What is the rarest coin in the world? There are several possible candidates for the rarest coin in the world, but the most widely recognized contender is the 1933 Saint-Gaudens Double Eagle.

This is a difficult question because there have been so many different coins over the thousands of years since coins were first used that the majority of them no longer exist. If one of those coins from thousands of years ago were to appear, it might suddenly become one of the rarest coins in the world. Coins were first used in Anatolia, which is in modern-day Turkey, in roughly the 7th century BC. In early civilizations, trade was generally carried out through barter. It was not always easy to carry around everything that was going to be traded, so money was invented to replace the actual object.

There was money of account, which represented how much of something somebody owed or had on credit, and there was money of exchange, which represented the actual item being traded. There were different systems for recording these two types of money. Some were large pieces of stone and some were smaller things, such as shells. The problem with all of these systems was that they could be forged pretty easily. Coins arose as a system that was much harder to forge.

Over time, money stopped representing something directly and became valuable in and of itself. It still represented a quantity of something, perhaps silver, as it technically still does today, but nobody would ever exchange it for the silver because the coin itself held the value. Once this happened, it became necessary to have coins that could not easily be forged. The first metal coins appear to have come from the kingdom of Lydia, in Anatolia, and they were hammered and stamped metal discs. All modern coins ultimately developed from this idea.

The 1933 Saint-Gaudens Double Eagle coin was designed by Augustus Saint-Gaudens, an American sculptor who lived between 1848 and 1907. He created many famous monuments that still stand in America, but he also designed the $20 Double Eagle gold coin and the $10 Indian Head Gold Eagle. The double eagle was called “double” because the US Congress had decided that the value of an “eagle” was $10. There were quarter eagles, half eagles, eagles, and double eagles. They were made of gold. A Double Eagle had 30.09 g of gold, which was worth $20 in 1849 when it was first created. Today, that same amount of gold would be worth far more. All of the gold eagle coins were discontinued in 1933 when the US government abandoned the gold standard and the price of gold began to rise.

Saint-Gaudens was hired by President Theodore Roosevelt to make the eagle coins more beautiful. It took a while to get his design ready for production, but the US Mint started making it in 1907, just after Saint-Gaudens had died. The coin was used as currency until 1933, during the Great Depression, when the US government made it illegal for people to hold gold coins. Because of the failing banking system, many people were hoarding gold coins, which made the economic crisis worse. Roosevelt wanted to get the economy moving again, so he took the US off the gold standard and made it illegal for private citizens to keep most gold coins. They had to turn them in in exchange for normal money. All of the gold coins in the possession of the US government were ordered to be melted down.

The 1933 Saint-Gaudens Double Eagle went into production one month before Roosevelt’s order. A total of 445,500 were produced. Of those, 445,478 were melted down. Of the remaining 22 coins, two were given by the US Mint to the US National Numismatic Collection to be displayed. The other 20 were stolen. Nobody knows exactly how, but it is thought that a US Mint cashier was responsible. The Secret Service, which is part of the US Treasury Department and was originally created to combat counterfeiting rather than protect the president, recovered eight of them, and those were melted down. A ninth coin was found in 1952 and was also melted down. One coin was sold abroad, and the other ten vanished.

In 2005, ten of the missing coins were discovered in the collection of a Philadelphia jeweler named Israel Switt. They were seized by the US Treasury, and a lawsuit over ownership followed. That legal battle became part of the reason the coin became even more famous, because it highlighted the strange position of the 1933 Double Eagle. Although the coins had been struck, they had never been legally issued, which meant that the government considered them stolen property rather than collectible coins. This legal battle is still continuing.

The coin that had been sold abroad reappeared in the collection of King Farouk of Egypt in 1944. He was deposed after the Second World War, and the coin vanished again. It appeared once more in 1996 in the hands of a British coin dealer named Stephen Fenton. It was never clearly established how he ended up with it, but the US Treasury dropped criminal charges against him. Ownership of the coin reverted to the US government, and they sold it at auction in 2002 for $7,590,020. Half of the money went to the US government and half went to Stephen Fenton.

The coin was sold again in 2021 for $18,872,250, making it the most expensive coin in the world and, in a practical sense, the rarest as well. There may be older coins of which only one survives, and there may be ancient coins still waiting to be discovered, but the 1933 Saint-Gaudens Double Eagle is probably the most famous example of rarity in the coin world because of its strange legal status, dramatic history, and astonishing price.

Sources

https://en.wikipedia.org/wiki/List_of_most_expensive_coins

https://en.wikipedia.org/wiki/1933_double_eagle

https://en.wikipedia.org/wiki/Augustus_Saint-Gaudens

https://en.wikipedia.org/wiki/Double_eagle

https://en.wikipedia.org/wiki/History_of_money

image By US Mint (coin), National Numismatic Collection (photograph by Jaclyn Nash) – National Numismatic Collection, National Museum of American History, Public Domain, https://commons.wikimedia.org/w/index.php?curid=42906038

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What is the bullwhip effect? The bullwhip effect is where a small change in consumer spending can lead to a very large fluctuation down the supply line. It is one of the causes of overproduction and waste. It is called the bullwhip effect because a small flick on the handle of a whip can lead to larger and larger waves further down.

