Why Indirect Exchange Is Important in an Economy

DRIGGS, IDAHO – Yesterday, I said bitcoin doesn’t have any value and won’t be worth anything in the future.

To demonstrate this, we began by looking at a simple economy consisting of two individuals bartering with each other.

Today, I continue unpacking my explanation. More below…

Dyson Family Mountain Nest

Greetings from our new nest in the mountains…

My family and I are a full-time traveling family. We drift from town to town, country to country, homeschooling our kids on the road and sleeping wherever we can.

Our only possessions are what we carry with us… a bit like tortoises or hermit crabs.

We’ve traveled around the world this way, but this year, we’ve mostly been in the U.S., traveling on backroads by day and camping at night.

We don’t want to travel internationally right now (because of COVID). And because our kids are fascinated with snow and mountains (they were born and raised in Florida)…

…and because we’ve started to crave a little community and fellowship (we’ve been on the road for two-and-a-half years)…

…we’ve decided to settle down and spend the winter at a ski resort called Grand Targhee in Wyoming.

We arrived last week. I’m writing to you from the little Airbnb apartment we’ve rented for the next six months. (It’s in a tiny town called Driggs.)

Getting Ready for Winter

“It snowed last night!” I said to Dusty (12), when I went into his room to wake him up this morning.

“Really!?!” He said, sitting up abruptly in his bed.

“No,” I said. “But I got you out of bed.”

The weather station says it might snow on Sunday. A “frozen mix” they called it. We’ll see…

Yesterday we got a good haul from the thrift store.

We got four ski helmets, four pairs of winter boots (including very good brand names like Sorrel and Tecnica), a brand-new fleece, two brand-new puffer jackets… and a bunch of other non-ski stuff… all for $100.

(I’m keeping track of everything we spend so we’ll know exactly how much this whole ski adventure ultimately costs us.)

Now, back to bitcoin and why it’s doomed…

Remember the Golden Rule

Yesterday, we imagined two individuals living on two neighboring islands, bartering with each other. And we came up with an important rule: You will only produce or trade when doing so will lead you to get something you want.

We called this the “golden” rule of money.

Now let’s imagine a hundred individuals, each with their own slice of land, living on one big island and trading with each other.

Each individual would still have to produce to survive. No way around that. But barter would start occurring on a much wider basis. And specialization of labor would develop…

Specialization of labor is when individuals concentrate on – or “specialize” in – producing only one or two things. Then, they trade their production with others to get the goods and services they want.

Through specialization, mastery, and trade, society “collectively” gets its needs met more efficiently than if each person acts as a “jack of all trades” and functions in isolation…

Pretty soon, we see that individuals start accepting goods in trade that they don’t intend to ever use. But they accept these goods because doing so improves their trading position with other individuals.

In other words, our economy now includes indirect exchanges as well as direct exchanges…

For example, you have eggs but you’re looking for bread. I have bread, but I’m not looking for eggs. I need milk.

So you find a third person who has milk and is looking for eggs. You trade your eggs for their milk. And then you bring the milk to me, and trade it for my bread.

Now you have your bread, but it took two exchanges to get it.

Remember the “golden” rule: You only produce or trade when doing so leads you to get something you want.

This still applies. When you traded your eggs for milk, you traded for something you didn’t intend to use but which helped you get something you wanted.

We now have a definition for indirect exchange: trading for something you don’t intend to use but which helps you get something you want.

What does all this have to do with bitcoin?

These indirect exchanges are the origin of money.

On Monday, I’ll show you how…

To be continued.

– Tom Dyson

P.S. By popular demand, we’re bringing back the Dyson Family Ramble videos. Here’s our latest, where the boys and I answer your feedback about skiing, finding community in Driggs, and the big question: When will Kate and I (re)tie the knot?…

P.P.S. Last night, we had a date at Teton Thai with locals PB and AB. (They have a friend who reads these Postcards, and this friend forwarded them one of our messages when we said we were moving to the area. (Thank you very much, dear reader!) Here we are…

P.P.P.S. We have another date tonight!

