Definition of Finance, Finances and Financing

Finance is about money.

Money is a thing. It is a legal agreement known as a negotiable instrument. An IOU. It is a technology used by communities to engage in commercial exchanges across distances of time, place and social connection.

Finance is how we decide what to do with this thing we call Money.

Individuals and enterprises that participate in an economy that uses money move through a recurring 5-point cycle of learning that leads to earning that empowers spending and saving that empowers investment in more new learning.

Finances may be used to refer to the movement of money through this cycle, as in household finances – how much money comes into and out of a family unit, including where it comes from and where it goes to; or firm finances – how much money comes into and out of a firm, including where it comes from and where it goes to.

Financing is obtaining money to spend that has not yet been earned, usually against a promise to repay the money advanced, plus, out of future earnings.

Financiers are people engaged in the business of providing financing to others.

Finance as the business of financiers is a social structure for social decision making through which society decides what its future history can, should and will be made to be through investment in enterprise for putting new learning into action evolving prosperous adaptations to life’s constant changes.

Finance as the business of financiers works in a three part cycle of:

  • aggregating surpluses saved as money from others;
  • deploying those aggregations as investment in enterprise for a charge paid in money or other benefits;
  • sharing investment returns and benefits with the people whose savings were used to provide the financing.

Finance is one of four primary social structures for social decision making, alongside Civil Society, Enterprise and Government, that are accountable to popular choice through various mechanisms.

Civil Society institutions see new possibilities along the creative edge of changing times.

Enterprising institutions make new possibilities available as technology surpluses through commercial exchange.

When Enterprise needs money, Finance provides it. Or not.


Many people experience Finance as the business. of financiers as something of a Black Box: savings go in, profits come out; but how the decisions get made about who gets the money, and why, are seen as something of a mystery.

If you open up this Black Box to look for the personas of the financiers who work in finance, and group them by the technologies they are expert in for aggregating and deploying savings, you can see there are six different such personas, six different technologies for aggregating and deploying savings.

Each of these different personas and technologies has their own unique:

  • purpose for which they aggregated the savings of others;
  • powers for deploying those aggregations; and
  • moral code for deciding which enterprising visions they will choose to finance.

If we map thee different technologies out as competing choices for our savings using a decision tree pattern, we can begin to see what Finance actually is, how it actually functions, and why today it has fallen into such severe dysfunction that the whole business is as it appears to be: crazy.