Whuffie, currency and the 'ready-fire-aim' syndrome
Spent much of the past couple of days getting overly-involved in two great threads on Venessa Miemis‘ ‘Emergent by Design‘ blog:
The first thread started with a very necessary attempt to distinguish between social-capital and reputation-based ‘currencies’ such as Cory Doctorow’s imaginary ‘Whuffie‘ (as described in his sci-fi novel “Down and Out in the Magic Kingdom” – the ‘magic kingdom’ being Disneyland, of course 🙂 ). The key distinction that Venessa drew – and I think she’s right – is that social-capital is collective, a ‘network effect’ of the social context, whereas reputation is an attribute within the frame of that social-network, typically attached or attributed to the individual: in other words, they’re not the same, and should definitely not be treated as being the same.
This lead to the second thread, about ‘the future of money’, because much of the discussion in the ‘Whuffie’ thread was about the supposed need for some kind of ‘alternative currency’. (Clearly some people in the thread had hoped that ‘Whuffie’ would be it, but despite the efforts of well-meant initiatives such as The Whuffie Bank, it became evident quite quickly that it wouldn’t and couldn’t work in a ‘currency-like’ way.) There was – and at present, still is – a lot of discussion about various ‘currency-like’ proposals, such as TimeBanks, ITEX cashless payment, ‘Quids’ alternate-currency, and so on.
But what I found immensely frustrating was that almost none of them were thinking in true economic terms – and I wasn’t very popular for pointing out this unfortunate fact. Instead of enquiring what an economy is, what it needs to do, what purpose it serves, and so on – what would seem to be essential first-principles concerns about the context – they’d all assumed automatically, without question, that some kind of currency was ‘the answer’, and hence rushed off to create it. In other words, exactly the same mistake as far too many IT-folks: “here’s the solution – how can we force your problem to fit it?”
Ready? Fire!!! … aim…?
oops…
Yeah… really frustrating…
No-one with any sense would doubt that there are serious problems with the present ‘money-economy’ – not so much ‘serious problems’ as ‘close to catastrophic failure’, in fact. Everyone in that conversation recognised this – which is why they were pushing so hard for alternatives. But the catch was that none of the alternatives actually resolved the core reasons why a money-economy won’t work; most of the proposed ‘solutions’ not only replicated those problems, but actually made some of them worse. What was so frustrating was that in each case it took no more than a couple of minutes’ analysis not only to show that it wouldn’t work, but why it wouldn’t work. Yet no-one, it seemed, wanted to hear this: instead, off they want, charging off down their respective blind-alleys in the blind certainty that they’d found ‘the solution’.
What’s wrong with money, then? Short answer is: a lot. To give just a few examples:
- It only deals with point-to-point transactions, not network-effects – especially at a societal level.
- It’s designed to work with ‘alienable’ physical objects, but now no longer has any actual anchor in the real world – instead, we have literally trillions of supposed ‘money’ in imaginary ‘derivatives’ sloshing around the globe.
- It’s very easy to ‘game’ via artificially-constructed price/value mismatches.
- The implied ‘gravitation’ structure of money-based capital means that it tends to create ‘winner-takes-all’ accumulations – exacerbating social imbalances, often in the extreme, requiring separate action to try to redress the balance.
- Attempts to link ‘intellectual property’ into the money-system have resulted in a system which purports to match finite ‘alienable’ entities (physical ‘things’) with potentially-infinite ‘non-alienable’ entities (information) – which by definition cannot balance.
- Many organisations – particularly banks – are legally ‘entitled’ to invent money from nowhere, in effect assigning themselves an ever-increasing share of the society’s resources.
- A currency, by definition, relies on trust in the institutions that manage that currency, which in this case is the banks – yet much of that trust has been lost, and at present remains at an all-time low (hence the strong societal interest in options for ‘alternative currencies’).