Like what you’re reading? Send your thoughts to [email protected].

A reader is concerned about Tom’s camper faring in Idaho winter weather…

Reader comment: There are a couple of great little thrift shops in Driggs, in case you need even more cold weather gear. One of my dear friends lives there in summers. We go every summer with the old gang from San Diego (where we were all originally from) to go fly fishing on the Snake River. Let me know if you need a place to park the camper for the winter, inside. If you leave it outside, the snow load could kill it!

Tom’s response: Thank you very much for this kind offer. Actually, as I mentioned in Wednesday’s Dyson Family Ramble video, we’re going to donate the camper. Do you know anyone who would get some enjoyment out of an old and slightly battered camper, but still in good, working order?

Meanwhile, others offer relief for Tom’s wine headaches… and share a multitude of ski advice…

Reader comment: I am so glad you and your terrific family were able to make it into Glacier National Park. It is an amazingly beautiful and scenic park. God Bless America, we are fortunate to have so many beautiful scenic parks! Enjoy your stay in Driggs. I am sure your children will love skiing.

By the way, those headaches from the cheap wine are caused by too much sulfide in the wine. Buy a better grade and you will enjoy it more (and lose the headaches). All the best to all of you!

Reader comment: Tom, love your Postcards. I am a professional ski instructor who taught in Big Sky (next to Bozeman, Montana) for eight years, several years in Deer Valley, Utah, and in a few other places. Skied in Jackson and Targhee a couple of times, often visiting in the summer. Great place for learning to ski!

Let me give you few tips to help with the process. The most important part is pre-season physical preparation. You all seem to be in great form so this should be no problem. Daily runs, and a few squats and pushups are a must from now until lifts open. Also, yoga is great for skiers, helping with core body strength and overall balance.

The next most important part is to own your own ski boots. Never ever rent ski boots! Your kids could use secondhand ones since they will need replacement boots every year (They grow so fast!). Go to a reputable ski store (not sure about Driggs, but Jackson has few) and spend as much as you can on customized pairs of boots (made individually) for you and Kate. Brand does not matter; fit does! Make sure the boots are not too long, they’re appropriate width and height for the foot, and are overall comfortable.

I could write much more, but these are pretty much the basics, and lots of information is available elsewhere.

Reader comment: Hi Tom. I’ve been reading your Postcards from the road, getting more interested as you approached the West. I live in Logan, Utah, and frequently visit the area you’ve been traveling in the past couple weeks. I have friends in Driggs and was there this summer mountain biking at the resort you’ll learn to ski/snowboard at. It is a great place; a little small and cold for my taste, but will suit you well.

As you get into the ski mountain experience at Targhee, I wanted to warn you that, occasionally/frequently, that mountain is shrouded in ground clouds/fog (that 500 feet of snow has to come from somewhere, right?). I’ve skied there and not been able to see my feet while getting off the lift… Don’t lose your kids or wife! Or your life!

Reader comment: I was reading your Postcards for over a year and I enjoyed your publishings a lot. Now that you want to stay over the winter in Driggs to learn skiing, here are some of my thoughts.

I was skiing extensively for 65 years, mostly in the Alps. I hope you don’t just want to practice downhill skiing – that is boring after a while. There are many more snow activities, like snowshoeing or cross-country skiing, for the whole family. Also, sledging can be a lot of fun.

But the most rewarding winter activity is ski mountaineering – if you love nature. You put fur under your skis and you climb by yourself, wherever you like. But watch for avalanches! It is not always easy and you have to study the mountains, but when you are able to ski down in fresh powder snow, you will never forget it! Enjoy your stay in Driggs over the winter.

Reader comment: I’ve been thrilled and engaged in your travels since India.

Reader comment: WONDERFUL. WONDERFUL. WONDERFUL.

Reader comment: Enjoy reading your Postcards and agree wholeheartedly on your gold philosophy. Hopefully, you’ll enjoy your winter location and have fun learning how to ski.

Tom’s note: Please keep writing us at [email protected]. We appreciate your kind messages and read every one you send in, even if we don’t respond to them right away.