money is emotion, and this is why startups feel so damn good

money is a physical representation of positive emotion, and little more. if this claim sounds absurd or offensive to you, then i have successfully transferred to you some of the emotional states i held while coming to this conclusion. sorry about that – but by the time you finish this article my aim is to also transfer you enough sense of possibility that the position of doubt you hold now will mature into an emotional state of ‘i don’t think i agree, but i admit that it’s interesting.’

the first time i was suddenly given a large amount of money, it was at first an intellectual experience – kind of like the opposite of finding out that your parents have died. it was a fact that i knew had large implications, and i think it took a while to process these in order for the corresponding emotions to manifest. in the following months, i noticed a gradual increase of hope, excitement, confidence, possibility, and self worth. those are all emotions.

as the money gradually dwindled on various failed attempts at building businesses, i felt my confidence and sense of possibility also gradually dwindle. i felt my hope and self worth decreasing in lockstep with my bank account. was the dwindling of this confidence caused by the failure to start a business? the dwindling bank account? both? or did they all represent each other?

when i had a piece of ownership over a small company with the possibility of a moderate exit if i worked hard enough and made the right choices, i felt the return of that hope, confidence, possibility, and self worth. i felt something else though – a sense of responsibility and stress. the hope, confidence and possibility all rose with the valuation, and the stress and responsibility rose with the possibility of failure.  those new emotions correlate well with the difference between liquid capital and options in a company that may not exist in a few years. liquid capital is certainty; options are possibility, and the chance of manifesting a distant possibility – of exercising the option in the money – is stress.

when the small company was sold and i received no liquidity from this exit, i felt lost, confused and more than a little angry at the world. those are also emotions, and they are arguably the negative correlates of purpose, certainty, and joy. the financial reality – a transfer of assets – corresponded perfectly with my emotional experience – a transfer of emotional position. hope can keep a woman going, but certainty keeps food in her stomach.

so that’s my personal experience. if you can find someone who doesn’t get upset at losing money, and doesn’t feel happy upon gaining money, i’ll reconsider my hypothesis. if you can find someone who doesn’t find running a business stressful, i’ll reconsider my belief that ‘purpose’ is illliquid nonvolatile emotional capital, while ‘confidence’ is volatile liquid emotional capital, and ‘hope’ is an emotional derivative. my guess is you won’t. in other words, i don’t have a lot of hope in you doing so. were you to do so, the hope would expire worthless, the confidence i have in this belief would drop, and i may liquidate some of the purpose i feel when thinking about spreading greater emotional awareness.  my guess is this drop in my emotional position will probably correspond to an increase in your confidence.

you may object that the money doesn’t represent the emotion, but causes it. when i worked at uber, we had internal representations of drivers and requests for rides in our software. an inbound request for a ride might ultimately cause a ride to occur, but that causal mechanism was entirely mediated by internal representations. i believe our emotional experiences represent the intuitive understanding we have of the possibilties the future holds for the world. certainty represents the belief that our understanding won’t change, and hope represents the belief that the number of possible future histories is increasing.

a person isn’t happy because of the money itself, but because of the senses it makes them feel. possession of capital doesn’t have nearly the same impact as the knowledge of what can be done with it. if i gave you a strip of paper with random numbers and letters on it, you probably wouldn’t feel much. if you confirmed my claim that this was the private key for a bitcoin address containing $100,000 worth of bitcoin you’d probably feel something very much similar to what you’d feel holding that much cash in your hand. of course there would be a difference, but the emotional consequences of holding 1,000 $100 bills is much more similar to the impact of holding control of $100,000 in bitcoins than it is to holding 1,000 $1 bills. the physical similarity of the two piles of money should have a similar physical impact on you – the sensory input data is largely the same. it’s the conceptual impact that causes most of the emotional content, because you now have a larger sense of possibility and hope for the future. your graph representation of all worldtracks in the multiverse – all the certainties and hopes of people living in the world –  now contains more possible future histories.

you can’t eat money, sleep in it, or wear it. you can use it to get all of those things, however, because you can give up that money in exchange for food, shelter, and clothing. is it really absurd to claim the exchange of money for goods represents an exchange of possibility for certainty? someone with tons of certainty – a big house, plenty of food and a nice bed – is much more interested in possibilities – capital investment with risk. someone with little certainty – no house, no food, nowhere to sleep – is more likely interested in certainty than possibility, and would prefer cash to startup options. the preference of ‘food to cash’ is probably very weak because cash is almost as certain as food – unless you’re starving in a desert,  or hungry in an epidemic of hyperinflation, in which case you’d definitely prefer the food.

imagine every investor wakes up one morning, and has no fear. if every single person with money in the market were suddenly imbued with confidence and stripped of doubt, do you think the stock market would go up? now suppose every investor wakes up one morning full of doubt and fear. how will the market respond to this new emotional content? do you think the shift from volatile assets (equities and derivatives) towards stable assets like bonds, land and metals is caused by the loss of liquid emotional capital? or would it be reasonable to say that the transfer of assets is representative of the world’s new emotional state?

