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The theory of Investing – An introduction

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Money seems ordinary because we use it daily, yet it is one of the most misunderstood forces in our lives. People often want to make more money without first asking a deeper question: where does money come from? The answer is not simply “work,” “banks,” or “markets.” Money comes from value—specifically, from the value that humans create, recognize, and agree upon over time. Understanding this is crucial for grasping investing, wealth, and how inflation quietly erodes what we already have.  At its core, money is a claim on human effort. Each unit of currency represents past work, problem-solving, coordination, or risk-taking. When you earn money, you are compensated for adding value to a system that others depend on. This is true whether that value arises from physical labour, intellectual effort, creativity, or organization. Money does not appear by magic; it is issued, exchanged, and trusted because societies agree that it represents real contributions.  However, once money is earned, a second issue arises: money does not naturally keep its value. Inflation ensures this. Over time, the same amount of money buys less. This is not an individual failure but a feature of modern economic systems. Inflation reflects population growth, changes in productivity, monetary policy, and shifts in demand. Philosophically, inflation symbolizes the idea that stored effort decays unless actively renewed. In simpler terms, money that sits idle slowly loses its meaning.  Yeah, yeah – where does investing come in? This leads us to the true purpose of investing. Investing is not primarily about getting rich quickly or outsmarting others. It is about preventing the value of your past efforts from fading over time. When people ask how to get more money, they often really want to know how to stop losing the value they have already earned. Investing serves as the link between present efforts and future significance.  To understand how people can get more money, we must recognize two main paths. The first is linear: exchanging time directly for money. This includes wages, salaries, and fees. While this approach is necessary, it has a natural limit. Time is finite, energy decreases, and opportunities are unevenly distributed. The second path is non-linear: putting money into systems that continue to create value without needing constant personal effort. This is where investing comes in.  When you invest, you are not just shifting money around. You are reallocating claims on future value creation. You are asserting, “I believe this system, organization, or idea will generate more value over time than the money currently represents.” This belief does not need to be technical to matter. At its essence, investing is a philosophical view toward the future: optimism balanced by realism.  Examples One of the most discussed personal investment options is stocks. Without getting into the mechanics, stocks represent partial ownership in companies—groups of people trying to solve problems, meet needs, or create efficiencies. When someone invests in stocks, they align their wealth with human productivity. If those companies grow and remain relevant, the investor’s claim on value also grows. This is why stocks are usually connected to long-term wealth preservation. They aim not only to increase money but also to keep wealth connected to ongoing economic activity instead of letting it stagnate.  Other investment options reflect similar philosophical ideas. Bonds, for instance, show trust in stability and continuity. They favor predictability over growth. Real assets often express belief in physical scarcity and lasting usefulness. Even simpler approaches, like investing in one’s own education or skills, follow this same idea: value must be placed where it can grow or resist decay.  Role of inflation Inflation makes this important. When money goes unused, its purchasing power declines. This decline is subtle but persistent. The danger is not a sudden loss but slow irrelevance. People often underestimate inflation because it does not feel like theft; it feels like time passing. Investing is a response to this reality. It tries to tie personal wealth to forces that move faster than inflation or at least alongside it. I really want to hammer home the importance of inflation here – investing reduces the effect of inflation, an action necessary to survive in today’s financial world. Importantly, investing does not eliminate risk. Instead, it swaps one type of risk for another. The risk of inflation is quiet and almost certain. The risks of investing are visible and uncertain. People tend to fear visible risks more than invisible ones, which is why many avoid investing even as inflation continually erodes their wealth. The investor consciously chooses uncertainty over certainty—not recklessly but purposefully.  This choice requires patience. Time is the most powerful element in investing, yet it is the hardest for people to respect. We crave immediate answers, immediate rewards, and immediate control. But value creation often does not work that way. Most meaningful systems—businesses, technologies, institutions—develop unevenly. Progress is often hard to see until it becomes undeniable. Investing aligns personal wealth with this reality. It asks individuals to tolerate uncertainty in exchange for long-term preservation and growth.  Is it truly worth it? Diversification, another commonly mentioned investing concept, shows humility rather than strategy. Philosophically, it admits that the future cannot be predicted accurately. By spreading investments across different areas, people accept uncertainty rather than ignore it. This acceptance is vital for sustainable wealth. Overconfidence destroys more wealth than ignorance ever could.  Investors also have different intentions. Some focus on growth, believing that innovation and change will outpace inflation. Others seek income and stability, preferring steady returns that keep purchasing power intact over dramatic growth. Some align their investments with ethical or social values, believing that money is not morally neutral. These approaches differ in form but share a common goal: keeping wealth meaningful in a changing world.  Conclusion Ultimately, investing is not just about numbers on a screen. It is about continuity. It ensures that yesterday’s effort still holds value tomorrow. Inflation threatens that continuity by quietly diminishing stored value. Investing responds by linking money to active systems—companies, infrastructure, innovation, and human collaboration.  The deeper lesson is that wealth is not static. It is a relationship between

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What Is Money? – From the economist and philosopher.

