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Money Changes Everything

Five years ago I started a project where I would publish a special page on this blog listing The 100 “Best” Books for a Financial Education. This project is nearing completion.

At the time I felt a few months max would be needed to compile the list. However, prior read books needed another read and the more I read the more books I discovered should get a review for inclusion.

As the finish line approaches I see over 450 books on my list. Every book was read at least once. Notes were taken, highlighted text reviewed, and books were re-read. This has been a daunting task, considering I realized as I was writing this blog post that The Federalist Papers also contain still relevant tax and finance information. I’ll need to decide soon if the new entry can make the list.

Regardless the level of effort, I had to edit the list to the “Best” 100. Categories within personal finance are evolving as the editing process continues. And I am determined not to dump 100 books I think you should read NOW!

No, the 100 “Best” must have order to make them of greatest value. These 100 books will have order to their presentation, along with an ordering of which books should be owned and those easily borrowed from your local library.

As I work through this process there is one book that has grown on me as being the single best book on money you can read. I continually go back and read and re-read parts of this book. It is so fundamental that everything else is irrelevant until you understand the material in this single book.

Money Changes Everything: How Finance Made Civilization Possible by William N. Goetzmann opens the eyes on how money has shaped our world from the very first form of money to exchange hands to modern fiat money.

Almost everything we take for granted would not exist if not for money. Barter doesn’t cut it. Even the written language finds its roots in accounting which measures revenue and expenses, cash flow, statement of financial condition and more. It was the numbers used to account for money that led to written words so contracts could be recorded. Numbers were not enough to secure a valid contract. Terms were needed and that required a written language. Therefore, it appears the earliest written languages find their beginning in money.

Partnerships, corporations, and limited liability changed our world in fundamental ways. Big things are impossible to accomplish without these financial tools. Bonds (borrowing of future time to invest today) allowed for the funding of armies and massive public works projects.

Money, lending, and the charging of interest on loans are of special interest. Early in the history of money people understood money had unusual characteristics. Money was really a measure of time. We understand this today and even in this blog we discuss how financial independence can buy you the freedom to use your time as you wish.

Debt does the opposite. Debt is an obligation to pay back borrowed money. You owe someone else some of your future time and there are contractual rules on how that will be done.

Interest of any amount was considered usury and forbidden for most of money’s history. Lending money had to find other ways to yield a return and account for risks. Partnerships and sharing of profits were some of the workarounds. The book details many more interesting solutions.

Today we consider unreasonably high interest rates usury. But in the beginning any interest charge on borrowed money was considered usury. Why? Is was believed to be unnatural because it felt like money was actually creating more of itself. And only God (or gods) can create from nothing. Hence the taboo.

There is plenty money history in Money Changes Everything, but let’s consider some modern financial tools. Options, for example, are a widely used tool for buying or selling a home (the lease/option) and to hedge or speculate on securities. Options on your investments can reduce risk and volatility. Options can also provide outsized returns if you buy the right option at the right time. Then there are the risks.

Money Changes Everything
Money Changes Everything

As modern as option might seem, they existed almost as soon as money came into use. Options on investments and assets were a tool quickly discovered by people and it only happened because of money. Options traded almost as early as stocks.

In the world of bonds we find perpetual bonds. Yes, human beings devised a bond that would never be paid back but would pay interest forever. Many of the entities behind these eternal bonds ceased to exist. But a perpetual 5% manuscript bond issued by the Dutch Water board of Leedijk Bovendams issued May 15, 1648 still pays interest to this day. The money was used to repair a dike.

The modern annuity is also not so modern. Pensions paid by government annuities have been a round a very long time. They took many shapes and forms. They also had massive errors in their calculations so that the mathematically astute could easily take advantage of the situation. And they did. Annuities have evolved and the math favors the insurance company now, which administers most annuities today versus governments in the past.

