I mentioned the concept of delayed gratification in passing back in Episode 010 while talking about certain elements alongside the phenomenon of trade. Let’s not delay any more!

We haven’t met our fictional friends in a while, so let’s go back to the setting in Episode 012 where Steve, Bryan, Brenda and Irene are sat in the garden looking around as Bruno the dog and Iris the cat are doing doggy and catty things around. Specifically, Bruno brings in a bone and buries it next to his kennel, which leads them to digress from their task at hand to philosophize. It’s a sunny afternoon after all and the beer won’t drink itself!

Brenda is like, isn’t that clever of little Bruno? Irene going, yeah, he’s saving up for the future, very prudent. Bryan reacts by saying, pah, what’s the big deal, he’s just burying a bone, with Steve adding, well, I mean humans don’t do such silly things, if I have a good sandwich in my hand, I’d eat it right away, why let it rot.

Brenda snaps back, no Steve, that’s not it, Bruno is showing restraint now for enjoyment later. Bryan starting to see, oh wait, that’s right, Steve, we do such things all the time as well, with Irene adding, that’s true. Steve, I mean after every harvest don’t you store up some of the produce for the next season’s planting, surely you don’t eat it all right away?

When the Waiting’s Worth It

Yes, that’s it, it’s that simple. Delayed Gratification is simply about sacrificing the prospect of immediate reward in favor of something likely more valuable at a future point in time. While this is mainly treated under the discipline of psychology, this, like many other concepts in that domain, has significant economic bearings as well. So let’s explore it from that angle.

This can be compared in many ways to the notion of the time value of money we discussed in Episode 007, along with capital we saw in Episode 005 - money, or using money and capital can be put to good use right now rather than later, allowing it to produce a return, a sort of a mirror image of delayed gratification.

It could even be human capital, like even though you want to stay in bed, it’s Monday morning after all, you resolve to and do get up early to write, as scheduled, that new piece about, let’s say, forgoing immediate enjoyment for long-term gain!

In making such choices, we are also applying the idea of opportunity cost. The cost of the lost opportunity of doing something productive and thus more rewarding longer-term is what you pay by snoozing and staying in bed (although there are times it may be justified!)

The most famous experiment around this is the 1970s Stanford University ‘marshmallow experiment’, where 4-year-olds were offered either one marshmallow they could eat right now or had to wait, in a closed room unsupervised, to get two later. (It’s almost as if one cannot ever write a piece on this topic without mentioning this particular experiment - it’s the marshmallow tax!) Kids who turned out to show restraint in that experiment were generally seen to be more competent and successful later in life. But let’s look at more specifically economic ramifications.

As you Slow So Shall You Reap

Back in TecC 10 in my other series here on the story of human innovation and progress, I spoke about the advent of farming - human existence in sedentary agricultural lifestyle is like the last 5 minutes of a 24-hour day, compared to the hunter-gatherer living over the rest of that 24-hour analogy.

And the central dilemma there was just that - how did the early farmers develop, first the idea, and then the ability, both individual and institutional, to store up the seed for future productive use rather than consume it right away - it may be obvious to us but we must be mindful it was a completely new idea to them representing an intellectual breakthrough!

There’s another classic example: education. The human species is said to have the longest childhood in the animal kingdom, and given childhood is that phase for any individual creature to learn the realities of life as relevant, humans expend the greatest effort in providing for it, unlike any other species.

And this - delayed gratification, scales from the individual to societies, institutions and nations - it’s at the very foundation of what we generally call civilization. Those of these bodies that are constitutionally built for long-term thinking and action may be expected to show better outcomes, economic and otherwise. (The question of how much short-term restraint many of our institutions from corporations to governments show compared to the 4-year-olds is left as an exercise to the reader.)

So, yes, this is a lot more than a dog and a bone, we’ve seen how this seemingly unrelated idea is intimately linked with concepts we’ve touched on in previous pieces, from capital to interest (time value of money), debt to opportunity cost to trade itself.

But there’s one other key concept vital in crystallizing the concept of delayed gratification in more specifically economic terms, one key concept needed to put flesh on the bone, and that’s what’s coming next. So between now and a week to come: it’s delayed gratification!

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* TecC 10 - Seeds of Civilization: The First Great Bargain

So, much like with the previous episode, I have indeed written earlier about standardization, but as I said there in the context of innovation. Here we take a slightly different angle.

Once more, that older innovation-series article, TecC 19 demonstrates by way of fiction how the idea might have arisen. So taking that as our standard, let’s proceed!

We saw in the very first episode of this series, Episode 001, that money can be seen as a social contract, which essentially works only if people agree to give the same meaning, value, to a certain piece of paper or other artefact. Back there I also likened this aspect of money with language. With small differences, a standard is the same, isn’t it.

From the perspective of this series, standardization would have been the logical outgrowth of the foundational concepts we’ve previously touched upon, especially trade, Episode 010, and specialization, Episode 011. Let’s dig a bit deeper into what might be different or unique about this concept.

