Money is a vector, not a scalar

We were having a discussion about “throwing good money after bad” the other day, and I found myself blurting out “well, after all, money is a vector, not a scalar.”

I’m sure you all remember (from your linear algebra class, perhaps) the difference between a vector quantity and a scalar. A scalar quantity has a magnitude while a vector has a magnitude and a direction.

“Good” money and “bad”. What are these but an additional dimension for money? In a bad investment the quantity of the money grows while its goodness shrinks; in a good investment they grow together. Additional money in a bad investment grows smoothly in quantity but has a discontinuity as it leaps from bad to good.

There are lots of discussions about money that acknowledge its vector nature. “Dumb” money and “smart”. “Patient” money. The “velocity” of money. “Easy” money (large first derivative of money with respect to effort).

Maybe just a dumb metaphor. Your thoughts?


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