Coined: The Rich Life of Money and How Its History Has Shaped Us

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  For Douglas Brinkley, mentor and friend

  Foreword

  In 1974, I was teaching economics at Chittagong University in Bangladesh. In order to reach the campus, I had to travel through Jobra, a typical Bangladeshi village next to the newly built university campus. That same year a terrible famine caused millions across Bangladesh to suffer, and when I realized I could do nothing to ease all that suffering, I felt the arrogance of knowledge and learning begin to melt away. I wanted to overcome this feeling of uselessness by helping at least one person at a time.

  I started walking around the village every day with that tiny mission in mind. There were so many things to be done that I hardly knew where to begin. Then I noticed loan-sharking was being practiced widely in the village, which was an ugly thing to watch—a mechanism that exploited the poorest people. Using my one-person-at-a-time approach, I started lending to people out of my own pocket, and that is how the idea of microcredit was born.

  My work as a banker to the poor has helped me reevaluate money. The traditional definition of money found in economics narrowly categorizes it as an instrument to be used either to maximize our self-interest or to give away as charity. Money, however, can also be applied to advance important social goals, such as reducing poverty and preserving the environment—but these objectives require innovative applications and a willingness to look at money from new perspectives and through the lenses of multiple disciplines. Kabir Sehgal’s new book, Coined: The Rich Life of Money and How Its History Has Shaped Us, does precisely that.

  I first met Kabir in New York City in 2010. He showed deep concern about the misery that the financial crisis of 2008 brought to millions of people around the world, and he agreed with me that we needed to redesign financial institutions to make them more responsible and inclusive. He went even further, wanting to determine why and how money shapes our lives, perhaps even reassessing the role it should play in our lives. He mentioned his interest in writing a book that would enrich our understanding of money, broaden our perspective, and augment our financial literacy.

  The book that resulted from his efforts is a unique and fascinating study of money, not just as an instrument for buying and selling but also as an extension of humankind through the ages. This book reflects our multidimensional nature, as it is an exploration of money and exchange through the perspective of various disciplines from biology and anthropology to history and theology. Kabir examines the uses of money, its invention, its change over time, its future forms, why it is such a powerful force in our lives, and, ultimately, how it should be used.

  Kabir examines the past and present of money and projects its likely future. I am most interested in the future incarnation of money: what it can be, and how it holds the power for changing society. That is the role of money I recognized through microcredit, a construct that can empower people and bring about meaningful and sustainable change in a society. That is how I see its power through social business with non-dividend companies that are dedicated to solving human problems. As more people read this book and broaden their understanding of money beyond the goal of accumulation, I hope that they will start social businesses in the future.

  But whatever the future of money might be, Kabir Sehgal has done us a great service in writing this book. He has presented in this book everything that money has meant to people over the centuries and with a panoramic perspective. He has prepared the ground for us to take it forward, to give new meaning to money, to assign it new roles in our lives, and to imagine the future of money as a foundation upon which we can build the future of the world we all cherish. Thank you, Kabir.

  Muhammad Yunus

  Nobel Peace Laureate

  Founder of Grameen Bank

  It is more easy to write on money than to obtain it; and those who gain it, jest much at those who only know how to write about it.

  —Voltaire1

  The image propagated by tradition is that of a city of pure gold, with silver locks and diamond gates, a jewel-city, all inset and inlaid, as a maximum of laborious study might produce when applied to materials of the maximum worth. True to this belief, Beersheba’s inhabitants honor everything that suggests for them the celestial city: they accumulate noble metals and rare stones, they renounce all ephemeral excesses, they develop forms of composite composure.

  —Italo Calvino2

  To Whom It May Concern,

  We regret to inform that the mounted centenary coins displayed at the museum are missing from their place. Whoever is in possession of the same is earnestly requested to return them to us in view of the historical importance of those particular coins which were presented personally to the Superior General of the Missions of Charity by the President of India, on the occasion of the Centenary Celebration of Our Mother Teresa.

  We can make a gift of coins of the same value on return of those coins. We assure that the entire matter would be kept private and confidential.

  —Letter posted at Mother Teresa’s Motherhouse in Kolkata, India

  Introduction

  Red light.

  Jakarta.

  Running late.

  An emaciated barefoot beggar paces in front of my taxi while carrying a baby in her arms. We make eye contact. I look away. In the other direction, I see several more beggars standing in line, index fingers raised.

  Odd.

  Street sounds blend harmoniously with a fainter, distant call to prayer. The adhan, now in its minor third interval, reminds me of Islam’s role in this city—a vibrant amalgamation of nearly 10 million residents.

  Here I am, far from home, smack-dab in the middle of them.

  Green light.

  Off and away.

  Or not.

  “Let’s go, bro,” I urge the driver. But he sits, heavy foot on brake, while others blare their horns. The beggar approaches. Expecting the inevitable knock, the curled hand, I look away again.

  The front door opens.

  Um.

