Life imitates art, even in payments

A few years ago, I took part in an entertaining event at the British Computer Society (BCS) during which my alter ego, Mr. Don Rogers from the Isle of Man Economic College, set out a new payment system. During this talk (you can see the video here), Mr. Rogers proposed the “Crime Pays System” or CPS. Under this system, digital payments would be either “light” or “dark”. The default transaction type would be light and free to the end users. All transaction histories would be uploaded to a public space (we were, of course, thinking about the Bitcoin blockchain here) which would allow anybody anywhere to view the transaction details. This “Light Exchange” is designed to promote an environment of social accountability. The alternative transaction type would be dark. With this option advanced cryptographic techniques would make the payment completely invisible, leaving no trace of the exchange, thus anonymising all transactions. A small levy in the region of 10% to 20% would be paid per transaction. The “Dark Exchange” would therefore offer privacy for your finances at a reasonable price. The revenue generated from the use of this system would be taken by the government to substitute for the loss of taxes in the dark economy.

Pretty whacky, way-out, left-field thinking, yes? Well, I must in all honesty admit that it was not my idea. Like all such concepts way ahead of their time, it has its origins in art, not technology. The idea came from my good friend and wonderful artist, Austin Houldsworth. As you may know, for many years Consult Hyperion ran the Future of Money Design Award as part of the annual Tomorrow’s Transactions Forum. Austin organised this award and he also designed the cover for my book Before Babylon, Beyond Bitcoin. In fact, here he is showing me the machine that he built for the cover photo of the book.

Welcome to the Machine

 

Well, it’s taken a few years, but Austin’s idea is a few steps closer to reality, since Coin Telegraph reported that just such a payment system is being proposed for Russia. And our guess of a 10-20 percent holding tax was remarkably accurate, since what is being proposed in Russia is apparently a 13% tax.

The CryptoRubles can be exchanged for regular Rubles at any time, though if the holder is unable to explain where the CryptoRubles came from, a 13 percent tax will be levied. The same tax will be applied to any earned difference between the price of the purchase of the token and the price of the sale.

From BREAKING: Russia Issuing ‘CryptoRuble’

That’s pretty amazing if you ask me, but it does illustrate a general point about futurology, which is that sometimes the technologist’s roadmap can be a less accurate guidebook than artists’ imaginations.

Whether we achieve a mostly cashless society sooner or later should be left to technological advancement.

From Should We Move to a Mostly Cashless Society? – WSJ

No, it shouldn’t. This is a matter of great importance and with significant implications for society. The strategy should be set by society, not by technologists. And we need to make some big decisions about it fairly soon, otherwise we will allow technology (that is, technology companies) to create an environment that we may not be comfortable with. What might that environment be? Well, it won’t be like 1984 (for one thing, we didn’t need the government to come around an install screens to watch us all the time, we bought them ourselves from Apple and Samsung and Google). I don’t think it will be like Star Trek either, partly because of the physics and partly because of the money-free utopianism. I think it will be more like the future set out a few decades ago by the “cypherpunk” writers who predate the internet and social media but saw which way the wind was blowing. I’m not the only one who thinks that “we are, roughly, living in the world the cyberpunks envisioned”.

There’s a nostalgia around that word cypherpunk for me, because it’s now many years back I saw these visions and was captivated by them. A quarter of a century ago, my Consult Hyperion colleague Peter Buck and I wrote an article for the “Computer Law and Security Report” (Volume 8, Issue 2, March–April 1992, Pages 74-76), asking whether William Gibson’s work was science fiction or informed prediction (clearly, we thought it was the latter). The article (called “What is Cyberspace” [Ref] [PDF]), which tried to explain the idea of cyberspace to a lay audience (this was before Netscape, the year zero of the modern age, so most lawyers had never been online), turned out to be rather popular. I like to think that one of the reasons was the conviction that we were exploring the actual future, not a hypothetical future. I can’t remember where the idea of the paper came from, but I do remember that we chose extracts from Gibson’s brilliant writing to illustrate the concepts rather than trying to paraphrase, and I still get a thrill from reading them now.

That’s king hell ice, Case, black as the grave and slick as glass. Fry your brains as soon as look at you

[From “What is Cyberspace?”]

I loved the idea of the “black ice” then and I love it now. In the Gibson world, Intrusion Countermeasures Electronics (ICE) refers to security software that protects data form unauthorised access, and black ice is ICE so deadly that it can kill a hacker. Wonderful. It came back to me a couple of years ago when I turned on BBC radio at random while driving home, only to discover that someone was reading one of my all-time favourite books, Gibson’s “Burning Chrome”, and the mention of the black ice gave me that chill all over again.

Writing this blog post I can still remember the shock of reading Gibson’s 1984 masterpiece “Neuromancer” for the first time. (Gibson later called this work an optimistic view of the near future because it assumes only limited nuclear exchanges between countries – let’s hope he’s right.) Why was it such a shock? Well, since leaving university I’d found myself specialising in secure data communications. I worked on one of the first secure LANs for the UK government, on secure satellite communications for banking, on secure military networks for NATO, that sort of thing. I understood computer networks, but I didn’t grok them. I didn’t feel what it meant, where it was taking us.

Reading Gibson back then was like lifting a veil from parts of my own brain. I took an artist to give me vision and vocabulary. And what a vocabulary it was. My very favourite William Gibson quote, right after “the future is already here, it’s just unevenly distributed” is about money. It comes from his novel “Count Zero” and it’s about the cashless society. I re-use it shamelessly in presentation after presentation.

He had his cash money, but you couldn’t pay for food with that. It wasn’t actually illegal to have the stuff, it was just that nobody ever did anything legitimate with it.

 Use of Cash in Sweden

As I’ve written before, we are heading toward a cashless society, cashless in this Count Zero sense, where cash will still be around and it will still be legal tender (although I don’t think people understand what a limited concept that is), but it will disappear from polite society and from the daily lives of most people. This vision of a cashless society, not a society where there is not no cash but a society where cash is irrelevant, may have seemed outlandish twenty five years ago, but it’s a pretty accurate description of Sweden now (where only a tiny fraction of retail payments are cash)  and China soon. The future is less unevenly distributed than it was even a decade ago.

[An edited version of this piece was posted to Medium, 16th October 2017].

Don’t listen to me, listen to Christine Lagarde

Now, you may think that all this talk about digital currencies is just unhinged techno-determinism when it comes from me, and you can safely ignore it, but when it comes from Christine Lagarde, the head of the International Monetary Fund (IMF) and pillar of the Washington Consensus, you have to take it seriously. In a talk given to the Bank of England conference on “Central Banking and Fintech” (29th September 2017), she said that virtual currencies [by which she means digital currencies in my taxonomy] could actually become more stable than fiat currencies. She says “for instance, they could be issued one-for-one for dollars, or a stable basket of currencies”. This idea of creating a what is strictly speaking a digital currency board is not new and I was interested to see Ms. Lagarde’s mention of a basket of currencies as a viable option. In my recent book “Before Babylon, Beyond Bitcoin” I discuss this as one of the potential futures for money, with reference to the vision of a former Chancellor of the Exchequer. Many years ago, John Major proposed just such an extremely sensible alternative to the euro, which at the time was labelled the “hard ECU”.

