Excalibur, Bezos, and Wizardry— Reframing How We View Money
The age-old adage of “money is power” is an absolute truth, especially in this late capitalist age. A lot of times when we think about money, we think about what we can do with it because money can buy us things. We can use our money to buy that house, purchase material items, or to get an education. Money can also grant us things that have an unquantifiable value such as first time experiences, stability, peace of mind, that weekend trip that you should take for your mental health, or that much needed impromptu date with your significant other, and so much more. Because of what it can do, we only think of it as an agent of change and we utilize verbs that insinuate that it’s just a tool like “use”, “buy”, “spend”, and “make” when talking about it. However, “tool” isn’t the right term. It is really a double-edged sword. It’s just not seen as such because we are enamored by its power to change our lives. Excalibur, King Arthur of Camelot’s legendary sword, is an awesome tool too… just with a grave (and piercing) reality: it’s still a weapon. It’s the duality or plurality of its existence that is left out or overlooked because only one part of it works well for us. We would simply view the good part of Excalibur’s existence because it would protect us from evil if we were the people of Camelot. To a kid hearing a story involving the sword, it’d be cool. To the people of an enemy nation, it’d be a WMD. Excalibur is actually not too dissimilar to money. Money has another side that we don’t take a look at too often. It can take just as much as it gives, but simply reframing how you look at it can give you the upper hand.
Before we get into the main idea, we should take a moment to think about our role. To put it simply, we are just distributing and collecting agents. We collect our earned money and we distribute it out for a good or service later. The problem is that we simplify our relationship with money as a closed-loop triangle that we’ll call the purchasing process. In it, we use some money to buy a good or service, and that good belongs to us or that service is done for us. The cost of anything is only weighed at one portion of the triangle where the money buys the good or service. The power then rests solely with the money’s value in relation to the good or service that you are trying to purchase. But where does our power come into play in this triangle?
The truth of our relationship is that it’s more open and complex than its simplified representation and should illustrate a cost & value going in and coming out that is usually directly proportional to each other at any given time. The upfront cost of having money is earning it in the first place, the end cost of having money comes when we want to purchase a good or a service from someone else. That end cost becomes the input for someone else, and thus the exchange process is born. “Earning” money should be viewed as a cost because something was given in exchange to then be paid to you. In a broad and sweeping generalization, acquiring money costs us one or a combination of our: time, effort, ideas, skills, energy, or some tangible resources to get started. Let's get fancy and call those our input variables. These variables are the inputs to the function whose output is the money that we make.
This idea that money cost you something has two benefits:
- You, as the distributor, are motivated to distribute your money more judiciously because you want to make sure what you spend it on is worth what you put in.
- The concept gets you away from the idea of earned money.
In the case of someone like Jeff Bezos, or Elon Musk, or anyone else that is being paid handsomely, not all of their money was earned with the same quantity of their own input variables along the way. They have something to drive down their cost. The idea that costs vary sits better with the current financial paradigm because we can then recognize that the cost per dollar for Jeff Bezos accruing his net worth in 2021 is so much lower than the unit cost of acquiring the same amount of money for a McDonald’s employee in 2021 or even Bezos himself back in 1999. If he were to attempt to accrue that same level of wealth at the unit cost of money as a function of his input variables in 1999, it would cost him lifetimes in time, unimaginable amounts of effort, Nobel prizes worth of ideas, and multiple suns worth of energy to acquire that much at its unit cost back then. His cost has dropped exponentially because he has built the machine that is Amazon to develop the ideas, put forth the group effort, and spend the collective time, energy, and resources required to accrue his current income and value of his portfolio. Amazon is the machine that adds to his input variables without him doing anything that drives down his cost to acquire capital.
