The Meaning of Life and Other Vegetables

Lately I noticed that finance has inertia, and after thinking about it a little I think I understand why.

When I say that finance has inertia, I mean that money is hard to set in motion. It also takes time and effort to stop it (or make it change direction) once it’s set in motion. The former statement is quite trivial, and intuitively relatable to almost everyone. The latter, however, might seem odd from a micro perspective (say, individual finances), but if you observe big enterprises, especially ones with many people, multiple/distant geographical sites and complex structures, it becomes quite evident. For example, I’ve seen companies choose to receive some supplies after paying for them and realising they don’t really need them, just because it’s so much easier than cancelling the order and stopping the payment (reversing the flow of money). It seems that a byproduct of the difficulty of setting large sums of money in motion, in the commercial world, is that everyone is just exhausted when it’s done and reluctant to try to negate it. “You know what? We’ll keep them anyway, have a good day!”

I think that the general reason is simply that people are strongly attached to their money. They will not easily part with it, even with a perceived fair exchange or return. When they lend it, they perceive the act as perilous – sometimes regardless of the objective odds – and thus they get even more anxious about it and require layers of assurance that indeed they will get it back, as well as a worthy return to justify the trouble of the entire affair. This makes the movement of large sums something that takes energy; always psychologically, but also practically, above the “everyday” threshold.

I’m a mechanical engineer, so I’m used to thinking in mechanical terms. In that context, mass is an illuminating concept. Mass can be seen as the property of a body that characterises its resistance to changing speed or direction. An aspect of it, in layman’s terms, is how hard we’d need to push or pull it to set it in motion, or to stop it once it’s on the move. The bigger the mass, the bigger the force required, for an effect that would look the same. Another illustration is that when a force is applied to stop a moving body, the bigger the mass, the longer the body will continue to travel (against that force) before it finally stops. That represents the “work” (or energy) put into the stopping.

The equivalent of the last observation in the commercial world is that sometimes when a payment needs to be stopped, by the time the procedure to do it is complete the payment is already made, and now needs to be reversed… This is not necessarily because someone was slow to act; it’s often simply a result of the number of steps to be taken and the layers upon layers of safeguards in place (anxiety remedy, in my view).

Money’s “mass” might be people’s attachment to it. Of course the sum matters, but if we look at a unit of money (say, a dollar), it can have different levels of attachment to it, for different persons and in different situations. You might think that companies have lower attachment because “there is no emotion to it”, and that the seeming resistance to movement is merely an effect of size (large sums of money), but don’t be fooled. Companies are super-attached, BECAUSE there is no emotion to it, and hence it’s more rigid. An emotional attachment to money can change – for a given person – over time and circumstances; but a procedural attachment is much more tenacious.

What am I trying to say here? Not much, I guess… It’s just an observation I felt like sharing. Maybe it will consolidate into something bigger, and maybe it won’t. And that’s okay!

Peace to all.