  My protest is ended by her taking a seat, fiddling with the air-conditioning.

  Four of us. Driver, pedestrian, baby, and I sit in silence as the car motors away. Is this a kidnapping? If so, it is the quietest and most orderly kidnapping ever. Maybe I should flip through the Lonely Planet guide to Indonesia. Where is the self-defense section?

  We speed onto the expressway and into the carpool lane, and it suddenly becomes clear.

  It’s not a kidnapping. It’s a transaction. For a cut, this pedestrian-now-passenger has enabled the driver (and me) to use the fast lane. She is one of Jakarta’s many small-time hustlers. These folks don’t care where they go. Neither does my driver. And in a certain sense, neither do I.

  We are all after the same thing. We are all out to make a buck. The pedestrian is happy to travel ten kilometers for a few rupiah, my taxi driver one hundred kilometers more for a fare, and me ten thousand kilometers for an investment opportunity.

  At first it may appear that money is merely an instrument of exchange, the turnstile of the transaction, movin
g from hand to hand. But money is far more than just an item to be swapped. Seen through a more panoramic lens, money plays a social, mental, natural, and even artistic role in this exchange.

  Because of money, I encountered three people whom I probably would not have met otherwise. Though I didn’t add them as Facebook friends (Indonesia is one of Facebook’s largest markets), money helped to create a relationship where one didn’t exist previously. Money spurred and shaped our interactions.

  Money also stimulates the brain: The thought of expected gain activates the nucleus accumbens, part of the reward center of the brain. The thought of making money probably stimulated the nucleus accumbens in the brains of the driver and pedestrian. The thought of losing money, thinking that I would be robbed, activated my amygdala, the fear center of the brain.

  Money plays a natural or evolutionary role. At the most basic level, humans are driven by a need and desire to survive. And all humans must exchange with each other in order to survive. The four passengers, in a sense, relied on each other: I wanted a ride, the driver wanted a fare, the pedestrian wanted a cut, and the baby wanted a place to sleep. Money helps us obtain the resources to survive, from a bite to eat to a place to rest. While money is a human invention, all organisms rely on exchange in order to survive. From sea urchins and algae to birds and flowers, exchange is fundamental to life on this planet.

  In this corner of the world, in Indonesia, birds and flowers are even on the money. In 1960, Bank Indonesia issued rupiah banknotes with indigenous organisms: sunbirds, green jungle fowl, tuberose, bougainvillea. Money, in this case, was a symbol not just of value but of things that are valuable to Indonesian society, like indigenous flora and fauna, a national crest and motto, or a founding president. On some rupiah notes is the Garuda Pancasila, the national emblem of Indonesia, which depicts an eagle clutching a ribbon. The Garuda is actually a symbol of the Hindu god Vishnu—a peculiar image for the nation with the largest Islamic population in the world to put on its money. But the symbol reveals a chapter of Indonesia’s cultural history, and how Hinduism spread to this island nation in the second century AD. In fact, the symbol can be traced back to the eagle and snake myth found in ancient Mesopotamia during the third millennium BC. It’s a symbol that has spread across many geographies and been incorporated by several cultures over thousands of years. For example, the back of the US one-dollar bill features the Great Seal, with an eagle at its center. In its beak is a ribbon that looks like a snake. The symbols on money are cultural fossils—links to our past. They can serve as a guidepost for our future, reminders of the virtues to which citizens should aspire.

  I never wanted to work at an investment bank. In fact, I cried on my first day on the job. After completing my graduate degree in London, I moved to Mangalore, India, to start an online education company with my buddy. We ran out of money, so I applied to be a computer coder at investment banks in London to cover our bills. I received two offers: Lehman Brothers and J. P. Morgan. I wish I could say that I picked J. P. Morgan due to my remarkable foresight and careful consideration of its historical importance, fortress balance sheet, and stellar management, but I decided based on office location. J. P. Morgan’s office was in Central London whereas Lehman was in Canary Wharf, a financial district in East London. And I didn’t want to ride the Tube.

  On my first day, it sank in—I was working at a bank. There’s nothing wrong with working at a bank, but it just wasn’t for me. I would have to wear an ironed collar and write “Best Regards” to close my emails. I would have to learn how to use financial jargon and manage my managers. It was all so very corporate, different from what I had envisioned for my life. I grew up wanting to be a character in Michael Lewis’s The New New Thing, a story about Silicon Valley tycoons like Jim Clark and Marc Andreessen. Instead, I had just walked into what I thought would be Liar’s Poker.

  After a few months in London and a quick stint in San Francisco, I was placed at the emerging markets equities desk in New York in 2008. I was a stockbroker who sold the stocks of corporations in developing markets to large institutional investors like pension funds, mutual funds, and hedge funds managing billions of dollars in assets. I worked diligently, but in the back of my mind, I thought I wouldn’t be around for long.

