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Vīta Brevis, Wit Artefāctōrum Ætērna Podcast

Vīta Brevis, Wit Artefāctōrum Ætērna Podcast

Written by: Ash Stuart
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 Exploring innovation, progress and achievement: a first-principles approach to everything that matters; combining history, epistemology, economics, anthropology, geopolitics, finance, philology, etymology and more... for, life is short, knowledge forever.

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Episodes
  • The Story of Money: The Madness of the Mississippi Bubble

    The Story of Money: The Madness of the Mississippi Bubble
    Nov 13 2026
    This is the story of one of the earliest and most spectacular bubbles and bursts in modern financial history, and how an outlaw made law and order and disorder, how a convicted murderer and fugitive and foreigner rose to amass the greatest financial clout and power in France, and fell and fled in disgrace.Let’s head to France in the year 1715. King Louis XIV is dead, the Spanish War of Succession -- a war with great consequences for Western Europe, which raged from 1701, is over, leaving France massively in debt. As an absolutist regime, the French monarch had used every means at his disposal to fund the war, such as massive coin debasement Episode 034, predatory and extractive taxation, to the effect that the impoverished French population had lost trust in French money and the State’s ability to honor the national debt - a huge portion of which was held by the citizenry. Things were desperate for the king, things were dire for the peasant.Enter a Scotsman.Paper PowerJohn Law, an Edinburgh-born gambler and adventurer, who had developed his own theories, convicted for murdering a man in a duel over a woman, had just fled Britain and ended up in this milieu in France. The new king, Louis XV was only V, I mean 5, and his regent the Duke of Orleans was ready to try anything, anything at all. It was thus that Law managed to convince the regent about his new-fangled theories and gained his confidence.The key element was this: using gold and silver was not efficient - let’s print paper banknotes in the name of gold/silver and issue them out as backed by said gold/silver. Law thus sets up the Banque Générale in 1716 with full state authority to print and issue paper money. The new money gets a fillip when the state agrees to accept taxes paid with the paper currency. Law becomes Controller-General, ie, the finance-king of France.Who Wants to be a MillionaireBut he doesn’t stop there, he buys up some of France’s colonial enterprises, in particular the Mississippi Company and thus the monopoly on trade with French Louisiana. (We must remember that Louisiana at its height was much larger, encompassing much of the Mississippi river basin and stretching right into Canada - much of what we now call the Mid West. However, this region had sparse European settlement and development at this point.)Law starts hyping up Louisiana as a magical El Dorado -- full of gold, although it was just swamp, mosquitos and crocodiles. But the French public buy into the hype, buying up shares in Law’s company -- the speculative frenzy gets so crazy, the share price jumps from 500 livres to over 10,000 livres in about a year.Given there were no stock exchange buildings in such a time, Rue Quincampoix, a street in Paris becomes the trading floor - people from all walks of life from a widowed cook to a noblemen all jostle and scramble to buy up the shares. There is a story that a hunchback (and no, he was not from Notre Dame!) rented out his back as a writing desk for the traders to record their transactions! There are stories of, for example, chimney sweeps becoming filthy rich overnight and purchasing villas.Perhaps the juiciest detail is that it was here in this frenzy that the word ‘millionnaire’ was coined!But... what goes up comes down, every bubble has a burst. By 1720, the better informed folk started to realize that the Mississippi dream was a mirage, there was no gold in Louisiana, it was just a dump. They start cashing out shares, and as we have seen in Episode 036 the institution cannot honor the shares for gold/silver - because the shares and the paper money were in the backed by nothing of corresponding value. They were in effect worthless.So yes, climax - bank runs, riots, currency collapses, and France’s financial savior, John Law, flees France and dies in penury in Venice.Lost LessonsSo the questions we raised in Episode 028 are all of relevance here, and one can see the parallels with the events described in Episode 029. Let’s see what we can salvage from this, or if we can learn anything in particular.Despite everything, there were a few things John Law did get right, and despite such a rocky start, time, much later on, has proved him right. He was one of the first to point out that money, specifically gold/silver, in itself is of no value, and value comes from labor and production -- something I’ve repeated pointed out in this series. He thus debunked the older mercantilist futility of hoarding gold and silver - something fellow-Scotsman Adam Smith would make the decisive case for 60 years later - see Episode 020. Law can be said to have invented paper currency as we know it in the modern form.However, having gone through the trauma of the whole episode, the French developed a very different view of it all: there developed a deep mistrust of such currency and any monetary innovation - to the extent that France’s financial affairs stagnated or deteriorated. This episode thus one can say was ...
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    8 mins
  • The Story of Money: The Mysteries of Moral Hazard

