Thursday, September 30, 2010

Scarcity Is an Illusion, no really

Some would say that while non-rival goods like information are not inherently scarce, rival goods like oil are. I disagree. There is the amount of oil that there is. It is neither abundant nor scarce. It just is. What makes us perceive oil as scarce are the humsn systems we have built that create a context for it.

Consider a violin. A violin is a system defined by the interaction of various elements (wood, string, bow). The violin system enables a certain kind of music to be created. If you wanted to use a violin to make percussion, it probably wouldn't work too well. Does that mean the music that's possible to make with the violin is scarce? Clearly not. It just means that the system within which you make such music defines certain parameters. What's more, there isn't anything scarce about the music that's possible with a drum either; it simply enables artistry within a different set of parameters.

Some would say that parameters on systems are what enable creativity in the first place. A person has to be a real artist to get any instrument to perform at the height of its potential. Artistry is only possible because there is a system within which it has meaning.

To continue the analogy in the economic domain, in the broadest sense, our instrument is the Earth. And the Earth has certain parameters. This doesn't make anything herein scarce. Quite the opposite. It simply gives us a system within which we have a chance to be artists. If we are experiencing scarcity, it is only because we are trying to play the wrong kind of music. There is no question in my mind that the new music we will learn to play together will be much better suited to our instrument.

Friday, September 24, 2010

The Core of MetaCurrency

For all the talk those of us at The MetaCurrency Project have gotten into about the meaning of open, the meaning of currency, and various subtleties therein, the core of The MetaCurrency Project is actually very simple. IMHO, it boils down to the following question: What would it take to make the role of 3rd party record keeping irrelevant?

For those of you who need a quick overview, 3rd party record keeping is what a bank does. It is also what a commercial barter organization does and even a timebank. When the records are denominated in terms of dollars, it is an official IRS designation. For those of us comfortable including things likes 5-star ratings in the definition of currency, 3rd party record keeping also refers to Yelp!, Ebay, etc, since they keep the records people make about fellow users.

The ability to record stuff that happened in the real world, and derive useful information from those records (such as account balances, or average user ratings) is obviously very powerful. Just being in the business of 3rd party record keeping can concentrate massive amounts of wealth (just look at the banking industry). What's more, as the failure of many local currencies has shown us, this architecture can be highly fragile, subject to the petty personal politics that so often run rampant in activist circles.

What if we had a way to perform all the same functions, but without the middle man? What if our records could be distributed in such a way that they couldn't be tampered with, and privacy was still protected? We believe this shift would open up vast new possibilities for how we organize ourselves economically, as well as offer a resilience to our economy heretofore unrealized. In essence, that has been what The MetaCurrency Project has been trying to figure out how to do for the last few years. And, this is a more difficult challenge than you may think....

However, I for one would be delighted if someone out there figured it out no matter who it was.

Wednesday, September 22, 2010

Job's Economy

That's Job as in The Book of Job. Yes, it's time to get Biblical. The Book of Job may be one of the oldest books in the Bible, but it actually contains some interesting wisdom pertaining to the new economy.

The basic story is very simple. Job is an upstanding guy who does everything G_d tells him to. Despite this, lots of bad things start happening to him. Job gets pretty upset and challenges G_d saying, "Hey, I did all this great stuff, and look what you gave me!" To which, G_d replies, "What the hell is wrong with you? The universe doesn't work like that. It's way cooler." Then, when Job finally accepts that the universe doesn't owe him anything, he regains all his former wealth.

At the core, this is a story about Quid-Pro-Quo a.k.a. something for something. Job expects the universe to work based on a quid-pro-quo agreement. He does some good, he gets some good. His sense of fair play is deeply offended when it turns out the universe doesn't work like this at all. What's more, we sympathize with Job. We feel his pain because we too often feel as though the universe isn't being fair.

The interesting part is, we've built our whole economy around this faulty notion of how the universe works. Money is the very essence of a quid-pro-quo agreement. I do something for you. I get something back from society. In fact, society actually owes me to the tune of however much money I have. What's more, we believe this core agreement to be at the heart of wealth production. It's nearly impossible for us to imagine how we could have an economy without this tit-for-tat way of doing business.

We forget that this is not actually how wealth is built in Nature. Nature is a complex system that exhibits emergent properties. The type of emergence that underlies true wealth production has almost nothing to do with quid-pro-quo. In many cases, the coming together of seemingly unrelated elements produces wealth far in excess of the sum of the parts. How would you describe that in terms of quid-pro-quo?

G_d says something like this to Job (albeit it not explicitly spelled out with these concepts). What's more, when Job finally "gets it" that being a good human being isn't about extrinsic rewards, his happiness returns.

Here is my strong intuition. If we lessened the degree to which we base our economy on quid-pro-quo we would create a lot more space for the emergence of new types of wealth. Wikipedia, Creative Commons, etc. are examples of this new kind of wealth emerging as we speak. And Lord knows the Old Testament was all for Wikipedia... :)

Wednesday, September 15, 2010

21st Century Property Rights

The question of property is not as easy as it first sounds. William Blackstone, a judge circa 18th century England, defined property rights as "sole and despotic dominion." It's no accident that this formulation coincided with the Industrial Age, which has been largely founded on the premise that control over nature / other is a worthy goal. Our conception of property, while certainly becoming more sophisticated over the last 250 years, has not really shifted from this basic notion.

One of the ways property rights have evolved is that today there are limits to "sole and despotic dominion". In many neighborhoods, I could not paint my house with green polka dots, as this would violate code. So, The State (as a proxy for the community at large) places restrictions on what I may do with my property if I want it to remain mine.

