A dictionary will answer that question with three criteria - a medium of exchange, a unit of account, and a store of value. That's all true, but I've personally always preferred pairing the dictionary with a more practical definition. To participate in society you have to pay taxes, and if you don't, men with guns put you in a cage. So "money" is just whatever the government accepts as payment for taxes.

This question popped into my head again this week as I was stepping back on the big geopolitical forces that are evolving and reshaping the world. Gold has now passed the euro in terms of reserves at global central banks, and if current trends hold it may pass the US dollar before the end of the decade. So it seems that at least from a "store of value" perspective, the globe is voting with its wealth that gold is money. In reality, the USD itself has never passed the "store of value" criteria. The old-timey stories about going to the grocery store with a quarter and coming home with milk, bread, and a dime are proof enough of that.

USD financial assets have acted as the "store of value" - based on the belief that the US would steward the dollar responsibly enough that you could lend the government USD for a decade and end up on the other side with more purchasing power than when you started. The cracks in that belief are obvious and warranted.

Gold is not perfect either. It fails the "medium of exchange" and "unit of account criteria," because the real world stuff we buy like pizzas and baseball tickets are way too volatile when priced in gold to make any sense. Crypto has the same failings, on steroids.

What is the importance of these musings? Maybe nothing, maybe everything. Maybe it's just another way of getting to the same point I've made many times, which is that you should spread your wealth across different types of "money" because they all have warts. I do know that as investors it is all too easy to assume tomorrow will look like yesterday, and the evidence is building and building that this is currently unlikely. Heck, OpenAI has a disclosure on their website that says "it may be difficult to know what role money will play in a post-AGI world." Stepping back and thinking about this stuff is probably healthy, in doses.

I'll sign off with 3 of my favorite pages of writing ever. Milton Friedman succinctly describes the dynamics of "money" on a small Micronesian island, and then artfully shows how conceptually similar it is to many of our "more advanced" conventions. Enjoy.