The idea of the hard ECU was to have a pan-European digital currency (it would never exist in physical form) but still be accepted in all member states. I am not alone in thinking that this was a missed opportunity. Keith Hart, author of the brilliant “The Memory Bank“, a book about money from an anthropological perspective, wrote that it was a big mistake to replace national currencies with the euro. He further pointed out that the hard ECU would have meant politically-managed fiat currencies alongside a low-inflation alternative, a plural option enjoyed by countries that didn’t join the euro, like Britain and Switzerland. I couldn’t agree with Keith more.

The hard ECU, or as I used to like calling it, the e-ecu was always a better idea than the Euro but when John Major proposed it, he was ignored. He envisaged a cross-border currency for businesses and tourists to use. Thus, businesses could keep accounts in hard ECUs and trade them cross-border with minimal transaction costs and no foreign exchange risk and tourists could have hard ECU payment cards that they could use across the continent. But each state would continue with its own national currency — you would still be able to use Sterling notes and coins and Sterling-denominated cards — and the cost of replacing them would have been saved.

 Global money

Real Money.

When researching the hard ECU concept for my book, I discovered that the proposal goes back well before Ms. Lagarde and Mr. Major and back into the early days of Margaret Thatcher’s government, in a 1983 report of the European Parliament on the European Monetary System. The proposal was at that time supported across the political and national groups in the parliament, including by the Germans so long as the central bank only concerned itself with stability of the currency (as subsequently transpired). It was taken up by Mrs. Thatcher’s government as a practical single currency for Europe, a means to expand the UK’s financial services industry across a European single market. But it never made it and the later political drive for the euro sidelined it. 

The point is, though, that it was a feasible option and that a digital currency that is backed by a reserve (whether of dollars or some basket of currencies or, indeed, commodities) is a sensible idea. In fact, it’s already being tried in a couple of places. In Kenya, where M-PESA is a private currency backed 1-1 by Kenyan shillings. And in Ecuador, where the government has been trying to launch a Central Bank digital currency. Any Ecuadorian over the age of 18 can open an account for free and transfer money to other people for free. 

An interesting aspect of this otherwise fairly straightforward value transfer system is that is denominated in US Dollars. The US Dollar has been legal tender in Ecuador since 2000, when the post-gold standard “Sucre” was abandoned although, apparently, the “centavo” coins are still in use. This is a practical solution to the big problem of small change under “dollarisation” and most countries that use the dollar still mint local coins: thus, Ecuador uses the dollar as legal tender but mints centavo coins. The government guarantees that anyone who wants to exchange 100 Ecuadorean centavos for a genuine United States dollar can do so. As the economist John Kay noted when he reflected on the coins in his pocket in Ecuador, is in itself an interesting comment on the subject of money. He also pointed out that there is a 50 cent coin minted for the government of Ecuador while the US does not issue 50 cent coins. So “while everyone in the Galápagos or the national capital Quito would accept my 50 cent coin, no one in Washington would”. He went on to note the curiosity that “genuine dollar coins, minted for the US Treasury, have not proved popular in the US but are widely circulated in Ecuador”. It is important to understand that the US Federal Reserve banknotes that are in circulation in Ecuador, stuffed under mattresses in Ecuador and fuelling the less-formal sections of the Ecuadorian economy are in essence an interest-free loan to Uncle Sam. By replacing these with digital currency, the Ecuadorian central bank can reclaim the seigniorage for itself.

All well and good and the ability to transact electronically will also be of the great benefit to the citizens and should cut transaction costs across the economy. If the central bank were to ask the advice of people with knowledge of the creation of a national non-bank mobile payment system (e.g., my colleagues at Consult Hyperion) I am sure that they would be advised to make the system a platform for innovation to encourage entrepreneurs to build local solutions on top of it. The lack of APIs in the initial roll-out of M-PESA was, in hindsight, a mistake and Ecuador could clearly learn from this to capture even more benefits from its transition to digital currency.

Ecuador Demo

 

Unreal Money.

The Ecuadorian Digital Dollar has, I have to say, not been universally well-received. A suggestion for governments thinking of introducing such a system in the future is that it  would benefit greatly from transparent auditing as citizens will not hold the electronic currency unless they are sure that it will remain redeemable at par for US dollars (or other basket of currencies or commodities) themselves. Any suspicion of fractional reserve is disastrous. If the government were to fall prey to the temptation to put more of the digital dollars in circulation than they have (or have the equivalent of) in reserve then, as the Wall Street Journal observed at the time of launch, they will simply be creating doomed electronic assignats that will never obtain traction in the wider economy and Ecuador will be unable to reap the many benefits of its transition away from cash. Christine makes this point herself, saying that the issuing of such a digital currency could be “fully transparent, governed by a credible, pre-defined rule, an algorithm that can be monitored…or even a ‘smart rule’ that might reflect changing macroeconomic circumstances”. I agree strongly: the use of shared ledgers and other such technology may be of maximum benefit in delivering the robustness and availability that a national cash replacement system and the radical transparency that it is required to give people faith in the system.

P.S. In case you see any tweets, newspaper comment or learned articles that refer to the Ecuadorean digital experiment in monetary futures as a “cryptocurrency” please bear in mind that it isn’t.

They are where the money isn’t

When most of us think about bank robbery, we think about people inventing complex derivates and amassing fortunes while the institutions that house them amass fine, bankruptcies and bailouts. But it turns out that your grandparent’s bank robberies are coming back into fashion. American Banker says that violent bank crime has become increasingly less common in the past decade, but that the rate of robberies has ticked back up in recent years.

At first I thought this might be a hipster revolt, like with vinyl records, but that doesn’t seem to be the case. So I’ve no idea. I don’t understand bank robbery. I remember getting into an interesting discussion about bank robbery at a lunch a while back. We were talking about risk and risk analysis. I was trying to make some points about why proper risk analysis like this is a more cost-effective way to proceed than (for example) panicking about newspaper stories on hacking, and that led to a train of thought around cost-benefit analysis for the robber, not the bank. Are robbers put off by thick doors and barred windows and such like? Are robbers deterred by visible, physical symbols of security? Come to that, should be bother with physical security at all in banks?