- There are no built-in mechanisms to manage assignment of resources to those ‘outside’ of the monetary exchange-system (particularly children, parents, elderly, disabled and their carers, but also artists, scientists, thinkers, futurists, ‘creatives’ of any kind) – these stakeholders can only be served by ‘external’ mechanisms such as taxation (which are clunky and kludge-ridden at best), or by forcing them to do work within the money-economy (which means that their actual needed work can no longer be done).
- There is a very strong tendency towards short-termism.
- There is a very strong tendency to try to force everything into a crude, ludicrously-simplistic ‘double-entry life-keeping’.
- There is a very strong tendency to assume that ‘value’ exists only in monetary terms, as ‘valuations’ of ‘resources’ – hence, for example, a forest supposedly has no value until it is cut down, a mountain has no value until mined for its minerals, and so on.
- There is a very strong tendency to assume that anything which cannot be counted and ‘valued’ in monetary terms either does not matter or does not exist.
The societal impacts of these problems are rapidly approaching catastrophic levels. Yet none of the proposed ‘alternative currencies’ tackle more than a minute fraction of that list: most offer at best a localised kludge that might address a couple of issues whilst creating several more.
Let’s be blunt about this: the present system does not work. It actually never has – and that’s not surprising, because it was only ever intended to deal with point-to-point ‘trade’-transactions between fairly large groups (tribes, communities etc), hence it’s bit unfair to expect it to be able to run the entirety of an economy. But to create something that does work, we do need to go right back up to the level of the entire economy, and work our way back down from there. Which, yes, might – might – include some kind of ‘currency’ to tackle specific types of transactions: but not as the core of the economy itself.
This is actually no different from any other whole-of-enterprise architecture. (The only distinction is that it’s an ‘enterprise’ at the scale of an entire society, but that’s all.) So we would use the same overall approach:
- Who (and/or what) are the stakeholders in this enterprise?
- What are the core values? What is ‘value’ in this context? What is valued, and by whom? In other words, what determines ‘appropriate’ in this enterprise?
- What are the assets, functions, locations, events, capabilities and decisions within this enterprise? – in other words, the resources of the enterprise that need to be managed, distributed, shared and used in the most appropriate manner.
- What are the value-propositions that this enterprise needs to offer to and with its stakeholders?
- What mechanisms and responsibilities would be needed to create, deliver and monitor those value-propositions?
- What governance would be needed to ensure that all activities within the enterprise are optimised to be ‘on purpose’?
- …and so on.
To me, every attempt at a currency will inherently fail because it cannot take network-effects into account: by its nature, a currency is a mechanism for governance of point-to-point transactions, without any direct means to link to whole-of-system impacts. So I honestly believe that all of these attempts at ‘alternative currencies’ are a waste of time: we should be far better served by putting the same effort into understanding how an economy actually works.
And the key to that, to my mind, comes down to perhaps the scariest fact of all: there are no rights. ‘Rights’ are a social fiction; but the mutual, interlocking responsibilities that underpin those purported ‘rights’ are a social reality. If we want those purported ‘rights’, where we need to start is with creating a better understanding the ways in which those real responsibilities need to interlock: a focus on ‘rights’, like a focus on ‘currency’, is at best an unhelpful distraction from this requirement.
Where this gets gets scarier still is that our entire present economic model is based on a concept of ‘right of possession’ – hence a ‘right to personal property’. But there are no rights: only responsibilities are real. And in a network, there is no ‘personal’: only the network is real. Right at the fundamentals of economics, ‘personal property’ is just another fiction – and a very dangerous fiction at that. Yet personal responsibilities for societal resources – the appropriate management, maintenance and use of those resources – are real. And as with ‘rights’, those interlocking responsibilities result in something that looks almost exactly the same as ‘personal property’ – but we now know how we get there, via those responsibilities.
If we turn it this way round, we end up with something that looks very similar to what we have at present: but it resolves all of the structural flaws of a ‘money-type’ economy, and we also know exactly how we get there.
Once we know that that’s what we need to aim for, then we can start talking about ‘intermediate currencies’ and the rest, as part of a transitional ‘roadmap’ towards that more workable model. But those ‘alternative currencies’ are only an intermediate step, and we don’t start from there.
