The Physics of Money Bono asked me for a light. I asked him for a cigarette. More than twenty-five years ago, I was at the World Economic Forum in Davos. Bono was there raising money for some of the poorest people in the world. I was there reporting for Bloomberg. We were in a lounge when he asked me for a light. I had one. I lit his cigarette. Then I asked him for a cigarette. He gave me one. We sat down, smoked and drank coffee. And we talked about money. The conversation continued later at the Belvedere Hotel, where I interviewed him for Bloomberg. What stayed with me was a very simple idea. That money, like water changes state depending its context. We talk about it as if money is always the same. It isn’t. Money is like water. It changes state. Ice. Liquid. Gas. And the state of your money may matter more than the amount. When you have very little money, it is ice. It is frozen. Rent. Food. Transportation. Medicine. Debt. Every dollar is already spoken for. The money can’t move. Neither can you. You can’t easily leave the job. Move somewhere else. Take time off. Try something new. Survive a mistake. This is what we misunderstand about poverty. It isn’t only the absence of money. It is the absence of mobility. As the amount of money increases, the ice begins to melt. Money becomes liquid. Now it moves. You earn it. You spend it. You save it. You invest it. You can move. You can leave. You can build. You can take a risk. This is where income begins turning into capital. And this is where we tax money most aggressively. The worker. The doctor. The lawyer. The executive. The entrepreneur. Even people earning enormous incomes are still earning. Their money is flowing through their lives. The more success they have the more brutally they are taxed. It is liquid. Then money changes state again. At enormous scale, for extreme wealth holders money becomes a gas. It expands rapidly with zero effort or action. The money expands. It no longer depends primarily on the activity of the person who owns it. That is gas. And this is where the American relationship with money becomes exactly backward. We largely abandon the people whose money is frozen. We brutally tax the people whose money is liquid. And we protect the largest pools of wealth precisely when the money has become capable of expanding on its own. We neglect the ice. We tax the liquid. We protect the gas. It should be the exact opposite. Thaw the ice. Give people enough room to move. Let the liquid flow. Encourage work to become savings. Savings to become investment. Investment to become ownership. And when money reaches the point where enormous pools of capital naturally produce more capital — tax the gas. Not because money is bad. Because money changes state. That conversation with Bono stayed with me because he was in Davos asking some of the wealthiest and most powerful people in the world to help some of the poorest. The entire physics of money was sitting in the same town. People representing those with almost none. People earning and building. People with more capital than they could ever produce through their own labor. Ice. Liquid. Gas. Money is not life. It is stored possibility. With very little, the possibility is survival. With more, it becomes mobility. With enormous amounts, it becomes power. The mistake is believing those are the same thing simply because we measure all three in dollars. They aren’t. And an economy should be judged by whether people can move between them. Can someone who is frozen become mobile? Can someone who works accumulate capital? Can someone with capital build something useful? That is the point. The physics are simple. Our policy is backward. Thaw the ice. Let the liquid flow. Tax the gas. ++ I write one of these every day. If you’d rather get them directly from me instead of hoping an algorithm shows them to you, subscribe free to DylanRatigan.substack.com