The problem comes because suppliers have to constantly monitor demand and react to it. Let’s take chocolate bars as an example. Every month, Steven’s Chocolate Bars Company sells one million of their chocolate bars. That means their supply line is set up to produce those one million bars with as little waste as possible. Wasted resources mean lost profits. The ingredients for that chocolate bar, the cocoa, the milk, the sugar, and the peanuts, all come from different suppliers. As does the plastic used for the wrappers and the cardboard used to box them.

This month, there is a football match in town, and people come from all around. After the game has finished, they all buy chocolate bars, and Steven’s Chocolate Bars Company suddenly sells 5% more chocolate bars than they usually do. The stores that sell the chocolate bar see that supplies are running low and they contact Steven’s Chocolate Bar Company, which increases production by 10% to make up for the sudden demand. They don’t know why, but if their chocolate bar sells out, customers will buy other chocolate bars, and they may never come back. They contact their supply chains and ask for more ingredients. These suppliers don’t want to be the reason why Steven’s Chocolate Bar Company can’t make enough chocolate bars, so they all increase their supply by 15%. The small change at the beginning of the supply chain amplifies as it gets further and further away because each link needs to provide more than enough for the link above it. Each level is trying to predict the demand with limited information, which leads to them adding safety stock. This is the bullwhip effect.

It doesn’t sound so bad, but demand falls back to normal levels, and Steven’s Chocolate Bar Company now has too many bars that it cannot sell, and each link up the chain has now produced too much that they can no longer sell. This is all wasted. The bullwhip effect causes a waste of food or whatever resources are in the supply chain, all because of the fear of not being able to produce enough. The problem is not just the resources, but the lost investment in inventory, which can even lead to people losing their jobs and bankruptcy. The effects ripple outwards as well. The company that produces the milk might reduce its supply to X company so that it can provide more milk to Steven’s chocolate bar company, and that might have knock-on effects as well.

This happened in 2020, with the rise of COVID-19 and panic buying of toilet paper. Toilet paper sales went up several hundred percent and stores very quickly ran through their stocks, which just added to the panic buying. The supply chain responded, but by then sales had dropped back to normal, in fact even lower than normal because people had hoards of toilet paper, and the stores were swamped with toilet paper. Toilet paper isn’t quite as bad, though, because it doesn’t have a best-before date.

The best way to deal with and mitigate the bullwhip effect is rapid communication along the entire supply chain. This has improved over the years as communication has become faster and the amount of available data has risen. AI systems also allow the supply chain to monitor the rise and fall of demand in real time and react to it in appropriate amounts. Walmart runs a system like this where they can analyze the data as it comes in from the cash registers. They know how much is in each store, each warehouse, and they can manage the supply chain appropriately. Walmart does have the advantage of controlling its entire supply chain, but they do show that it is possible. Prices are very important to Walmart, and keeping the bullwhip effect in check is a great way of saving money.   

The bullwhip effect has always existed, but it became more significant as supply chains grew longer and more global in the late twentieth century, when logistics and information systems made it possible to react quickly — and therefore to overreact. Supply chains before this were generally local and in no way fast enough to react to an increase in demand, unless it was a long, slow increase.

Sources

https://www.investopedia.com/bullwhip-effect-definition-5499228

https://www.shipbob.com/blog/bullwhip-effect

https://en.wikipedia.org/wiki/Bullwhip_effect

Image By Cgoodwin – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=3759427

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What was the gold standard? The gold standard was a system that tied the value of a country’s currency to a fixed amount of gold. It is often said that it ended in 1971, because that was when the United States stopped converting dollars into gold for foreign governments and central banks, which was the last major official link between money and gold under the Bretton Woods system.

The gold standard was a way of tying money to gold. Gold is valuable because it is rare, durable, and widely trusted, and it is also valuable because we believe that it is valuable. In the same way, people pay huge amounts of money for a painting because they believe it has that worth. Under a gold standard, whatever unit of currency a country used, one unit of that currency was worth a specific amount of gold. In principle, the money had to be convertible into gold at that set rate. (In the older “classical” gold standard, ordinary people could often redeem notes into gold; under Bretton Woods, redemption was mainly for foreign officials.) That meant a country could not create unlimited money without also risking a run on its gold reserves. It also made exchange rates more stable, because currencies were linked to the same underlying metal. However, if confidence dropped and many people wanted gold at the same time, the system could come under strain.

Modern money doesn’t work like that. Most countries use a fiat system of money these days. “Fiat” comes from Latin and is used for an order or decree. Fiat money is money that has been declared legal tender by the government. It is not backed by any precious metal and only has worth because the government accepts it for taxes and because everyone else accepts it in daily life. If trust collapsed and people stopped accepting the currency, the whole system would seize up. We obviously don’t do that, though, because we need people to believe that money still has value, so we can use the money we are paid to buy things. With fiat money, governments and central banks can increase the money supply, and exchange rates move based on many factors, such as inflation, interest rates, economic growth, trade balances, and demand for a country’s currency.

There are several problems with the gold standard, which is why no major country uses it today. The first is that, because the currency is tied to gold, changes in gold supply can affect the money supply. New gold discoveries can cause inflation, and gold outflows can cause deflation. Countries also cannot easily increase the supply of money to deal with recessions or financial crises, because they would risk breaking the promise of convertibility. Many economic historians argue that clinging too tightly to gold made the Great Depression worse than it might otherwise have been.

