'Coined' author Kabir Sehgal: Credit cards make money abstract
In 2008, Kabir Sehgal was working on the emerging markets equities desk at JPMorgan Chase in New York City. From that position, he got a firsthand look at the financial meltdown that would send the United States into the Great Recession.
That experience, and others in his career as a banker, led Sehgal on a four-year quest to answer the question: What is it about money that makes the world go round? His research led him to adventures in 25 countries. In Indonesia, he shared a taxi with a beggar. He met lepers in India and, in Japan, encountered the complicated gift economy of on and giri. His travels and research resulted in "Coined: The Rich Life of Money and How its History has Shaped Us" (Grand Central Publishing, 2015).
The book's exterior is as intriguing as its innards. The back cover contains glowing blurbs from former U.S. President Jimmy Carter, former Federal Reserve chair Paul Volcker and Sir Richard Branson, founder of Virgin Group. Sehgal, who grew up in Atlanta, says he made most of those contacts working in international banking. "You get great access to policymakers and businesspeople," he says.
Sehgal's godfather is former Atlanta Mayor Andrew Young; Sehgal says his father and Young worked together at a now-defunct engineering company in Atlanta. He describes both his father, a civil engineer, and his mother, a psychologist, as self-made people. "My father left India at age 16 and swept floors in a Goodyear factory," he says. The lesson to Sehgal and his sister, a tech entrepreneur in Atlanta: "It's not where you're from, it's where you're headed," he says. "I knew I had to hustle."
Sehgal, a graduate of Dartmouth College and the London School of Economics, says he wrote six books and ran a nonprofit while working in international banking. Now 31, he lives in Atlanta and is a full-time writer, working on a children's book as well as an opera. Via phone, he answered a few questions about the role credit cards play in "Coined."
Author Kabir Sehgal, a former executive at JPMorgan Chase, roamed the world after the 2008 financial meltdown examining the history of money and credit. In his book "Coined," he explains how currency and credit have evolved with humankind.
Q: The book discusses the idea of money as an exchange, for goods or services. How does the use of credit cards enhance or diminish that idea of exchange?
A: Credit cards make money more abstract. Using physical cash, there's a lot of activity in the nucleus accumbens center in the brain, [associated with motivation, pleasure and addiction].
When you use a credit card, it dulls your sensitivity to pain. There's less activity in the anterior insula, the part of the brain that makes you feel anxiety or hunger. It contains spindle cells, which are also found in the digestive track. When you make a bad decision, you feel it, but not as much when you're using credit cards as when you're using cash.
First, money was meat, food products, traded as a commodity. Then financial loan instruments, then coins, then paper, then checks, then credit. The next evolution is mobile phone [payments]. When you look at that [history], the instrument of money is becoming an abstraction.
Q: Your research shows that credit card use is far more prevalent in the United States than other places, and that globally, 85 percent of transactions are cash. What does that say to you about Americans' attitudes toward credit and spending, compared with other countries?
A: It's cultural. In developing countries, you're more reliant on your family and the social community you live in. In China or India, four generations can live in one house. You're not as likely to spend indiscriminately. Whereas America is a more independent country. Kids, after they graduate from college, are expected to live on their own.
Q: Use of credit cards, popularized by oil companies in the United States in the 1920s, took off pretty quickly. What's been the effect of that?
A: Distribution became more abundant in the late 1970s and '80s, through the Supreme Court case Marquette National Bank of Minneapolis v. First Omaha Service Corp., 1978 that said states could allow banks to charge whatever interest rates they wanted. It was actually a policy goal, to get credit cards in the hands of people who couldn't afford things. [Washington lawmakers] wanted to democratize debt.
What's happened since then -- people have abused it. Like anything, [credit] can be abused. I was looking at credit card balances. One in four people in the military has a credit card balance of more than $10,000, which is a lot. We're sort of addicted to cheap credit in this country.
I don't think I brought this up in the book: Your financial decisions are often governed by your genetics. Identical twins, separated for a long time, invest and make financial decisions in the same way. We actually have genes that regulate your risk-taking behavior. So, it goes to show you -- if you're not good with a credit card, you can always blame your parents.
We're sort of addicted to cheap credit in this country.
Q: How do you think credit card use has changed our perception of money? Think of this: When you find a $20 bill, you get excited. If you're an honest person and find a credit card, you think, 'Oh, some poor person lost her credit card.'
A: Cash is more anonymous. Eighty-five percent of transactions around the world are still cash. When you see a $20 bill, people get excited -- it doesn't belong to anyone. That's why, in 2008, during the credit crisis, people were hoarding $100 bills. It was something you can touch. Credit cards -- it's not really your money. It's linked to a bank. It's illegal to use someone else's credit.
Q: How did researching and writing the book change your perception of credit cards?
A: I started thinking about all the different parts of the ecosystem involved in a credit card transaction. When you swipe your card, there are so many parties involved. The network, the merchant, the processor, the issuing bank. There are four or five parties involved. When you use a card overseas, there are as many as 10 parties involved. I started to see the complexity and started to be amazed at how quickly it all happens.
Q: Based on your research, where do you see credit card use going, nationally and globally, in the near and far future?
A: I think that credit card companies are really investing in global expansion because that's where the incremental revenue is, that's where the profitable customers are.
Here, there's not huge loyalty. If someone comes to you with a better rate, you're bound to change [cards]. Abroad, customers tend to be more sticky. Anywhere there's a large population, you see credit card penetration increasing dramatically. India has 1 billion people. If you capture 20 percent of that, that's two-thirds the size of America. And it will be mostly on mobile payments.
Q: Do you feel sad or worried that we're exporting that part of our culture -- possible credit card overuse?
A: I don't think credit cards are to blame. It's the love of money that's the root of all evil, not money. Don't blame the instrument, blame the person who's using the instrument. There definitely needs to be regulations and disclosures on cards that are abundantly clear. But credit cards have brought about a wave of prosperity for many people.
Credit can be a good thing. It introduces more money into society, it helps people afford things. Used the right way, it can help you live a better life.
Published: November 4, 2015
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