However, I would assert that The State may not be the most effective or efficient arbiter in property rights. Consider the following: the bank can own a completely unused house (appropriately painted), acquired through foreclosure. I doubt many people would claim if pressed, that the unused yet appropriately painted house was more beneficial to the community than my lived-in green polka dot house next door. Clearly something is amiss with the way we assign property rights today.

One thing is clear. Property rights are derived the perceived benefit to the community (or at least non-harm) from one person or group's stewardship of what is owned. I will lose my car if I use it to run people over. I will lose my house if I use it to refine crack cocaine. So, given the rise of online tools that can instantly reflect public sentiment, perhaps it is possible to disintermediate The State as the sole authority in this matter. What if we were to look towards the proverbial wisdom of the crowds as a way of determining property rights? The state has proven itself clunky at best in mitigating modern society. Perhaps there is a way of moving this function of defining property rights out of the state's hands and into a more dynamic, adaptable, and democratic framework.

Imagine a world where property is owned because it is being well stewarded rather than ownership being a priori to stewardship. Much of the worst behavior we see in the economy would be impossible, because the second any firm stopped stewarding their properties for the benefit of the larger community, they would no longer own their properties (intellectual or otherwise). In this world ownership is derived from good stewardship, rather than the other way around.


Wednesday, September 8, 2010

Currency Design Possibilities

I've been deep in the alternative currency community for the last five years or so. Unfortunately, even after the economic crisis of 2008, our movement still hasn't had anything more than anecdotal success. To tell you the truth, this has on occasion gotten me down. There is something deeply unsettling about the mismatch between what is obviously so (the unsustainable nature of conventional money), and how people behave in reality.

Recently, however, I have been feeling a lot more upbeat about the prospects of creating a new economy. I started feeling better when I realized that it wasn't about ME, as a currency designer, creating a new kind of economy. There is an often unspoken assumption for many of us in the currency design world that good currency design is what gets people to behave in new and more sustainable ways. In essence, if you can get enough people to participate in a well designed currency, their behaviors will be incentivized in ever more sustainable and virtuous directions. The more I have become aware of this assumption, the more I have grown wary of it.

The core problem in this assumption is that currencies DO NOT create behaviors. Currency designers DO NOT play puppet master to the unsuspecting and largely ignorant masses. Currencies are adopted and adapted because they support existing behaviors. For instance, when we made the shift to fractional reserve banking, the merchant class already needed a form of money less controlled by monarchs to support an emerging industrial production model. The evolution in currency happened because it supported an ascending pattern of economic production.

So, where do we see an ascending pattern of economic behavior today? While there are lots of experiments in local artisanal production, IMHO these are dwarfed in significance by what Yochai Benkler has called "commons based peer production." This kind of production has been most famously embodied in Wikipedia, open source software, and Creative Commons licensing. Commons based peer production is global in scale, and is made possible by the many-to-many communications technology of the Internet.

The main question for us then, as currency designers, is not how to get people to buy local, or how to incentivize more sustainable behavior. The main question should be how to support the growth of this entirely new type of economic production. Now, in no way I am discouraging folks from experimenting with different incentive structures for the existing economy. I am simply saying the sea-change we need to catalyze will be founded upon an entirely new pattern of production. Imagine what would happen if manufacturing was organized in the same way as Wikipedia. This is not as far fetched as it sounds now that the cost of 3d printing is dropping into reach of everyday folks.

What's most important about this new mode of production is that it is NOT about the quid-pro-quo, something-for-something social contract. The primary motivation for participation is intrinsic rather than extrinsic. Therefore, in the most fundamental way, this new currency will NOT be based on the quid-pro-quo social contract. This is difficult for us to conceive of since all modern money is based on the assumption that producers of value should be incentivized with rewards as determined by the market. Even most alternative money substitutes simply recapitulate this basic pattern. The logic of the quid-pro-quo market goes something like this "I'll provide my service at $50/hour but not $30/hour, and if you can afford it, you are worthy of my time."

Instead, these new currencies will be about making it easy to find the right place to put one's own efforts based not on extrinsic reward, but on intrinsic value. In other words, where will my efforts be the most fulfilling to me and most in harmony with my community? This is about right placement, and about being in economic communication with people all around the globe.

I am highly optimistic that this kind of world is not only possible, but inevitable.

Monday, September 6, 2010

Spontaneous Teams

Recently, my parents were visiting me from out of town. At one point in the conversation I made a quip about how I thought employment was on its way out as the dominant conduit for producing value in the economy. They were interested and a little skeptical, so they asked me to explain further. I quickly realized I had to find a way of communicating these ideas without citing things like Wikipedia and open source since they really aren't that tech savvy.

Then, I remembered I had recently been at a wedding reception where, in a lull between a small intimate brunch and roaring evening party, folks were asked to help set up tables and chairs. A group quickly assembled and sorted out which tables went where, and got chairs around them for the numerous guests who were to arrive later in the day. What's interesting about this vignette is that a team spontaneously assembled to perform a task without a clear "person in charge." Also, once the work was complete the team disbanded just as quickly as it was assembled.

Think how different the above is from our usual employment scenario. At the wedding, the team was self-defined; i.e. no one had to apply to be admitted as part of it. The team was self-organizing; i.e. people were free to lead or to follow as they chose. No one was trying to protect their spot on the team, i.e. no one was afraid of being laid off. Once the work was done, the team disbanded; i.e. we weren't trying to ensure ongoing employment.

I went on to explain that these kinds of spontaneous self-assembling teams have been the mainstay of human culture for as long as there have been humans, but until recently they were only possible on a very small scale. New communications have enabled the same kind of pattern on a much larger scale. What if the dominant means of producing value in the economy was in the context of teams like these? Wouldn't that be a lot less stressful? We could simply trust that there were always projects to work on, and ways our contributions could be valued.

To my delight, this meme seemed to resonate a bit. :)