Another issue is that economies can grow faster than gold supplies. If money cannot grow with the economy, you can get long-term deflation. Deflation can sound nice, but it can discourage spending and investment because money becomes more valuable simply by holding it. People also hoard gold because it is seen as a safe investment, which can tighten the system further. Prices can end up being indirectly connected to shifts in gold supply and demand, even when nothing real has changed.

People sometimes argue that there isn’t enough gold in the world to support the enormous world economy we have today. This is a bit too simple, because a gold standard doesn’t need to “equal world GDP.” The real question is whether the financial system can keep its promise to convert money and bank claims into gold at a fixed price during a panic. Still, the basic point is true: the modern world runs on an enormous amount of money and credit, while the supply of gold is limited. If confidence breaks, the promise of conversion becomes extremely hard to keep, because far more people may want the “real thing” than any government could realistically hand over.

The gold standard wasn’t “started” in a single year, but Isaac Newton did play an important role in Britain’s shift toward gold. Britain was losing silver coins because they were worth more as silver than they were as coins, so people were taking them abroad, melting them down, and selling the silver. Newton was Master of the Mint, and in 1717, he recommended fixing the value of a gold guinea at 21 shillings, which was then set by royal proclamation. Britain was officially bimetallic at the time, using both gold and silver coins, but if the official rate between the two metals was slightly wrong, one metal would be undervalued, and people would export it or melt it down. Newton’s recommendation was meant to bring the official rate closer to the market rate, but Britain still drifted toward gold over time as silver tended to disappear and gold became the easier “default” standard in practice.

The system didn’t last forever. Many countries suspended gold convertibility during World War I. Attempts to restore it in the interwar period ran into trouble, and countries left it in waves during the Great Depression. After World War II, the Bretton Woods system linked many currencies to the U.S. dollar, and the dollar was linked to gold for foreign official holders. That arrangement finally ended in 1971 when the U.S. “closed the gold window,” and the world moved fully into the modern fiat era. And this is what I learned today.

Sources

https://en.wikipedia.org/wiki/Gold_standard

https://www.investopedia.com/ask/answers/09/gold-standard.asp

https://www.gold.org/history-gold/the-classical-gold-standard

https://en.wikipedia.org/wiki/Fiat_money

https://moneyweek.com/investments/gold/how-isaac-newton-created-the-gold-standard-by-accident

https://www.investopedia.com/articles/investing/071114/why-gold-has-always-had-value.asp

https://www.moneyandbanking.com/commentary/2016/12/14/why-a-gold-standard-is-a-very-bad-idea

https://elements.visualcapitalist.com/visualizing-how-much-gold-is-left-to-mine-on-earth

https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp

https://moneyweek.com/investments/gold/how-isaac-newton-created-the-gold-standard-by-accident

Photo by Michael Steinberg from Pexels: https://www.pexels.com/photo/gold-bars-366551/

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What is the Laffer Curve? The Laffer Curve is a graph that shows the theoretical relationship between the amount people are taxed and the amount of revenue the government can expect to get. The amount of revenue is zero when people are taxed 0% or 100% of their income, and it rises to an optimal point somewhere in the middle.

The Laffer Curve is named after an American economist called Arthur Laffer, although he says that he did not come up with the idea. He sketched it on a napkin in a meeting with Dick Cheney and Donald Rumsfeld in 1974. A journalist was present at the meeting, and he wrote an article about it, calling the graph the “Laffer Curve”. Arthur Laffer said that he was just summarizing economic theories that were developed long before his time. Still, his curve was very visually appealing, and it was one of the arguments that led Ronald Reagan to cut taxes.

The theory is fairly simple to understand. If the government cuts taxes to zero, then obviously, there will be no tax revenue. People would be happy until all of the public services, such as hospitals, schools, and roads, stopped working. On the other hand, if tax is raised to 100%, the government would also not receive any income because people would have no incentive to work or would leave the country. That is, unless everything becomes free, which is not really possible. There is a magic point on the graph, which is the top of the curve, where tax is at just the right percentage to balance out these two halves. The government gets its maximum revenue, but people are still incentivized to work. Working out where this peak on the curve sits is a constant and ongoing economic problem for governments. It also depends very highly on culture. For example, the peak on the Laffer Curve is far higher in Finland, for example, than it is in the UK.

The Laffer Curve is a very simplistic way of looking at taxes and there are many factors that need to be considered. The first is that a flat tax rate across society doesn’t work because taxing a billionaire 30% and a low-income worker 30% can have vastly different outcomes. There are different Laffer Curves for each income bracket in society, and it is very difficult to find all of them. It also depends on trust in the government. The Organization for Economic Cooperation and Development (OECD) looks at the level of trust people have in all governments around the world. At the top are Switzerland, Luxembourg, Finland, Ireland, Norway, and Denmark. At the bottom of the list are the USA, Colombia, and Slovakia. (It isn’t an exhaustive list of all countries, and years vary.) Not surprisingly, tax rates in the countries with higher levels of government trust tend to be higher than those in countries with lower government trust. People are willing to pay more because they can see the results of the tax they are paying. The Laffer Curves in these countries would be very different.