This is a fair point. So it set me thinking: if you are an amoral sociopath desperate to amass as much money as possible, are you better off robbing a bank or working for it? As a responsible father, I want to help my sons chart the best course for life. Right now, they are at University studying socially useful subjects in science and engineering. Having myself studied science only to become trapped in mortgage serfdom and forced to work until I drop, I am trying to persuade them to become Somali pirates or Wolves of Wall Street, without much success so far. So I understand that side of the equation, but am less certain of the other. Remember that old paper “The Decision-Making Practices of Armed Robbers” by Morrison and O’Donnell. It’s a study of armed robbery in London and one of my favourite papers. It is based on first-hand research (viz, the analysis of over 1,000 police reports and interviews with 88 incarcerated armed robbers).

While it’s about the UK rather than the US, I’m sure the thought processes of the perpetrators must have some similarities. Crucially, the paper notes that “almost all of these robbers evaluated the offence as having been financially worthwhile (aside from the fact that they were eventually caught and punished for their crime)”. So robbing a bank seems like good idea, if you exclude the possibility (in fact, the likelihood) of being caught. I suppose this is standard Jordan Belfort, Bernie Madoff thinking thought isn’t it? Unless people believe they will be caught (and these people don’t) then they only consider the upside.

(One of the interesting snippets it contains is that a great many of the armed robbers in the UK use imitation firearms even though they could have access to real ones. I imagine that in the US the use of imitations is vastly less prevalent, since it’s presumably harder to buy an imitation gun than a real one there.)

So, what to do? While glancing back over the paper I note that the authors say that it doesn’t seem practical to “expect financial institutions and commercial properties to reduce counter cash much more than they already have”. That may have been true when the paper was written a few years ago, but it clearly isn’t true now, since both bank branches and businesses in many countries are becoming cash free. And this is a good thing, because as we all know there is a direct and measurable relationship between the amount of cash out there (more on this later) and the amount of crime. As the paper says, “even when the amount of money obtained was quite small (an element often touted in support of the irrationality of economic criminals), it must be recognised that even apparently small sums may be adequate for the offender’s immediate needs. Hence, gains may be subjectively much larger than they appear”.

Bank robber or management consultant?

 

It’s a stick up

The rewards of armed robbery seem to me, then, as an educated middle-class professional, to be rather low. Yet they are still sufficient to attract the robbers, because their needs are immediate and limited. I want a holiday home in the South of France but the guy in the Nixon mask isn’t robbing a bank to pay his way through college or to obtain seed finance for a start up, he just needs to buy a car or some drugs or whatever. This paper seems, then, to indicate that so long as there is some cash in the till, there will be robberies. This is not an observation confined to banking. A study of the American Electronic Benefit Transfer (EBT) program found that “the EBT program had a negative and significant effect on the overall crime rate as well as burglary, assault, and larceny”.

What they are talking about here are US programmes where benefit recipients are paid electronically and given cards that they can use in shops instead of being given cash. The authors found a 10% drop in crime correlated with the switch to EBT. It seems pretty overwhelming evidence, and even more so if you read the paper, which notes no impact on crimes that do not involve the acquisition of cash. If we can to stop armed robberies, that would surely be an excellent social benefit to the move to cashlessness and would help us to explain the nature of appropriate regulation to legislators.

But back to the specific point about the relationship between bank cash and robberies. With the rewards from robbing banks and businesses falling  armed robbers, like everyone else, follow the money – literally – and so cash-in-transit (CIT) robberies are now the preferred option. We see the same in Europe where countries that have much higher usage of ATMs have much higher CIT robbery rates than countries that have lower ATM usage (see, for example, Sweden and Denmark).

Overall, then, we see another early indication of the emerging post-cash era: Spending on physical bank security is being reduced and spending on virtual bank security is being increased. We do, indeed, live in interesting times.

Central bank digital currency again

Greg Medcraft, the Chair of the Australian Securities and Investment Commission, recently said that “traditional” bank current accounts may disappear in the next decade because central banks will create digital currencies and provide payment accounts to customers directly (Australian Financial Review, 3rd September 2017). This is a topic that I examined in some detail in my recent book, Before Babylon, Beyond Bitcoin. Did I mention that I have a new book out, by the way? This is what the noted British magazine Prospect said about it:

When a book comes along with glowing praise on its sleeve from Kenneth Rogoff and an introduction by Andrew Haldane, Chief Economist at the Bank of England, you know you’ve got something hot on your hands. This analysis of money by one of the world’s leading experts on the subject does not disappoint…

Birch is brilliant at bringing together these disparate historical strands, through the birth of the great European trading centres, up to the present day. The central insight of all this is that money is essentially a technology, just like any other and that technologies change—and improve—over time. In other words, money is not fixed. And it is certainly not just coins and notes.

And what of the future of money—will it be characterised by a drive towards a small number of unified currencies, or towards a multitude? Birch opts for the latter. In future, communities will develop their own stores of value, Birch says, independent of governments and central banks. The growing popularity of crypto-currencies such as Bitcoin suggests that he may have as good a handle on the future as he does on the past.

From What actually is money? A new book examines early civilisations to find out | Prospect Magazine

As you will deduce from this, I think that the way that money works now is, essentially, a blip. It’s a temporary institutional arrangement and it must necessity change as technology, business and society change. These sentiments are not restricted to technological determinists of my ilk. As the former governor of the Bank Of England, Mervyn King, wrote in his book The End of Alchemy”, although central banks have matured, they have not yet reached old age. But their extinction cannot be ruled out altogether. Societies were managed without central banks in the past”. I was reminded of this when I listened to the excellent London FinTech Podcast series produced by my good friend Mike Baliman. In Episode 85 “The Nature of Money, Economic Imbalances & will Central Bank Digital Cash alleviate them?” which Mike made with David Clarke of Positive Money, the idea of central bank digital currency is discussed in some detail. While I understand the reasons why a digital currency is attractive to a central bank (and there are many of them) I’m not convinced that in the long run central banks will retain any sort of monopoly over digital currency. And if they don’t have a monopoly, what can they do to keep the value of their money up and therefore attractive as a store of value?

 I had to think about this sort of thing in some detail when the kind people from Amsterdam Institute of Finance (AIF) and the Dutch central bank (Die Nederlandsche Bank, DNB) invited me to Amsterdam to launch my book in their fair city, so I took the opportunity to run through the “5Cs” model of money issuing from the book and take questions from a very well-informed audience.

DNB_Amsterdam

 

One of the points that I made was that technology is no longer a barrier. The idea of the DNB running something like M-PESA but for Dutch residents is hardly far fetched. There are 26 million M-PESA users in Kenya (as of 2Q17) and Facebook can manage a couple of billion accounts, so I’m sure that DNB could download an app from somewhere to run a few million accounts for the Netherlands. There is a middle way though. The central bank could create the digital currency but it could still distribute it through commercial banks. The commercial banks would not be able to create money as they do now (only the central bank would be able to do this) but they would use their existing systems to manage it. Yao Qian, from the technology department of People’s Bank of China, wrote about this earlier this year.

