Daily Archives: June 18, 2018

The Five Stages of Money (and why we’re stuck at stage 4)


Like everything else, money has evolved. It began in a primitive form and morphed into something more sophisticated, more successful. Then, probing and testing for an even better form, it morphed again. A simplified history of money’s evolution can be outlined in five stages:

STAGE 1: Money is a tangible thing of value—e.g. a gold coin.

At some point in the pre-history of humankind, the “invention” of money solved a time-gap problem in cooperative trade: I’ll give you my baby goat in exchange for your flint-knife—but you have not yet made the knife, so the exchange is stymied. To solve the impasse, you give me a token of gold to temporarily stand in place of the flint-knife, so you can take my baby goat. The gold token is a promise that the knife will be delivered, and that promise is secured by the fact that the gold itself is deemed equally valuable as the knife. In the meantime, I may find someone else with a flint-knife already made who will exchange it for the gold, thus completing the trade. The invention of this place-holder transformed the cooperative trade interactions of human society.

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