Back to the governing rule

Finance turns today's value into credible claims on the future. Every financial product is a way, under some constraint, to make such claims more accessible, more credible or cheaper. Part One started from one person's yearly harvest and derived today's financial institutions. Part Two changed only one parameter, the price of cognitive labour, and showed which constraints loosen, which tighten and which stay the same. Part Three started from one person and one sum of money and derived a product. The derivations of all three parts can be tested with these three words.

1. Accessible, credible, cheaper

In Part One, saving, lending, money, insurance, banks, shares and markets let people who could not make the exchange before obtain claims on the future: this is "accessible". Commitments, custody, disclosure and regulation make sure these claims are honoured in the future: this is "credible". Diversification, index funds and defaults bring down the cost of the exchange: this is "cheaper".

In Part Two, almost free cognitive labour first moves "cheaper" and "accessible" a long way forward: research, comparison and execution cost almost nothing, and personalized arrangements no longer belong only to large clients. Yet "credible" tightens instead. Agents cannot afford to pay for their mistakes, can change their names, resemble one another, and are close at hand at the very moments when people are most impulsive; each of these calls for new guarantees, records and lines of defence.

In Part Three, four of the product's five parts answer to "credible": the agreement and authority, verifiable records, limits, confirmation and compensation, and the path to building trust. This is no accident. In a world where cognitive labour is almost free, cheapness and accessibility arrive by themselves; what is scarce is credibility. The value of a product depends more and more on what gives the user grounds to trust it.

Three parts and three words

Choose a word to see what the derivation in each of the three parts did for it.

2. The principles of the book

All the principles obtained in the book's derivations are placed on one chart: the order of derivation runs along the horizontal axis and the year proposed along the vertical axis. Most of the principles in Part One were proposed only in the middle and later decades of the twentieth century, while the institutions they explain often existed long before. Parts Two and Three retest many of them and borrow new principles from law, psychology, computer science and safety science.

Where the principles sit

Across: the order of the derivation. Up: the year each principle was proposed. Tap a dot to see the principle and who proposed it. A principle that comes later in the logic but earlier in history shows practice growing institutions before theory explained them.

Dots are collected automatically from each chapter's principle cards. The vertical axis is split at 1900; earlier years are compressed. Several principles from one chapter are spread left to right in order of appearance. Hollow dots are principles re-examined in Part Two, drawn at the chapter where they are re-examined.