That’s what would change these sad attempts at ‘Ready? Fire! Aim…’ into a more viable ‘Ready? Aim? Fire!’ – and rekindle the fire in our social economy.
wow tom. you’ve put a lot of thought into this! you could consider cross-posting this over on http://p2pfoundation.ning.com/ – i’m sure it would be enticing for that community. maybe add this at http://metacurrency.org/ too.
the financial industry/economics has always been rather baffling to me, so unfortunately i have nothing intelligent to add here, but i’m glad EBD was able to be a platform for you and others to engage in some debate over the issue. i hope you can channel this energy towards initiatives that will help create the next step!
– @venessamiemis 🙂
Yes you can “game” alternative currencies like Whuffie, and through things like derivatives, banks game “real” currency. I loved your discussion of economic restucturing as enterprise architecture.
This is a great article asking all the right questions. I have two comments to make (1) any future currency or trading solution will not be a one size fits all. Much like treating cancer there are thousands of different problems and each has some good solutions and some bad. I think the focus should be on what works, even if it’s on a tiny scale. If Time Banks are working for the elderly, let’s expand on that, if the Berkshares are working to gain wider exposure-increase local/regional business and sustainability…let’s expand on that in other areas. Regional, local, volunteer currencies, QR codes for oscurrency vouchers…it could be we end up with 100 different solutions and no one says they all have to fit together.
(2) Give credit where credit is due, the small advances in new work like oscurrency or metacurrency are really mind blowing if you consider the possibilities they hold for changes to the world. I’m amazed there are not 6 Grameen Bank clones on each street corner in America that is a huge success on a small dollar scale. Let’s recognize the small gains and build on them. Attack each tiny problem, solve it and move on to bigger ones. That’s how it’s done from the ground up. Just my opinion. Rome was not built in a day.
I talk to so many people who say things like, “Bernard von Nothaus introduced me to sound money” or “integrating e-gold into our Egyptian web business made us a success” lots of great advanced have been made in the past few years and they have quietly sunk back into obscurity. There is no one solution that will fit us all, so take each successful advance and build-build-build.
Great article, we’d like to reprint this one in CCmag.net
Mark
Venessa – Thanks for the comments, but perhaps even more for the blog-threads that started this. Brilliant, frankly – some of the best summary-analysis I’ve seen.
“I have nothing intelligent to add here” re the financial industry/economics, you say: if so, bluntly, neither have they. (Neither have I, for that matter. 🙂 ) The whole thing is jury-rigged out from some of the most dumb assumptions I’ve ever seen (‘rational actor’ theory, anyone?) – what you wrote in those two posts was a darn sight more intelligent than most so-called ‘economists’ these days. Humph.
On cross-posting, sure – but I probably need to edit it somewhat first, because there’s quite a bit there that would apply only to that specific conversation, and my somewhat overly-disparaging opinions in places about others’ work don’t really need a wider audience… 🙁
Thanks again, anyway – I really do value what you’re doing and how you do it.
@John – “…and through things like derivatives, banks game ‘real’ currency”.
Yeah, we’d kinda noticed that… 🙁 – and a very nicely rigged game (in their favour) it is too… 🙁 🙁
“I loved your discussion of economic restucturing as enterprise architecture.”
Thanks! 🙂 But it’s actually not an analogy – it is a straightforward application of whole-of-enterprise architecture. What we do in EA is model the overall economy of an organisation in relation to its ecosystem (‘extended-enterprise’); and the principles are entirely recursive, applying in the same way at any scale. So if you think about it for a moment, you’ll recognise that this is exactly the same, just at a larger scale – it is enterprise-architecture.
That’s what I’ve been trying to explain to the IT-centric and, now, business-centric ‘EA’ folks for several years: it’s all one continuum, it’s all linked together, so you can’t just deal with one small part in isolation. You’re one of the few EA folks I know that grasped that point pretty much straight away – for which I was, and am, profoundly grateful. Thank you!
