Merryn Talks Money: John Law, The Gambler Who Invented Modern Money (Part 1)
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This special holiday episode from Bloomberg's "Merryn Talks Money" podcast tells the extraordinary story of John Law, an 18th-century Scottish gambler-turned-financier who fundamentally shaped our modern monetary system. Born in Edinburgh in 1671 to a goldsmith family, Law's life took a dramatic turn when he killed a man in a duel and became a fugitive. (13:34) His exile led him across Europe, where he refined revolutionary monetary theories that would eventually make him the most powerful financier in France.
- Main Theme: The podcast explores how Law's fugitive status paradoxically enabled him to create financial innovations that laid the foundation for today's fiat currency system, demonstrating how crisis often catalyzes monetary revolution.
Speakers
Merryn Somerset Webb
Merryn Somerset Webb is a respected financial journalist and host of Bloomberg's "Merryn Talks Money" podcast. She brings extensive expertise in financial markets and economic history, providing insightful commentary on monetary systems and their evolution.
John Stepek
John Stepek is co-host of this special series and brings deep knowledge of financial history and monetary theory. His expertise in economic systems and historical analysis provides the foundation for this comprehensive exploration of John Law's revolutionary impact on modern finance.
Key Takeaways
Crisis Creates Innovation Opportunity
John Law's story demonstrates how personal crisis can lead to revolutionary thinking. His fugitive status after killing Edward Bowe Wilson in a duel (14:14) forced him to travel across Europe, exposing him to different financial systems and refining his monetary theories. This exile period from 1695-1705 became his intellectual laboratory, where he learned about probability, banking, and financial markets in Amsterdam and other European financial centers. (29:44) Sometimes our greatest setbacks force us to develop skills and perspectives we never would have gained otherwise.
Money is Technology, Not Value
Law's fundamental insight was revolutionary for his time: "Money is not the value for which goods are exchanged but the value by which they are exchanged." (31:58) This distinction revealed money as financial technology rather than intrinsic value, challenging gold-based systems. He recognized that money's function as a medium of exchange was more important than its material composition, laying groundwork for modern fiat currencies. This perspective shift from viewing money as a commodity to seeing it as a tool enabled entirely new approaches to monetary policy and economic management.
Practical Experience Trumps Theory
Law wasn't just an academic theorist - he was a practitioner who funded his lifestyle through high-stakes gambling and understanding probability. (27:32) His ability to calculate odds and serve as "the house" in gambling games gave him practical insights into risk, probability, and human behavior around money that pure theorists lacked. This combination of theoretical knowledge and real-world application made his later financial innovations more effective because he understood both the mechanics and psychology of money.
Timing and Context Drive Success
Law's ideas gained traction because they addressed urgent problems - European governments were heavily indebted from decades of war, and traditional funding mechanisms were failing. (24:23) The Bank of England was established in 1694 while Law was in prison, showing the desperate need for new financial solutions. France was particularly vulnerable with debt running at 80-100% of GDP and an inefficient tax system. (38:25) Revolutionary ideas often require the right crisis to gain acceptance.
Networks and Relationships Enable Opportunity
Despite being a fugitive, Law maintained and built valuable connections across Europe, including Jacobite supporters and various European courts. (37:26) His loyalty to those who helped him and his ability to navigate different political factions gave him access to power structures necessary for implementing his ideas. These relationships, built during his exile years, would prove crucial when opportunity arose in France. Personal networks often matter more than credentials when seeking to implement revolutionary changes.
Statistics & Facts
- John Law inherited and spent approximately £4,000 per year in London (equivalent to £675,000 today), demonstrating the massive wealth inequality of 18th-century society. (13:43)
- By 1711 in Genoa, Law had accumulated 140,000 lira when laborers earned only 1-2 lira per day, representing wealth equivalent to £850,000-£1,700,000 in today's money. (36:20)
- France's debt was running at 80-100% of GDP when Law arrived, creating the desperate financial conditions that would make his revolutionary ideas attractive to the French government. (38:25)
