Imagine if you suddenly had the power to make anything you thought about appear in front of you.  *Juicy Steak*  Zap.  A sizzling, pink New York with a great crust on your kitchen table.  *Rolls Royce*  Boom.  Brand new Phantom in your garage.  *Hologram TV*  Pow.  Something that doesn’t even exist, right in your living room.  If you had this power, you’d never need money, right?

So, intuitively, we understand money isn’t what we’re really after.  Wealth is what we want.  Whether it’s houses or cars or futuristic technology, or even just food and clean water, it’s the wealth that money moves around that we care about.  No shit, right?  Not a huge revelation.  But, thinking about making money, the stuff we don’t really care about, instead of acquiring wealth, the stuff we do care about, can make it harder to figure out how to get where you want to go.

Why We Have Money

If the world only had two valuable goods, corn and water for instance, nobody would need money.  This should be obvious: if half the people spent their days growing corn and half the people spent their days getting clean water, you should be able to trade a certain amount of water for a certain amount of corn, and vice versa, at any time.  There’s no need for some other medium of exchange when all you can buy is water or corn.

But of course, there are hundreds of thousands of valuable goods, not two.  If someone spends their day mining uranium, but none of the people who grow corn want uranium, how does the miner get to eat?  Money solves this problem.  It allows the miner to give the farmer something he can exchange for what he really wants.  Money is the natural result of specialization.

The Confusion

Outwardly, all we see is that the farmer wants money.  His prices are listed in dollars, or gold, or whatever the local currency is.  But, as we know, the farmer doesn’t really want money.  He wants a new tractor, or a barn, or some overalls, or whatever.  But he doesn’t want schlep around with a sack of corn, hoping that Lamborghini, or the barn builder, or the seamstress really needs 380 pounds of corn.  Instead, he trades his corn for money.

And that’s what farmers, or craftsman, or businesses do.  They don’t make money.  They provide people with something people want.  Whether it’s making a bunch of words appear at your doorstep in the form of a book, or enabling you to communicate with anyone around the entire world in the form of an iPhone, businesses provided people with wealth.  In exchange for providing that wealth, they get money in return, which the businesses or their owners can use to move wealth around however they want.

Creating Wealth

The central idea of creating wealth is not acquiring dollar bills, but providing something other people want.  While there may be a limit on the amount of gold or the number of dollar bills in circulation at any given time, there is no limit on wealth.  People will always want stuff they don’t have, so there is always an opportunity to create wealth.  Whether it’s inventing the next great gadget, or merely delivering a book to my house, anything you do that another person finds valuable enough to give you wealth for in return necessarily creates wealth.

Artists and craftsman know this well.  If you can take a blank canvas and splash some paint on it so it looks great, you’ve just created wealth.  Before, there was just a canvas, which are a dime a dozen, and some paint in a can, also a dime a dozen.  But by skillfully combining the two, you’ve created something other people want.  You know other people want it because they’ll pay for it, and they’ll pay more than simply the cost of the canvas and paint.  You’ve just created wealth.

Wealth is not Zero-Sum

Clearly, no one else is poorer because you painted that canvas.  No one had to lose wealth when you created wealth.  When you think about it in these terms, as opposed to thinking about “money”, it is so obviously that there’s not a fixed amount of wealth in the world.

So, remember, money does not equal wealth.  Wealth is what we want, not money.  Wealth is created whenever you do something other people want.  Do lots of things other people want, or one thing lots of other people want, and you will acquire a lot of wealth.