“To offset the shock to the current banking system imposed by an independent digital currency system (and to protect the investment made by commercial banks on infrastructure), it is possible to incorporate digital currency wallet attributes into the existing commercial bank account system so that electronic currency and digital currency are managed under the same account.”

PBOC Researcher: Can Cryptocurrency & Central Banks Coexist? – Bitcoin Magnates

We had a go at this sort of thing a couple of decades ago with Mondex and its ilk in the first attempts to get bank-issued electronic cash into the mass market. Those efforts failed for a number of reasons but primarily because of a lack of acceptance. It was easy to give people cards but hard to give people terminals. That’s all changed now. M-PESA doesn’t use cards and terminals, it uses mobile phones. I’m sure that when future historians write about the evolution of money, they will see that the mobile phone, not the plastic card, was the nail in the coffin of cash. But back to the point, which is… why bother? What if the Chair of the Australian Securities and Investment Commission is right? Why bother with the commercial banks in this context? Now we are clear about the differences between cryptocurrency and a digital currency, let’s review a few of the key issues:

  • A monetary regime with central bank-issued national digital currency (i.e., digital fiat) has never existed anywhere, a major reason being that the technology to make it feasible and resilient has until now not been available. But now technology is available, and we should use it.

  • The monetary aspects of private digital currencies (a competing currency with an exogenous predetermined money supply) may be seen as undesirable from the perspective of policymakers. Also, as I have mentioned before, the phrase “digital currency” is perhaps a regrettable one as it may invite a number of misunderstandings among casual readers.

  • Digital fiat means a central bank granting universal, electronic, 24 x 7, national currency denominated and interest-bearing access to its balance sheet.

  • The cheapest alternative for running such a system would clearly be a fully centralised architecture like M-PESA but there may be other reasons for want to use some form of shared ledger implementation instead (e.g., resilience).

  • A feature of such a shared ledger system is that the entire history of transactions is available to all verifiers and potentially to the public at large in real time. It would therefore provide vastly more data to policymakers including the ability to observe the response of the economy to shock sort of policy changes almost immediately.

Were we to decide to create a new central bank digital currency issued and managed by commercial banks (let’s call it Brit-PESA) now, of course, we wouldn’t use the basic SIM toolkit and SMS technology of M-PESA. We’d use chat bots and AI and biometrics and voice recognition and all that jazz. I don’t think it would that difficult or that complicated: there would be a system shared by the commercial banks with the funds held in a central account.

There’s a very good reason for doing so. I’m sure you’re all familiar with the Bank of England Staff Working Paper No. 605 by John Barrdear and Michael Kumhof, “The macroeconomics of central bank issued digital currencies”. It says (amongst other things) that 

…we find that CBDC issuance of 30% of GDP, against government bonds, could permanently raise GDP by as much as 3%, due to reductions in real interest rates, distortionary taxes, and monetary transaction costs. Countercyclical CBDC price or quantity rules, as a second monetary policy instrument, could substantially improve the central bank’s ability to stabilise the business cycle.

Did you see that? Permanently raise GDP by as much as 3%. Scatchamagowza. Permanently raise GDP by as much as 3%. Why aren’t we doing it right now! Let’s draw a line under the money of the past and focus on the money of the future. Talking of which, back to my presentation at DNB.

dnb slide

Whether digital fiat is the long term future of money or not (and I think it isn’t), let’s get on with it, whether Brit-PESA or Brit-Ledger or Brit-Dex, and give everyone access to payment accounts without credit risk.  And there’s another reason, beyond GDP growth, for doing so. Writing in the Bank of England’s “Bank Underground” blog, Simon Scorer from the Digital Currencies Division makes a number of very interesting points about the requirement for some form of digital fiat. He remarks on the transition from dumb money to smart money, and the consequent potential for the implementation of digital fiat to become a platform for innovation (something I strongly agree with), saying that:

Other possible areas of innovation relate to the potential programmability of payments; for instance, it might be possible to automate some tax payments (e.g. when buying a coffee, the net amount could be paid directly to the coffee shop, with a 20% VAT payment routed directly to HMRC), or parents may be able to set limits on their children’s spending or restrict them to trusted stores or websites.

From Beyond blockchain: what are the technology requirements for a Central Bank Digital Currency? – Bank Underground

If digital fiat were to be managed via some form of shared ledger, then Simon’s insight here suggests that it is not the shared ledger but the shared ledger applications (what some people still, annoyingly, insist on calling “smart contracts”) that will become the nexus for radical innovation.

Bitcoin isn’t the future of money, but tokens might well be

The noted cryptocurrency investor Brock Pierce was responsible for the first Initial Coin Offering (ICO) of its kind (which was MasterCoin) back in 2013 and he is an investor in a great many companies in the space via Blockchain Capital. He’s a serial entrepreneur with a track record going back many years. He knows about investing in a way that I very much do not. Listen to what he says about the impact of ICOs.

I think what I’ve done is the end of all VC, all private equity, all rates because these are industries that are illiquid… I think the Sequoias of the world will go out of business. I think all the big VCs are done.

From The Wizard Behind the ICO’s Transforming VC

Wow. That sounds like a pretty astonishing claim, hubris verging on the delusional. But the thing is… I think he may be right. To see why, you need to think about the money of the future. In his book “The Money Trap”, Robert Pringle (a former editor of that well-known revolutionary pamphlet “The Banker“) writes that at the turn of the millenium “globalization reached the limits compatible with existing international monetary arrangements”. I could not agree more. There is pressure for change and I think the current cryptomania gives us a window into the future of money. But as I have written many times before, the future of money is not Bitcoin and Bitcoin is not the future of money.

Now I accept that with the price of Bitcoin around $4000 and still climbing, that seems like a brave statement. But Bitcoin $4000 doesn’t mean anything. How do you figure out what Bitcoin is worth? From the market? On the one hand I read that this opaque marketplace is being manipulated but on the other hand I read that Bitcoins will be worth like $1 billion each or something (which makes it all the more puzzling why merchants bother with Bitcoin acceptance, since no sane shopper would spend Bitcoins instead dollars if they are going to go up a thousandfold in the next few years). In the long term, for Bitcoins to be worth something, someone has to want them for some reason. What will they want them for? Shopping? It’s too slow, it was never designed for real time payments. Money laundering? Bitcoin isn’t anonymous enough for mass market criminals (as the FBI guys who stole coins during the “Silk Road” investigation and that BTC-e guy who got arrested in Greece have discovered).  No, I don’t think uncensorability is going to be a good enough business to sustain Bitcoin. The Wannacry ransomware scallywags swapped their Bitcoins for anonymous Monero as soon as they could get them out of their wallets. Bitcoin will, in time, be superseded in these markets by truly anonymous digital money.

