An Approach To Ledgers That Make Multi-Currency Not Just Possible, But Easy

Without Ray Dalio, we wouldn’t have McNuggets.

Back in the 80s, McDonalds wanted to add chicken nuggets to their menu. But there was a problem: the price of the chicken was influenced by corn and soy, which are traded in financial markets.

McDonald’s wanted to protect itself from all that. It wouldn’t make any sense to buy nuggets at one price today, and a completely different one tomorrow. They wanted to hedge but there was no viable chicken futures market out there.

So, they turned to Ray Dalio.

Before founding Bridgewater from his apartment in 1975, Dalio had worked as a commodities trader on Wall Street for a few years. He happened to have a chicken producer client willing to sell chicken to McDonald’s at fixed prices, provided that Dalio found a way to hedge the producer’s exposure to corn and soy.

That was Dalio’s expertise. He combined the two commodities into a synthetic future, and the McNugget was born.

There’s a key takeaway from this. Any business sells products that can be broken down into components. Some of them have a relatively stable value, like buildings, or have a value that changes predictably, like office furniture.

In both cases, traditional accounting has all sorts of tricks to take into account changes in value. For buildings, we call it surplus value; for office furniture, we call it depreciation.

But there’s a special kind of component whose value fluctuates rapidly, and unpredictably. Foreign currency is the most visible example.

Thanks to technology, though, we can do what Dalio did with the chicken nuggets in the 80s. And in this article, I’m going to tell you how.

I’m Alvaro Duran, and this is The Payments Engineer Playbook. You’ve already come across tons of tutorials that show you how to pass software design interviews that use payment systems. Frankly, a lot of it is junk. But there’s not much that teaches you how to build this critical software for real users and real money.

And because I’ve built and maintained payment systems for almost ten years, I’ve been able to see a lot of amazing, but behind-the-scenes conversations about what works and what doesn't for money software.

In my opinion, these conversations should be shared. And that is what this newsletter, The Payments Engineer Playbook, is all about.

In The Payments Engineer Playbook, we investigate the technology that transfers money. All to help you become a smarter, more skillful and more successful payments engineer. And we do that by cutting off one sliver of it and extract tactics from it.

I believe this is the only place in the entire Internet where you can get that.

Read the rest.