How money created our modern world is not an absolute. What worked in Mesopotamia thousands of years ago and in Europe of the past thousand years or so is only one possible way to use money to create a civilization. China took a different path in how money could and should be used. Values surrounding money in China were significantly different from Europe and it led to a widely different outcome. Both systems are worth considering and have their strength and weaknesses. One can only wonder how many more money systems could exists and their outcomes on society. Money Changes Everything provides great detail on the matter.

Money Changes Everything spends plenty of time researching the different facets of money from antiquity, but it does not stop there. Our modern world of finance is also considered.

A discussion on stock markets would be in order. The first known stock market to ever exists was at the steps of the Temple of Castor and Pollux, Roman Forum, where contracts were auctioned on Roman companies. Shares of these contracts also traded there.

We learn how securities evolved and were traded from the days of the Roman Forum up to our modern stock markets. And the stock market crash of 1720 changed the world of finance more than 1929. 1720 actually crashed more and took 100 years for markets to get back on their feet. The causes of each crash have eerie similarities.

And where there are stock markets, fear and greed live. Rome suffered a financial crisis about the time of Christ’s crucifiction. It did get people thinking about limited liability in ways that really worked.

It is hard to understand in our world today the huge benefit limited liability brings. No project of size is possible without limited liability. Roads, airplanes, large building, and most businesses are impossible without limited liability and the corporation.

Without limited liability, investors are on the hook for the debts of the company they invest in, not just their investment. Imagine how willing you would be to invest in a company, run by managers, where if things went south you were on the hook for the debts incurred by managers. Lloyd’s Of London of our modern world still works on this old model. It offers huge rewards and unlimited risks.

Money Changes Everything goes on to discuss the many attempts at different economic systems. Communism is one example.

Many ideas fail; others evolve. Rarely are things static when money is involved. Money can do almost unlimited things compared to mere trading (barter) between people. Money creates shared fantasies (fiat money) and fractional ownership with limited liability (corporations). We once decided that money backed by gold, silver, or some other precious commodity (specie) gave money real value. Today, virtually all money is fiat (by decree of a government).

Money continues to evolve with blockchain, the mathematical model of money creation and control. Only time will tell if cryptocurrencies are a footnote in the history of money or the future of money. Emotions run high when the future of crypto is discussed. But one thing is certain. This is not the first, or last, time money will evolve.

Temple of Castor and Pollux, Roman Forum. The location of the first known stock exchange.
Temple of Castor and Pollux, Roman Forum. The location of the first known stock exchange.

The Importance of Money Changes Everything

Why do I consider this book perhaps the best of the lot?

Some people pay no attention to money and wealth at all. It shows. Some pay special attention to modern finance and investing. It also shows.

Very few really understand what money is, what is does, how it evolved to what we have today, and what it is capable of. Money is more than a mere medium of exchange. The ancients considered money a trade for time (give me a day of work, I give you a coin that you can use to buy food, clothing, shelter…). The ancients were right. But not completely right.

The best way to understand money is to understand where it came from and how it evolved. Why it was even needed in the first place. Why somebody came up with the idea of money.

Want to understand how to buy a stock with good potential for going up? Modern books can help (and plenty will be on the list). But going back in time makes it easier to understand why those rules for successful investing are the way they are.

Summing up a book like Money Changed Everything is difficult because so much is covered. On one hand, the book is an endless list of trivia on money from Day 1 to today. It is also a guide on how money evolved and how it might evolve in the future.

And if you understand how money works you are more likely to have more of it.

Money Changes Everything is a book you will want to own. You should take notes and highlight text. When finished reading the book do not put it on a side bookshelf as completed. It is never completed! The lesson in those pages are endless. Those lessons will make you wiser and financially wealthier.



Monday 9th of October 2023

This sounds like a great educational experience book. I just ordered it off your link so hopefully you get some incentive. Thanks for the suggestion.

Keith Taxguy, EA

Monday 9th of October 2023


I know you will love this book. Every time I pick it up I keep reading and re-reading.

Amazon links are affiliate so I do get paid. It seems this blog gets more expense and time consuming so I appreciate the support.