Money is Life

The title is of course deliberately provocative. A simple "proof" is given by combining

"Time is money" - anonymous

with

"Lovest thou life? Then waste not time. For time's the stuff life's made of." - Benjamin Franklin

There is a deeper connection, however, which goes to the heart of something called "the time value
of money".

If you want to borrow money from a friend, you can do that fairly easily, as long as the amount
isn't too great, and as long as that friend is hoping to sleep with you.

Borrowing from strangers is a much more difficult deal. In fact, you generally have to pay for the
privilege. That payment is called interest. Several properties of interest are immediate.

The first is that, at least for amounts that aren't too big or too small, the interest cost is
proportional to the amount borrowed. To borrow twice as much money, you'll pay twice as much
interest. That's true because there's not a lot of difference between loaning you twice as much,
and loaning you half of that and loaning to somebody else the other half. The advantage of loaning
it all to you is that there's just one transaction to keep track of, but the advantage of loaning
part to you and part to somebody else is that there is less risk in doing that. If you fall on
hard times, maybe the other borrower is just fine. If the amounts are too small, the transaction
costs start to be a problem, if the amounts are too big, then the fact that there are few borrowers that you can safely lend to starts to matter. But generally the interest is proportional
to the amount you borrow.

A more subtle point is that interest compounds. This means that to borrow for two years, I have
to pay interest each of those two years. If I wait until the end of two years, I have to pay the
amount I borrowed, plus the first year's interest, plus the second year's interest, plus interest
for the second year for having borrowed the first year's interest, which would otherwise have been
due at the end of the first year. This is because borrowing for two years and paying it all back
at the end of two years is equivalent to paying back the loan, plus interest, at the end of the
first year, and then borrowing back the loan, plus the interest we just paid, for one more year.

But the real question is why do we have to pay interest at all? In the Jewish religious tradition,
which embraces also Christianity, Islam, Protestantism, Mormonism, there is provision for charging
interest, but also provision for weaseling out of debt. That tension has been resolved in
differing ways in the various groups, each of which claims to be the authentic embodiment of the
Middle Eastern religious tradition. In Islam, as historically in Christianity, charging interest
is a sin. But, in a beautiful reflection of the principle that "biology trumps religion every
time", paying interest is not. So as long as somebody is willing to be the sinner who lends, it's
ok to borrow.

The phenomenon is best understood in light of the Principle of Selection - that whatever is more
probable probably happens more. Two specific embodiments of the principle were taught by Darwin,
as the Principle of Natural Selection and the less celebrated but more important Principle of
Sexual Selection. Both of those concepts seem to get people riled up, but you don't have to
believe evolution of species to grasp the selection principles. If you believe species do not or
have not evolved, I'm sure it is nonetheless obvious to you that within any given species,
offspring do inherit traits from their parents. That traits which are heritable and which enhance
the probability of surviving will spread, while traits which are heritable and which curtail the
probability of surviving will tend to die out, is likewise obvious. That's the point of natural
selection.

Darwin's argument for evolution was, among many other points, the observation that an astonishing
degree of variation exists within any given species. Evolution of species is not a logical
consequence of natural selection. You have to either posit a mechanism for mutation of heritable
traits, or else that all possible traits are already dormant in any one living thing. The latter
possibility is highly unlikely in light of the known biochemistry of the cell, which, on the other
hand, does afford a mutation mechanism. But, again, none of this need be understood or accepted to
grasp the point of selection.

Sexual selection, on the other hand, is the observation that heritable traits which make you more
likely to have offspring are more likely to spread, while such traits that make you less likely to
have offspring are more likely to die out.

A stark example of this is given by the shaking quakers, who believed that all sex was punished by
a supernatural being, and who consequently had less sex. So little sex, in fact, that they've died
off completely. You can of course quibble as to what degree a religious belief is heritable. In
spite of my parents' most heroic efforts, I'm not saddled with their superstitions, and conversely
there are people who today are religious by consequence of my persuasive powers during the time
that I was. But selection principles don't need causality, only probability, so the illustration
does have some value.

A striking illustration of the relative importance of sexual selection for our own species is
provided by the study of human temperament. I learned this from Linda Behrens, but I believe it
comes from the work of David Keirsey, who distinguished four human temperaments, and identified a
core need associated with each. I use the highly insightful Behrens labels to describe them. For conceptualizers, that core need is competence. For stabilizers, that core need is responsibility,
to belong. For improvisers, being free to have an impact. For catalysts, being authentic and true
to themselves. Each of those needs has little to do with survival, per se, and everything to do
with being attractive.

So what does this have to do with money? Money has survival implications, but money also has
sexual selection implications. A humorous illustration of this fact is the "how to spot a
millionaire" series of pictures that's been circulating, showing an implausibly gorgeous woman
in the close company of an implausibly repulsive man. Money is just a value measure, so you could
imagine converting it all into a specific commodity. Imagine that there's a food that is perfectly nutritious and tastes better than anything you've ever had in your mouth, that you never tire of,
and that never goes bad. Having a stock of that food would guarantee you don't starve, that your
kids don't starve, that their kids don't starve... Having that stock of food would improve your
family's chance of surviving, but that fact alone would make it more attractive for others to join
their family with yours, to become breeding partners with your family members.

A thought experiment clarifies this completely. If you're male, and doubt the outcome, ask any
female. A woman finds herself torn between two suitors, who are equal in every way. Equally smart,
equally witty, equally charming, equally handsome, ... She likes them equally well. One day, each
one buys a lottery ticket. One of them wins. The other does not. What happens?

So here is the dilemma. If I have money, I can use that money to be attractive today. Buy a nice
house, get nice clothes, take dance classes, get a nice car, get a personal trainer, whatever.
But I can also lend that money out. Just for illustration, suppose I can lend out $1000, and be
assured of getting back, in a year's time, $1,000,000,000. The amount is unrealistically large,
obviously. That's the point. By making it a caricature the essential feature becomes clear. Being
a billion dollars worth of attractive in a year beats hands down being a thousand dollars worth of
slightly more attractive today. Viewed in this way, it's obvious why when interest rates are too
low, nobody will lend, while when interest rates are high enough, anyone will. Sexual selection
forces it. To forgo potential offspring today with no payback of more offspring in the future is
a biologically losing proposition. To forgo a payback of large numbers of offspring in the future
for a marginal chance of more offspring now is an equally losing proposition.

Thus interest rates, fundamentally, must fall at the arbitrage point, where any lower rate of
interest would not increase the chance of future offspring enough to compensate for chances now,
while any higher rate would penalize the borrowers future offspring options too much to compensate
for the momentary gain. The exponential structure of offspring is mirrored in the compounding time
value of money.

With this lens, it's clear why people kill over money, just as they kill over sexual betrayal, and
harm to their children. It's never "only money", when money is offspring, money is life.