If not Bitcoin, then what? Of course, it’s entirely possible that while Bitcoin and other cryptocurrencies may not be the money of the future, they may be the platform for money of the future and I think can erect an intellectual scaffolding to support this claim even if I cannot architect the financial institution of the future that it will be used to build. In my book “Before Babylon, Beyond Bitcoin”, I explore the notion of private money set out by the noted Maltese “lateral thinker” Dr. Edward de Bono. He wrote a pamphlet called “The IBM Dollar” for the Centre for the Study of Financial Innovation (CSFI) back in the early 1990s, in which he rather memorably remarked that he looked forward to a time when “the successors to Bill Gates will have put the successors to Alan Greenspan out of business”. (It was reprinted in David Boyle’s superb book “The Money Changers” in 2002 and you can read it online here at Google Books.)

Dr. de Bono was arguing that companies could raise money just as governments now do — by creating it from thin air. Now, if that notion seems to have resonance Mr. Pierce and his ICOs then, well… yes, that’s my point. Lots of companies are doing just that and they are raising literacy billions of dollars doing so.

WOULD you like to invest in Filecoin, a marketplace for digital storage services? Or Indorse, a professional social network where members own their data? How about Lust, a service “to enable all human beings on Earth to find their perfect sexual partner anonymously?” These are just three of a wave of what are called initial coin offerings (ICOs)… What are they and why are they so successful?

From What are initial coin offerings? in The Economist (22nd August 2017).

The idea of private currency as a claim on products or services produced by the issuer caught my attention two decades back when I first worked on digital money and continues to inform my thinking. For one thing, it makes economic sense. IBM, in de Bono’s example, might issue “IBM Dollars” that would be redeemable for IBM products and services, but are also tradable for other companies’ monies or for other assets in a liquid market. Now, to make such a scheme work IBM would have to learn to manage the supply of money to ensure that the monetary base and its capacity to deliver are matched and that inflation does not destroy the value of their creations, but I’m sure they could get Watson to do that, so it is easy to imagine that such a system could work.

To Mr. Pierce’s point, this would mean a new kind of financial market. A start-up launches, and instead of issuing equity, it issues money that is redeemable against future services. So, for example, a distibuted file storage start-up might offer money in the form of megabyte days that are redeemable five years from now. In the early days, this money would trade at a significant discount to take account of the risks inherent in the venture. But once the file system is up and running and people like using it, then the value of the money will rise. With tens of millions such currencies in circulation, constantly being traded on futures, options and foreign exchange markets, it might sound as if the “money” would be unusable because transactions would be unbearably complex for people to deal with. But as I wrote in “The Financial Times“, that’s not the world that we will be living in. This is not about transactions between people but transactions between what Jaron Lanier called “economic avatars“. This is a world of transactions between my virtual me and your virtual me, the virtual Waitrose and the virtual HMRC. This is my machine-learning AI supercomputer robo-advisor, or more likely my mobile phone front end to such, communicating with your machine-learning AI supercomputer robo-advisor.

These robo-advisors will be entirely capable of negotiating between themselves to work out the deal. Dr. de Bono foresaw this in his pamphlet, writing that pre-agreed algorithms would determine which financial assets were sold by the purchaser of the good or service depending on the value of the transaction… the same system could match demands and supplies of financial assets, determine prices and make settlements. He also wrote that the key to any such a system would be “the ability of computers to communicate in real time to permit instantaneous verification of the creditworthiness of counterparties”, an early vision of what we might now call the reputation economy that I explored in my previous book “Identity is the New Money”. Now, 

Now, two decades on from this description, we have a technology to implement and while the idea using cryptocurrencies as tokens linked to something in the real world  is hardly new (from the earliest days of Bitcoin people were using “coloured coins” to do this), token technology really took off with the development of the ERC-20 standard back in 2015. ERC-20 defined a way to create a standard form of token in a “smart contact” on the Ethereum blockchain. (Ignore the language here :  they are not smart and they are certainly not legal contracts, they are a special kind of application that executes on the blockchain). The use of these ERC-20 tokens to implement ICOs has exploded in recent months. Filecoin, the company that plans to monetise unused computer storage noted in the Economist article above, has just raised $50m+ in token pre-sales to Silicon Valley investors (including Sequoia Capital and Andreesen Horowitz) and another $200m in a public token sale. That came not long after Tezos, which is developing a blockchain competitor to Ethereum, raised $232 million and Bancor raised $153 million in three hours.

Despite these huge sums, there is a lot of uncertainty in the space. The Securities and Exchange Commission (SEC) ruled in July 2017 that certain kinds of tokens are in fact securities and that transactions must regulated. This was hardly unexpected and I certainly think that the ruling was good news. Yes it is causing some disruption right now (one of the largest exchanges, Bitfinex, has just suspended ERC-20 token used for ICOs from trading for US citizens) and yes some people will lose a lot of money and yes some people will end up in jail, but that’s what happens as we move from a Wild West to regulated growth and prosperity. The regulation of ICOs is important because ICOs are more of a picture of the money of the future than Bitcoin is.

As I said in Before Babylon, Beyond Blockchain, tokens may make a real difference to the way the economy works. When the current craziness is past and tokens become a regulated but wholly new kind of digital asset, a cross between corporate paper and a loyalty scheme, they will present an opportunity to remake markets in a new and better way. One might imagine a new version of London Alternative Investment Market (AIM) where start-ups launch but instead of issuing money they create claims on their future in the form of tokens. The trading of these tokens is indistinguishable from the trading of electronic cash (because they are bearer instruments with no clearing or settlement) but there will be an additional transparency in corporate affairs because aspects of the transactions are public. And while the company and observers may not know the beneficial owner of the tokens (because the wallets are identified only by keys), the market will be set up to issue wallets after appropriate KYC. In the general run of things, transactions are private but where there is suspicion of wrongdoing the ownership can be exposed under appropriate legal conditions. With reputations established as an immutable history of participation in transactions, good behaviour will not be gamed and bad behaviour will be on display. Market participants will be able to assess and manage risk, regulators will be able to look for patterns and connections. I’ll be able to see that your assets exceed your liabilities without necessarily being able to see what those assets or liabilities are.

The transparency obtained from using modern cryptography (e.g. homomorphic encryption and zero-knowledge proofs) in interesting ways, as an aside, is one of the reasons why I tend to think of the blockchain as a regtech, not a fintech. As Salome Parulava and I wrote in “Ambient Accountability: Shared Ledgers, Glass Banks and Radical Transparency in Financial Services” in just-published “Handbook of Blockchain, Digital Finance and Inclusion”, these “translucent transactions” mean that we will find ourselves in an era of ambient accountability, where the technological architecture means constant verification and validation instead of periodic auditing long after the trades and exchanges have taken place.  