Working out how much tax people should pay is not a new problem. People have been paying taxes for over 5,000 years. Some of the earliest records of tax come from ancient Egypt. At the time, Egypt didn’t have a system of money, and people paid taxes with the produce they had grown or their labor. Advisors of the pharaoh traveled the country every year, assessing the value of livestock owned by individuals. An amount of grain had to be paid as a tax on that livestock. If people didn’t have livestock or grain, they paid with their labor. Great buildings, such as the Pyramids at Giza, were partially built using labor as a form of tax. The Rosetta stone, which was used to translate ancient Egyptian, had a lot of tax information on it as well. The kingdom of Sumer also taxed people, but the proceeds went to temples rather than the government. A lot of the standardized taxes that we have today came about because of the Romans. They came up with a sales tax and a wealth-based income tax. European powers came up with more ways to get money out of their subjects to finance their building projects and wars. The Domesday Book in England was a way to work out how much land people owned so that they could be effectively taxed. Since then, systems of taxation have slowly become more complicated. The Laffer Curve is very useful, but working out where the peak sits is very complicated. And this is what I learned today.

Sources

https://www.investopedia.com/terms/l/laffercurve.asp

https://www.socialeurope.eu/after-the-laffer-curve-taxing-the-rich-at-last

https://en.wikipedia.org/wiki/Laffer_curve

https://en.wikipedia.org/wiki/Arthur_Laffer

https://worldpopulationreview.com/country-rankings/trust-in-government-by-country

Image By Bastianowa – This file was derived from:Krzywa Laffera.svg:Laffer Curve.png:, CC BY-SA 2.5, https://commons.wikimedia.org/w/index.php?curid=117585270

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What is the tragedy of the commons? The tragedy of the commons is the idea that if anybody can use a finite resource as much as they want, they will usually overuse it and destroy it. That is human nature.

The common that the tragedy of the commons refers to is common land that most villages or settlements would have had. Common land was land that could be used by the common people, also known as the commoners. The word common comes from the Latin “communis”, which meant “public, shared by all, general, not specific”. Societies have always been divided into classes and they were often the royals, the

, and the leaders of whatever religion the society follows. All those that are left are the commoners.

Up util the end of the feudal system in England, all of the land in the country was owned by the crown. The crown would then parcel it up and lend it to nobles who were in favor. They would then parcel that land up and keep passing it to people who were in favor with them until there was a smallish area called a manor. The lord of the manor would divide the land into tiny pieces, and the commoners would work those pieces of land. They had to give most of what they produced to the lord of the manor in return for the land. Because their pieces of land were so small, there was barely any room to graze animals. The lord of the manor would make available a piece of wasteland that everybody could graze their cattle on. This is the origin of the common. Once feudalism ended, and people started to own their own land, the idea of a common ground for everybody continued. These days, most villages in the UK at least have a commons in their center. They don’t graze animals anymore, but the land is used for communal events and is technically owned by everyone.

The tragedy of the commons is an idea put forward in 1968 by an evolutionary biologist called Garrett Hardin. He was concerned about the rapidly increasing world population and our overuse of resources. When he was writing, the world population was 3.54 billion people. (With our current 8.2 billion, that sounds rather nice.) In his lifetime, the world population had almost doubled. In fact, 1964, probably when he started thinking of the topic, is the year the world population increased the most in one year, ever. The world population jumped by 2.25%. These days, as birthrates are declining in many countries, growth has fallen to 0.85%. World population growth is predicted to peak in 2084 at 10.2 billion people and then start to fall. Hardin based his ideas on a famous lecturer by an economist called William Forster, who lectured on overpopulation in the early 19^th century. The population in his lifetime went from 900 million to 1.2 billion. Although, he was probably influenced by the overcrowding in cities due to the Industrial Revolution. Both of these people thought that the world’s resources would soon be used up. And this is where the tragedy of the commons comes from.

In the tragedy of the commons, if everybody is allowed to use the common land as much as they want, then the available land will soon become unusable. All of the grazing animals will eat all of the grass, and their hooves will tear up the land so more grass can’t grow. The more people there are to use the common land, the more quickly that common land will be destroyed. All of the farmers are in competition with each other because they want their animals to find more grazing land than the others. There is also no incentive for each farmer to stop grazing on the land, so the grass will grow back because that would give them a disadvantage. There is also no incentive for each farmer to pay any money for the upkeep of the land because that would put them at a disadvantage as well. Hardin took this example and likened it to the world’s resources, something that we can see today. Climate change, water pollution, and plastic in the oceans.

Both Hardin and Forster were not aware of the ability of technology to keep pace with us. Malthus made this error as well when he predicted exponential human growth and our demise. We have become adept at finding ways of producing more grass on the commons to graze more and more animals. That cannot go on forever, though, and sometimes, increasing the grass on the commons comes at the expense of a resource somewhere else in the world.

However, in an ideal commons system, there is a way of fixing this. With the original commons, the lord of the manor could stint the commons. That meant a limit on the number of animals that could be grazed would be implemented, or the use of the land would be banned until it was restored. Ideally, this system allowed for the continued use of the resource. In today’s world, the government is theoretically the lord of the manor, and they have the ability to stint a commons. We see this sometimes. Things like fishing limits are implemented, or mining is banned. However, there are too many exceptions where governments are influenced by the farmers who have the most animals to graze. In an ideal world, we wouldn’t need to worry about the tragedy of the commons. Maybe we will get to that ideal world one day. And this is what I learned today.

