JANUARY 19
Scarcity
Why Less Can Be Worth More
The Signal
Good money should be difficult to create, because lasting value depends upon lasting scarcity.
The Reading
Imagine discovering a beautiful beach covered with flawless diamonds. At first you would probably be amazed. You might fill your pockets, your backpack and even your car. But before long, something unexpected would happen. The value of every diamond on that beach would begin to fall because their scarcity had.
Throughout history, people have naturally valued things that are difficult to obtain. Gold was treasured because finding it required enormous effort. Precious gemstones were admired because they were uncommon. Their scarcity meant they could not simply appear overnight.
Good money follows the same principle. If new units of money can be created easily and in unlimited quantities, each existing unit gradually becomes less special. If, however, creating more money is slow, difficult and naturally limited, each unit has a better chance of preserving its value over time.
History repeatedly rewarded forms of money that were difficult to produce while quietly moving away from those that could be created more freely.
Scarcity is more than rarity. It is the quiet discipline that prevents abundance from destroying value.
First Principles
Good money should be difficult to create.
Scarcity helps preserve purchasing power over time.
The harder money is to increase, the better it protects existing holders.
Today’s Challenge
Imagine you own a collection of one hundred rare trading cards.
One morning, you discover that perfect copies can now be produced instantly and in unlimited numbers.
How would you feel about your collection?
Now ask yourself another question.
If creating more of something becomes easier every year, what happens to the value of the pieces that already exist?
Tomorrow’s Signal
Acceptability