Wednesday, November 11, 2020

Why Cookies Are Not Money

There's a meme where a plate of cookies sits before three guys. The rich guys takes all but three, leaving the other two to fight over the other three. The idea is to show how the rich make everyone else fight over the remainder while taking most of it for themselves. 

It doesn't work that way, folks, and it's important we as businessmen to understand why.

The problem here is that the plate of cookies represents money as a limited resource. While that's certainly the case for the cookies, that's not so much the case with money; that is, when a cookie is eaten it's gone, it ain't coming back. With money, on the other hand, you can take it out of the system but you can bring it back. Sure, you can destroy money, but that's not something you see done everyday; people try to not burn money. 

The catch is that money is more of a liquid resource; that is, it's constantly changing shape and constantly being recycled through the process. It's important that you understand that: Just because it disappears from your ledger doesn't mean that the money is gone; it's merely gone somewhere else. However, it's important to understand that money is never truly eliminated; it's just shifted around. 

And that's something you absolutely need to understand to as a businessman, and why people say to "keep it local". If a kid does his chores and you give the kid a cookie, that cookie is history; you will never see it again. But if you give him a five, he's going to buy a comic book. The shop owner gets a coffee with that. The coffee house buys some cream. That dairy farmer used it to help buy some feed. That original $5 became $20, and its journey is just beginning. 

Note the difference: The cookie could only be used once, while the five-dollar bill can keep being used. 

Keep that in mind as we revisit the original plate of cookies, but replace the cookies with $100 bills. Sure, the rich man is going to get most of them, but most of them won't stay in his possession for long. He may put several of them into the bank, but he's going to spend money improving his home (money that goes to local contractors). He's going to spend money on food (which goes to grocery stores and restaurants). He's going to spend some on clothes (which goes to local shops).

Remember that money he put in the bank? The bank gives him interest on it, but it also goes to financing homes, local businesses, and even whatever charities the bank supports. 

[This is where the myth of "trick-down economics" comes from, or the idea that the rich support those below them as their money filters down to everyone else. Keep in mind that what we're discussing applies to everyone, just to different degree; as such, money circulates around, not down. Everyone contributes to the economy, unless they keep their money in a mattress.]

So why do you need to keep this in mind? Because that's how the comics business works. The money you put into a crowdsourcing campaign allows the person to buy more comicking supplies and pay his crew. That money, in turn, is used to keep printing businesses, internet service providers, and merch sites going, which makes the comics industry possible. This also means that those people are buying comics, which helps us all. 

There are a lot more cogs to the machine, and I'm obviously keeping it comic-centric (those people are also paying bills, getting food, grabbing sundry items), but the point is that the original couple of bucks is being used by a lot more people, and those few bucks quickly become a lot of bucks if you track where they go. 

Once the cookies are used, they're gone. The plate is useful to see how much money different people get, but it breaks down really quick if you use it as a model of the economy as a whole. As money is something that continues to circulate as it's used, bolstering the economy the more it's used. So spend your money to get more cookies; they're delicious and you're helping the economy. 

Or let the money earn interest in your bank account. Either way works.

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