The True Nature of Money

During the course of my journey from poverty to financial abundance I developed a deep understanding of what money is, where it comes from, what it means and what it can do. At a very young age, I remember looking around at how people viewed money and thinking to myself, “Something is very wrong here. If people understood what wealth is, where it comes from and what it can do for people, they would not view money the way they do…”

So I studied money. I read everything I could about it. I discovered that if we want to begin to remove the mystery, chaos and confusion surrounding money, the best place to start is by answering this question: what is money?

And it turns out that there is actually an objective answer:

Money is simply a tool of trade. It is a medium of exchange. Nothing more, nothing less. Money is an invention that allows us to trade the goods we create and the services we offer more easily. It is one of the most important inventions in the history of our species. Without money, civilization would not have been possible.

Money has two primary purposes, to standardize value so that people can trade things more easily, and to store value, so that people can save it to trade at a later date. And these two things are the foundation of the civilized world.

Here is an example of what “standardizing value” means: Say I was a wheat farmer a few thousand years ago, before money was invented. I want some eggs, so I have to barter. I need to find a chicken farmer and try to trade him some wheat for some eggs. But if the chicken farmer doesn’t want wheat – if he wants beef instead, now I have to find a man with cows. And if I find the man with cows but he doesn’t want my wheat either, say he wants 3 clay pots instead, now I have to find a potter. Finally! I find the potter and he is willing to trade me 3 pots for my wheat! Now I can trade the pots for the beef and the beef for the eggs!

That is what people used to have to do to trade their goods and services – trade directly for other people’s goods and services. It was really clumsy and inefficient. But money eliminated all of that. As a wheat farmer, the invention of money allowed me to turn my wheat into silver coins. And since everyone in the kingdom recognized those coins as the “standard of value,” I could trade them for eggs, beef, pots, jewelry – anything I wanted in ONE STEP. It’s infinitely more efficient and allowed civilizations to flourish.

Money is a medium of exchange. It standardizes or equalizes value. It makes EVERYTHING worth X amount of coins or dollars.

Money also allowed people to store value, which was a remarkable leap forward in the history of commerce. As a wheat farmer, I work all year long in my fields. But the harvest happens all at once. If I don’t trade my wheat quickly, it will mold and all my work will go down the drain. So I have to trade my wheat for whatever happens to be available at the time. If I want to trade my wheat for a horse, but there are no horses available at the time, I am simply out of luck. Maybe next year I’ll be able to find a horse when I have some more wheat.

Money changed all that too. With money I can turn my wheat into coins and not only trade them for what I want, I can trade them when I want. This makes my wheat so much more valuable, because I can wait a month, 6 months, or even a year until I find exactly the horse I’m looking for. I can even pass my money onto my children.

Money allowed people to SAVE for the first time in history. And what is it that they were saving? What was contained within that money? Their productive accomplishments. Their ingenuity. Their hard work.

Money is STORED ENERGY. Your work, your sweat, your thinking, your talents are what is contained within the money in your wallet.

Today we use paper money. In America we use dollars. Dollars are pieces of paper printed by the government. By themselves, they are worthless. You can’t eat them, you can’t live in them, you can’t do anything with them other than what it was invented for – to trade products and services. It’s not the dollars themselves that have worth – it is only what dollars represent that have worth.

Why is this so important to understand? Because it frees you from chasing those pieces of paper and focuses you instead on the true source of wealth, which is what those pieces of paper represent…

Money represents the very best things human beings have to offer each other: the goods and services that people produce. With money, people can easily exchange their work, talents and skills – the very best that is inside of them – for the very best that is inside of others. Money is quite literally a symbol of human productivity and achievement. It represents all the good things that we create for each other.

Today, we trade our work for money, which we then use to trade for the work of other people. Steven Spielberg’s work is to make movies. And the rest of us go to work, trading our various talents for money, then we trade a small part of what we have earned to Steven Spielberg’s company, so we can enjoy an evening’s entertainment.

The value Bill Gates has created is software that has changed the way people live. He is wealthy because he has positively affected the lives of literally billions of people in a profound and positive way.

A doctor, a teacher, a lawyer, a janitor all provide valuable services to other people. They exchange those valuable services for money, so they can acquire the valuable services of others. The better they are at what they do, the more valuable they become to others. And the more valuable they become, the more money they will be able to trade their work for.

Money is nothing more than a SYMBOL of the best that people have to offer each other.

Do I love money? If you mean do I love little green pieces of paper with pictures of dead presidents on them, the answer is “No, not really.” But if you mean do I love what money represents, what it means and what it can do – the answer is “absolutely.”

Anyone who has “collecting dollars” at the center of their life’s aspirations is missing the point. If you want to enrich yourself, stop concentrating on those little pieces of paper and start concentrating on the value that you can contribute to the people around you, because THAT is the true basis of money. And it’s the only true way to create wealth.

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