Intuition to Institution

In the earliest times of human interaction via practices such as trade, especially as the scale and scope of such exchange expanded beyond a small isolated community, the need to identify compatible agreed-upon ways of doing things across group divisions, or at least the benefit of doing so would have at some stage become apparent.

It would lower the barriers to the matters of exchange - in modern parlance, it would lower transaction costs - an economics term that I believe may be more widely used and understood beyond the field. (My intent in my writing is to use purely non-technical terms to describe these phenomena, but this one’s a glaring violation!)

But perhaps, the phenomenon of standardization deviates from the emergence of money, and especially language, somewhat sooner, in the involvement of a centralized body to oversee its use. This could be a standards body constituted of the different participants defining and policing the rules of engagement, comparable to the developments we traced in Episode 002 around the growth of the market, or it could be an even more overarching institution, the State, especially as the scale increases. Quite often, such bodies may be semi-autonomous arms of the state.

So one might say that even if at first emergent, practices at some stage undergo a certain formalization to become a standard.

The Standard-Bearers

In both this and the innovation (TecC) series, time and again there has arisen the question of the dichotomy between two systems of organizing anything: top-down vs bottom-up. Usually, as we’ve seen, the forces at play in each case have appeared somewhat in opposition to the forces in the other dynamic. However, standardization is one of those things that’s pertinent in not just top-down systems, where it’s easy to conceive of it, but also in bottom-up systems.

The classic telephone system was built as a top-down, central exchange-based standard. The Internet, a bottom-up system where any node can join the internetwork, is an expressly protocol-based design, where the protocol serves as the standard.

One may even argue that standards, by way of the just-mentioned protocols, are even more fundamental in bottom-up systems. And as I’ve said before, the best clues to this come from nature / biology. It can be argued that every aspect of planetary behavior, and every aspect of cellular behavior, operate on the basis of some kind of a ‘standard’, whether encoded in the laws of gravity or embedded in the codes of DNA.

But coming back to human affairs, standards are still pervasive. But we usually only realize this when something goes wrong: you’re at the nice cosy cafe and you try to stick your charger cable into the socket and it doesn’t fit!

So we may conclude that standardization is an unalloyed blessing in our lives. Or may we? Promulgating a standard, which means eliminating other ways of doing that particular thing, we may say, has its own opportunity cost (Episode 009).

In the design of complex systems, how do we know this approach to formulating a standard is in the long-run better than that? Only where there is some sort of competing standards can we have an opportunity to see which one’s working better? But then if we have multiple standards, are they even standards?

(And often there’s the spectre of the wrong standard prevailing, owing to custom or other factors - the QWERTY keyboard most of us use was expressly designed to slow down the typists banging away on those early typewriters that jammed easily!)

So yes, the fundamental question is - what is the right balance between standardization and variety / competition?

And then, the top-down/bottom-up dichotomy comes back. At what stage in the development of a new system do we formalize emergent practice as a standard? What is the right engagement of top-down versus bottom-up forces in this?

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* TecC 19 - Footprints in the Dust - one of the greastest examples of standardization ever

* TecC 29 - Common Grounds: The Neat and Sound Worth of Grassroots Growth - the emergence of bottom-up standards

In fact, I’ve previously written about specialization, in the context of exploring how innovation accelerated at a crucial historical juncture - TecC 43. However, let’s look at this from the perspective of our story here.

And indeed, apart from the historical angle, I do have a fictional depiction around how this arose, in that episode. But, fiction and history apart, let’s now focus on the core concept itself, in other words, let’s specialize!

In Episode 010 we touched upon the specific concept of trade. Whilst in the smallest isolated communities, every member would have bothered with every aspect of making things they need, from trade, ie the ability to get certain items from someone else in exchange for what you have or can make, it naturally proceeds that different individuals could focus on making the different things they need.

This proffers a few striking advantages to the group as a whole. Different individuals have different propensities, so they might be inclined to do, or learn to do, one type of work better than another. It has been shown that broadly it’s easier to focus on a few things than to keep switching tasks all the time: code-switching is hard, it’s a cognitive load (just imagine ejecting and inserting separate CDs into your working personal computer every few minutes!)

Furthermore, there is a limit to how many skills single person can master - the classic jack of all, master of none, stuff. As communities get larger therefore, with their needs growing, it becomes quite compelling for such division to emerge or be enforced.

Divide et Coopera

The classic explanation of this phenomenon, division of labor is of course that by the economist Adam Smith in the late 1700s. But let’s take a look at a more recent example or argument of this at play.

There is this question, should a very highly skilled professional, say a brain surgeon, wash one’s own car before heading to work in the morning? The answer economists (and the Association of Car-washers) would give is, no, they should hire someone to do the job for them!