Sources

https://en.wikipedia.org/wiki/Commoner

https://en.wikipedia.org/wiki/Common_land

https://www.investopedia.com/terms/t/tragedy-of-the-commons.asp

https://en.wikipedia.org/wiki/William_Forster_Lloyd

https://en.wikipedia.org/wiki/Tragedy_of_the_commons

https://www.etymonline.com/word/common

https://en.wikipedia.org/wiki/Feudalism_in_England

https://www.worldometers.info/world-population/world-population-by-year

https://en.wikipedia.org/wiki/Malthusianism

Image By JimChampion – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=4640694

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What is antitrust? Antitrust is a set of laws that are supposed to promote fair competition and prevent monopolies.

You have probably heard the word “antitrust” a lot since the birth of the giant tech industries. It is always being used to refer to Microsoft, Google, and Facebook (sorry – Meta). But, what actually is it? Well, to work that out, we need to start by finding out what a trust is.

Companies have existed for as long as people have had money and wanted to make money. A company is simply a legal construction for people to engage in business. There are different types of companies, but they generally exist so that people can make money for doing something. The problem with a company is that there are usually regulations to stop them from becoming too big. It was difficult for companies to buy other companies if it would make them too large. In America, at least, it was also difficult to buy multiple companies in different states as well. To get around this, one system was to have trusted people, but the companies for you. These trusted people would sit on a board of trustees that would manage all of the companies in the portfolio. They would all have different owners on paper, but there would actually only be one real owner. In the 19^th century, John D. Rockefeller began to heavily use this system.

Rockefeller was born in 1839 to a fairly poor family. He started out as a bookkeeper but moved into the newly emerging oil industry as the Civil War was winding to a close. There was a lot of money to be made in refining oil, although not as much as there would be when the gasoline engine was invented in about 20 years. Through various methods (some quite dubious), he got his hands on more and more small refineries. He reinvested his profits in the company, and it began to grow. He called his company Standard Oil of Ohio in 1870. He started to buy up oil refineries, oil companies, and any kind of company connected with the oil industry. It took him a long time, and he had to do some things that were quite underhanded, but by the early 1880s, Standard Oil controlled 90% of the United States’ oil market, and most of the world’s as well. Rockefeller played the market and bought out companies when times were hard. He also improved efficiency, and the price of kerosene fell by 80% during the life of Standard Oil. By using all of the hundreds of companies in the trust, Rockefeller was able to bring prices down.

Rockefeller might have seen manipulation of prices as helping the consumer, but it certainly helped him. He could use the vast array of companies at his disposal to push prices down and put companies out of business. This was not illegal, but the companies going out of business, and the press certainly did not like it. From the early 1880s, there was a strong movement to do something about Rockefeller’s trust. The government started to listen, and the antitrust laws were born. In 1890, a senator called John Sherman brought in the first antitrust law to prevent companies from forming monopolies.

Standard Oil was taken to court numerous times for breaking these laws, but it was only in 1911 that the US Supreme Court ruled that Standard Oil was a monopoly and needed to be broken up into 34 separate companies. Many of these oil companies still exist and have combined to become massive oil companies, such as ExxonMobil. The idea behind the antitrust law was sound, but it didn’t actually work in this case. The 34 companies might have become separate entities, but they were not going to compete against each other. Also, Rockefeller had owned most of the original company, and now he owned a large part of each of the new companies. His fortune skyrocketed.

Since then, antitrust laws have been used whenever it looks like a company is becoming a monopoly. The main problem with a monopoly is that there is no competition, and that makes things worse for the consumer. Monopolies are not subject to the laws of supply and demand because they can increase or decrease the supply at will and increase or decrease the price at will. If you don’t like their price, there is nowhere else to go. Most recently, antitrust laws have been used against Alphabet, Google’s parent company. Google has been accused of acquiring companies to close down the competition when it comes to their search and advertising business. They control pretty much the only search engine, and they also control pretty much the only advertising service, which means there is no competition. Not sure what will happen. And this is what I learned today.

• #1189 When did people start playing board games?
• #787 Is “I think therefore I am” true?
• #882 What caused the Great Depression?
• #108 Why is the official kilogram in France no longer used?
• #921 How much oil is left?

Sources

https://www.ebsco.com/research-starters/history/standard-oil-trust-organized

https://en.wikipedia.org/wiki/Trust_(business)

https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws

https://www.investopedia.com/terms/a/antitrust.asp

https://www.investopedia.com/terms/c/company.asp

https://en.wikipedia.org/wiki/John_D._Rockefeller

https://en.wikipedia.org/wiki/Sherman_Antitrust_Act

Photo by Pixabay: https://www.pexels.com/photo/blue-and-black-glass-building-exterior-164572/

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Who is the richest person ever? This is an incredibly difficult question because society and economics were vastly different in the past. Still, Mansa Musa is often said to be the richest person who ever lived.

