Supermoney

Think of the late, great Anthony Bourdain. He was a cultural translator, a storyteller who could parachute into a chaotic Vietnamese street market and, over a bowl of pho, reveal the entire economic and social ecosystem humming around him. He showed us that the value of food was found in the stories, the relationships, and the trust baked into it. Bourdain had an uncanny knack for seeing the hidden game behind the obvious one—the real market behind the market stall. He understood that a simple transaction was about human connection, reputation, and the invisible currents of influence that truly determined value.

Now, imagine taking that same sensibility—that same ability to see the human drama behind the numbers—and applying it to the world of high finance. It’s one thing to see the game in a street market, but what about the abstract, dizzying world of stock markets and investment funds? This is precisely the world that was beginning to feel alien and dangerously detached from reality in the late 1960s, a time when the money game was getting so complex it felt like it was playing by its own rules. One person uniquely positioned to translate this strange new landscape was a writer who went by the pen name 'Adam Smith.' In reality, he was George J.W. Goodman, a financial journalist and editor who had spent years observing the players, their psychologies, and the absurdities of Wall Street. He wrote Supermoney as a travelogue—a dispatch from a foreign land where the money itself had become more important than the things it was supposed to represent.

Module 1: The Alchemy of Supermoney

Imagine you're a doctor. You and a partner run a small practice, earning a solid $100,000 a year. Your net worth is maybe $10,000, mostly in stethoscopes and office furniture. Then, a banker comes along. He tells you to incorporate as "Pediatricians, Inc." and sell shares to the public. The market, hungry for growth, values your company at thirty times its earnings. Suddenly, your $50,000 in after-tax profit is the basis for a $1.5 million market valuation. You haven't earned any more money, but you are now a millionaire. This is the alchemy at the heart of the book.

The author introduces a powerful concept to explain this phenomenon. He calls it Supermoney. This is distinct from the cash in your wallet or the number in your bank account, which is just money. Supermoney is capitalized income, created when the stock market assigns a high multiple to a company's earnings. This process creates wealth out of thin air, just as if the Federal Reserve had printed it. For instance, the Levitz brothers turned a modest furniture business into a public company. At its peak, the market valued it at 100 times earnings. The brothers cashed out for $33 million and still held stock worth hundreds of millions more. They had converted their business into Supercurrency, a liquid and powerful form of wealth.

This concept has profound implications. First, the tax system actively encourages the creation of Supermoney over simple earned income. If you write a poem and sell it for $10, that's taxed as regular income. But if someone buys that poem and later sells it as an asset for $1,000, their profit is a capital gain, taxed at a much lower rate. The system incentivizes turning work and ideas into "things," into capital assets. This is why a high-earning dentist might invest in a cattle-feeding operation. The investment is about converting high-tax income into a low-tax capital asset.

And here's the thing. The existence of Supermoney fundamentally changes business incentives and widens wealth inequality. Why run a family business for generations when you can sell it to a large corporation for a mountain of Supercurrency? The owners of Hellmann's mayonnaise and Dannon yogurt did just that. They traded their private businesses for shares in corporate giants like Kraft. They gained instant liquidity and became part of a different financial class. This creates a stark divide. There are those who earn money. And there are those who control Supermoney. The gap between them is vast and growing. The author suggests we should even think of Supermoney as a third category of the money supply, an "M3" that influences the economy just as much as cash and bank deposits.

Module 2: The Madness of Crowds

We've explored what Supermoney is. Now let's turn to how it behaves in the wild. The 1960s provided a perfect laboratory. It was the "Go-Go" era, a time of speculative frenzy. A new breed of fund managers emerged. They weren't interested in sleepy, dividend-paying stocks. They wanted "Maximum Capital Gain." And for a while, they got it. These aggressive funds skyrocketed, with some managers like Gerald Tsai becoming rockstars. This was a psychological game.

The core lesson from this era is stark. Market bubbles are driven by the triumph of perception over reality. Investors stop caring about balance sheets or cash flow. They fall in love with "concepts," with stories. A company didn't need real profits. It just needed a good story and a name with "tronics" or "computer" in it. To fuel this fantasy, corporate accounting became a tool of deception. Companies would change depreciation methods, capitalize research costs, and play games with pension funding. Anything to create the illusion of a smooth, upward "stepladder" of earnings. Leonard Spacek, a respected accountant, called financial statements a "roulette wheel." But nobody listened. The party was too good.

This speculative fever wasn't just for small-time gamblers. Even the most conservative institutions get swept up in market manias. The Ford Foundation, a pillar of the establishment, warned universities that "caution has cost more than imprudence." So, endowments at places like the University of Rochester sold off stable bonds. They piled into a handful of "great companies" like IBM and Xerox. Their portfolios soared. But they were concentrating risk, not managing it. They were joining the herd, just as it was running toward a cliff.

Of course, what goes up must come down. Bubbles inevitably burst when reality reasserts itself, leading to brutal corrections. The gap between soaring stock prices and stagnant underlying value becomes too great to ignore. When the crash came in the early 1970s, it was devastating. The "Go-Go" funds that had been the darlings of Wall Street collapsed, losing 50% or more of their value. Gerald Tsai's celebrated fund lost 70% over eight years. The University of Rochester's endowment saw a decade of gains wiped out in a matter of months. Perception finally slammed back down to meet reality.

And it doesn't stop there. The most chilling insight is that financial history repeats itself with frightening precision because each new generation forgets the lessons of the last. The author draws a direct line from the "Go-Go" bubble of the 1960s to the dot-com bubble of the late 1990s. The language was different—"new economy" instead of "Go-Go"—but the psychology was identical. Both were fueled by concept stocks with no earnings. Both saw a mania for IPOs. And both ended in a roughly 50% market collapse. The names change, but the game remains the same.