    The Story of Money: The Mysteries of Moral Hazard
    Nov 6 2026
    Last time we explored the development of insurance. As we’ve done with other such topics before, let’s see what could go wrong!We saw last time back in FictionTown that our friends Steve, Bryan, Brenda and Irene started off stressed about the prospect of their house getting burned down just as had just happened to a neighbor. In the end, luckily, they worked out the concept of insurance and set it in motion across the town, so that they could live happily ever after as in every good story!The scene ended with Steve, initially the most indignant of the lot, now confidently having a barbecue indoors, right next to his books or his attached barn full of hay!Risk-free Risk-takingSo yes, as I hinted last time, that is an example of moral hazard: as long as the risk of fire persisted, Steve would be very careful, but once that was ‘covered’ by way of payments from a common pot, he couldn’t be bothered to be careful. To generalize, when one is protected against consequences of a given risk, one might not be so careful anymore. Even where such a person may by nature tend to be somewhat cautious and careful.Perhaps a relatable example is health insurance - without it, we may be a bit more careful, but if we are to say get full health treatment at any time under a generous healthcare package, we might go for that extra drink or the fags. If we are on the road behind the wheel after having secured a hefty driving insurance deal, we might be less mindful of good driving comportment. (”I’ve got fully comp. YOLO. Now slam the goddamn pedal, yeeehaaa!”)Skin in the Cat-n-Mouse GameBut equally, in the modern day, those who have read the fine print of the insurance policy papers know that it’s not that simple. The insurance industry has adapted to moral hazard - no insurance policy we know of offers us unfettered coverage. There are deliberate constraints imposed by the insurer: phenomena such as co-pay, where, as the name says, the insuree pays for a portion of the benefit availed - say 20% of the overall cost; then there is excess (or deductible) where you first fund a fixed amount yourself before your insurer steps in. Some policies offer you a bonus at the end of the year if you never claim.Fundamentally, the idea is to ensure the user has ‘skin in the game’ (call it a skin tax if you will!) that even though you’re paying the regular premiums, you have additional obligations at the point of making a claim, sufficient to deter, the insurer would hope, spurious claims. I say ‘hope’ because, some users will find a way to game the system - skin or no skin, it’s still a cat-n-mouse game?O Insura, O Mōrēs!We saw back in Episode 024 discussing monopoly, similar behavior change once a seller ends up in a state of monopoly - jacking up prices, not bother with the quality etc. And just like I said there, even here the change in behavior doesn’t have to suggest that the person is ‘evil’, or even, despite the term in use, ‘immoral’.(’moral’ actually has two meanings - the original meaning of this Latin term, incidentally coined by Cicero, is simply ‘customary’, referring to the customs: derived from Latin ‘mōs’ which also gives us ‘mores’!)My point is, that it’s the incentive structure (in both cases) that drives behavior, and the adverse turn could manifest even in otherwise well-meaning people. Thus the moral-as-in-ethical connotation is a derivative of the above stated moral-as-customary sense.Furthermore, all this is not strictly only in the realm of standard insurance. This can be seen further afield, and as applicable not just to individuals but even large organizations - such as corporations and governments.If you live in a society where the norm (mores!) is for the final bill after dinner is to be split evenly amongst all 5 of you at the table, would you order tap water and a boiled egg or a 12yo double malt and a lobster?Or, let’s bring in the banks - the big ones - if they know that whatever their behavior of risky trading in the markets, the government, using taxpayer money, the money taken from you and me, will bail them out if something goes badly wrong because of systemic risk to the entire economy, ie, they are ‘too big to fail’, how... have they behaved?So yes, you’re right to have noticed that our discussion here has veered into psychology, even moral philosophy you might say, but lest that be an objection, I’ll point out, as I have before, that this has direct economic (and even ecological) implications - a direct bearing on how humans and organizations deploy resources, and the attendant behaviors to ensure proper deployment or not.And with moral hazard, we are just scratching the surface of the tip of the iceberg of the interplay between economics and human behavior, so I’ll have a lot to say on this from time to time. What is, in this context, your favorite quirk or pet peeve?Article written by Ash StuartImages, video, voice narration ...
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    7 mins
  • The Story of Money: Scrutinizing the Innards of Insurance