If we think about this, especially having considered opportunity cost in Episode 009, the brain surgeon would utilize one’s time and exertions to far better outcomes in the operating theater than outside the house. The car-washing can be done by someone with far less training and expertise than the brain surgeon: your time has a market value, act accordingly! (Of course, if our professional expert finds the car-washing act itself therapeutic there can be a carveout made here, but how about we relegate that to Saturdays...)

Twixt Skills and Wills

So yes, in a nutshell that’s what specialization is about, a concept we are so used to in the modern day, that one may be justified to ask, what’s the big deal?

Allowing different members of a group to focus on different areas of work, whether it’s in a small village or a big industrial setup, allows them to, by way of gaining experience in that area, become much more skilled at it. Again something we take for granted. But this helps significantly increase the overall quality of output, and when combined with innovation as I’ve demonstrated in the quoted piece, even build much better, far superior, more ambitious things.

Therefore specialization is an accelerant of value creation, Episode 004. However, there are a few problems with specialization, and we cannot ignore them.

Most obviously, specialization leads to interdependence, which is generally seen as a good thing, but it relies on the larger system of trade and cooperation to continue to function. And then, the inability or difficulty for us to switch from one silo to another can feel stifling, and the more the degree of specialization the harder can this be. We end up being cogs in the wheel. The philosopher Karl Marx most famously complained against specialization insisting, I paraphrase, anyone should be able to do anything at any time. (I only know how to make the left shoe, Dave makes the right one)

Some of the greatest examples of genius we have were in fact not specialists at all. Leonardo da Vinci, perhaps the greatest example from the Renaissance was one such - he dabbled in a great many things, from canal fortifications to dissecting corpses to designing flying machines that won’t become reality for another 500 years! He was good at most of those things, he was indeed brilliant, but he was also easily distracted - a great many of his ventures were in the end left half done.

So yes, generalization has costs and limits, but specialization also comes with costs - what is the right balance between the two for any of us?

Specialization may have worked in da Vinci’s time because things were less complex 500 years ago than now. It might have been necessary in the early industrial era because there was no other way we knew to carry out that level of industrial scaling. But then, today we have better instruments and techniques which have also progressed in line with the increase in sophistication, so we are after all, in the modern, post-industrial knowledge age, rather more generalists than we think we are?

And then, the application of machine intelligence to more and more aspects of modern knowledge-based work, especially for the more mundane stuff, can surely allow us to, without sacrificing quality thanks to such cognitive tools, become more and more generalist?

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* TecC 20 - A study in the catastrophic breakdown of specialization

I trust we’ve seen so far that the story of money involves a lot more than just cash and coins. In this spirit we’ve dug into some of the core concepts that make up the foundation of economics, today let’s explore one more such.

Let’s first do a quick fictional round.

Our friends Steve, Bryan, Brenda and Irene are sat in the garden, some of them halfheartedly taking stock of their recent business activities to keep the books up to date, but mostly in the mood to just take it easy - it’s a sunny afternoon, the birds are chirping. Bruno the dog and Iris the cat are playing out there. So they just need an excuse.

That’s when they notice Bruno bringing in a piece of bone with a very proud look on his face. He buries it carefully making a place for it next to his kennel almost as if it were a sacred ritual of a treasure deposit. He then goes away to sip some water and.. Iris the cat sneakily saunters over and just sits on it (cats are not particularly into bones, remember!) Bruno is seething, he starts barking at Iris furiously but the cat won’t budge.

Our four friends, amused watching this, have found their theatrical excuse to digress from work for a fine philosophical treatment of the just-observed phenomenon. Bring on the beers!

From Bare Bones to Smartphones

Yes, so we now know the burning question. Who does that bone belong to? Or to come back to human reality, who does anything belong to? This has been a question thinkers in many societies have grappled with. Let’s do the same (start stroking your chin..), and let’s get down to first principles first.

Back in Episode 004, when we discussed value creation, we saw that things exist in nature as such. And the starting point for value creation is that we take something from the pristine surrounding and do something with it making it suitable for human use.

In other words, there is a difference between something unused in nature and ‘appropriately taken’ (the proper word here would have more aptly been ‘appropriate’ with its inherent meaning of ‘proper’ and ‘property’, but sadly there are too many judgemental connotations to that now loaded word that I hesitate. Given our goal for now is to get to the concepts without any ideological baggage. As promised before in the stated episode, I’ll come back to the thorny questions of... impropriety in due course.)

But yes, the etymology there is quite clear, all those words, derived from Latin ‘proprius’, do have those shared and related senses, also add in ‘proprietor’ and ‘proprietary’ to that list.

High-hanging Fruit

So at the conceptual level, this line of reasoning offers a framework for the core question posed above. And once someone has taken a said natural resource, put their own labor into it (in the simplest theoretical example, the mere act of stretching out and plucking an apple from the tree), they have attribution.

But who’s to say someone else won’t lay claim to the labor of someone, just as we saw in our silly story above? How is one to affirm that attribution in practical terms? How can such a system as outlined above practically work?

