The Evolution Of Finance
“Large numbers of strangers can cooperate successfully by believing in common myths. Any large-scale human cooperation — whether a modern state, a medieval church, an ancient city or an archaic tribe — is rooted in common myths that exist only in people’s collective imagination” - Dr Yuval Harrari, author of Sapiens.
Evolution goes above and beyond our innate biological processes and transcends into the built environment that surrounds us. It is through our enhanced imagination or ability to imagine that empowers us to dictate how fast and what angle we want the world to spin. Imagination is what fuelled revolutions and established social structures for us to grow, it is what enabled us to step out of the food chain and build our own way of life. Using this power tool, we created money, a key driver for many of these institutional changes that steered us in the direction to globalise.
Money is what we work for, survive on and what some of us would die for. One of the most valuable assets to human survival and yet its reliance blinds us to see that it too evolves alongside our changes in height, brain chemistry, strength, etc. It is rare to come across an individual with a balanced mindset on money as typically, we are either too conservative or too wasteful when it comes to spending. Aware of this, we impose rules or prescribe recommendations on how to be smart with our earnings. Our parents and our parents’ parents tend to give similar advice from generation to generation. “Put half your paycheck in a bank account”, “don’t buy takeout food more than twice a week”, “invest in property, it’s a sure thing” and “let your savings accumulate in a separate account”. While all this advice may be good in principal (some better than others), the idea that money and the institutions that protect it are evolving is not generally taught to the greater population. Just because the dollar coin looks the same, you’ve accounted for inflation, market changes and currency rates does not mean you are financially literate and on your way to being financially independent (FI).
Banks were established as early as 2000 BC and by the 12th and 13th century, they had been classed into pawnbrokers, money changers and merchant bankers. Throughout history, their roles varied from being a sanctuary for you to secure any dime you made to empowering an individual with the capacity to overcome times of financial hardship. In return, they would request a small service fee, however, as time passed, banks have become ‘smarter’ (and greedier). They now offer any and every financial service imaginable, and in their hunger, the number of financial products made far exceeds the number of people they’ve helped. These extend from the basic credit card to the complex MBSs and CDOs (the very things that caused the GFC). The greed is almost Gollum-like.
If you need any further convincing, the Royal Commission took care of that. Banking practices including “charging dead people fees, mortgage fraud rings in the big banks, unfair practices to farmers and struggling SMEs,” were all reported by Commissioner Hayne. Though we may be aware of the dodgy practices that banks engage in, not all of us feel comfortable enough to walk away as we tend to think that banks are the be-all and end-all to any financial decision we make.
“So, what’s the next wave of finance?” you may be asking. We would reply with the examples of SoFi, Even and pearler (my team and I), or better yet, reading The Barefoot Investor, all of which advocate the importance of passive investing to better people’s financial position. Now I’m sure you have a million questions such as, what is passive investing, what does it entail, how much will it accumulate, why is it better than keeping your savings in a bank account? We’re working on getting you better answers to these, but for the meantime, check out the FIRE/FI movement to better understand this evolutionary change in money and the attitudes towards money.
Evolve as your money evolves and the institutions that evolve with it. Be part of the evolution at www.pearler.com.
Disclaimer: At pearler, we pride ourselves on the quality of the financial advice we give, however, this advice has not been tailored for you. You may have unique financial goals, circumstances or needs which make this advice inappropriate, and it is important that you know whether you do. If you’re unsure we urge you to speak to someone you trust who is competent with money and understands your individual needs, whether they be a trusted friend or professional.
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