The richest person today is Elon Musk, although his wealth fluctuates wildly. At its peak, he was worth $425 billion. The first person to pass 300 and 400 billion dollars. However, it has also fallen by 200 billion at times. Today (July 30^th 2025) he is worth $415 billion dollars. He has enough money to give everyone in the world $51. The top three richest people in the world have more money than the bottom half of all people. Elon Musk has more money than South Africa. If he was a country, he would be number 38 on the list of all countries by GDP. Yet, his wealth is very volatile because it is tied to the companies he owns. Most of it comes from Tesla, where he owns 12.8% of all the shares. If the value of Tesla goes up, he is richer, and if it goes down, he is poorer. And that is interesting because even though Musk is worth $415 billion, he doesn’t actually have $415 billion sitting in the bank. It is potential money because he could potentially have that much money if he sold all of his shares. However, in reality, he couldn’t sell all of his shares because it would crash the share price of Tesla and cause damage to the economy. So, he is rich without having any real money. 

There are several things that make this a different question. The first is that these days people can be rich through owning a share of something. In the past, people were rich because they owned things, or they owned a commodity. The second is that the value of things has changed. A commodity that made someone rich in the past may no longer be valuable. The third is that it is difficult to translate amounts of money from the past into modern monetary amounts. The fourth is that many of the people who were rich in the past were rulers who laid claim to the entire wealth of their country. I’m not sure if that is acceptable. And the last is that records were not very well kept or even true. Record keepers may have inflated the wealth of a person to curry favor.

All of that being said, it looks like the richest person who has ever lived was a man called Mansa Musa, who was the 9^th ruler of the Mali Empire, which was an empire in West Africa that lasted from 1226 to 1610. The empire had some gold mines, but controlled many other territories that mined. The gold was all the property of Mansa Musa and it was illegal to trade the gold other than with the government. Mail was also important for mining salt, which was probably more valuable than gold. The reports of Mansa Musa’s wealth come from accounts of when he went on a pilgrimage to Mecca and took a ridiculous amount of gold with him. He is said to have had all of the gold in the world, but he probably just had more gold than people had seen and he certainly knew how to splash the wealth. However, these stories may have been exaggerated and they don’t necessarily prove that he had tremendous wealth. It also assumes that all of the wealth of his country was his own personal wealth.

To find someone who was ridiculously wealthy but not because they could get their hands on the treasury of an entire country, we have to come to the 19^th century with people like Rockefeller and Carnegie. Both of them had enormous fortunes, but they were not in the league of the Elon Musks of today. It is often said that both Rockefeller and Carnegie had roughly $600 billion each, but that is not quite true. Adjusted for inflation, they both had about $25 billion each. The high number comes because both of them had a fortune that was worth roughly 2% of America’s GDP at the time. The thinking goes that if someone had 2% of America’s GDP today, they would have potentially $600 billion. That doesn’t quite work because the GDP of the US was a lot smaller back in the days of Rockefeller and Carnegie. Which means, if we don’t look at monarchs or dictators who had access to all the money in their country, Elon Musk might very well be the richest person ever. And this is what I learned today.

• #1385 What was the Gilded Age?
• #220 Why did Hawai’i become a US state?
• #228 What was the South Sea Bubble?
• #56 Why is gold so rare?
• #261 When did people first start using paper money?

Sources

https://www.therchktruth.org/general-news/2025/3/30/10-richest-people-in-history

https://en.wikipedia.org/wiki/Mansa_Musa

https://en.wikipedia.org/wiki/Mali_Empire

https://www.bbc.com/reel/video/p09dcbl0/the-richest-person-who-ever-lived

https://en.wikipedia.org/wiki/Wealth_of_Elon_Musk

https://www.investopedia.com/articles/insights/052616/top-4-tesla-shareholders-tsla.asp

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Photo by Pixabay: https://www.pexels.com/photo/copper-colored-coin-lot-259165/

The post #1398 Who is the richest person ever? appeared first on I Learned This Today.

What is Boots theory? Boots theory is a theory that poor people have to buy low quality products that don’t last very long. This means they have to replace them often and end up spending more in the long run than they would have if they had been able to buy a more expensive product. It is also called the theory of socio-economic unfairness.

Boots theory is a theory that was introduced in one of Terry Pratchett’s Discworld novels. It is not technically an economic theory because it didn’t come from an economist, but it is certainly true and very observant. It has since been taken up in economics circles. The theory is introduced by a character called Sam Vines, who is the captain of the guards. He wants to buy a pair of boots, but a good pair of boots costs $50. He earns $38 a month, so he never has enough to buy the good pair of boots. That means he is reduced to buying cheaper boots which, although affordable to him, don’t last very long. They cost about $10 and he needs to replace them every year. The $50 pair of boots would last for a very long time because they are very well made, let’s say 10 years for the sake of argument. That means, because Sam Vines doesn’t have enough money to buy the expensive boots, he will end up paying $10 a year for the ten years that the expensive boots would last. He is paying twice as much, even though he is not paying much up front.

There is another example in the book of a wealthy lady who lives in a house with excellent quality furniture that her ancestors bought. Because of the quality of the furniture, she doesn’t need to buy any now and lives far more cheaply than captain Grimes can. Expense up from can lead to savings later on.