This is a far more efficient way to manage a marketplace. There won’t be some giant IMF database that manages the new kinds of money. In this market, company perfomance rewards private money holders by improving the exchange rate against other private monies. No coupons and dividends, no clearing and settlement, no hiding the number of tokens out there. The cost of trading these tokens will be a fraction the cost of trading stocks and bonds, which is why liquidity will seep out of existing markets and into these new and more efficient structures. Stephen McKeon, a finance professor at the University of Oregon, summarises this imperative by saying that assets of all kinds will tokenise because they will lose the “liquidity premium” if they do not.

Tokens won’t only be issued by companies, of course. It seems to me that tokens that implement the values of communities (and, because they are “smart”, can enforce them) may come to dominate the transactional space (think of the Islamic e-Dinar and the London Groat). One such community might well be the nation state. In fact, at least one nation state is already thinking along these lines. Kaspar Korjus, the director of Estonia’s e-Residency program, has already floated the idea of issuing tokens instead of sovereign bonds.

Korjus said that the money raised in the offering could be used for a fund jointly managed by the government and outside private companies. This fund would be used to invest in new technologies for the public sector as well as invest venture capital into Estonian companies founded by both natives and e-Residents. Eventually Korjus sees the tokens holding value and being used as a payment method for public and private services both within the country and globally, which would provide a return on investment to ICO participants.

From This European country may hold an ICO and issue its own cryptocurrency – TechCrunch

This is, to my mind, the ultimate answer to “what is money”. Money is something that you can pay your taxes with! If Estonia were to go ahead in this way — merging, essentially, currency and bonds into a single, liquid, circulating digital asset —we will have gone full circle back to the days when government tally sticks were circulating in England. Every day, in every way, the future of money looks very much more like its past.

Mo’ identity, mo’ money, mo’ book

In his book “Sapiens — A Brief History of Humankind”, the historian Yuval Noah Harari writes perceptively and entertainingly about things that are fundamental to our economy and indeed our society: money, trust, reputation and the like. I found his description of the “cognitive revolution” quite compelling, especially where he talks about human beings gaining the ability to communicate information about relationships and therefore reputation (or, as I might simplistically label the basket of concepts linked together here, “identity”). He talks about the ability of the neolithic clan to remember the mutual obligations that bind people together when they can grasp the idea of a future, and how memory does not scale into the settlements of the agricultural revolution, thus necessitating the invention of money. He writes that

When trust depends on anonymous coins and cowrie shells, it corrodes local traditions, intimate relations and human values.

Yet we needed them. The problem, as Harari framed it, is that trade cannot exist without trust, and it is hard to trust strangers (but easy to trust their money – indeed he later talks about this saying “if they run out of coins, we run out of trust”). As society scales beyond the ability of individuals the local (including the money) is given up to the global.

In short, then, when we cannot share memories about information about identity, relationships and reputation we have to come up with some other way of making payments to support trade and increase prosperity. Which leads me to speculate that if there is indeed an identity revolution, a new way of sharing memories, underway because of the transition to online-centric life then we might need to rethink the modus operandi founded on central banks, nation states and fiat currency. As Mervyn King, former governor of the Bank of England wrote in his End of Alchemy, banks and central banks “are man-made institutions that reflect the technology of their time”. 

Perhaps their time is coming to an end. The way that we think about identity today is simply not working (identity fraud in the UK is at an all-time high and still rising). We need some different ideas. The always fascinating Jan Chipchase pointed me to this section of a very thought-provoking Medium piece on identity by Dan Hill:

“How might we be able to think more richly of ‘both/and’ in terms of identity, of being part of nations, cities and the world, of respect for both the local and the global?”

For more identity, not less – Dark Matter and Trojan Horses – Medium 

Yes, yes, yes. More identity, not less. In my previous book “Identity is the New Money” I wrote how social media and mobile phones and cryptography restoring the reputation economy of the neolithic clan but at scale, making the point that while our ancestors lived in one community, we live in many. Community is no longer geography.

In my new book “Before Babylon, Beyond Bitcoin” I explore the intertwined evolution of technology and money, which I hope will provide the general business reader with some useful structure for thinking about the future of banks and Bitcoin, leading to an exploration of community and value. I finish by putting forward the idea that the multiple monies of the future will be linked to the multiple communities we will inhabit and, as the quote above makes clear, the multiple local and global identities of the future.

“Our identity is framed in terms of street, neighbourhood, region, nation, biome — all are meaningful, alongside various forms of communities of interest” 

For more identity, not less – Dark Matter and Trojan Horses – Medium 

My personal suspicion is that while this is certainly true and that these identities will all be meaningful, a generation from now the city identity will be the most important. Indeed, Dan Hill goes on to say that

“Europe has functioned via urban centres for millennia, rather longer than our modern understanding of states. In some respects, this is a more meaningful form of organisation than that relative latecomer, the nation state, for all the benefits that the latter has accrued.”

For more identity, not less – Dark Matter and Trojan Horses – Medium 

Dan makes the point that Manchester and Estonia are similar in population size and while we are all familiar with e-residency of the latter perhaps, rather as Gill Ringland suggests in her financial services scenarios for 2050, e-residency of desirable cities will become a valuable right and the basis for one of a number of demographic asset classes. He goes on to speculate, as I have done, on whether a new Hanseatic League or a new Mediterranean Economic Union might be viable structures. I’m not sure I agree with his views on EU e-residency (because the EU is rather an artificial structure) but it’s certainly an interesting position to discuss, not least because it forms a money-issuing community of the kind that I discuss.

My general view is that we are returning to Harari’s “local traditions, intimate relations and human values” as the basis for trade because those new technologies (mobile phones, social networks and so on) mean that we can recreate the clan, the widespread and diffuse memory of obligations, on a population scale. Hence it is not implausible to imagine that new forms of money will arise that map more closely to the values of the communities they serve.

One last thing. Those communities will not be limited to people. Much if not most trade will be between machines, between my car and your garage door, between my flying car and your Amazon drone. We might see communities of robots developing their own money to reflect their own values. Will we be allowed to use it? I don’t see anyone in Star Trek using money, but something must be going on in the background to allow my starship to use your scarce crystals for power. I don’t claim to have all, or indeed any, of the answers but I hope that my framing of the questions will help you to think more clearly about an inevitable future of more identities and more monies.

By the way, you can buy an advance copy of the new book (which will be launched officially at Money2020 in Copenhagen next month) for the giveaway price of £17.50 if you can put up with having a copy signed by me. The pristine, signature-free copies are £22.50. Run, don’t walk, over to London Publishing Partnership and reserve your copy now.

After the euro, the digital euro

Hello. It looks as if the number of currencies in the world is set to go up again. Across the English Channel, satisfaction with supra-national monetary arrangements is waning.

[Marine le Pen] said she could see the EU setting up another currency like the ECU, or European Currency Unit, which the bloc used for internal accounting purposes before the euro was introduced in 1999.

