Page 32 - #letter to son

#SangamNiti MORNING
More than creating a business, I think our chief had created a culture.
That was the essence of his leadership.

Authority and its very entrustment is nothing new but as old as the
sun rising every morning. In fact, the prudent installation of authority
is foundational to the proper functioning of the society, governing its
trade and acting as its bulwark against socio-economic or geo-political
disturbances.

Initially, though trading was effected through barter, with rising
sophistication and societal advancement, the system of barter was widely
considered to have outlived its utility. The principal pain-points were the
challenges of divisibility and the need for the participant to necessarily
have what the other wanted, without which there was no barter. To
resolve some of these issues, commodity money was introduced. The
construct of commodity money was such that it had duality of purpose.
Depending upon the requirement of the transaction, it could be of value
both as a resource or as money. However, as with barter, commodity
money was also not a perfect medium of exchange. There were issues
of portability, divisibility, acceptability, durability, stability and scarcity.
So what was the solution to this? With more knowledge came more
sophistication and more ingenuity. The result: The introduction of fiat
money, or currency, whose value is underwritten by the government
and sanctioned as acceptable for the exchange of goods, services and
other resources.

But what led to the formation of the government in the first place?

With the evolution of trade and commerce, the concept of money
began to firmly entrench itself within communities and societies
all over the world.Furthermore, the ease with which money could
facilitate transactions also glossed its allure. However, as the complexity
of currency-driven transactions increased, laws and regulatory
mechanisms were created in response to resolving disputes. Processes
were also set in place for standardisation and reference. The authority
of the central bank, or the financial regulator, was stamped on currency
with the proclamation, “I promise to pay the bearer the sum of…”

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