What is Money? (plus Reading Habits w/ Dan Solin) (EP.207)

Episode Summary

Executive Summary: The episode mixes show updates, a book review of Scout Mindset, a deep follow-up on private real estate as an asset class, a long exploration of what money is and where it comes from, and a guest interview with author Dan Solon about reading habits. The money segment contrasts commodity, credit, and state theories of money, arguing that money is better understood as credit and a tax-backed social institution than as a commodity like gold.

Main Topics: Show updates and listener engagement (Priority: 3/5): The hosts update the goals survey, reading challenge, upcoming guests, crypto-related episodes, listener reviews, and store promotions, emphasizing community growth and ongoing audience feedback. Book review: Scout Mindset (Priority: 5/5): Benjamin Felix summarizes Julia Galef’s framework for avoiding motivated reasoning, highlighting practical tests and habits for becoming more open-minded, less identity-driven, and more willing to update beliefs. Private real estate and illiquidity (Priority: 5/5): The hosts respond to a listener question by synthesizing research on private real estate, arguing that much of its return is explained by systematic factor exposure, leverage, and appraisal smoothing rather than a true illiquidity premium. What money is: commodity vs credit vs state theory (Priority: 5/5): A major segment traces historical and theoretical views of money from Adam Smith and Menger to Innes, Graeber, Keynes, and modern fiscal theory, concluding that money is best understood as credit and a state-backed unit of account. Guest conversation with Dan Solon on reading (Priority: 4/5): Dan discusses his reading habits, preference for nonfiction and hard copies, how books influence his work and thinking, and why he treats reading as a daily habit akin to exercise. Critical thinking and intellectual humility (Priority: 4/5): Across the episode, the hosts connect reading, investing, and money theory to a broader theme: using evidence, skepticism, and humility to avoid overconfident or ideological beliefs.

Key Arguments: Scout Mindset is valuable because it teaches practical methods for updating beliefs rather than merely criticizing bias. If enough people prefer dividend-paying stocks for non-return reasons, expected returns should still be lower because demand raises prices. Private real estate does not appear to offer a special return premium once REIT factor exposures and valuation lags are properly accounted for. Appraisal smoothing in private real estate creates the illusion of low correlation and diversification. The standard barter-origin story of money is historically weak; there is little evidence that barter economies preceded money. Money is better understood as credit and a unit of account than as a commodity with intrinsic value. Tax obligations help create demand for a state’s money; money is tied to state authority and debt settlement. Many views on money and inflation are deeply ideological, so listeners should be cautious about politically motivated narratives. Reading works best when it is habitual, personally relevant, and chosen for genuine interest rather than obligation. Good questioning and evidence-based reading can improve both business decisions and personal relationships.

Data Points: Goals survey responses: 274 - Number of listener responses at the time of recording; the hosts said they wanted at least 300 before processing the results. 22 and 22 reading challenge participants: 533 - Current number of participants in the reading challenge. Books read in the challenge: over 2,100 - Cumulative books read by participants in the 22 and 22 challenge. Ben’s friends in the reading challenge: 266 - Number of friends/contacts Ben currently has in the challenge app. TikTok minutes vs Netflix minutes: 21 trillion vs 9 trillion - Cameron relayed a podcast claim about attention spent on TikTok versus Netflix over the last 12 months. TikTok users: 1.6 billion - Claim cited from another podcast about TikTok’s global user base. TikTok creators share: 55% - Claim cited that 55% of TikTok users are creators. TikTok creators count: 850 million - Derived from the user/creator claim cited in the conversation. Streaming industry employment: 800,000 - Claim cited that streaming companies employ this many people. Correlation after de-smoothing private real estate: 0.66 - Illmanen-related research finding on the correlation between de-smoothed private real estate and equities. REIT-to-equity correlation: 0.82 - Benchmark correlation cited for REITs and equities. REIT vs de-smoothed private real estate correlation: 0.77 - Correlation cited between REITs and de-smoothed private real estate. REIT factor mix: approximately 60% small-value stocks and 40% long-term high-yield bonds - Mladina paper finding on the beta profile of public REITs. Episode number: 207 - The Rational Reminder episode discussed in the transcript.

Pivotal Quotes: "as people become better informed, They should start to converge on the truth wherever it happens to be. Instead, the opposite often happens." — Benjamin Felix: Introduced during the Scout Mindset review to explain why humility and updating beliefs matter. "If you're not changing your mind, you're doing something wrong." — Benjamin Felix: Closing takeaway from the Scout Mindset discussion. "money has not been generated by law. In its origin, it is a social and not a state institution." — Benjamin Felix: Used in the money theory segment to contrast commodity theory with state and credit theories.

Implications: Listeners are encouraged to question convenient stories about investing and money, especially ideology-driven ones. The episode argues for evidence-based thinking, skepticism about private asset premiums, and a more realistic view of money as credit/state infrastructure.