This is often called the trap of the poor because it is a trap that you need money to get out of. A good example is laundry. A washing machine costs roughly $300, according to Amazon. A decent one will be about $500. If someone doesn’t have enough money to buy a washing machine, they have three options. The first is to buy on credit. All credit cards charge interest and the person will end up paying more for the washing machine than buying it up front. If someone doesn’t have credit cards, then the second option is to rent a washing machine. This might cost $10 a month. That seems like a good deal because $10 is cheaper than $500, but in 4 years the rental washing machine has cost about the same as the purchased one and a purchased washing machine might be good for ten years or more. If someone cannot afford to rent, then the third option is a launderette. That might cost $2 to wash and $2 to dry. Plus many people will buy the washing powder there, which costs more than buying in bulk. After a few years, these people have again spent more than the purchase price of the washing machine. Because they cannot afford the $500, they end up spending far more. And, because they are spending so much to get by each month, they are trapped. Thus it is the trap of the poor. There are a lot of different examples of this. Buying a good new car with a warranty versus buying a cheap used car. The used car will end up needing to be repaired a lot more and will probably end up costing as much if not more than the good car.

This is a trap of the poor, but it might also be a trap of modern society as well. We have been taught that cheaper is better and we have become very used to living in a throwaway society. Even if we are not poor, we feel that it is better to pay less for something than to pay more. This seems like common sense. If you have two items side by side and one is a tenth of the cost of the other, most people will buy the cheaper of the two. However, if the more expensive one is made of a better material, it will last much longer and won’t need to be replaced. In the long run, buying the more expensive one at the beginning will save us money. It will also be much better for the environment. And this is what I learned today.

• #62 Why are zippers called zippers?
• #691 What causes a heat wave?
• #30 How does a Venus flytrap know when to close?
• #1201 What are war bonds?
• #848 What is the sunk cost fallacy?

Sources

https://www.upworthy.com/boots-theory-why-rich-get-richer-ex1

https://en.wikipedia.org/wiki/Boots_theory

https://moneywise.com/managing-money/budgeting/boots-theory-of-socioeconomic-unfairness

https://www.fintechfutures.com/fintech/the-boots-theory-of-socioeconomic-unfairness

Photo by Clayton Anastácio: https://www.pexels.com/photo/black-damaged-shoes-on-ground-16904322/

The post #1359 What is Boots theory? appeared first on I Learned This Today.

Why was there a tulip bubble? There was a tulip bubble in Holland and across Europe in the 16^th century because tulips were rare and because people didn’t want to lose out on an opportunity to make money.

The tulip bubble, also called tulipmania, is a good showcase for human nature. It shows how people let their judgement get the better of them when they might miss an opportunity. It shows how we value things for their financial value and not their worth. And it shows how we like to believe in a good story of greed and people getting their comeuppance. Karma, if you will. Let’s look at what happened.

Tulips are native to Central Asia and they made their way into Europe via the Ottoman Empire and the spice routes. A lot of things reached Europe this way. Tulips were rare and not grown in Europe, so they became a luxury. They were often found in the houses of the wealthy. Tulips were difficult to grow and it could take seven years for a tulip planted as a seed to flower. In the early 17^th century, Dutch tulip growers worked out that the plants grew a bulb under the ground and this bulb could be removed and stored. When it was planted, it would flower the next year. In this way, tulip bulbs could be stored for a long time and sold more easily. That brought their price down a little. At that point, tulips were basic colors, but one bulb was infected with a virus that made the tulip that grew from it come out in a variety of mixed, striped colors. That was called a broken bulb and they were extremely popular. Because they were rare and sought after, their price started to go up.

When the price of something goes up, the manufacturers will make more of that thing to meet the new demand. Once the supply has equaled the demand, the price will come down again. You can’t do that with tulip bulbs because the number of tulips that have been planted for the following year is already decided. It takes one or two years for the supply to increase, which means the demand will keep going up. And that is where the tulip bubble began. Throughout history, people have bought things hoping that the price will go up and they will be able to sell them for a profit. That is why people buy art and rare single malt. Many people that invest in something don’t care about the product itself, just that the price will go up.

From 1634, the price of tulip bulbs had risen to the point that speculators began to join the market. These are people who only buy in the hope that the price will go up again. By 1636, the price of some tulip bulbs had reached hundreds of thousands of dollars, possibly even a million. Other people saw the rise in prices and wanted to make some money themselves. At this point the bubble starts to inflate itself. As more people try to buy bulbs, the demand pushes the price up, and as the price goes up, more people want to buy. At this point, a lot of people started to borrow money to buy bulbs, or parts of bulbs. The interest spread across Europe and this only served to push the price up further. By February 1637, the bubble burst. A product like this, where the price is far higher than the individual worth of the item, can only keep going up so long as people are willing to pay more. In February, people stopped buying. Nobody wanted to pay the price. Of course, once this happens, the bubble bursts. People are suddenly afraid that they won’t be able to sell their bulbs, so the price starts to drop. The dropping price pushes other people to sell and there is now more supply than demand. The price keeps dropping. People are left with worthless tulip bulbs and those who borrowed to buy tulip bulbs are left with debt to repay. And that was the short lived tulip bubble.

