When most of us think money, we also think dollars.
Charles Duhigg, the Pulitzer Prize-winning author of “The Power of Habit” says we’ve got it all wrong.
In fact, he says, money has a language all its own.
Duhigg tells Wealthsimple:
As I got older, I began to understand that money really is a language the same way that Spanish is a language. And people who learn how to be fluent in money have an advantage. A lot of people don’t think of money in those terms. They think of it as a thing in and of itself, that money is this tangible thing called dollars, but that’s not right.
A dollar is essentially a fungible stand-in for some other type of resource. Time is a resource. Energy is resource. A pension is a resource. Once you understand that a dollar is just stand-in for some other type of resource because we’re trying to find some easy way to exchange one resource for another, then you begin to understand how money works.
He goes on to explain that some of the most meaningful questions we ask ourselves are questions of money and value — not “Which costs more?” but “What’s worth more to me?”
He tells Wealthsimple:
If you think about it, many of the questions we spend the most time thinking about are arbitrage questions: Does it make more sense for you to go to work and hire a nanny or to stay home with your kids? Should you catch up on your emails or spend half an hour talking to your wife? What has more value to you?
At the root of that is actually one of the most important questions about what it means to be human — we’re constantly trying to arbitrage to maximise those things that are meaningful and minimise those things that aren’t. That’s at the root of all economic activity.
Duhigg’s explanation provides another perspective on a common piece of advice: Money doesn’t buy happiness. (Admittedly, some people disagree.) By Duhigg’s reasoning, that might be partly because dollars can’t buy the answers to questions of value and time. If you can’t place a price on time spent sifting through your inbox or talking with your spouse, it hardly matters how much you have.
Not to mention that when we explore how rich people think differently from the average person, it rarely comes down to dollars.