Money as Tokenized Reputation

Insights from the study of psychopathology

I recently listened to the Jordan B. Peterson Podcast episode titled “The Psychology of Social Status and Class” with guest Rob Henderson, and he made a point I found very compelling. The discussion wasn't about money specifically, but about the way psychopaths exploit a high-trust society.

Dr. Peterson said,

I think the right way to think about this is that there isn't anything more valuable than reputation. Right? Because there's no difference between reputation and wealth fundamentally. I mean, even monetary wealth is a form of abstracted reputation. So yeah, you know, it's just been tokenized, essentially. Like, money is tokenization of reputation. Well, the problem is reputation can be gamed."

This is a really perceptive way to describe money, and I think there's a lot to learn by analyzing the idea. It dovetails quite well with my definition of money as a ledger of deferred consumption from my recent article "Money Is Not Wealth".

Deferred consumption is very closely linked to reputation. A good reputation is established by being generous, productive, helpful, and honest. Basically if you produce and contribute to other people and their wellbeing instead of only working for your own selfish interest, your reputation will benefit. That’s essentially synonymous with deferring consumption. You put in the work now, but you don’t personally benefit. You do the work for someone else’s benefit.

In the article I make the point that these pro-social behaviors, in a small community setting, accrue to you a kind of informal “credit” that defines money at its most fundamental level. You could define reputation as the sum total of those “credits” accumulated by a pattern of productive and pro-social behavior over time. The inverse is also true. Constantly asking for favors from the community, but never being willing to reciprocate that service, will cause you to accumulate a lot of unpaid “debt” to the community. We describe that as a “bad reputation”.

The ne’er-do-well loafer everyone knows who can’t hold down a job, shows no responsibility, lives off handouts and welfare, and wastes everything he gets on drinking, drugs, or gambling would be a perfect example of someone with a bad reputation. As word gets around, it isn’t long until people are hesitant to do favors for that person. They rightly view him as a malicious parasite and realize that if his behavior is rewarded, it will continue to be a drain and a detriment to the function of society.

As I pointed out, this informal “credit/reputation” system breaks down when dealing with larger groups and more complex supply chains, because it’s necessary to do one-off transactions with strangers who’s reputation you have no way of knowing and with whom you won’t have opportunity to enter into a reciprocal relationship. That’s where money comes in. Conceptualized as tokenized reputation, it represents the fact that the holder of money has provided valuable goods and services to someone else in the past in order to acquire that money. You can feel confident that engaging in a cooperative transaction with this person will be beneficial and pro-social, and not just rewarding a malicious parasite.

The Psychopathy Connection

According to Wikipedia,

Psychopathy is a mental health condition characterized by persistent antisocial behavior, impaired empathy and remorse, and bold, disinhibited, and egotistical traits.

The first characteristic given is persistent antisocial behavior. Psychopaths lack empathy and remorse, so they’re willing to use manipulation, deceit, force, or anything required to benefit themselves, regardless of the harm to others.

In the podcast I quoted, Dr. Peterson was making the point that most people are fairly good at cooperating and functioning productively in society. But a group of trusting and cooperative people makes the perfect target for a psychopath. They’ll come in, lie to everyone, take advantage of people’s goodwill, and exploit the group by any means possible until they own everything or the group sees their true character and pushes back. So they tend to be constantly moving, never staying too long because their behavior only works on unsuspecting victims, and never able to form stable long-term relationships.

The focus of the discussion was how psychopaths exploit the current victimhood culture for their own benefit by falsely portraying themselves as victims to gain special treatment they don’t deserve. But psychopaths exploit society in lots of other ways as well.

Psychopaths often try to portray themselves as good and worthy people, even when they’re really the opposite. This means establishing a deceptive reputation. If money is tokenized reputation, what better way to bolster your reputation than to somehow get your hands on a lot of money? Honest, cooperative people who encounter a stranger with money will tend to assume he acquired it the same way they acquire their money; through working and providing value to others while deferring consumption to the future. They won’t hesitate to do business with that person.

If there’s a dishonest way to acquire money without actually putting in the work and providing value to others, you can bet psychopaths will sniff that out a mile away and take full advantage.

Unfortunately, the game theory of money dictates that even if you know someone acquired their money through dishonest, illegal, or otherwise harmful and antisocial means, you’re still incentivized to just accept the money and do business with them anyway. Even if you know the method they used to get it is harmful to society in general, taking the money and using it yourself will benefit you personally.

For example, imagine someone came to your business and offered to buy your product, but told you they were going to pay with money they stole from a guy walking down the street last week. You might be appalled by the theft, but you would gain nothing economically by refusing to do business with the thief. You would gain economically by taking his stolen money. Doing so would just encourage him to continue stealing, which is terrible for society, but as long as he doesn’t steal from you, you’ve still benefitted financially.

This provides a strong motivation for psychopaths to continue their exploits, because if they can manage to acquire the money, they will almost certainly be able to spend that money and benefit as much as an honest person would. So in a sense, money makes it a lot easier for psychopaths to flourish, as opposed to a close-knit community that would soon catch on to their behavior and respond with punishment or expulsion from the community.

I can think of a lot of people today who have a lot of money they acquired through ways that are very detrimental to society, but who maintain a veneer of public respectability almost exclusively because they do have so much money. Weapons manufacturers, career politicians, owners of exploitative and unethical businesses, and financial industry executives come to mind. Yet these people have no problem finding someone to do business with, because as the saying goes, “their money is just as green as anyone’s”.

Banking

So what if there were a way to create money with no effort? To bolster your reputation with piles of cash without having to lift a finger? You can imagine how giddy with excitement a psychopath might be at the thought.

Counterfeiting seems like a possibility, but it’s actually very difficult to accomplish, and there’s a high risk of getting caught.

What if there were a way to create “counterfeit” money that was so identical to the real thing that almost no one could tell the difference? And suppose we actually made it legal? Well, legal for those who have the correct license, and a crime punishable by years in prison for everyone else. Can’t have the honest people competing with you and siphoning value away from the grift, after all.

That’s essentially what we have today with the modern banking system. Banks create “money” (bank deposits) with a keystroke every time they make a loan. It costs them absolutely nothing, and they can then loan out that new money and collect interest on it, without having to lift a finger. Seems too good to be true, but in this case it is.

That subject deserves its own in-depth explanation. Suffice to say that if you’ve ever felt that the financial system is a parasitic entity infested at the highest levels by people with “persistent antisocial behavior, impaired empathy and remorse, and bold, disinhibited, and egotistical traits,” you’re probably on the right track. It’s the ideal habitat for a motivated psychopath, and I believe they’ve maneuvered themselves into the system and are busy exploiting our trust and the properties of our most crucial social technology. Unfortunately not one person in a thousand understands what’s happening. Most can see the decay spreading and feel something is wrong in society at a fundamental level, but without understanding they cause, they don’t have the knowledge or tools to fight back.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” -Henry Ford

My goal in writing is to begin building that understanding. Each person who wakes up to reality will be able to protect themselves, to stop providing sustenance to the parasites. Without access to the real wealth produced by honest, cooperative individuals, the parasites will starve. And who knows, if enough people wake up, they might be so outraged by the exploitation that they’ll start the revolution Ford dreamed about.