I think I might have mentioned it once before, but I flunked economics in college. Couldn’t get my arms around those macro-economic concepts or understand their relevance, when I didn’t have a clue where money really came from, what it really was, and what I needed to do to make it. (Of course, I knew how to earn it; but knew nothing about how it was actually created.)

I’ve pretty well figured it out for myself, though—at least enough of it to apply to my daily life. Just like it helps me to understand or explain what’s going on with General Motors or General Electric by comparing it with Lucy’s Lemonade Stand, (the concepts and principles are all the same), it helps me to understand complex economic theory by mentally stranding a couple of families on a desert island. There’s hardly a theory so complex—at least that I have a practical need to understand—that it can’t be modeled after the shipwrecked unfortunates.

In the initial survival stage, the families would collaborate to forage for food and construct shelter from existing trees or the topography—no money in that scenario. Move them through survival into the quest-for-comfort stage, and money suddenly appears. No longer does everyone do everything. Skill sets and preferences sort out new occupations.  And finally money—a token given in return for someone doing or providing something of value to someone else—is adopted to overcome the inconvenience of barter.

Well, that’s a pretty good start. See how you can go from there to understand whatever economic theory arouses your curiosity. I really believe, if you can’t find a commonsense explanation that way, it’s not all that important to you. What do you think?

s Food for Thought, Fundamental Investment Views, Investment Concepts barter, earning money, economics, fundamentals, making money, money