TIP 058: COINED – THE ESSENCE OF MONEY AND HOW IT WORKS

W/ KABIR SEHGAL

9 October 2015

In this episode, Preston and Stig invited New York Times bestselling author, Kabir Sehgal to discuss his new book, Coined. It is a captivating narrative of how money and its history has shaped us. Coined has been praised by former US President Jimmy Carter, billionaire Sir Richard Branson, and former chair of the Federal Reserve Paul Volcker.

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IN THIS EPISODE, YOU’LL LEARN:

  • How the Roman empire collapsed because of increased money supply.
  • How digital currencies might change our lives in the future.
  • Why we are using paper money today and not currency backed by silver and silk.
  • Why inviting someone to eat with you in ancient times was like a futures derivatives contract.
  • Ask the Investors: How do you calculate the intrinsic value of a stock, and which discount to the value should you look for?

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TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Preston Pysh  01:04

Hey, how’s everybody doing out there? This is Preston Pysh. I’m your host for The Investor’s Podcast. And as usual, I’m accompanied by my co-host Stig Brodersen out in Denmark.

And this is really going to be a fun episode because we’re talking about the book “Coined.” And this book was written by Kabir Sehgal. And we have Kabir on the show with us today. But before I talk with Kabir and introduce him officially, I want to give the audience a couple of quotes from the book “Coined,” which we’re going to be talking about today.

The first quote that I’m going to read here, this one says, “The best things in life are free. But ever since civilization began, money has had a profound impact on humanity. Kabir’s book brings the story of currency to life, and it is worth spending a few of your hard-earned coins on it.” That endorsement and that quote come from the billionaire Sir Richard Branson from Virgin.

I’ve got another quote for you, “An exceptional examination of the history of money. Kabir has written an engaging narrative that spans thousands of years and introduces readers to important people who have impacted the chronicle of currency.” That’s by the former President Jimmy Carter.

Okay, so one last quote, and then we’ll get to the interview here. I’m sure I’m embarrassing Kabir. But here’s the last quote, it says, “Coined doesn’t resemble any of the usual textbooks on the money. For one thing, it’s actually fun to read. And Kabir will stimulate your thinking about our financial crisis in banking.” And that was by the former Fed Reserve Chairman Paul Volcker, who is obviously one of the most famous Fed chairmen of all time.

So just an amazing array of people endorsing this book and Kabir, all I can say is, wow, this is really amazing. Some of these endorsements are phenomenal, and we are so excited to have you on the show to talk about this phenomenal book.

Kabir Sehgal  02:50

Thanks. I was blessed, especially Paul Volcker. I didn’t realize it. I didn’t think he would do that. But I’m grateful that he did.

Preston Pysh  02:57

Paul’s a very impressive guy. I mean, I’d say if you rank the Fed chairmen in order, Paul’s probably the number one guy there for what he did back in the 80s, with inflation and all that is just really amazing.

So I just want to tell the audience so Kabir is the Vice President of the Emerging Market Equities at JP Morgan in New York. This is what I really like. He serves as an officer in the United States Navy Reserve. In addition to that, he’s a term member for the Council of Foreign Relations. He’s also a New York Times bestselling author for three different books. He’s a Grammy-nominated producer who has performed with Grammy Award-winning musicians as a jazz bassist. And Kabir is also a graduate of Dartmouth and the London School of Business with Economics. Kabir, the background is just crazy to me. You’re this Grammy-nominated producer, you’re in the armed services, you work for one of the leading banks in Wall Street, and it’s just quite impressive.

Kabir Sehgal  03:54

Got it. Thanks for having me. I’m looking forward to learning from you and I’ve listened to a couple of shows. I really like what you guys do.

Preston Pysh  03:59

Well, thanks, Kabir. That’s awesome. We’re honored that you’re listening to the show. hey, we’ll throw it over to Stig. He’s got the first question. Go ahead and fire away buddy,

Stig Brodersen  04:08

So Kabir, to really understand the scope of your extensive research and the structure of the book, could you please tell us about your experiences at the Galapagos Islands and why your book starts there?

Kabir Sehgal  04:20

Yeah. you know, I started my journey at JP Morgan on Wall Street, just months before the credit crisis began. And I found myself wondering what’s happening. People are losing their jobs, people are losing their minds. And I asked a question that governs the entire book, which was what’s happening in your brain? What’s happening in your mind when we think about money when we deal with money? That was largely a biological question.

And so, when I mentioned the word money to you right now and people listening, there’s actually an electrical current going through your skin. You are having an increase in your skin conductance. You know, they’ve taken brain scans at people who are high on cocaine, and people who are about to make money. And they look similar. it shows that there’s a neural reaction. I wanted to figure out is there a biological basis for using money.

If you look at most histories of money, they start, perhaps in western Turkey. There was the invention of coinage or maybe Africa, the great, great valley where you could dig up fossils that served as money. But I went to the Galapagos Islands because that’s where Charles Darwin was inspired to come up with his theory of evolution by natural selection. And so, I went there and I met with a couple of marine biologists and we went diving, and we didn’t find any gold, but we found something else which was, I found symbiosis at work. One example there was a sea turtle. The sea turtle was being cleaned by different fish. And so, what’s happening there, the turtle was getting clean, but the fish were ingesting those parasites and getting nourishment. It is an example of energy exchange.

And so, I went all through the Galapagos and I learned how the exchange is really an energy, is really the currency of nature all throughout the world. Right now, you’re having an exchange with the plants when you’re breathing out carbon dioxide, the plants accreting oxygen. you’re in a carbon loop. You have exchanges everywhere.

And so, you look at the first type of currency and it was salt, it was meat, or even now money if you boil it down gives us the calories we need to survive. the most like concrete for money is really energy. I went into that. I went into the genetic basis of money. That’s why I went to the Galapagos to look at money and to come up with the biological link between money and energy.

Preston Pysh  06:41

Do you have any other examples of this exchange? And then how did you bridge that over into finance and money? I guess that’s where I’m really trying to have the audience understand that linkage that you talk about in your book.

Kabir Sehgal  06:55

Yeah. money is an instrument of exchanges. Exchange is social interaction. There are all kinds of studies that show that more social people, they live longer, and they feel more satisfied with their lives. And there are actually genes that we possess that regulate our social interactions. And this even gets to financial behavior.

For example, there was one study that showed that about 20% of someone’s credit score can be influenced by their genetics. And so, there’s one gene, it is called the CLMT gene and it’s evenly dispersed within the population. Two variants of it are evenly dispersed within the population. in this study, they swab some people’s cheeks and they asked them a bunch of financial decisions, like make the capital asset allocation decision, choose between stocks and bonds, and cash. And they found that one of the variants, you’re much more likely to be risk-averse and to put your money in cash, and you had fewer credit lines and a higher credit score. And the other gene, there’s just the opposite. You’re more risk-seeking. You put more money into stocks. And so, this goes to show you that it was about, again, 97 points, which is about 20 points in your credit score, was influenced by your genetics. And so, the good news is that if you’re not really good with your money, always blame your parents because it’s their gene pool.

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