13 December 2018

Money is Dead

Written by Published in Finance
Money is Dead ©by Jcomp freepik.com

While the working poor are shopping at the local food bank, the smart money is being sucked into a black hole of hedge funds and murky derivatives

Numerical Flatland

Expression of the EmotionsMany blame capitalism for the extinctions that are hastening climate breakdown. But political discussions can easily reduce ecological complexities to a few human-centred dimensions. We have had several hundred years since the French began to align everyone along the narrow axis of ‘left’ and ‘right’. More recently, algorithms became trendy, so mainstream economists are now selling ‘reality’ as a kind of numerical flatland.

Unfortunately, economic orthodoxy has failed to value genuine ‘diversity’ or long-term futures. But maybe the real problem is not capitalism, but money itself. We can all see that it is not trickling down to the needy, as we had hoped. While the working poor are shopping at the local food bank, the smart money is being sucked into a black hole of hedge funds and murky derivatives.


Money is Shiny

goldImage by André KarwathActually, the problem is more a matter of over-scaling, rather than ideology. Indeed, it is the colossal momentum behind the global currency system that allows a few hollowed-out men to hold the world to ransom. It would seem that their insatiable need for more zeros in their bank balances is more important than the future wellbeing of their grandchildren. Money works well because it was designed to ‘add up’, both literally and metaphorically. Unfortunately, although it is simple enough for monkeys to use, living systems are not summative systems.

Five thousand years ago, fiat money emerged as a ‘super-tool’ for building empires. By giving soldiers the means to travel beyond friendly territories it enabled leaders to expand their power-bases. As its users were expected to be strangers it consisted, in essence, of numbers. This proved handy for imperial authorities, who could exercise power at a distance, simply by instructing their legislators and accountants to manage payments, tributes and spoils. Scaling-up became a bad habit, because it encouraged humans to swap personal responsibility for systems of accountability.


Monkey Money

abacusHomo sapiens has been extracting, shaping and collecting shiny ‘stuff’ from the ground for around 3 million years, so converting subtle values and relations into countable units seems ‘natural’ to the monkey brain. We fashioned hard objects into talismans, tools and weapons; prized them for their magical powers and valorised them as tokens of exchange. Although humans are surprisingly inept at counting, big numbers excite us, so we always want more. As Georg Simmel put it, “regardless of the amount, the liveliness of attached hopes gives money a glow”.

It is a pity that human beings find large numbers perplexing, because money consists of digits. We easily become biased by particular numbers and get confused about the difference between qualities and quantities. Interestingly, these idiosyncrasies are similar to those of the laboratory chimps who learned to use money. This is not to say that humans think like chimpanzees. Whereas the chimps choose to spend their cash on berries and sex, most of the world’s richest men are making money out of systems designed to make more money. This is one of the main drivers behind wars, climate change and the current cascade of extinctions.


Money is Inanimate

bar code 24157 1280To be fair, the unit-based nature of money made it more flexible than barter systems. As economists say, it enabled us to trade without a ‘double coincidence of wants’. But, our faith in the arithmetic of ‘dead things’ has made us forget that relations are more abundant and valuable. Whereas money consists of inanimate, storable registers that ‘add up’ in a predictable way, living systems are capricious and adaptive.

In a relational world, diversity is our most precious resource, therefore, if money is to be re-born, it must become more combinatorial. In order to be less forgetful and insensitive it would need down-scaling. Whenever we scale-up organisations we create hierarchies. And, whenever we scale up hierarchies we create new layers of management that filter information and de-sensitise the organisation to its surroundings.


Money is Rigorous

PSM V01 D223 Flint hatchetsToday, cryptocurrency evangelists are telling us to have faith in the god of Blockchain. This is not such a bad idea. Distributed ledgers technology (DLT) offers us the chance to reclaim value, perhaps by dissolving the intrinsically granular, unit-based nature of money. This seems unlikely to happen soon, judging by the popular cryptocurrency terms, such as ‘tokens’, ‘work’, ‘mining’, or ‘units’ that are more akin to classical science than to the creative economy.

Mining logic makes sense if what is mined is homogeneous and plentiful. If so, quantities can be distributed fairly and returns on investment can be quantified dependably. However, when extraction costs rise to meet the product’s market price, a predictable path to depletion makes them ‘uneconomic’. This inspired the economist’s ‘law of diminishing returns’. It supports the pessimistic belief that we must strive endlessly for ‘growth’. Of course, mines do not ‘grow’ or multiply in the sense that crops, livestock, or creative thoughts grow. ‘Economic growth’ merely reflects a faster digging rate, or regarding newly discovered assets as ‘surpluses’.


Natural Profit

If we could bring money to life, would it help users to seek out likely partners in order to ‘multiply’ the opportunities for ecological regeneration? After all, this is how jokes, ideas, or new species proliferate. In some cases this can be achieved with two ‘players’ (making babies comes to mind, here), but two is not a magic number.

CP Quartet Relations Diagram 2016

In literal terms, the word ‘enterprise’ suggests at least three ‘players’, however, the number of combinations needed is limitless. A helpful framework for mapping the process is Euler’s Law, of 1751, which shows why it is more auspicious to design business models with collaborative clusters of at least four players (see figure above). In geometrical terms this transcends the flatland of unit-based money.

Triangle to Tetrahedron

As Euler showed, when you combine more than three things together you get a ‘natural surplus’ of 2 relations. A comparison between the triangle and tetrahedron shows this (see figure above). Triangles exist in two dimensions, but tetrahedra exist in a three-dimensional space. Here, we might use the vertices (i.e. numbers in green) depict ‘players’, or ‘assets’, and the lines (i.e. numbers in red) to depict ‘relations’, new opportunities, or possible synergies. This surplus of two is also found in subsequent polygons, as they scale-up. Ultimately, we can use this is a template for achieving a global ‘synergy-of-synergies’.



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