Book Review of ‘Coined’

Debashis Basu 30 April 2015

Another book on the medium of exchange

Coined, Kabir Sehgal, JP Morgan, John Murray, Federal Reserve bank, book review

There are plenty of books on money. A few years ago, Niall Ferguson wrote a gripping history (a Western one) of money in the book The Ascent of Money. Just off the presses is Coined, by Kabir Sehgal, a vice president with JP Morgan in New York. Sehgal explores basic questions like: why do we use money; what is money; and how should we use money? For answers, he has researched biology, psychology, anthropology, history and religion, while travelling over 700,000 miles across 25 countries that his job demanded.

Consistent with this eclectic approach, the book is divided into three parts: Mind, Body and Soul. The section Mind is all about ‘why?’, i.e., the roots of money. In chapter-1, Sehgal travels to the Galapagos Islands in search of the ‘origin of exchange’, since exchange is at the heart of money. He meets scientists who tell him about the “evolutionary biological process and how exchange is fundamental to life on this planet” and why organisms enter into symbiotic relationships—usually to obtain food and resources. Sehgal traces the evolution of the human brain and how the first signs of thought are found in cave drawings that were made tens of thousands of years ago.

He then goes inside the brain, examining the ‘neuroscience of financial decision-making’ which is now a vast and important area of study. Thanks to pioneering work by Daniel Kahneman, Amos Tversky, Richard Thaler and others, we now know that human beings almost always take decisions ‘irrationally’—a process that vastly exacerbates the outcome when the decisions are about financial products.

Even in our day-to-day lives, involving small decisions about money, researchers have found that the weather impacts how much one tips a waiter or the type of music playing in a store influences what type of wine one buys. Why are some people risk-takers and others not? Could it be a genetic trait? Money is no more the same after neuro-economics has burst upon the scene, complete with brain-scans experiments that have killed the ‘Rational Man’ who was at the centre of conventional economic studies.

In chapter 3, Sehgal looks at the ‘social brain’, the collective wisdom of crowds. Some anthropologists contend that debt, not barter, was the forerunner to money. Sehgal shows how various cultures deal with social debt or gifts—from the Maori people of New Zealand, to residents of the Trobriand Islands in the Solomon Sea to the Kwakiutl people of the Pacific Northwest and even netizens who use Napster (a file sharing site) and Kickstarter (a crowd-funding site). Sehgal explores where the gift economy ends and the market economy begins.

The second section of the book, Body, is about what is money? He starts with hard money, made from precious metals. Sehgal has travelled to the gold vault beneath the Federal Reserve Bank of New York (where sovereign holdings are kept), to ancient Mesopotamia (where metal as money originated), to ancient Egypt. From 7BC, when coins were invented in Lydia, to Greece through the Roman Empire, coins have gone through many shapes, appeared in different forms that have been repeatedly debased and manipulated by rulers, even as they tried to control and shape the society around them.

From hard money, Sehgal moves on to soft money. Paper money was discovered by China in the 10th century which was used by Kublai Khan to unify his empire in the 13th century. Paper money freed us from the bondage of limited supply of gold; if gold was supposed to be used primarily as currency, there would never be enough of it. But, then, paper money is also the cause for inflation as rulers have repeatedly found the easy way out of fiscal discipline by printing more of paper money.

Sehgal discusses one of momentous events in living memory, when President Richard Nixon’s announced the de-linking of gold from dollar in 1971, paving the way for monetary policy being conducted only by regulating supply of paper money. What is the future of money? “In the emerging world, there is a lack of credit cards but a plethora of mobile phones. The future of money will be realized when mobile phones become the preferred method of payment for billions around the world.”

This leads to the third section, or Soul, where Sehgal explores the ‘How?’ of money—how should we use money? He answers this question by delving into religions, drawing upon lessons from the Bible, Kora, Torah and the Vedas. This is a fine history of money, filled with engaging stories. Worth a read.

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