Mark – Many thanks for the comments, though (as per my reply to Venessa above) I really ought to rewrite the post a bit before cross-posting elsewhere.
On your (1), yes, strongly agree that there will not be a ‘one-size-fits-all’ solution – which is what the current money-system purports to be. An economy is made up of a vast number of intersecting ‘enterprises’, each of which – in a possession-based model – needs its own distinct ‘currency’. But the obvious problem that then emerges is how on earth we transfer between each of these local economies? – because as we know all too well from the long history of ‘money-changers’, that too is easily ‘gamed’.
So in practice, to make a global economy work, we either need a single currency that crosses everything, or we have to dump the concept of currency altogether. A single currency sounds a great idea until you realise that that too will almost inevitably be ‘gamed’ by whoever acts as the central banker: to give just one example, look at how the usage of the US dollar as a secondary currency in large parts of Latin America has helped those countries very little, but in effect kept them as vassal-states under US hegemony; whilst I for one cannot see any chance that the US will relinquish currency control to any other state, or (perhaps especially) to the UN. Which in practice means that just about the only viable option in the longer term will be to find a complete alternative to currency-based economies. The local-currency concept pushed by CCmag etc is a useful short-term kludge, but it’s really important to recognise that that’s all that it is: to find something that works, we do have to go much deeper into what ‘economy’ actually means.
On your (2), much the same applies: yes, we do need to acknowledge to acknowledge and celebrate the real work that’s been done so far (though I note the presumably-unintentional irony of the phrase “give credit where credit is due” 🙂 ).
Remember that I’m coming at this from the perspective of an enterprise-architect: and one thing that we do very definitely know from that field is that whilst experiments are always interesting, they need to be constructed and run within the aegis of an overall architecture if they’re to contribute anything of real practical use. This is why I keep hammering away at the need for a better understanding of what an ‘economy’ really is, because that’s what would provide the contextual framework in which experiments with currency and the like can make practical sense.
To give just one example, look at the number of people who’ve assumed, without any actual in-depth question, that some kind of ‘currency’ must be ‘the answer’? We already know that it isn’t ‘the answer’ in most families, in most social/volunteer contexts, in the internals of any functional organisation – so why on earth should we assume that it ‘must’ be ‘the answer’ elsewhere? This is what worries me most of all: there’s a whole mass of really fundamental re-think that just hasn’t been done yet, and because that hasn’t been done, almost everyone is leaping in to construct the same old mistakes in yet another form. We must do better than that – and urgently, too.
But thanks again, anyway – and hope also to continue this conversation elsewhere.
Thank you for your response, regarding, “…we either need a single currency that crosses everything” I agree, how about pure gold as the global currency, but country, state or local brands? After all a gram of Tom’s brand of gold, is equal to a gram Zimbabwe gold or even Ahmadinejad’s gold brand. A gram is a gm. is 1 gram hence the world of digital gold currency now on the rise. Wouldn’t that work?
Again, excellent article.
Mark
@Mark – “How about pure gold as the global currency?”
It’s been tried already. 🙂
Might just-about work if it was a fixed quantity and in guaranteed permanent circulation, but unfortunately practice shows that neither of those would apply. It’s still possible to mine the stuff, which means that those countries that still have reserves of it in the ground (Australia, South Africa, Russia, to name a few) are potentially ‘rich’ – which means either that they can game the system, or other countries will try to take them over to game the system. And a currency only works if it literally flows, hence stockpiling (e.g. Fort Knox) provides an easy means to hold the economy to ransom (literally) and, again, game the system.
As I said above, “A single currency sounds a great idea until you realise that that too will almost inevitably be ‘gamed’ by whoever acts as the central banker”. Unfortunately I didn’t make it clear enough that any currency in a possession-based economy will be gamed. The only way out of that mess is to have no currency at all, and to move to a responsibility-based model instead. (Yes, it’s possible to game a responsibility-based economy simply by avoiding responsibility: but proper transparency protocols make that a non-viable option in the longer term.)
Hope this makes sense, anyway? – and thanks again.