14. Money And The Double Coincidence Of Wants - Business Bits - 30 Days Challenge

in business •  2 years ago

money

Way too often we forget that money is just a convention.

Money doesn’t exist outside of us, humans, it’s not sitting out there, like something set in stone, that can be used for any other living being. Try sending your dog to buy you cigarettes, if you don’t believe me.

Money is something that is specific only to us, as a species, and at its most basic level, is nothing than a convention: a bunch of people agree that a piece of paper can be exchanged for a certain amount of goods. Money appeared as a way to solve the famous “double coincidence of wants”.

What Is The Double Coincidence Of Wants?

Suppose you’re a singer and you perform in a bar. The owner agrees that your performance has a certain value, but he doesn’t have anything to give you in exchange for it. The only thing he can give you is a place to stay over night. Coincidentally, all you need is a place to stay over night. So, you have a deal. That’s a double coincidence of wants (it’s “double” because it must happen at the same time for both parties involved in the transaction).

But the next day you go at the same bar and the owner still doesn’t have to give you anything but a place to stay. Incidentally, you don’t need a place to stay anymore, but you need food. The owner can’t give you food, so you won’t have a deal.

It kinda sucks. Now you have to find a bar owner who can give you food in exchange for your performance. And that proves to be quite difficult.

Statically speaking, the odds for a double coincidence of wants to happen are infinitesimal.

And that’s how money appeared: as a mean to exchange value in a satisfying way for both parties involved in a transaction.

How Much Value Is In Money, Really?

Now here’s where it becomes interesting. The degree of satisfaction of a transaction is based not upon the rough number of money exchanged (being it 10, or 100, or 1.000.000), but upon the “power” of money. It depends on the strength of the currency.

In other words, money is as powerful as the convention behind it.

For instance, I can make my own currency between me and my girlfriend. We can call its, let’s say… friendcash. We can write on 10 pieces of paper the number 1, and underneath that number the word “friendcash”. And we can agree between the two of us that we can spend 1 friendcash for a donut.

It all goes well until we try to pay at the donut store with that piece of paper. Surprise, surprise. It won’t be accepted.

The only real difference between that piece of paper and a real banknote is the size of the convention layer behind it. It’s not about the security elements, they’re irrelevant. What’s relevant is that the seller doesn’t agree with me upon the value carried by that paper.

This is a very simple explanation of why money appeared and how they really work. They're nothing more than a social convention that streamlines transactions. Yet, many times we forget what it is and get attached to some empty numbers or cling to some shallow expectations.

Of course, things can get insanely complicated and the very fact that you’re reading this on Steem, right now, is a consequence of this degree of complexity applied to money as a social instrument.

We’re on a social media platform in which we’re paid for writing in 3 difference currencies, none of which existed one year ago. They exist right now only because you and me and the rest of the users of the platform, agree it exists. Outside of this convention, they’re just some numbers without any value associated with it.

I’m going to end with a few questions and hopefully some of you will take the time to answer in the comments:

  1. how much money are you willing to give me - directly, not by voting - for this article?

  2. how much money do you think your time here on Steemit is worth?

  3. how much money do you think the founders and developers of the platform should receive?

  4. how much money would you consider fair to receive after another year on Steemit?

I’m really, really curious to hear your answers. After the first 30 answers I promise I will answer as well.

In case you’re curious ;)
image source


This post is part of a 30 days challenge on business, you can find the entire list of articles here.


I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.


Dragos Roua

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Make sense about money. I place way too much importance on money. Trying to be more well arounded person.
Upvoted. Already followed you before.

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sill curious about the questions... :)

Great article, I really enjoy all your writing and how organized all your content is. I'm seeking to do the same for all of my content too yet I'm only just now learning to write and blog.

Answer to questions:

  1. I guess nothing because I'm not used to paying for things I read on the internet. That is not to say that I don't value your work because I really do value it.
  2. I never thought of that. To me I am donating my time in exchange for a learning experience with a new community, with the possibilities of earning jackpots on my blog much like gambling.
  3. As much as they want, their making a new system and I admire their goal to redistribute wealth; Unlike the other social medias.
  4. Oh wow, I guess after a year of steemit I would want some financial payback. 500$ would be nice but i might just invest that into steempower.

Oh also I voted for your blog post for steemplus :)

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Thanks for the kind words, appreciated. As for getting clearer and more expressive in your writing, just keep writing, in time, you will find your own voice.

Now, the questions. I asked them specifically to showcase the real nature of money. Which is, as I said, just a mere convention. Right now, if you don't want to give to somebody else any steem for their writing, it means you think they don't deserve of it. Period. :) Because, as of right now, Steemit design actually gives money to the writers if you upvote them. That's very interesting. It's probably the first time in the online realm when somebody tries to enforce an economy before the actual currency takes off. It's a very, very interesting experiment.

Thanks for the steemplus proposal, really appreciate.

And keep staying around, I think this Steem experiment will lead to something important.

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Anytime, Thank you, I appreciate the advice.

No it does not mean I don't think they deserve it. It mean that I have a lacking mentality more than an abundant mentality but that is already starting to change within me. Right that why i enjoy it, I can give without the feeling like its taking away from me. Yes it almost making the assumption that it is valuable and giving it away based on that.

No problem, anytime. you made some thought provoking ideas in this blog.

I will, I plan on it. I'm already expanding in more way just putting myself out there like this that thinking about what content can bring value to peoples lives.

Yea, that's the layman's approach. I'm not saying it is not true, but the very rich people see things differently, as I explained here:

https://www.vingle.net/posts/1000774?asrc=copylink

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Thanks for the link, I looked over it and it's very interesting. It shows how you can play with the concept, once you understand it. Like I said, the degree of complexity that you can build on top of it is amazing (think also at the financial markets, or forex, or even Steemit). But at the core remains, at least for me, the necessity for agreement: if we don't agree that this worth that, than the concept of money is irrelevant.

Great post! In fact, it was so good that we decided to feature it in our latest newspaper. Read it here: https://steemit.com/steemplus/@steemplus/steemplus-tuesday-october-18-the-daily-newspaper-that-pays-you-to-find-high-quality-content

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