That’s where the enforcer comes in: the State. In most practical cases, it is only with the State, the legal apparatus that sets the rules of engagement, that we can really have a functional system of property rights.

Let’s think about this for a moment, in practical terms, any functioning ‘right’ is indeed a construct of the State? Otherwise, we are just whistling in the air, shouting in the wind?

We may say, in principle, we have a right to something, but in practice it needs enforced? (Don’t get me wrong there’s a lot of well-constructed argument along moral lines for a theoretical basis of rights, but I’m only refering to the practical application in this case. And that said, this remains a highly debated area, so take this with that in mind.)

The First Principal

Let’s now go back to another principle. What drives the whole process of resource extraction and value creation is agency. It’s agency that thus also informs attribution. In this context, I’ve so far been vague about ‘someone’, but what is the unit of agency? An individual? Groups of individuals acting as a unit?

I’ll come back to the aggregate question (of groups, institutions, corporations acting in collective capacity) for that deserves its own detailed treatment, but ultimately the individual is the smallest unit of agency and thus of rights? It’s because agency requires discretion, and the individual is the smallest unit where decisions happen. (Think about it, even in the most collectivist arrangements, there has been one, say, Supreme Leader, who has had the final say?)

In any case, beyond the individual, we can’t split it further down, despite economist’s penchant for saying “on the one hand...” and quickly contradicting (or hedging) themselves by going “on the other...” *

I once remember watching a video of the very first contact with some remote uncontacted tribes in the deep Amazonian interior. Having never seen modern goods and clothing, one of the bewildered tribesman walks up to one of the explorers and starts to pull out his T-Shirt, clearly fascinated by it and wanting to try it on. And we can agree not out of greed per se, but quite simply because they had no concept of property rights.

While a more ‘communal’ system might work for small, isolated everyone-knows-everyone, hunter-gatherer groups who subsist on (and satisfy themselves with) what’s available in their immediate surroundings, for society to scale, for agency to flourish, for prosperity to take root, and thus for us to live in the world we live in, we should perhaps pause to appreciate the proper and appropriate value of property rights?

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* TecC 10 - A more detailed account connected to the potential origin of property rights

* TecC 47 - On the origins of intellectual property

Last time, I concluded on the suggestion that economics is a lot more ubiquitous than we tend to think. Let’s dig deeper into the fundamental question of why we even need economics at all.

Let’s in fact take this forward from where we last left off on one particular point. Back in Episode 009 discussing opportunity cost, we were faced with a few dilemmas, such as which of the two full-time job offers to take, or even something as mundane as whether to go out for the evening or stay in. That’s when the idea of scarcity came to the fore.

The Specter of Scarcity

The fact of the matter is quite simple: almost everything - every resource we consume, is scarce, in other words, in finite supply.

This in itself is not a revelation to us. We are all aware that the natural resources on our planet are finite (even if perhaps as a species we should’ve recognized this sooner?) Land is scarce, our skills are finite, our attention is limited. We are aware perhaps more than anything else that time is scarce: how many of us have wished we had more than 24 hours in a day?

But scarcity cuts through other dimensions of reality as well. You could say that the traffic lights are a response to scarcity - streams of vehicles cutting across a perpendicular thoroughfare cannot all drive on at the same time. So we are forced to allocate.

Striking Deals

Scarcity forces choice. And choice reveals values. Let’s think about this for a moment. If we could have any amount of anything at any moment at no cost whatsoever, in some sense you’d never need to bother to choose anything, you’d just have everything.

But because we don’t live in such a universe, we have to pick. And as we saw in Episode 003, price is a signal that gives us information of the relative affordability of the different choices we are confronted with, representing the underlying reality of their availability in the system as a whole. And that connects to value - what we value more, how much we think a thing is worth, and thus whether the price on offer is viable for me or not.

This throws up moral, even philosophical, questions: the choices I make in my spending reveal my values, could I have made better choices and thus led a life of better value? How do we define this whole ‘value’ thing in the myriad nuances of that word I’m using?

But it also has practical ramifications. At the very least you don’t want to go broke, or have buyer’s remorse, or in general get a bad deal.

Enough’s Enough?

And then there is the question, if resources are scarce and technology or innovation is about reducing the scarcity of resources by means of improved production (my whole TecC series since early 2025 is dedicated to exploring this), assuming we do increase the availability of a certain resource: how much is enough?

This is a thorny question, because, human needs and wants are infinite - as soon as a previous, projected yardstick of ‘enough’ is met, our wants expand, we want more.

So in fact this is not just a puzzle in the physical realm, but also a bit of a quandary in the psychological.

Consider for example, the phenomenon of artificial scarcity, taking as an example diamonds. Sidestepping the question of what diamonds are actually worth or why they tend to become best friends with some of us, are they even scarce in the first place?