From China Media Warn Trump of ‘Big Sticks’ If He Seeks Trade War

Now, younger readers may be unfamiliar with the ECU, but I’ve written about it more than once on this blog. The idea of restoring the Franc while simultaneously creating a new pan-European currency actually makes sense and I’m rather in favour of it. Which makes we wonder how she got hold of the draft manuscript for my forthcoming book “Before Babylon, Beyond Bitcoin: From Money We Understand to Money That Understands Us” that the good people at the London Publishing Partnership have agreed to publish in June? Oh well, since the cat is out of the bag, I may as well give you a sneak preview…

I remember hearing the Chancellor of the Exchequer talking on the radio during the great financial crisis. He referred to the difficulties of currency union and spoke about the problems in Ireland, Greece, Portugal and Cyprus. He spoke about the problems of maintaining monetary policy across currency unions between economies with different fundamentals. All true. But he didn’t explain why this is different for the UK. How is the insanity of trying to maintain a currency union between Germany, Luxembourg and Greece any different to the insanity of trying to maintain a currency union between England, Wales and Scotland? The fact that they are in a political union does not alter the facts on the ground: they have fundamentally different economies. The Chancellor was arguing that if Scotland opted for independence, it would be impossible to maintain a currency union between England and Scotland. But surely that is true now! The best monetary policy for England is not necessarily the best monetary policy for Scotland, and technology means that what was optimal for commerce at the time of the Napoleonic Wars may no longer best for the modern economy.

If the argument for currency union is only about transaction costs within economic zones, then former Chancellor of the Exchequer John Major set out a potential way forward in 1990 (although the idea dates from 1983) with his alternative to the euro, which was at the time was labelled the “hard ECU”. The ECU was the “European Currency Unit”, a unit of account set using a basket of currencies, that was intended to help international business by minimising foreign exchange fluctuations. Major’s idea for the hard ECU was a fully-fledged currency with a “no devaluation” guarantee (Hasse and Koch 1991). Whereas the ECU reflected the weighted average of inflation rates in the countries concerned, the hard ECU would be linked to the strongest currency (which would have been the Deutschmark, of course). This guarantee would be backed by a commitment from participating central to buy back their own currency or make good exchange losses in the event of devaluations.

Imagine what that kind of parallel currency might look like today. It would be an electronic currency that would never exist in physical form but still be legal tender (put to one side what that means in practice) in all EU member states. Thus, businesses could keep accounts in hard ECUs, even in a post-EU England, and trade them cross-border with minimal transaction costs. Tourists could have hard ECU payment cards that they could use through the Union without penalty and so on. But each state would continue with its own national currency (you would still able use Sterling notes and coins in British shops) and the cost of replacing them would have been saved.

The reason for doing this is to minimise the costs of doing business across Europe while giving each country control over its own currency. But the more general point that I want to make is that the advance of technology gives us new choices in the way that money works. The way that money works now is not a law of physics: it is a set of institutional arrangements that could be changed at any time. Thus, if anything, Ms. le Pen is not being radical at all. Why have nation-state control over money? Why not allow regions to have their own currencies? Why not use Google Money? Or Islamic e-Dinars?

I’m not the only one who thinks this, by the way. Check this out from “The Futurist Magazine” in September 2012, where as part of a compilation of pieces envisioning life in 2100, the article asks if we will still have money in 2100, and speculates on what form it may take if we do:

It is quite likely that we will still have money in 2100, but it may not be issued by governments any longer.

[From European Futures Observatory]

I couldn’t agree more. But if not governments, then who? One of the things I discuss in my book is my “5Cs” model for thinking about future issuers: central banks, commercial banks, companies, cryptography and communities. My good friend Rob Allen from PwC was kind enough to use this model in Sydney this week and, frankly, if people like Rob are taking it seriously then I know I’m on the right track.

It’s time to start thinking about the future of money and not just because I have a book about it coming out in June (did I mention that before?) but because the current industrial age monetary arrangements do not support the post-industrial economy.

The Wall

The American President recently re-iterated his plans to build a “beautiful” wall along the border with Mexico, for no reason that I can fathom except to provide stimulus to the Mexican economy at a difficult time. As a good friend of mine says, we should not get too exercised about what is after all nothing more than a harmless public works project of the kind often undertaken by national leaders to secure a place in the national imagination.  

I don’t think it will become an object of awe and admiration, though. This 1,000 mile long, 40 foot high barrier, a vanity project of unusual cost and complexity, may never become a tourist attraction to rival the Great Wall of China (the most astonishing man-made object that I have ever seen in my entire life, and I’ve been to the City of Manchester Stadium) but it may become a new Maginot Line for future generations to study.

Who knows. All I can say with absolute certainty is that it will make no long term difference to smuggling, immigration or the security of American citizens.

How do I know this?

Well, we Brits have been there and done that. We built a wall. We built a wall that was twice as long as Mr. Trump’s wall. And there is nothing left of it today. Nothing. Absolutely nothing.

Dronning victoria

In the days when Her Majesty Queen Victoria was not only our ruler but also the Empress of India, the British administration in the subcontinent had, amongst other depredations, increased the hated salt tax (which later spurred the noted insurgent and rebel Mahatma Ghandi to begin his campaign against the many benefits of British rule with the Dandi March). The salt tax was particularly despised because hundreds of millions of people in India’s interior were dependent on salt from the coast to survive.

The British salt tax was not the first (under the Mughal Empire, for example, there was a salt tax of 5% for Hindus and 2.5% for Muslims), but it became a cash cow under British rule and the price of salt more than tripled. The natural result was that salt was smuggled from the Bay of Bengal to the interior.

Other things were smuggled too — opium, people and such like — but it was the smuggled salt that upset us Brits the most. So the East India Company decided to do something about it. Remember, India was ruled by the Company until 1858, when it was taken under the wing of the Crown following the rebellion of 1857.

The Company decided to build a wall down the middle of India. A big, beautiful wall. And they made the Indians pay for it.

This wall, or the “Inland Customs Line” as it was called, turned out to be quite hard to build. In large parts of India, there wasn’t the rock needed to build it or bricks to build it from. But a British civil servant thought laterally and came up with an amazing solution. Allan Octavian Hume, a man who remains unknown to the masses but who should be as celebrated and revered as a Barnes-Wallis or a Dyson, was appointed Commissioner of Customs for the North West Province (1867-1870) and the Line was officially his problem.

Allen Octavian Hume A British innovator: political reformer, ornithologist, botanist and one of the founders of the Indian National Congress.

Hume had noticed that along various sections of the Line, thorny hedges had taken root. In 1869 he began to experiment with different shrubs. As a result of his work, the British were able to grow a thorny barrier that stood in for rock, bricks and other traditional materials. A green alternative had been found!

From Above Top Secret.