  But then the world started to shake. First, the J. P. Morgan office in New York sits above Grand Central Terminal, so you can feel the rumble when a train approaches. And second, Lehman Brothers failed (as did my Indian enterprise), and the great financial crisis was under way. I had a unique position. I had a desk in a row on a trading floor in a building that belonged to a bank in the middle of the crisis. I didn’t just have a courtside seat. I was in the game. It occurred to me then, as it does now, that I was a part of history. I decided to stay (and wasn’t fired).

  Being new to global markets, I had trouble keeping up with the alphabet soup of news: AIG, AAA, CDS, TARP, VOL, ZIRP. I created an “SGO” or “Shit Going On” folder on my laptop in which I saved stories to read over the weekend. I was alarmed with the damage wrought by the financial crisis, and I had difficulty grasping how it could have happened in the first place. I rode the No. 6 train and saw grown men crying while they carried cardboard boxes of office supplies. I remember watching on television the misery in the eyes of Americans who had lost their homes. Seven years later and now a vice president, I am still working out the meaning of it all.

  I made it a personal project to learn about the financial crisis and its root causes. I began an odyssey that took years and culminates in this book. I started by reading books on the financial crisis and quickly learned that historically, busts are as much a part of the financial system as booms: from tulip mania, which gripped the Netherlands in the 1630s, to the dot-com crash at the turn of the twenty-first century. I read historical works such as Charles Kindleberger and Robert Aliber’s Manias, Panics, and Crashes and Roger Lowenstein’s When Genius Failed. These older texts deepened my interest in economic history and reintroduced me to the works of economic philosophers like Adam Smith, David Ricardo, John Stuart Mill, Karl Marx, John Maynard Keynes, Friedrich Hayek, Murray Rothbard, and Milton Friedman. In total, I read hundreds of sources looking for answers. The more I read, the more I wanted to know.

  My investigation into financial crises provoked me to ask a more sweeping question: What is it about money that we can’t master? There’s something about it that makes us act in bizarre and irrational ways. I looked for answers in the texts of behavioral economists like Daniel Kahneman, Amos Tversky, and Richard Thaler, who study the psychology of people when making economic decisions. Their research led me to that of neuroeconomists like Brian Knutson and Paul Glimcher, who examine and interpret brain scans of people while they make financial decisions. Since all decisions, including financial ones, are made in the brain, I delved into the research of evolutionary economists like Haim Ofek, who examines how the brain developed over thousands of years, and whether money was an output of an evolutionary process. My quest for depth resulted in breadth. I grew fascinated with the many approaches through which one can understand money.

  It became apparent that to focus only on financial crises or to consider money with a traditional economic lens belies the full range of what money means to us. Besides, the world didn’t need another book on the 2008 financial crisis.

  Money is like a musical note. In one note, there are more notes vibrating at other frequencies; we just can’t hear them. Similarly, there is more to money than there may first appear. Take, for instance, $2,500. It means something different if it’s booked as revenue, income, taxes, plunder, bribes, earmarks, or an honorarium—even though it’s the same amount. Whether someone hoards $2,500 or donates it to the Red Cross may reveal their values, character, and even religious beliefs. Say someone pays $250 to his mother-in-law as payment for her preparing Thanksgiving dinner. If this is acceptable behavior, it provides anthropological insights into the society itself: Norms of the marketplace have replaced those fo
und in the familial sphere. In this case, money has altered a societal norm and modified human behavior.

  The necessity of money, and its multiple frequencies, led me to an even broader question: What is it about money that makes the world go ’round? My obsession for money, not making it but understanding it, was governed by this question. It’s this question that is at the center of this book.

  The traditional definition of money is that it’s a medium of exchange, unit of account, and store of value. It likely originates from economist William Stanley Jevons’s 1875 text, Money and the Mechanism of Exchange. The definition adequately describes the economic function of money. During my taxi ride, the rupiah acted as a medium of exchange, the valuable item that changed hands. It also acted as an Indonesian unit of account because it provided a standard measurement for the service being rendered, in this case, the taxi ride. We didn’t haggle about how much 10,000 rupiah was worth. It also acted as a store of value in that I could keep it in my wallet and retrieve it hours, weeks, even years later and it would have roughly the same value (not considering inflation and other developments that impact the value of money over time).

  But as my taxi experience suggests, money doesn’t just play an economic role, and the traditional definition seems limited. It doesn’t account for various other ways one can interpret money.

  A wider perspective begets a broader definition: I define money as a symbol of value. A symbol is used to represent something else. It’s an abstraction from the thing that it represents. Value is the importance or worth of something. Money is therefore a sign of something valuable and important.

  This simple yet expansive definition isn’t original. But it gets us past seeing money purely as a monetary instrument. It helps us to listen in to money’s various frequencies and set the frame for the collage of topics found in this book. Despite the kaleidoscopic lenses in which money is viewed within this book, it can be understood throughout as a symbol of value. Each chapter unpacks money through the prism of a different critical perspective in order to see the same topic in a new light. And that’s the purpose of this book: to coin a multiplicity of ways to think about money.