Given diamond is just carbon, if we devise a laboratory method of crafting the perfect diamond completely indistinguishable from the ‘real thing’ how would the dynamics shift? (Also, maybe they already have done lab stuff, don’t quote me on this, this is just a thought experiment.)

Still, and leaving the glitter aside, while not perfect, economics is humanity’s best known attempt to handle the specter of scarcity.

Given the pace of technological progress, there is a chance that many more elements will sooner or later escape the straitjacket of scarcity but in our current reality we cannot escape it -- and I’ve looked into this exciting prospect in my futurist research, but until then, we’ll have to use economics for those elements -- and until then, ironically annoyingly enough for the siren seductress Scarcity, I’ll have a fair bit to write about all this!

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* A Study of Innovation from a Technocentric Perspective

This series is already ten articles old! I’ve covered some of the most fundamental concepts so far, some that might have seen too basic to bother. But hopefully I’ve shed some new light. Let’s take stock and consolidate.

A Decimilestone

We started with the very question of money itself, because the popular perception of it in some quarters can be somewhat blurred; we saw that it can be similar with the market, price, but especially profit and capital - its general use has diverged from the conceptual reality to the point of making for confusion or even conflict. We then considered aspects such as risk, the time value of money, interest, debt and opportunity cost - many of these may seem outside the scope of a series on money but fundamentally speaking they are not.

Taken together, this set is intended to serve as the first layer of an introduction to economics and finance, hence, as you may have guessed, the series ref ‘EcFin’. Let’s now briefly look at one last concept that ties this all together.

Taking Stock in Trade

Yes - trade! Again, like some of the other topics one could say, what? I know what trade is! But again, let’s peel the surface.

Of course, in its simplest definition trade is the exchange of goods, a practice that started off with the simplest barter between two individuals in the earliest of times. How early?!

Here’s the thing, trade is almost entirely a human activity, none of our relatives in the animal kingdom really carry out anything that can be seen as trade in any sustained and deliberate way.

All animals still do manage resources, seek profits (see Episode 004), hoard capital (in different ways as different from the squirrel stashing away nuts to the camel doing it ‘in-house’!). Some of our primate cousins have developed systems of reciprocity and political factionalism, which means they deal with risk and especially debt: you scratch my back today, I’ll scratch yours tomorrow - literally!

But not trade as we do it! Alongside a handful of other attributes such as the opposable thumb, highly developed vocal chords, which allows for language, trade is the other primary human trait. Note that this list starts with the more physical ones - the opposable thumb turned out to be rather handy 👍, our hominid ancestors could grip a club and thwart a predator, but increasingly it’s the more advanced intellectual systems that come to define us, or at least distinguish us from the rest of the animal kingdom.

Of these, I’ve time and again spoken about language - TecC 15 where I first discussed the Proto-Indo-Europeans and the origins of most of the main languages of Eurasia, TecC 28 where I got into the roots of our number terms again going back to the PIE-folk, but also others.

So let’s pause to appreciate the other one.

A Fine and Worthy Trade-on

To be able to trade requires developing mindsets and institutions, first and foremost trust, as we all know only too well, whether in the positive or in the negative. We need disciplines such as delayed gratification. On top of the bottom-up emergence of trade, as we saw in the market episode, we also need other institutions around it to ensure fair play (whatever our notions of that may be.)

In sum, and combining the two human traits I’ve just mentioned, economics is simply an extension or formalization of our language, our ideas, our practices. And of course, as this field has developed over the thousands of years it has, this technical language has become rather jargon-heavy to the casual outsider, and contributes to the dismal image of economics as a social science.

However, economics touches a great many aspects of our daily lives, as we’ve seen in this series so far, where we have decisions to make, risks to take, limited resources to manage, economics as a discipline is more ubiquitous than generally appreciated.

So it helps to be able to demystify the fundamental, and even advanced concepts, in the field by piercing through the thicket of jargon, and in accomplishing this I reiterate my commitment to you.

Thank you for your interest and support, what we’ve seen so far is but just a teaser, there’s a lot more to the story of money!

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* TecC 15 - Imperishable Fame or Immeasurable Impact?

* Reich, David. (2018). Who We Are and How We Got Here. Oxford University Press. ISBN 978-0198821250.

Yes, opportunity cost is indeed one of those strange things, it sounds like one of those classic terms in economics one would prepare to explain in a job interview or one would hear from one of those experts in a panel making a strokey-beard pronouncement. But it’s more relevant to you and me than we might think.

Let’s imagine a few situations in life: you’ve got a job offer (maybe you did blurt out a good explanation in that interview after all!), maybe you’re deciding whether to buy that house we touched upon last time, or even something rather simpler - like are we eating out or staying in tonight.

The Untold Tolls

When it comes to making many such decisions, Opportunity Cost is simply the value of the best alternative you did not choose. It’s the ‘cost’ of the ‘second best’ opportunity -- if we assume the best choice was made.

