can we trust someone that we don’t know?
Simply by removing the need for that much trust. Here comes the trick; we introduce money. When having a common means of exchange that is widely accepted, as a hunter (producer), you don’t need to trust who you are selling to. You trust the money you are receiving as payment. It does no longer matter if the farmer you are selling to is a bad farmer and the quality of their goods isn’t good enough for you. Now, you get money in exchange, and you can take the time to find the farming products that fit your needs. You can simply take the money from a stranger and go buy what you need from someone you trust.
As you can see, after introducing money to the equation, we don’t need to trust a person who is paying us. We just need to trust in the money we are receiving. Now individuals are more willing to give up learning some skills and focus on something specific. All needs are covered by someone and the outcome of people’s work is much better because everyone masters their field. We produce more, better and cheaper.
Trust in money equals specialization
In summary, trustable money allows us to trust unknown people, and that leads to individuals improving their expertise in their fields, which also leads to prosperity. The opposite would lead to poverty. That is why trust in money is key to society.
And this is what is at stake nowadays when western policies are not taking the trust in money into consideration. Unfortunately, we cannot change things, but we can try to protect our savings and try to make it to the other side in the best shape possible. You can check my public stock portfolio as inspiration on how to do so. And you can check in the link the conversation between Mark Moss and Jeff Booth that inspires this post.
I hope you find the idea of linking trust and specialization cool. If you did, please share this post by clicking on the icons below to help me grow the blog. And if you want to read about more ideas related to economics and finance, hit the subscribe button below and you will get a notification with every new publication.