this isn’t my idea alone. economist John Maynard Keynes used the term ‘animal spirits’ to describe the role of emotion in the market. what he saw as ‘one factor that influenced’ the market, i’d say emotion is “the portion of reality that the market represents.”

what does this say about startups? for one it explains the incredible amount of hype around startups – it’s caused by the sense of possibility, the hope. you can feel it when you walk around san francisco and the valley, as if it were leaking from us as we talked about valuations and exits and REST API’s.  it explains the loss we feel when our startups tank – the loss of hope (the options are worthless) and the loss of purpose; your home is gone.  the safe place, the place you go to know it makes sense to keep going – is no more.  it explains the various preferences for risk among the different types of investors. those motivated by jealousy of their peers are more drawn to startups their peers have invested in, because the possibility of a large gain doesn’t matter as much as the fear of your friend winning when you lose.

what does this predict for startups? it suggests that those with the greatest emotional intelligence will dominate those with technical abilities. steve who – jobs or wozniak?  both emotional intelligence and technical ability are forms of capital; the knowledge that someone depends on you is emotional capital that keeps you going and helps you overcome fatigue. the belief that you can accomplish anything – even if it’s a false belief – helps you hedge against doubt and keep going when your graph representation has fewer possible future histories under your current algorithm. the ability to intimidate and bully others is the ability to steal their hope and confidence.

so this theory predicts that hustle and charm are rewarded more than technical chops, and that in an environment of confidence and optimism, startup investments will rise, as possibility is more in demand than certainty. since both of those trends – the primacy of emotional intelligence over technical savvy, and the increased investment during a period of optimism – are so evident as to be observations, let me wager a prediction:

tackling issues of mental health will make startups more likely to succeed. if we provide each other with more emotional support whenever possible, we increase the flow of emotional capital and prevent someone crippled by doubt – that is, short on certainty – from liquidating their remaining hope in exchange for certainty, by quitting their startup and taking a job at google.  a startup that values its employees’ emotional well being has a better chance of succeeding, just as a startup that helps its employees manage their finances is less likely to have employees quit because they need the higher salary an established company – long on certainty, less so on hope – has to offer.
what does this say about cyrptocurrencies?  if enough people holding bitcoins sit on them under the hope that they will continually appreciate, while slowly adding to their collection by buying a fixed dollar amount each month, they transfer certainty from the dollar to bitcoin. their hope becomes a self fulling prophecy. bitcoin will only fail if the long-term holders of bitcoin need to sell some btc for dollars in order to buy food. that is, if they need to exchange hope for near-certainty in order to obtain certain nourishment, the hope options will drop in value, signaling a drop in certainty. this is my second prediction:

if holders of bitcoin can maintain their certainty by keeping food in their stomachs and rooves over their heads, bitcoin will continue to rise. their internal certainty is given credibility by its consistency over the long run.  someone who is certain of an elaborate thing and can’t keep food in their stomach is easily ignored. someone who is certain of an elaborate thing over a long period of time, and continually passes on chances to cash out that certainty for something seen as more certain isn’t so easily ignored.  you may ignore someone holding bitcoins and crowing about them being worth $10,000 in order to maintain your certainty in your worldview – until your certainty in market values having some real meaning becomes more important.  when that happens, bitcoin will earn a kind of certainty on par with the certainty that the dollar will hold value because of the hope a bank run will never occur.

how would people behave differently if we removed emotion from the world? would people eat so much junk food and buy so much entertainment? probably not. we would simply purchase enough calories to sustain ourselves, and consume nutrients that made us healthy, rather than things that felt good.

would we buy large houses? possibly – the signaling mechanism of ostentatious displays of wealth does have a rational component. the presence of intricate baroque styling elements is a reputation mechanism that signals command of lots of labor. would we be upset about the lack of housing for poor people? no – because that’s an emotion. we might work to improve their housing conditions if we believed that giving them better housing would make them more productive, but it would be a strictly rational, utility increasing move.

would we spend so much on security theater? no – because we’d see that the cost of what we spend on homeland security efforts is not worth the benefits, and appeals to emotion would not be effective because emotion would not exist.

would we invest more in startups? maybe. the sense of security and comfort – emotional senses – are what keep many of us employed in full time positions. the sense of risk would still be real, but stripped of its emotional content, it would not be such a sharp restriction on our activities. on the flip side, jealousy would no longer drive investment, and people in the game because of how it makes them feel would no longer be there.

in an emotionless world, what would we value? i’m not certain. it’s not a world which i’d prefer to live in, and the thought exercise of considering the world without emotion suggests to me that, at its core, value itself is an emotional phenomenon.

i hope you enjoyed reading. feel free to comment – unless your certainty is overvalued.