This arises, or is seen as a ‘cost’, because you chose to forego something, it’s a ‘loss’, a potential benefit you did not enjoy. The decision path was constrained by the fact that the alternatives were mutually exclusive which is because of limits on the resources and reality: you can’t both accept this full-time job offer and that one, you can’t both stay in and eat out at the same time...

And given economics concerns itself with best managing limited resources, this is a central theme in the field, the objective being analysing the quality of decisions, and ultimately that of resource management.

But, as I hinted, this pervades every area of our lives.

The Thousand Roads not Taken

It indeed does, even outside the realm of formal and conscious application of economic theory, because quite simply almost anything we do is a bunch of decisions each of which we may choose one way or the other.

Every yes is a thousand nos, every path taken is a thousand not taken. (Not precisely a thousand but you get the idea.)

So while this might seem like it has nothing to do with money, given the centrality of this concept in economics, or if you prefer here: ‘lifestyle optimization and results maximization’, being able to assess or quantify this ‘cost’ can be valuable. And even more simply, just being aware of this whole idea can take us towards making better, more informed decisions.

In fact we have seen opportunity cost earlier in this very series, just not so named. Remember in Episode 007 Bryan hesitating to lend out Steve his 100 silver coins because he had his own plans of deploying it usefully, with the idea becoming palatable only after the arrangement involved Steve paying an additional 5 silver coins for each month held?

The Twin Sisters of Chance and Choice

Back in Episode 006, while discussing chance, we saw the word contingent with regard to all the things in this world that may or may not happen (with the epistemological foundations of the concept laid out in TecC 33C1).

If contingency is about forces beyond our control, opportunity cost is for things we decide. The paths we take.

The thing is, decisions are hard, even simple or silly things like what color socks do I put in this morning... decisions are a cognitive load. (Our word ‘decide/decision’, similar to ‘incision’ and ‘precision’, comes from the Latin dē + cid-, literally “to cut off”)

Furthermore, if decisions are hard enough, the later regret of what turned out to be a bad decision can be even more painful.

(There’s some interesting research on how offering more choices on a menu led to increased stress levels among customers.)

Across human history much effort has been expended on offloading decision-making: to the planets, to the birds, to dice. (I’ve discussed the rationale of this in TecC 24.) That may make navigating the vagaries of life seem easier: dodging responsibility, deflecting blame.

But isn’t it better to try and make better decisions from the opportunities available to us, and what’s of better value than to fully appreciate the workings of opportunity cost?

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* Flights of Chance - How human societies circumvented the burden of decision making

* Two economic blindspots we all share - an article by Koenfucius which touches upon ideas related to opportunity cost

In the previous episode we discussed the concept of interest, the price of lending money, I also made this huge claim that much of the modern economic engine and elements of our prosperity hinges on the core concept. Let me add some flesh to the bones, getting into a very closely related concept: debt.

I don’t think it’s even necessary for me to give a formal definition for the concept of ‘debt’, we sort of know it instinctively, certainly I may safely assume, more so than say ‘interest rates’ or ‘capital expenditure’.

Going back to the fictional story of the previous episode, when Bryan lent Steve 100 silver coins, or conversely when Steve borrowed that sum from Bryan, Steve went into debt (formally he became a debtor and Bryan the creditor, but I’ll come to the nuances of credit itself another time.)

(A quick note, at this stage of the series I want to focus mainly on the conceptual aspects of each topic coming back to a greater focus on the socio-political and similar elements later. But debt is one of those things where this seems harder to ensure.)

So let’s touch briefly on the psychological and social dynamic that our fictional friends are in having gotten into the arrangement in the previous episode. (And yes, it’ll help to read that story once at this point.)

Steve now obviously carries the ‘burden of debt’. Brenda and Irene, who suggested that the lending/borrowing take place might also have a sense of responsibility, what if Steve doesn’t pay back, or soon enough. And of course, Bryan is the most emotionally invested in the outcome, because it’s his money after all!

As You Owe so Shall You

Let’s now take a brief look at how the notion of debt and its connotations are deeply ingrained in the language we use. The German word for ‘debt’ is ‘Schuld’ -- which is cognate with English ‘shall/should’, but guess what, that word also means “fault”, “blame” and “guilt”!

Also consider ‘owe’ and ‘ought’, but again note that ‘owe’ is also connected with ‘own’, what does that say?

Or the Latin word ‘dēbitum’, the source of our word, is connected to ‘dēbilis’, “weak” as in debility.

But despite all these sombre connotations, debt has a significant economic utility.

Connecting the Debts

In Episode 005 we discussed one of the most fundamental ideas in economics - resource management, which normally goes under the name of ‘capitalism’, and then in Episode 006 we looked at risk management. These last 3 episodes in summary build up to this one in a fundamental way. Because all productive activity in human society involves the question of resource and risk management, both of which use money as a unit of measure and thus as a core enabling instrument in all such management.

