Somehow I got to my mid-30s understanding nothing about the nature of money. I could buy and sell stuff, I could “make” money, but I didn’t understand the physics of moving money at all.
Computing came to the rescue. A series of finance-related projects forced me to program basic money-related concepts. Since programming is how I understand the world, I started to understand money. Over time the lessons soaked into my intuition and changed how I saw development.
James Buchan in Frozen Desire (Picador) makes the case that we often want stuff but not right away, and that money represents this “frozen desire.” If you have created enough value to eat for a month, but you don’t want to store a month’s food, it’s extremely convenient to be able to store the value you’ve created and turn it into fresh lettuce a week at a time.
Money, though, is curious stuff. It has its own nature. The combination of money’s nature and money’s centrality to the work we do leads to tension. What makes sense for us to do as programmers may go contrary to the nature of money. When geeky imperatives clash with money imperatives, money wins. Eventually.
Once my lessons in the nature of money had soaked into my intuition, I found my attitude toward programming shifting. Strategies that had made perfect sense to me now seemed bizarre where they contradicted the nature of money. Strategies that had seemed fringe or sketchy or naive became just sensible money management. The more I rowed with the Stream of Commerce, the faster my boat went.
The nature I learned consisted of two surprising properties:
A dollar today is worth more than a dollar tomorrow, so earn sooner and spend later.
In a chaotic situation, options are better than things, so create options in the face of uncertainty.
These two strategies conflict at times. Earning money now can reduce future options. But maybe if you don’t earn money now, you won’t be around to exercise those future options.
If you already understand NPV and options greeks, feel free to skip the next two chapters. If, like to the me of 30 years ago, “NPV and options greeks” sounds like gibberish to you, then carry on to learn a bit about these first two phrases in the financial phrasebook. Just as it feels good to be able to say, “Where’s the bathroom?” and “Another beer, please,” in a new country, the following two chapters will help you begin to navigate FinanceWorld and finance’s profound influence on software design.
Software design has to reconcile the imperatives of “earn sooner/spend later” and “create options, not things.” We’ll get to how software design interacts with money after we’ve looked at these two effects—the time value of money and optionality—in more detail.