Calling All Hackers: How money works (2024)

Overall reception of the article

• Several readers found it engaging and accessible, especially for “hackers” who usually avoid finance, and praised the broad tour from interest rates to VC incentives.
• Others thought it was shallow, biased, or “surface-level,” arguing it reflects a common hacker mistake: assuming competence in tech transfers to economics/finance.
• Some recommended alternative primers (e.g. classic finance texts, Graeber’s “Debt”) as more rigorous introductions.

Life, work, and “wasting your twenties”

• Discussion branched into the tradeoff between startup founding and stable employment:
  • Founders may feel they sacrifice friendships, hobbies, travel, and “youthful experiences.”
  • Conventional jobs can feel meaningless or underpaid, limiting those same experiences.
• A popular mental model: evaluating activities along three axes—fun, economic value, and meaning. The “grand slam” (all three) is rare; most people trade off at least one axis.

Banking mechanics and money creation

• There was extensive pushback on simplistic “fractional reserve” explanations:
  • Loans are bank assets, deposits are liabilities; capital requirements, not a fixed reserve ratio, typically constrain lending.
  • In modern systems, reserve requirements may be zero, yet banks still face economic and regulatory limits.
• Some commenters incorrectly claimed banks lend 10–100× their assets; others corrected this, stressing leverage caps, risk, defaults, and thin net margins.
• Debate over how far banks can create money “from nothing” led to nuanced arguments about interbank transfers, reserves, capital cushions, and historical “free banking” examples.

Narrow banking, gold, and stablecoins

• Narrow banking (deposits fully backed by safe assets like short-term government bonds) attracted interest as a way to avoid bank runs, but others noted regulators have blocked such models as destabilizing to credit creation.
• Gold-backed and gold-pegged stablecoins were debated:
  • Proponents see gold as long-term more stable than fiat and like tokenized access.
  • Critics highlighted audit risk, volatility, and the need to trust either private issuers or governments.

Fiat money, usury, and ethics

• Some criticized fiat as “backed by nothing,” others countered that it is backed by trust and state power.
• Religious prohibitions on usury (Bible/Quran) came up, with debate over their compatibility with the time value of money and modern banking workarounds.
• Several comments contrasted “making money from money” versus productive value creation, tying this to bailouts and moral hazard.

Accounting nitpicks and conceptual accuracy

• A major critique: the article’s treatment of borrowing and interest misstates basic accounting (liabilities and interest accrual), signaling conceptual confusion about the time value of money.
• Defenders argued these simplifications don’t materially harm a high-level narrative; professionals countered that such errors undermine trust in the rest of the piece.

VC ecosystem and valuation models

• Some argued the article misuses discounted cash flow by equating the discount rate with the risk-free rate; for startups, risk premia dominate, so low base rates alone can’t explain bubble valuations.
• Misallocation in VC was attributed more to incentive problems (LP–VC agency issues, fee structures, weak downside) than to theoretical failures in finance models.