And this is where debt comes in, because, as I’ve said in the previous piece, at any time there’s someone with a deficit of money (ultimately the resources/capital they need) and someone else has a surplus of it, and it helps that it can be transferred, temporarily, from one party to the other, to enable productive activity.

This is what I was referring to when I concluded my previous piece with my claim, linking such activity to much of modern prosperity.

Home Truths

Let’s take an example closer to home, or rather at home! Most of us do not earn enough to be able to walk up to a Building Society, dump a suitcase of cash (or equivalent) and walk out with a brand new house in your name. (I know we all wish we could but a more viable option perhaps is building castles in the air!)

It thus goes without saying that, whether we like it or not, without debt, we wouldn’t stand a chance of looking like that happy couple on the mortgage billboards all smiling next to a shiny new house keys in hand.

I’m not trivializing the matter though, but I hope we are now at least a bit closer to answering the questions I posed earlier: is debt inevitable, can we avoid it, can we master it?

Well, at least the first two: debt is a necessary instrument of the economic engine, not just for individuals but businesses and even governments (anybody hold a government bond?)

At least one may hope it’s some solace that it’s not just us mortals but even the largest of our institutions that have to think about debt, even if the scale and dynamics are slightly different - (more on this later. Also to come related concepts such as credit-worthiness, collateral, mortgages, refinancing and more.)

As for the last question, can we master it, yes there is hope, but, as I just hinted, it involves a lot more than just the plain concept of ‘debt’, and these are the sort of questions I intend to address in this series on the Story of Money, so do stick around!

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* The System of Resource Management

* Mark Twain’s satire about the German Language

What if I told you of the grandson of a peasant writing a letter in 1500s Europe to the most powerful man in the continent if not the world, Emperor of the Holy Roman Empire (modern-day Germany and a bit more), King of Spain and thus of the vast Spanish dominions in the Americas, Archduke of Austria, Lord of the Netherlands and some small change, of this son of a weaver writing this letter to the Emperor telling him you wouldn’t be emperor without me, so now better pay up the debts you owe me?!

This is the story we’ll be following today, as part of the advent of the Early Modern Era, of the shift from power coming from land, bloodlines and armies to commerce, business, and banking.

But this is still also a story of technology, so let’s apply our technocentric view to dig out the innovations and achievements, which happen to be relevant to us to this day.

Read full article here.

Article written by Ash Stuart

Images, voice narration and some footnotes generated by AI

Further Reading & Reference

* Hunt, Edwin S.. (1994). The Medieval Super-Companies: A Study of the Peruzzi Company of Florence. Cambridge University Press. ISBN 978-0-521-89415-9.

* de Roover, Raymond. (1966). The Rise and Decline of the Medici Bank, 1397-1494. W. W. Norton & Company. ISBN 978-0-393-00350-5.

* Parks, Tim. (2005). Medici Money: Banking, Metaphysics, and Art in Fifteenth-Century Florence. W. W. Norton & Company. ISBN 978-0-393-05827-7.

* Steinmetz, Greg. (2016). The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger. Simon & Schuster. ISBN 978-1-451-68856-6.

* Häberlein, Mark. (2012). The Fuggers of Augsburg: Pursuing Wealth and Honor in Renaissance Germany. University of Virginia Press. ISBN 978-0-813-93244-6.

* Strieder, Jacob. (2001). Jacob Fugger the Rich: Merchant and Banker of Augsburg, 1459-1525. Beard Books. ISBN 978-1-587-98109-8.

* Morris, Charles R.. (2006). The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy. Henry Holt and Co.. ISBN 978-0-805-08134-3.

* Josephson, Matthew. (1934). The Robber Barons: The Great American Capitalists, 1861-1901. Harcourt, Brace and Company. ISBN 978-0-156-76790-3.

* Isaacson, Walter. (2014). The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution. Simon & Schuster. ISBN 978-1-476-70870-6.

* Isaacson, Walter. (2011). Steve Jobs. Simon & Schuster. ISBN 978-1-451-64853-9.

* Wallace, James; Erickson. (1992). Hard Drive: Bill Gates and the Making of the Microsoft Empire. Wiley. ISBN 978-0-471-56886-5.

* Frenkel, Sheera; Kang. (2021). An Ugly Truth: Inside Facebook’s Battle for Domination. Harper. ISBN 978-0-062-96067-2.

* Wynn-Williams, Sarah. (2025). Careless People: A Cautionary Tale of Power, Greed, and Lost Idealism. Flatiron Books. ISBN 978-1-250-39123-0.

* Soni, Jimmy. (2022). The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. Simon & Schuster. ISBN 9781501197260.

* Vlismas, Michael. (2022). Elon Musk: Risking It All. Jonathan Ball. ISBN 9781776191857.

* Berger, Eric. (2021). Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX. William Morrow. ISBN 9780062979971.

* Vance, Ashlee. (2015). Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. Ecco / HarperCollins. ISBN 9780062301253.