Bubbles like this show how people are eager to take a risk when they think they might be missing out on something. I don’t think this is greed. It is more a fear that we are missing out on this great opportunity. We become so afraid that we don’t listen to our judgment. It also shows the interesting fact that we put more importance on the value of a thing than on its worth. Wines from the 17^th century sell for vast sums of money, but they probably don’t taste very good. People are not buying them to drink, just as an investment. It also shows that we like a good story of people taking risks and then being shown to look foolish. Perhaps it makes us feel better about not taking risks. This is all the more true because the story of the tulip bubble is mostly an exaggerated story. It did happen, but it did not affect the whole of Europe. It did not bankrupt huge numbers of people and push the Dutch economy to the brink. It was written by a Scottish journalist called Charles Mackay in 1841, and he appears to have greatly exaggerated things. And this is what I learned today.

• #757 What is price elasticity of demand?
• #113 Why did Thomas Edison use bamboo in his light bulb?
• #228 What was the South Sea Bubble?
• #903 Why does hair turn white?
• #1120 Why does soap produce foam?

Sources

https://www.bbc.com/news/business-51311368

https://en.wikipedia.org/wiki/Tulip_mania

https://en.wikipedia.org/wiki/Bulb

https://www.history.com/articles/tulip-mania-financial-crash-holland

Photo by Pixabay: https://www.pexels.com/photo/white-and-red-tulip-flowers-69465/

The post #1304 Why was there a tulip bubble? appeared first on I Learned This Today.

What is a hedge fund? A hedge fund is a pool of money invested by private individuals. Their money has more power together than they each would have individually.

The expression “hedge” fund came about in 1949 and the word “hedge” was used to imply that the fund was hedged against risk. That means that the investments are spread in such a way that if one goes down, another will go up, ensuring an overall success. The word “hedge” to imply an offsetting of risk comes from the 1670s. The idea probably comes from the fact that you can surround something with a hedge as a fence to make it safer. If you are hedging a bet, you are surrounding it with something else to reduce its risks.

The idea of investing as a group rather than as an individual is not new. Ever since the invention of trade, people have invested. You have to buy merchandise to trade, or spend money to grow the crops to trade, and there is no way of knowing if you will get that money back. You have to invest up front in the hope that you will receive a payoff. Investing as a group can increase profits because there is a larger pool of money to invest, but it can also decrease the risk because any losses will be spread across more people, potentially reducing individual losses. Investing flourished along with society, but it really took off with the age of sail and the dawn of truly international trade. People who owned ships couldn’t usually afford to fill them, so they would seek investors and those investors would be guaranteed a percentage of the profits, assuming that the ship wasn’t captured or sank in bad weather. This idea grew to become the Dutch East India Company and the British East India Company.

The first hedge fund is said to have been formed in 1949, but they probably existed before then. The idea was that the invested funds would be spread across different areas and types of stocks so that the risk was hedged. The fund was managed by a fund manager and that manager was paid a management fee, usually 2%, and a performance fee, usually 20% of the profits. That meant that any manager was invested in trying to get as big a gain as possible because they would earn a large chunk of those profits. This is a great incentive for the fund manager to work harder, but it is also an incentive for them to take more risks because that will increase profits. These days, hedge funds are not completely risk free.

Hedge funds generally have several different strategies for investing money. They can invest on a global level, using the differences in values of certain commodities between countries to make a profit. They can invest in regular companies, using long or short strategies. That means they bet money that a company will do better than expectations or worse than expectations. They choose competing companies so that their risk is minimized. They can invest money based on certain events, such as a merger, or a natural disaster. Or they can just invest in regular stocks. There are many other investment strategies as well and each fund manager will have different ideas and different areas of expertise. By spreading their investment over a large number of categories, hedge funds are freeing themselves from being tied to the stock market, which is a way of hedging risk. The idea is that the fund goes up an equal amount (let’s say 10%) when the stock market is doing really well and when the stock market is doing really badly. This is the hedge.

Hedge funds don’t take money from just anyone. You need to have a certain amount of wealth to be allowed to join the fund and this is because you need to be able to cope with any losses. A lot of large institutions, like pension funds and insurance companies invest large amounts of money in hedge funds. There are many hedge funds around the world and collectively they hold about $3.2 trillion. The two largest funds are a US fund called Bridgewater Associates and a UK fund called Man. Together, they have about $260 billion.

Hedge funds are supposed to hedge risk, but you obviously cannot have zero risk in investing and hedge funds do fail. This can be due to bad decisions, bad organization, or have turned out to be scams, like Bernie Madoff’s empire. And this is what I learned today.

Try these:

• #848 What is the sunk cost fallacy?
• #1224 What is a Ponzi scheme?
• #857 What is survivorship bias?
• #25 Why is Wall Street called Wall Street?
• #833 What is your risk of dying every year?

Sources

https://www.investopedia.com/terms/h/hedgefund.asp

https://en.wikipedia.org/wiki/Hedge_fund

https://www.etymonline.com/word/hedge

https://www.truewm.com/guides/The-history-of-investing-and-what-you-can-learn-from-the-past.pdf

https://www.sec.gov/spotlight/hedgefunds/hedge-vaughn.htm

https://en.wikipedia.org/wiki/Bridgewater_Associates

https://www.insidermonkey.com/blog/5-biggest-hedge-fund-failures-925034/?singlepage=1

Photo by energepic.com: https://www.pexels.com/photo/close-up-photo-of-monitor-159888/

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