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Money is perhaps the most bizarre invention of human beings. We find it everywhere making it, spending it, worrying about it, with goals of acquiring it. And yet if we sit back and reflect on ourselves, what exactly is money? —the answer too readily melts away into abstraction. Is it the tokens in our wallets, the figures on our monitors, the promise of the state to back its currency, or something less tangible: a communal belief that sustains economic existence?  Both economists and philosophers comprehend that money is not simply a “thing,” but a relationship, a system of trust, and above all an idea. If we are to understand its place in human life, we do not just need to look superficially at its history but also dig deeper into its meaning in philosophy.  Essentially, money has three distinct but interconnected functions: it is a medium of exchange, a unit of account, and a store of value.  These three roles explain why money is unavoidable. But what is peculiar about money is that, while the things it purchases are functional in and of themselves, money itself is not. Bread nourishes, a coat warms, and a tool builds. A banknote obtains strength only because we all agree to accept it.  Trust and Abstraction  This reliance on trust reveals money’s philosophical oddity. Physical goods have value due to what they contain. A copper or nickel disc is more valuable than it is heavy. A paper bill cannot clothe us or nourish us. Even electronic scales possess no physical nature whatsoever. Their power is purely based upon the mass agreement that other people will accept them as being of worth.  It is for this reason that philosophers like to describe money as a social contract or collective fiction. John Searle, for example, calls it an “institutional fact”: it only exists because enough people collectively behave as though it did. Without belief, money does not work. With belief, it can get millions to coordinate their behaviour.  Money is but an ‘institutional fact This abstraction is what makes money versatile and powerful. Because money represents not a particular good but value in general, it is exchangeable for just about anything. Economically speaking, it is “generalised purchasing power.” Philosophically speaking, it is an idea that brings together strangers, coordinating cooperation on scopes other arrangements cannot.  A Brief Historical Perspective  Even if our focus here is economic and philosophical, some history does help place in context how money has evolved through forms while its substance has remained abstraction and trust.  Early Accounting Systems (circa 3000 BCE): The first “money” was not coins but ledgers. In Mesopotamia, people noted debts and credits on clay tablets—whom to pay in grain, whom to pay in labor, when to repay at harvest time. Money began as a system of trust and accounting, not something tangible.  Commodities as Money: Over time, societies used commodities such as cattle, salt, or shells as money. They held intrinsic value but were awkward—cattle had to be fed, grain could spoil, and salt was heavy.  Coins (around 600 BCE): Ubiquitous coinage, discovered in Lydia (now Turkey), revolutionized trade. Coins made value transportable, divisible, and familiar everywhere, but most significantly, their legitimacy was not merely based on the metal but on the stamp of power that guaranteed their value.  Paper and Credit: Renaissance and medieval merchants increasingly employed written assurance and bookkeeping rather than pocketing coins. The development of banking firms such as the Medici formalized it, showing money could live in the form of notations in books—long before there were computers.  Fiat Currency: By the 20th century, money was completely divorced from gold and physical anchors. With the demise of the gold standard in the 1970s, money became strictly fiat: worth only because governments say it is and people believe it.  This path serves to illustrate a philosophical reality: money is not the physical tokens themselves but the network of trust, authority, and common belief they represent.  The Philosophy of Value  In an economic sense, money gives one a means of comparison and measurement. In a philosophical sense, the question becomes: what is being measured and how?   Economists like to define value in terms of utility—the satisfaction or usefulness that individuals get from goods and services. Money is therefore a mechanism for communicating relative desires in a society. Prices tell us, in a shorthand way, how much of one people are willing to give up in order to get another.   But value abstraction into money has its own issue. Does money reveal real worth, or does it distort it? Is value objective, like weight, or always subjective, constructed by circumstance and want?   Philosophers like Georg Simmel had thought of money as “the purest form of exchangeability.” As it eliminates specificity, it allows anything to be equated with anything else. It is that universality which makes cooperation in the economy possible but can also detach humans from the tangible specifics of value invested in labor, resources, and human needs.   Nietzsche, in a harsher tone, warned that money is a tool of power rather than of truth. It allows its owner to shape the world, to give commands to work, to alter conditions—not through any intrinsic value, but because others believe in the institution that makes money so powerful.   Money as Coordination  Economically, money is a coordination tool. It allows strangers’ societies to coordinate without trust among people. A shopkeeper does not accept a customer’s money because they believe or know the customer, but because they trust in the system overall.  This makes money one of the greatest tools of organization in all human history. Modern economies with their extensive systems of specialization would be unimaginable without it. Farmers can farm, engineers can engineer, and doctors can heal, all of them relying on money to link their different inputs.  But this universality is double-edged. Money does not discriminate motive or context—it simply coordinates. It will be employed to build schools or to wage wars, to invest in communities or to disinvest from them. It is oblivious to purpose, and that neutrality is both its power and its danger.  Money is more abstract than ever today. Wealth is largely not coins or paper but virtual records

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