What if the true risk to your wealth isn’t market volatility, dangerous luck, or inflation — however physics itself?
In Episode 4 of The Physics of Cash, Alan Hibbard reframes cash in a manner most traders have by no means thought-about: not as a monetary invention… however as a instrument for resisting essentially the most highly effective power within the universe — entropy.
Why Physics — Not Economics — Explains Cash Greatest
Just a few years in the past, Alan made what appeared like an excellent cryptocurrency funding. After driving 5 hours by a snowstorm to interview the dev staff and studying each line of code he might discover, he lastly invested $20,000.
Months handed. The token rose. Then at some point… it didn’t.
It collapsed. Quick. So quick that by the point Alan discovered the trigger, his $20,000 was price $20.
The set off? A founder had a sudden medical emergency. To pay for therapy, he dumped tens of millions of tokens in the marketplace. A single occasion — unpredictable, uncontrollable, unpreventable — unraveled years of labor.
This wasn’t simply dangerous luck.
It was entropy.
Understanding Entropy: The Hidden Power That Destroys Wealth
Entropy is the pure tendency of methods to maneuver towards dysfunction, decay, and chaos.
Your garden grows weeds. Your workplace turns into messy. Your physique ages. Your investments, with out upkeep, drift towards threat and collapse.
In physics, entropy describes how vitality spreads out and turns into much less helpful.
And right here’s the breakthrough:
If wealth is saved vitality, then the common power attacking your wealth is entropy.
Each helpful motion you pay for — a haircut, a cleaned room, a medical therapy — reduces entropy. The whole lot you keep away from — stress, crime, sickness — will increase entropy.
This single perception reframes your complete goal of cash.
Cash’s True Function: To Preserve Entropy Low
Economists say cash shops worth. However physics offers us a deeper reality:
Cash shops worth as a result of it resists entropy.
The extra successfully one thing resists entropy, the higher it capabilities as cash.
This explains every part:
Gold is efficacious as a result of it barely decays over time. Silver maintains kind and performance for hundreds of years. Bitcoin defends itself by decentralization and steady vitality expenditure. Fiat currencies, in contrast, inflate, decay, and devalue as a result of they’re designed to extend entropy.
This results in a profound conclusion:
Fiat methods behave like ailments — always growing dysfunction and draining private and societal vitality.
Work, Worth, and Entropy: Why All Worth Comes From Order
Take into consideration the providers you pay for:
A barber turns messy hair into order. A landscaper turns weeds into construction. A health care provider turns sickness into well being. A instructor turns ignorance into information. An entrepreneur turns uncooked supplies into helpful merchandise.
What do all of them have in widespread?
All helpful work decreases entropy.
If you wish to get wealthy:
Scale back entropy for others.
If you wish to keep wealthy:
Maintain cash that resists entropy for the longest attainable time.
That is the physics behind wealth creation and wealth preservation.
There isn’t a such factor as passive earnings. Entropy by no means sleeps — and “passive” methods ultimately collapse.
Storing Worth: Cash as a Low-Entropy Asset
If worth is a low-entropy state, then a retailer of worth should:
Stay ordered over time Resist all vectors of decay Forestall vitality leakage Stand up to unpredictable shocks
Sturdiness alone isn’t sufficient. A factor may be bodily sturdy but nonetheless lose financial worth if it can’t resist extrinsic entropy (inflation, centralization threat, corruption, dilution).
One of the best shops of worth are these with the fewest methods for vitality to leak out.
And solely three belongings traditionally meet this commonplace:
Financial Entropy: Why the Properties of Cash Actually Exist
Each classical property of cash — shortage, sturdiness, divisibility, portability, verifiability — has one goal:
To maintain entropy low.
When a cash loses these properties, entropy rises, and worth disappears.
This was the lesson Alan discovered when his crypto collapsed: the system had a central level of failure, a vector for entropy, and it solely took one shock to destroy it.
True cash should take away each avoidable leak of vitality at:
This is the reason decentralized, high-energy, non-inflationary belongings outperform all others.
Forex vs. Cash: Why You Want Each
Cash and foreign money aren’t the identical — and complicated them is among the greatest errors traders make.
Cash minimizes entropy.
→ It shops worth.
Forex minimizes friction.
→ It strikes worth.
Currencies (like {dollars}, airline miles, or reward factors) are optimized to maneuver quick and low cost.
They aren’t optimized to withstand entropy.
Which means:
Currencies are excellent for transactions Currencies are horrible for saving
If an asset is marketed for:
…it’s nearly actually a foreign money, not cash.
The Sensible Takeaways for Buyers
1. Keep away from high-entropy methods (fiat, centralized tokens, fragile belongings).
They behave like illness — growing chaos in your monetary life.
2. Select cash that resists entropy (gold, silver, Bitcoin).
These belongings preserve order and protect vitality throughout time.
3. Create wealth by decreasing entropy for others.
Clear up issues, restore order, create methods, construct construction.
4. Preserve wealth by holding belongings that resist entropy on their very own.
Don’t retailer long-term worth in methods constructed for frictionless motion.
Key Query this Episode Solutions
How do the legal guidelines of physics and thermodynamics apply to financial methods and their long-term sustainability?
As a result of when you perceive that cash is a battle towards entropy, every part about currencies, inflation, gold, silver, and Bitcoin snaps into place.
Last Thought
The universe pushes every part towards dysfunction. Your job is to reverse that development — in your work, your atmosphere, and your monetary life.
And one of the best instruments humanity has ever created to withstand entropy are:
Gold, Silver, and Bitcoin.
In Episode 5, Alan makes an attempt to design the proper type of cash — and discovers why perfection is not possible… and why trade-offs all the time exist.
Folks Additionally Ask
What does entropy must do with cash?
Entropy is the pure tendency for methods to maneuver towards dysfunction and diminished usefulness. Cash’s goal is to withstand that dysfunction. A superb type of cash retains vitality (worth) from dissipating over time. Belongings like gold, silver, and Bitcoin work nicely as cash as a result of they preserve a low-entropy state for lengthy durations.
Why is decreasing entropy thought-about helpful work?
All helpful work turns chaos into order. A barber shapes messy hair, a physician restores well being, and an entrepreneur organizes uncooked supplies into helpful merchandise. Every of those reduces entropy. The extra an individual or enterprise lowers entropy for others, the extra worth they create — and the extra wealth they will earn.
Why do fiat currencies improve entropy?
Fiat currencies are simple to create, centrally managed, and topic to inflation. These traits improve dysfunction within the monetary system, elevating private and societal entropy. Because of this, fiat currencies are poor shops of worth and behave extra like high-entropy liabilities than secure cash.
What makes gold, silver, and Bitcoin good shops of worth?
Gold, silver, and Bitcoin deliberately resist entropy. They’re scarce, troublesome to supply, and decentralized (or energy-backed), which minimizes the methods vitality can leak out of the system. This enables them to carry worth over time much better than currencies designed for velocity and low friction.
What’s the distinction between cash and foreign money in physics phrases?
Cash is designed to attenuate entropy so it could retailer worth long run. Forex is designed to attenuate friction so it could transfer worth rapidly. Complicated the 2 results in poor monetary selections. It’s best to spend foreign money however lower your expenses — ideally in belongings constructed to withstand entropy.