* Isaacson, Walter. (2023). Elon Musk. Simon & Schuster. ISBN 9781982181284.

Last time we saw how the seemingly simple concept of ‘risk’ can have profound consequences in the story of money and our life in general. This time let’s explore another underrated idea in relation to money: time.

Previously on fictional TV, we had our friend Steve in dire straits struggling with a disastrous harvest, unlike Bryan’s bumper one. This time however, they’ve both had a great harvest, in fact Steve’s has been so great that he has not enough room to store his surplus produce. He’s in pressing need to build a new barn, so as to make the best of it, but he has no money to get any of this going.

Steve and Bryan are sat there with Brenda and Irene looking on as this issue surfaces. Eventually Brenda is like, well Bryan, why don’t you lend Steve a 100 silver coins, he’ll give them back to you once he’s able to manage the storage and sell some of the produce.

Bryan’s reaction is instant: wait, what? No, I’ve had plans to build a well etc, I could use that money myself! Brenda tries to coax him, why don’t you do it in a few months time, once you get the 100 coins back from Steve... but Bryan’s like, but why should I have to wait for months for something I could do now and benefit from...

And Irene then steps in, look, Bryan, you can take the temporary hit of not using your money and help Steve out, and in return, Steve will pay you back not the exact same money but an extra 5 coins on the hundred for every month he keeps the money. Brenda is like, yeah that makes sense, that additional payback compensates Bryan for his temporary sacrifice, but also means Steve will be keen to give all the money back asap. Are you both interested?

Sins Time Immemorial

An arrangement of this kind may seem logical and sensible to most of us, but the funny thing is for much of pre-modern times and in many of the great religious traditions, such a practice - of charging money for money - was seen either as illegal or even downright sinful. A great many of the leading religious figures and philosophers spoke out squarely against this idea, including Moses, Aristotle and the Buddha.

I’m of course referring to the specific concept of charging interest on money lent, with the older term being usury. Our modern concept of interest is certainly not alien to us, who doesn’t expect to get some interest paid out, however paltry, on the money we put in a savings account left there to be used later on? What was the bloody fuss about? Let’s take a brief look.

The Other Side of the Coin

Let’s take Aristotle, for example, who has found a good few mentions in my TecC series, but let’s say it’s because he had opinions on everything! (Wonder what he thought about iPhones and Quantum Physics, okay sorry..) But practically also because a great many people heeded his opinions, from the Islamic scholars to the European scholastics of medieval Christendom.

In this context, I have dealt with the topic of usury in rather more detail, including how Early-Modern bankers in Italy circumvented it in some juicy detail in TecC 49, but here’s the gist of it: Aristotle opined that money, such as a bag of coins, did not reproduce itself over time (say unlike, you guessed it, cattle!), and so it would be wrong to charge any money for its lending. So, said Aristotle, money is sterile.

And Thomas Aquinas, the influential medieval scholastic, who with help from the Islamic Scholars -- see TecC 33C1 for example, keen to reconcile Aristotle with Christianity, took the concept even further, embedding it into the Catholic Church’s moral framework.

But here’s the thing: money in the form of cash or coins can be resourcefully used by either you or me, and as we saw in the above story, if Steve needs it more than Bryan, surely he must pay a price for it? Bryan’s ‘hit’ there must be compensated?

In Modern Economic theory, there is this concept of the time value of money, the notion that the same money today is worth more than it is down the line, which is because you could do something useful today with that money, that is, investing it in something productive, and thereby, hopefully, end up with more of it? I mean, if I offered to give you 1000 bucks today or 1010 in 10 years what would you go for?

In Everyone’s Interest

There is however a genuine moral concern among the sages of old, which I think we can all relate to. It is the dangers of predatory lending, of rich but unscrupulous types taking advantage of someone in a really bad position by charging exorbitant interests, the kind we now refer to as loan sharks. None of this economic logic is intended to justify that behavior, but that topic deserves its own piece and I’ll come back to it in due course.

The problem in the pre-Modern period was not objections to this predatory practice per se, but in many cases, all interest charging on any lending.

But let’s consider this bit of reality, even more pertinent in our own times - there are times when we have more money than we need and at other times the other way around. And at any given time, some people have more than they need, and others need more than they have. So just like any other service the availability, the transferability of money within the market mechanism, also has price and reward?

Also because this goes beyond the individual and personal. As I’ve been building in my other series, overcoming the shackles of this extreme injunction against all interest can be said to underpin the very birth of the Modern - for, as we’ll see, it unleashed forces of creativity, economies of scale, trajectories of growth, to the extent that a great many elements of prosperity we take for granted in our day would not even have been possible?

Article written by Ash Stuart

Images, video, voice narration and some footnotes generated by AI

Nothing in this presentation constitutes as advice - financial, investment or other

Further Reading & Reference

* TecC 33C1 - The Very Architect of Existence