Yes. You read that correctly. The British built a 12 foot high thorny hedge to stop the smuggling of salt, opium, cannabis, sugar and who knows what else. This living wall, as described in one of my all-all time favourite books, Roy Moxham’s The Great Hedge of India, eventually extended for some 800 of the Line’s 2,500 miles 

Now, it wasn’t only smugglers who found the Company’s Line  inconvenient. The British Viceroys of India didn’t like it either because it was an impediment to trade. They did not feel that the tax collected to the benefit of the East India Company would compensate for the reduction in trade and, in the end they won. You can read about it in “The Economic History of India Under Early British Rule: From the Rise of the British Power in 1757 to the Accession of Queen Victoria in 1837”, where Romesh Chunder Dutt writes:

The East India Company would not willingly sacrifice even a revenue of £220,000, or any portion of it, for the prosperity of the internal trade of India. Professing the utmost anxiety for the material welfare of the people of India, they were unwilling to sacrifice a shilling to promote that welfare.

By 1872, the Line had a staff of 14,000! There were customs posts every mile, and in order to pass through you had to pay the tax. No tax, no deal and you would be detained. Many of the customs posts had a police cell where smugglers could be detained on the spot. These were called “chowkis”, the Indian word for a police station (from the Hindi cauki). This is why English people of my parent’s generation (my grandfather served in the British Army in India in the 1930s and my mother lived there as a small girl) still refer to prison as “chokey”, the anglicisation of the word.

So what happened to the smuggling? In some places the smugglers just drove laden camels through the hedge, in other places they threw the salt over it. Smuggling was reduced, but at what was eventually seen as an unacceptable cost because apart from the running costs it led to clashes between smugglers and custom officers (including an event in 1877 when two customs men attempted to arrest 112 smugglers, with predictable results) as well as stimulating bribery and corruption. Dutt again:

evils had grown under British Rule as compared with the state of things under the Nawabs of Bengal; manufactures were killed and internal trade paralysed by the Customs’ Officers who were paid so low that it was possible for them to live only by extortion; travellers were harassed and the honour of women passing through the lines of customs houses was not safe; and that this huge system of oppression was maintained for the sake of an insignificant revenue.

In the end, the Viceroys won. After all of the work it took to build this incredible artefact, in the end it was abandoned. Work stopped in 1879. When India became independent in 1947, the remnants of the hedge were torn up. In some parts of India, the Inland Customs Line provided the only surveyed straight line and so it was used for the route of highways in the new country, which is why nothing remains of the Great Hedge of India. No Ozymandian testament stands as a reminder.

The wall was an exercise of corporate power, not a sane economic proposition, and what eventually ended the smuggling was tax reform, as it always has been and always will be, but that’s a story for another time.

 Sir John Strachey, the minister whose tax review led to the abolition of the line, later described it as “a monstrous system, to which it would be almost impossible to find a parallel in any tolerably civilised country”.

So, my advice to Mr. Trump is to create a cheap, green and sustainable wall out of thorny cacti, which flourish in abundance in places like Texas and New Mexico. After all, since the wall won’t make any difference, why waste money.

P.S. I notice that there are expert tunnellers in Mexico, so the wall needs to go down about 50 feet and I’m not sure cacti can really help with that, sorry.

P.P.S. Exciting update! One of my favourite BBC radio programmes “Long View” with Jonathan Freedland recorded an episode about the Great Hedge following this blog post!

Freedland Twitter

My new favourite property is “everywhereness”

I’ve been reading The Four-Dimensional Human by Laurence Scott. It’s subtitled “Ways of Being in the Digital World” and I found it thought-provoking in a very positive way. I particularly like the core conceit of social media as another dimension, outside our normal time and space, a dimension we are able to traverse as starships are able to traverse our universe through wormholes into parallel spaces. Think of it as a kind of Flatland of our time, explaining spheres to squares, so to speak.

Everywhereness” describes how it feels when there is no longer any experience – meeting a friend, looking out of a window, feeling momentarily exasperated or exhilarated – that is particular to that moment, that place, those people. Social media make each moment four-dimensional.

This makes complete sense to me, and makes much more sense than Interstellar did (that was dreary in all four dimensions, and I especially hated that stupid robot TARD). Everywhereness. What a great word.

Of course, since the days of Flatland we’ve had Einstein and the idea of space as the fourth dimension. Perhaps it’s time to readjust the paradigm. Scott makes me that that as I traverse the mundane plane, tracing out a four-dimensional time-space trajectory as envisaged by Einstein, I’m also tracing out a five-dimensional time-space-media trajectory. You may not know my exact location and momentum simultaneously, but you may be able to deduce strong approximations from my Twitter feed.

Small is beautiful

In 1657, Blaise Pascal made a comment in a letter. In English, it translates as

“I have made this longer than usual because I have not had time to make it shorter”.

[From If I Had More Time, I Would Have Written a Shorter Letter | Quote Investigator]

I love this quote, and I’ve heard it many times. The first time I heard it I think it was attributed to Lord Palmerston or Teddy Roosevelt, but that’s by the by. It’s a great quote, and it came to mind when I was talking to someone about Twitter. I enjoy being forced to squeeze a thought into 140 characters and it makes me work and it makes me appreciate the work of others. As Pascal was saying, it’s more work to make a point that way, but it’s better.

Supposedly US President Woodrow Wilson said something along the same lines in 1918 when asked how long it would take him to write a speech. I’d heard this quote before, and it is one of my favourites, but it accords so closely with my own thought processes.

“That depends on the length of the speech,” answered the President. “If it is a ten-minute speech it takes me all of two weeks to prepare it; if it is a half-hour speech it takes me a week; if I can talk as long as I want to it requires no preparation at all. I am ready now.”

[From If I Had More Time, I Would Have Written a Shorter Letter | Quote Investigator]

If you’re wondering why I bring this up, it’s because there is going to be a TEDxWoking! Oh yes, Woking is finally on the post-modern intellectual map. And what’s more the organisers have asked me to be one of the speakers, which I’m very excited about, partly because it’s flattering and partly because it’s an opportunity to sit down and (as Wilson indicates) spend around a week working on a great talk. So now, whereas I would have no problem at all giving a an hour long talk on half-a-dozen different topics at the drop of a hat, I’ve got to think about picking one topic and squeezing it down into 18 minutes.

Now, as you may know, I’ve given one of these talks before. (And to be honest, if I’d known how important it was to get on the TED home page for a weekend I’d have put more effort into !) It’s still online at TED and you can watch it here if you like:

So. I’m not sure what I’m going to talk about in Woking in January, but I think I might do something about the future of money. Something about communities and cities and decentralisation. Something about the economy and London and Jane Jacobs and Gill Freehand and the C50. I’m considering “Never mind the Euro, get us out of the Pound”. What do you think?

In the future, everyone will be
famous for fifteen megabytes