    The Story of Money: Scrutinizing the Innards of Insurance
    Oct 30 2026
    Way back in Episode 006 while exploring the concept of risk I said that much of the banking industry was founded upon the need to and with the goal of managing risk. Let’s now look deeper into one of the most widespread and relatable of such instruments.But first we go to FictionTown.Steve, Bryan, Brenda and Irene are sat in the frontyard of one of their houses and having a sombre chat. News is that one of the houses in their community burned down. Obviously our friends are terrified at the possibility of this happening to their house.Steve starts, astutely as usual: this should not happen! Bryan’s like, Steve, you can’t control certain things. Brenda chips in, well, if we can’t control it, we should manage the damage, like save up to rebuild or something. Irene interjects, hmm, it’d be too hard for each of us to save up that much, wait, what if we all saved up in one collective pot, how many houses are there in our community?Steve says it’s about 50 but cannot see how that matters. But Bryan’s like, wait, Irene, that way you mean it can be used if any one house burns down? But how much do we each put? Brenda makes a different point, wait, it’s not just present quantity, how often does a burndown fire happen - the last one was 5 years ago. Irene gets it all - right, we should check the pattern at the Mayor’s office records, but, assuming on average there’s one such fire in 5 years, and we are 50 houses, we each pay a two-hundred-and-fiftieth (1/250) of the pot each year, which becomes even easier to foot if paid in monthly than in a lumpsum!Pot LuckThat’s it, that’s insurance in a nutshell, or in a nice collective pot!Obviously, the mathematics of it in the real world is a lot more complicated, and the whole thing is managed by distinct commercial outlets - the insurance companies, who inevitably charge a cut for their services, but this encapsulates the concept with the basic elements in place.Let’s see what’s actually happening here. As we discussed in the risk episode, everything in life is contingent - we can never tell what’s going to happen next. But based on past performance (which by the way is no guarantee of the future), the best we can do is calculate future probability. So if in FictionTown, the last burndown was 5 years ago, the one before 11 years ago and the one before 15 years ago, we can cautiously take 5 years as the average frequency. Generally, the larger the scope of our past dataset, the easier it is to identify patterns.And we saw how there is the ‘pooling’ of risk among all 50 houses, which as we noticed, and as we might intuitively know, softens the blow on any individual.We must also be aware that such a scenario as depicted implies an insurance based solution manifests ‘after the fact’ - it cannot prevent the fire in the first place, but as we’ll see, even there, there’s nuance.Can you Count on it?The key goal of statistics and probability, the cornerstone sciences of risk management is to put a number on the innumerable, express the unquantifiable in exact money terms. Ultimately, how do you measure risk, really? Why is my insurance premium $100 and not $50? While I’ll get to these more complex topics when the time’s right, what we take away at the moment is the simple idea of turning scary unpredictable losses into a small predictable cost.Again, this is not perfect, and based on changing circumstances, the insurance premiums we have to pay might keep changing constantly, and with advances in data collection and similar technologies, this could become even more fluid.But we all know we are required, often by law, to foot insurance bills: car insurance, health insurance, travel insurance, whatever it may be. It may be frustrating to see money you could’ve used elsewhere go into some external source which, unless a stated calamity materializes, you never get back. (consider this weird paradox: almost anything you buy, you actually want to use it. But with insurance, you actively prefer not to?)But what you’re paying for here is the peace of mind that should the worst (the insurance company defines ‘worst’ btw!) happen, at least you are ‘covered’ (again, mainly in terms of financial payout, you cannot undo the accident or another incident.)(Also, just to note, a state-run free-at-the-point-of-use health service doesn’t mean you’re not paying for it, just that it’s taken off your taxes with much lower visibility if any of how much is your actual health premium!)Now let’s go back to FictionTown one last time. What if, with such a scheme set up, Steve goes, “yeah nah, we have a collective pot now, and they’ll pay out from that pot should something happen”, and ends up setting up a barbecue indoors, next to his book collection, or more likely knowing Steve, in his attached barn by the hay?!I’ll get to moral hazard another time, but the insurance industry, especially under the pressure of regulation to drive ...
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    8 mins
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