Two Opposing Ideas

And one lingering thought..

F. Scott Fitzgerald famously wrote in 1936 that “the test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.”

Everything decision in life can be boiled down to this sort intellectual meandering. It is the classical tango of yin and yang. Do I save my money for retirement or enjoy it while I am young? Do I choose to save five people from a runaway trolley by diverting the trolley to kill one person? Do I believe that AI has the power to destroy the world, or will it be thwarted away by regulatory capture and humans with responsibility moats?

The problem/solution is that there is never one correct answer except to find the balance in everything. The only wrong answer is to meander too close to one side, to be too proselytizing, too dismissive, too sure. Strong opinions, loosely held.

The two opposing ideas that I am meandering between today define the axis on which all the world seems to pivot: money.

How much does money actually matter?

On one hand, money is the fuel for progress, it increases the bandwidth of humanity, and along with it comes social progression. This relationship between technology and humanity is not just correlation, but causation. The invention of things like transportation for example, allowed humans to connect with one another, learn from one another, which led to becoming increasingly compassionate towards a larger number of one anothers. Of course not everyone falls neatly into this paradigm, you have to put up with some lemons along the way, but the progress of humanity and society is not up for debate. At least I don’t think it is.

Technology being massively deflationary has made it easier for everyone to acquire a cell phone, a TV, and a car. These things increase our quality of life, a critical factor in defining the importance of money.

That being said, it is also not debatable that the increase in technology has unequally benefited some in society more than others. This is the trend in which the history of wealth has played out since the beginning of time. Wealth compounds over time, so without redistribution, it is only going to continue in one direction. A question to ask oneself then is, as the pie grows larger, are people, according to their personal worldview, getting their “fair share” of that pie?

Money defines the political axis, both the top and bottom, by determining how much authority the government is allowed to have. As well as in the left and right, which dictates how much redistribution of wealth occurs.

The rhetoric in much of politics today is about that “fair share” of the money, a subjective metric by any account. There are many aspects of this to break down, starting with the in-congruency of the “give me the power and I’ll give you the money” approach. Economic incentives prove to hold true that those in power tend to keep money for themselves, or by proxy, for things they deem appropriate, which can vary greatly. There is also a scarcity mentality to this rhetoric that preys on the mindset of “someone else has, therefore I have not”. Of course, the intended audience for this rhetoric is people who have less, or otherwise do indeed need monetary assistance to meet the basic human rights for a decent quality of life. All of this is to say that the underlying base assumption here is that money matters greatly.

Another side of the political spectrum might start with the same base assumption that money matters greatly and say that those who make the money are entitled to keep it. After all, if risk capital were not deployed, no businesses would be created for owners to bogart the equity of. Disincentivizing business creation slows down the growth of the overall economy. If we all agree that money matters, we should care not only about who gets it, but how it is created.

Money clearly matters on a multitude of levels, but the assumption that it is the end all be all of existence is being shoved down our throats from all angles. We do need it to provide us with all of our base needs: food, shelter, clothing. It also affords us the ability to participate in society, to find friends and community. But, as I rhetorically asked last week, is everything above our base needs just “surplus”? That is the real question of how much money matters.

Money is the axis that defines the political top and bottom, as well as the left and right. How much moral authority should we allow upon us defines how much money that authority decides to redistribute. We clearly cannot trust the free market to act on its own, because perverse incentives will eventually be the downfall. However, it is becoming clearer and clearer every day that government intervention seems to have its own perverse incentives to remain in power, and in control of the money.

What is the argument for saying that money doesn’t matter though? That can be one of spirituality or surplus. Or maybe they are one in the same..

Spiritually, if we become enlightened and reach nirvana, our desire for “things” vanishes. Thus, by renouncing our material things we can focus on what is really important: family, friends, community, love. This is a base instinct that all of us have inherent inside of us, but money gets tied up in it inevitably. We need (or tell ourselves we need, or our community tells us we need) money to provide for our friends, family, community, lovers. The more we can “provide”, the more status we achieve (going back to last week’s article). Of course we must provide and protect our family and community, but we also must make sure our value systems align, lest one party or another feel like they are being short changed or taken advantage of.

How much money matters seems to be not a function of how much one needs it, but some other psychological factor that we can’t define. There are poor people who are absolutely content with what they have, and rich people who are perpetually not content. An individual’s political leaning will have to factor in their perspective on the importance of money (based on their level of nirvana and their demarcation line of surplus), plotted against their answer to the trolley problem, all against the backdrop of where they think they sit in the continuum of economic output. Yeesh. And that still doesn’t cover probably one fifth of an individual’s motivation, as one simple trigger issue could wipe away 99% of the intricate economic trigonometry rolling around in our heads. We are all helplessly complex, and we would sooner solve AGI than actually figure out how the human brain really works.

So money matters immensely, and it also does not matter in the slightest. We can live both lives in tandem. And not just in a “balanced” way, where we make what we think of as “enough” and then optimize for happiness. No, we can be full fledged free market capitalists in one instance, and full fledged mindful vessels of compassion in the next. In fact, I would say those that are able to hold those two opposing ideas in their head while retaining the ability to function have the signs of a first rate intelligence.

This all leaves me with a lingering thought which has been bopping around in my head for quite some time.

The value of a dollar is subjective, based on one’s exposure to the scale of better or worse options.

Money is like time, it is a method of measurement, it is an instrument of information transfer, and it is based on perception. The perception I am talking about is the “keeping up with the Joneses” mentality.

As technology progresses, things get better, and with that, our appreciation for things goes down. That is to say, our expectation for our quality of life goes up. As stated, by any measure, both humanity (as measured in being a good human) has gone up, as has our average quality of life (as measured in technology).

As new things are invented, or better versions of things are released, our perception of what is a baseline for quality of life increases along with it. If we were not “aware” of a new iPhone release every year, would we “need” it?

Since the top few people in the world own the majority of everything, that is where all the purchasing power resides. And where purchasing power resides is where the newest products get marketed to. I am speaking here about new cars, bigger houses, bigger yachts. This is obviously unattainable to basically everyone, but our exposure to it increases the upper bound of our perception of what is possible for quality of life.

Yachts are an extreme example, but think about being in high school and the pressure to wear brand name clothes. The difference in price of a no-name pair of jeans and brand name is an oh-so-attainable figure that may be less than $100. Of course, due to levels of inequality, that $100 might still be unattainable to many, but the degree to which it feels attainable is many, many, many orders of magnitude closer than the yacht example. The little extra notch that expands the upper bound by $100 is immensely more impactful on psyche than the one that is quite obviously unattainable at $100M.

What all of this means ties into what I was trying to articulate last week about status. The increase in quality of life is a perception in most cases, and that is where the majority of commerce is derived, and what increases our GDP and by default our wages. We are all being paid by customers who are buying products because they have a baseline perception of quality of life that they need to exist at. I am not one to say that anyone’s value structure is more or less valid than someone else’s, but we have to admit that the baseline we set for ourselves is based entirely on what we see as options out in front of us. Not to mention our self-esteem (what we feel we deserve) or our bank accounts (what we can afford - keep your eyes out for a consumer credit crisis).

Economics has always been a psychological game. We all have a number in our heads in which we feel like there is no discernible increase in quality of life once surpassed. For some people that’s $70k, for some that’s $10M, for some it is always going to be $1 higher than whoever is in 2nd place.

Money matters. It fuels human progress and creates better opportunities for all. Every sentient being is entitled to basic rights, which require money, even if in an abstract version like a public good or job opportunity. At the same time, money does not matter at all, and the importance we place on it is a self-inflicted illusion.