Albert Einstein once observed: Not everything that can be counted counts and not everything that counts can be counted. How true.
Money – something that can be counted, is really all about relationships – the value of which we can't quantify.
I want to introduce to you, perhaps the wealthiest individual in modern history. If you were to adjust his fortune for inflation it would dwarf even Jeff Bezos' net worth. His name: John Davison Rockefeller; the oldest son born to a traveling salesman father and a devout Baptist mother. Rockefeller learned the value of thrift, hard work, and the grace of giving early. He gave no less than 10% of his income to church and charity his entire life.
An industrious child Rockefeller learned from his father that to really succeed in life he had to make his own way – control his own destiny; make it on his own – but not by himself. He listened to his father and joined forces with partners in all his business ventures. A pearl gleaned from his mother, "Willful waste makes woeful want," resulted in him working diligently to make his ventures as efficient and effective as possible.
As a boy, even while contributing to family finances, Rockefeller managed to save a tidy sum. At the behest of his mother, he lent his savings to some neighbors in need. When the neighbors returned his money with interest he began to understand it was better to have money work for you than for you to work for money.
In the 1850's, the Rockefeller's settled in Cleveland, Ohio. At the age of 16, after completing a ten-week business training program, Rockefeller secured a position as an assistant bookkeeper with a small produce commission firm. For two years Rockefeller worked hard for that firm. He became a trusted agent and learned everything he could about the business. In 1859, he teamed up with a partner and started his own firm shipping agricultural commodities on commission. With the Civil War breaking out Rockefeller's timing was perfect. He and his partner grossed 450,000 dollars the first year and turned a profit.
While working hard to expand his commodities business Rockefeller kept an eye out for other opportunities. In August 1859 drillers struck oil in northwestern Pennsylvania. Rockefeller jumped at the opportunity to break into the newly coalescing oil industry.
With partners, Rockefeller founded an oil refinery. Having a grander vision Rockefeller soon bought out his existing partners and brought in his brother and established Standard Works. He then went on a buying spree to consolidate and improve the oil industry.
Rockefeller was an adherent of the Darwinian philosophy of business: survival of the fittest. Competitors soon learned that it was better to go into business with Rockefeller rather than try to compete against him.
What by then evolved into Standard Oil quickly became one of the largest, fully integrated petroleum producers, refiners, and distributors in the world. Rockefeller at one point controlled nearly 90% of the world's oil industry; making him the richest man on earth.
Rockefeller retired at the age of fifty and devoted the next 40 years to giving his fortune away; founding universities, financing medical centers, eradicating disease, funding church missions, and supporting the arts. John D. Rockefeller leveraged the currency of trust. He built and maintained positive, productive relationships, he added value and made money on a monumental scale; reshaping the world. John D. Rockefeller made money.
Something very special, a secret is hidden in this notion of making money.
How is money made?
Before we settle that question; let's talk about how much money is out there.
Since Covid, the US monetary base, comprised of currency in circulation or held at banks has exploded 30%. Currency in circulation or on deposit totals approximately five and a half-trillion dollars. This is what economists call the M1 money supply.
Beyond currency, coins and notes, and deposits, the workable "Money Supply" – the M2 money supply – consists of "relatively" liquid instruments and assets routinely used to facilitate the exchange of goods and services. The current value of the currency, deposit accounts, and special instruments, exploding since the advent of Covid, is nearing nineteen trillion dollars. That's a lot of zeros – nineteen plus twelve zero's before the decimal point. This is the money we – in the United States – commonly conduct business with.
Let's break this down.
The US population is roughly 330 million. On a per-capita basis, the US money supply of nineteen trillion dollars amounts to 57,576 dollars for every man, woman, and child in America.
How much is in your pocket and in your accounts?
The United States has the largest single economy in the world, by traditional measure, an economy on par with the entire economy of the European Union. US gross domestic product (GDP), the market value of all goods and services produced in 2020, depending on who's numbers you use, is approximately twenty-plus trillion dollars. World GDP is about ninety-two trillion dollars.
If we equalize output to a per-person basis, every man, woman, and child in the United States would have produced approximately 61,000 dollars worth of goods and services in 2020.
How much money flowed through your hands?
I know it's not fair to invoke averages. As one man astutely observed, "The average human has one breast and one testicle." This is to give you a sense of the number of dollars out there. Dollars that can just as easily pass through your hands as anyone else's.
The US money supply and GDP are pretty impressive numbers, but that's not the whole picture. What we're trying to determine here is how to make money. With trillions of dollars out there – how can you make some?
We've discussed what things are worth already. Something, anything, a car, a house, clothes, furniture, labor, is only worth what someone will pay for it. What one person holds dear another may not value. But generally speaking – what's valuable?
Value is often an educated guess as to what other people will pay. And what they will pay for is what they want. What do people want?
Again we can answer that question with all kinds of stuff, but if we peel back the onion we know what people want are feelings. People want to feel, and they buy stuff to get a feeling.
We're reviewing a bit here.
People are motivated to do any and everything because they want; they desire something – and that something will ultimately produce a feeling. Getting that feeling is what someone values. When people buy things – products or services – they are attempting to acquire something that will produce a feeling they value. People will pay to get what they want.
Business, all business is about helping people get what they want. All business is people business.
How do you make money? By creating or adding value; by helping people.
You make money by adding value, helping people get what they want.
Simple; magical. This means something.
We'll lay bare that meaning in the next session.