You’ve probably held a banknote before and, if you’re anything like me, never really thought about what you were actually holding. A piece of paper. Some ink. A number.
And yet that rectangle of cotton and dye can feed you, house you, get you across the world, or, if enough of them vanish, collapse an entire society.
So what actually is money?
It started as a promise
Long before paper bills and bank accounts, money was already abstract. Accounting records found in Mesopotamia date back over 7,000 years, long before coins existed. People were tracking debts, obligations, and balances on clay tablets. The coin came later.
Anthropologist David Graeber put it simply: money began as a transformation of the unquantifiable “I owe you one” into something measurable, “I owe you one unit of something.” That shift from a vague social obligation to a precise, transferable number is the founding act of modern finance.
What makes that remarkable is that money was never really about stuff. It was always about trust.
Not valuable because it’s useful, but useful because we agree it’s valuable
Here’s the twist that messes with most people’s heads: money has no intrinsic value. A cowrie shell, a gold coin, a $100 bill, a number in a banking app, none of these are worth anything on their own. Their value exists only because enough people agree that it does.
The German sociologist Georg Simmel spent a whole book wrestling with this in 1900. His core insight: money functions as a universal mediator, enabling comparison between otherwise incomparable objects. It turns the qualitative into the quantitative. How much is a year of your life worth? A relationship? An hour of your expertise? Money doesn’t answer those questions, but it pretends to.
That’s what makes money so strange. It’s a collective hallucination we’ve agreed to share. And for the most part, it works brilliantly.
Money as freedom, and its limits
One of Simmel’s more radical arguments was that money is, fundamentally, a tool of personal freedom. When an obligation takes a monetary form, you’re free as to how you fulfil it, grow wheat, keep cattle, work a trade, as long as you pay what’s required. Compare that to feudal arrangements, where you had to deliver specific goods, or to slavery, where your whole person was subject to someone else’s will.
Money abstracts the relationship. It makes you, in theory, freer.
But Simmel also saw the dark side. Money is “empty,” it doesn’t point you toward anything meaningful. Having more of it doesn’t tell you what to do with your life. And the more everything gets measured in money, the more personal, qualitative relationships get replaced by impersonal, transactional ones.
In 2026, this feels more true than ever. How many things in your life have been “monetised” in the last decade that never used to be?
Three things money actually does
Economists traditionally define money by its functions:
Medium of exchange, meaning it lets us trade without barter. Instead of finding someone who has what you want and wants what you have, you just use money as a middleman.
Store of value, meaning it lets you save today and spend tomorrow. Inflation, as anyone who’s been grocery shopping lately knows, erodes this function over time.
Unit of account, meaning it gives us a common language for measuring value. A house, an hour of work, a loaf of bread, all measured in the same units, even if they’re fundamentally incomparable things.
These three functions seem straightforward, but they’re in constant tension. What’s good for storing value (scarce, hard money like gold) isn’t always ideal for exchanging it. You can’t split a gold coin at a coffee shop. And what’s good as a unit of account doesn’t always hold its value (see: the last few years of inflation).
What we’ve learned from the modern era
The 20th century ran a massive experiment on money. We went from gold-backed currency to pure fiat, money backed by nothing except government decree and collective belief. The US dollar became the world’s reserve currency not because of any intrinsic property, but because of military power, economic dominance, and, again, trust.
Fiat money gave governments enormous flexibility: they could expand the money supply to fight recessions, fund wars, and stimulate growth. But it also introduced new risks. When trust in institutions erodes, so can the value of money itself.
And now, in the 2020s, we’ve seen something genuinely new: the attempt to create money through code. Cryptocurrencies are, in a sense, a direct challenge to the idea that money requires state backing. Some see this as liberating. Others see it as a naive bet against thousands of years of institutional infrastructure.
The jury is still very much out.
So what is money?
After all that, here’s my honest answer: money is a technology for coordinating human cooperation at scale.
It’s not wealth itself. It’s a representation of value that only works because enough people believe in it. It’s a social contract encoded into a number, a note, a token.
The philosopher Thales, considered the first philosopher in the Western tradition, was also, interestingly, what we’d today call an options trader. He used money to speculate on future olive harvests. The connection between abstract thought and financial innovation is ancient. They’ve always been intertwined.
And that’s what makes money worth thinking about seriously. It’s not just economics. It shapes how we value our time, our relationships, our work. It determines who has power and who doesn’t. It’s the invisible infrastructure of almost everything we do.
Next time you hold a banknote, notice how strange it is that this small piece of paper, backed by nothing more than shared belief, can determine so much of a human life.
That’s not just finance. That’s philosophy.