So then, what does this idea do for us? It certainly doesn’t add value to money itself or the money that we currently have, but it puts a larger weight on the decision to distribute and you should be more judicious in your distribution because you now understand what it cost to get what you currently have. You had to tap one or more of your input variables to get what you have. If you work for a paycheck, it took all of your input variables to get the money that you have. If you’re an investor and received dividends, you spent time and effort in researching the right investments and applied your skills to grow them. Even if you were given money by your parent or anyone else, it cost you time and energy to grow that relationship that prompted them to give it to you or some skill to ask for it and get what you want. Every other input variable with the exceptions of skill and ideas is finite and you can’t get it back. The money you exchanged them for should be worth it all in the end. Sadly, the verdict on that can only be decided after you make the decision to distribute it so it behooves you to choose carefully.
Changing the idea of money in this manner is a very disrupting thing, but it actually simplifies the structure of the buying process. Instead of money being the medium of exchange, it’s now an irrelevant concept in the purchasing process and there is a linear flow from your input variables to the good or service purchased. You are just the wizard at the junction that decides which way the current flows (think Gandalf from LOTR). To get an even better idea, let’s use another example that’s less straightforward. Imagine that you’re an artist, who has been working on a painting that you’ll sell when you’re done. You spend 100 hours in time and energy, $200 in supplies, made expert use of your skill, and used an original idea for the painting. You sell the painting to the highest bidder at $10,000. It cost you all those input variables to make $9800. If we want to frame it in $/hr, you were rewarded $9.80 for every hour of input. Input that you can’t get back. What is the function? What is the output? Most would say that the function is the painting and the output is the $9800 you received for selling it. Well, yes, but not really. If we think about it this way, we’ll certainly forget our input when it’s time to pay the clerk at your favorite coffee shop because that’s the magic of money; we forget about what it costs because we’re so focused on what it can do. We need to think in terms of the cost to help us make better choices. The painting is the function, and whatever you buy with the money you get is the output. We get to this point because we simplified the two equations into one(see below). You’ll certainly think twice before buying that $10 coffee on a whim — or anything for that matter when you reference what it cost you at your unit cost of money.
If we rewind back to earlier in this argument, we’ll remember that money can afford us things with unquantifiable or higher values. However, value is subjective, but that’s where your magic comes in. You are a wizard (Harry) and you use your want to create more value than the cost you put in. You can choose if you want to be a full-time wizard or not with every purchase. For example, you’re a software engineering intern and you make $25/hr. You put in 8 hours of time and energy, working on an original idea, while giving full effort and applying your skill at work, and earned $200. We’ll assume that you’re a person that values saving or investing and spending the rest on something that you can remember or use. Now take that same $200 and choose between investing half into a dividend stock and spending the rest on a concert ticket for your favorite artist coming to the city you’re interning in or spending the whole $200 on a new pair of shoes that you’ll be wearing back to school. Which way will your wand point? Probably the first option. The answer is pretty obvious given the provided context because your values drive your choices. If we used an example of a person who values looking great, then the latter would have been the easy choice here. The value of investing half and spending the rest on the concert tickets is way above the 8 hours at work that you spent to get the money in the first place because it aligned with the values that you hold dear. The simple act of choosing to serve your personal values allows you to tip the scales and get more out of spending than other choices, and possibly more than you put in.
It all comes down to the fact that it more than likely cost you something that you cannot get back to acquire the funds that you have. It’s a jarring realization but it’s important to understand because we have to take a pause and decide to exchange our input for the things that add the most value to our lives. The thing we choose will only add extra value if they serve the values we hold close to us. Day to day we have so many chances to make those choices that will leave us fulfilled and help us get the most out of every exchange. The next time you go to purchase something ask yourself the following questions before buying and start living a valuable life.
- Do I need it?
- What would this and any other choices cost me?
- What are my values?
- Will I be getting more value out of this exchange over another choice?
Thanks for reading. If you want to see this article and many others in video form, check out my YouTube channel as they’ll be coming soon. I hope this quick read has added value to your life in some way, be sure to leave a comment and like this post!