A new car, caviar, four-star daydream

I'm not rich and I suspect it is not easy to become rich. This blog is about how money works and how you can earn it. Hopefully an inspired reader will make far more money than I ever can.

What the heck even is money?

Money is a social construct. It's a made up concept. A very long time ago we'd trade physical things and you could keep and hold the said things to prove that it's real. But money is different, it's issued by a government. The AUD is only worth something because everyone in Australia agrees it does, and everyone else in the world agrees that it can be exchanged to and from other currencies at fluctuating rates.

I find that the best way to think about it is to treat it like a credit system. The more money you have, the more credit or trust you have to exchange it for other things of value.

I find that the easiest way to think about making money as an employee or starting any kind of business is to ask yourself: where can I deliver value?

There are broadly speaking two kinds of value. The first is functional value. These are practical essential needs people can't skip. For instance, food, water and medicine. If you can diagnose and treat a disease for someone who's suffering, you are delivering immense functional value. This in turn means that the said person is likely to give you a lot of money for it. When you buy bread from the supermarket, or install electricity to a new house, or debug a nasty error for a software company, you are delivering concrete value and solving a problem for them.

The second type of value is emotional value. Humans control money, emotions control humans. We want to look and feel a certain type of way. We want to be stimulated in certain kinds of ways. Industries like entertainment, fashion, perfumes, luxuries are all examples of emotional value. Ads are meant to help us connect with a product and grow fond of it. Gambling is supposed to be exciting and give us a rush.

Most forms of value delivery are a mixture of the two types. When you pay for a dish at a restaurant, it is both to satiate your functional need to eat and emotional need for eating something delicious, or perhaps feeling important if it's a fancy restaurant. Let's walk through some examples:

1. You are still studying in high school when you decide that you want to buy things for yourself. You go to a restaurant after school and get paid a minimum wage to cook some chicken, work the checkout or wash some dishes. Here you are doing relatively simple tasks and delivering value as a basic worker.
2. You are a supply chain operator at Nokia. You allocate resources and choose how/where to buy or sell certain assets and where to store them. You get paid the big bucks since if you do your job well, you make the companies you manage more efficient and save them a lot of money.
3. You created an epic video game Spray the Sire. Gamers around the world pay you $30 to buy the game and have an awesome time with their friends. You keep a portion of the money minus platform fees and other costs and deliver value in the form of creativity and fun.

To earn money, you want to have a healthy relationship with money. Making money is hard but losing money is pretty quick and easy. If you get too emotional about making or losing money, you'll end up unhappy with whatever amount of money you have and will find it extra hard to make money.

Take investing for instance: As someone who has observed my mom trade and invest over many years, it slowly became apparent to me that getting emotional about making or losing money clouds your judgement like a smoke grenade in a closet. You'll commit every logical fallacy known to mankind.

I lost money

Everyone hates the feeling of losing money. In fact it's part of what psychologist Daniel Kahneman won a Nobel prize in economics for, how losing a dollar makes you about twice as sad as gaining a dollar makes you happy. In the case of a loss this can lead to some pretty irrational decisions. For instance, if you bought a stock at $20 and it's now worth $10, an irrational investor might just hold so their loss is "unrealised" and make believe they haven't actually lost any money. Of course, this is not how it works and you actually already lost the money. The right question to ask yourself is whether you'd buy this stock at $10, and if yes, hold. If it looks like your thesis was wrong and you'd not buy it at $10, sell it.

If you get even more emotional, you might opt to invest more money in so you "beat" the stock and let it know who's the boss. Of course, the stock and the market don't care about you and personifying it doesn't help with your decision making.

I made money

Nothing quite gives you the high you get when you make money. Your ego is through the roof and you see everyone else as beneath you. How can I be so smart?

Reality of course, always finds a way to humble you. Your judgement slips, you make a few poor decisions here and there, and pretty soon you'll be cleared out again. Speaking from experience. I have deeply mastered the art of losing money.

The bigger, overall takeaway here I think is to treat money as if it's not real. You want to be as removed from it emotionally as possible to act logically.

Abstinence

Many people choose to not participate in any investing. This of course is mostly an emotional choice too. People want to avoid any risk of loss. However by simply existing and participating in the economy, you are already exposed to everything that can go on in the wider market. Your savings are in a dollar currency issued by your government that can inflate. Your assets like cars and houses can appreciate or depreciate. Your job can be made totally obsolete by newer rising industries. Given these as premises, correct investing that generates modest returns and hedges you against existing risks is the most plainly logical thing to do. If you have disposable money to invest, you should do it responsibly. Heck, even putting it all into gold bars you bury is not a bad idea.

Even the simple act of buying things is clouded by emotion. Most people think of the money spent buying objects as permanently gone, but this is not true. You simply converted it from one form to another. You can always sell the said object to convert it back into money. As such, sometimes more expensive purchases are more economical. For instance I bought an RTX 3090 in 2023 for $1000 and due to the rise in local AI, sold it in 2026 for $2000. Who would've thought. In the time period, you'd also enjoy its higher quality for longer and be able to use it for a longer time due to superior durability. In this case not abstaining actually made me a profit, the market is strange.

As I'm typing this I'm coming to the realisation that a lot of actually executing the above ideas and not being clouded by emotion requires a lot of skill and experience. People have finite time and effort, so I don't blame anyone for not doing any of the above. It just feels like something I had to learn the hard way when basic financial literacy should be taught at a young age.

Money in the modern day

One thing I find interesting is how as your wealth grows, money is less about exchanging it for material goods and more about the power to allocate resources. For instance billionaires can spend millions on lavish goods, but the majority of their wealth and influence are just used to invest or allocate capital back into the world, sometimes for good purposes, other times for the not so good purposes. Suppose you are Mark Zuckerberg. You can allocate a lot of your incredible wealth towards building out VR technology at Meta or use it to fund politicians. It is a lot of power.

In modern society, we have so much wealth and resources that the efficient allocation of wealth is often more important than actually producing goods or providing services. Take for instance if you can efficiently price and trade oil and anticipate risks and sell insurances, like all the finance bros in Wall Street, you can make billions and billions just by making the market more efficient, having produced no good of your own. I've always been a grounded and practical person so this part of how the world works now always breaks my brain a little bit. How can someone trading on soybean futures make more than actual soybean farmers? Well if there are enough soybeans, any farmer's value is weakened but the value of ensuring those soybeans reach the right buyers at the best prices is strengthened.

People lie about money and how they feel

A lot of people claim to be removed from money but actually aren't. People don't understand themselves well and think they are better than they are all the time. After smoking a lot of copium, someone who's actually deeply unhappy about their amount of money might give a big speech about how money doesn't matter. Then when they hear about someone they know becoming super rich, deep jealousy inevitably bubbles up and the guise of zen fades with the wind. I've done this often in my life. In fact, a few times every year probably. But every time I find I do get closer to actually not caring about money as deeply as I did before.

For me I think the perfect amount of money is to be able to do what I want. To be free from surviving month to month and to pursue my creative endeavours without worry.