Oikonomics: a social life of money

Neural fingerprints - the scientific roots of individuality

Finally, the ‘neuro’ debate has been allowed to go beyond the ‘big brother’ / zombies/ brain in the vat simplicity demanded by the journalistic interview (mainly due to an impressive collective resistance by two scientists on the Today programme this morning). Despite the best efforts of my toddler to impose her own subjectivity onto proceedings ("what do you mean I am not the centre of the world for 20 seconds!?") the gist of the argument was that of ‘neural fingerprints’ – and the implication that, as demonstrated so brilliantly in the crowd scene of life of Brian, ‘We are all individuals’.

If I am prepared to allow my brain to be fully scanned then, the theory is that it should be possible to predict my response to situations, based on a genome style analysis of my particular chemistry and wiring – such as my response to perceptions of fear or the communication of ‘sell’ / ‘buy’ messages by others. The step forward is that it moves us on from the overly reductive 'behaviourist' perspectives and allows the individual to exist beyond a purely subjective ontology.

The implication for the current situation (perhaps as a throwaway line by one of the interviewees) was to remind us that efficient markets require independent thought and decisions, i.e. we need to stop behaving like ants sniffing the wind to see what to do but instead become rational thinkers. The interviewee seemed to think that the current generation were past saving (i.e. they are already too 'programmed' to follow signals like a herd), but that would go counter to many of the trends that can be observed concerning individuals and their use of money - particularly on the internet.

It is the privilege of doing ethnographic research that you get about as close as you can get to experiencing the decision making (and attendant cultural world view) of an individual, in the actual act of decision making. In spite of the need ultimately to generalize, this has always been the touchstone of ethnography’s ability to change a perspective on a particular problem or issue. It is good to know that what has always been intuitively ‘true’ – that we are not reducible to a set of behaviours (I am not a ‘Clubcard’) but instead need to be looked at as ontologically unique ‘things’ whose nature and social life contribute to both an individual and collective set of meanings called ‘culture’ is also being asserted by the world of science.

Vive la difference!

The meaning of 'global'

There have been many litres of ink spilt on globalization, I wonder how much is being re-written as the delegates at Davos survey the significant empty seats at the previous high table of global chit chat?

A few conversations over the last couple of weeks have struck me about the way the idea of global is framed as ‘the other’ in direct contrast with the ‘local’. With the current blame game very much seeing this problem (in the UK) as derived from the global hoi barbaroi it is hard to frame the alternative ‘economy’ in terms which don’t imply a regression to some form of localism.

Keith Hart’s ‘The hitman’s dilemma’ frames the debate differently – between the impersonal world of business and the personal connections which get tied up in it. This seemed to be the gist of the debate at webank – how does the world of business translate into the personal world of money inhabited by the likes of zopa without creating such a dilemma (and all the attendant costs and bureaucracy that would result from the attempts to regulate it)?

Another look at the meaning of global might be a useful startpoint. The ‘experience’ of being global (such as told in Pico Ayer’s book "Global Soul" or more mainstream in the film "The Terminal") seems fundamentally transient. Pico Ayer travels the world looking for home, Tom Hanks is a man who creates home in a fundamentally non-place world of the airport.

Globalisation seems to be a function of the technologies that create freedom of movement or freedom of action (even freedom from the constraints of actual physical movement). This dominant imagining of ‘global’ – of free flowing capital, people, ideas, information does not appear in itself ‘negative’ or somehow immoral. The problem perhaps is that individual societies (the polis states of the global economy) have not fully adjusted to the consequences this freedom creates. We can no longer rely on the conventional mechanisms for the creation of trust and relations which serve as a ‘regulator’ (in the sense of a the regulator on a steam engine – you know, one of those whirling metal things that spreads out the faster it gets and slows the machine) but need to create new ones.

In the selling of the idea of zopa we found it useful to talk about it being ‘an ebay for money’. I think that the VC’s translated this in terms of the connotations of ‘markets’ and ‘trading’, but my personal perspective was that it was also analogous to the creation of a community of trusting individuals without recourse to the traditional methods of personal connections. This also led us to challenge the conventional models of ‘underwriting’ and their reliance on the statistical models of the ratings agencies which struck me as being based on an assumption of distrust of my motives (i.e. I start from zero and work my way up in your estimation by being ‘good’ in an empirical sense). These were important to maintain a system of regulation which would manage the growth of the community without trying to constrain or control it too much.

If the outcome of the credit crunch is a global bureaucratic economy (Lenin must be smiling in his mausoleum) based on empirical models of trust creation then perhaps it’s time to sell up all property and join a proper commune. Sad to say, my experience yesterday as a small business trying to renew my overdraft suggests we are on the cusp of just such a reaction - a box ticking exercise in ‘relationship’ and ‘risk management’ if ever there was one and certainly not one that will help get the ‘flow’ of money going again.

The real cost of dying...

I often tell the story of the insecure smoker I observed needing a cigarette to give her comfort after a particularly hard hitting anti-smoking campaign which left her feeling both over-weight and low in self esteem after just 30 seconds of well meaning, but ultimately de-humanizing nanny marketing.

 

This poster struck a chord with me for understanding people and their money in the current crisis.  Am I like a smoker who has woken up to the real costs of smoking compelling me to put a halt to my debt fuelled consumption?  The danger of this advertising is that £1700 seems cheap compared to what I spend on going out and boozing on a Friday night, or having dinner out – all things that also shorten my life in many ways but would make a longer life much less interesting… (imagining myself as a target audience 20 something as opposed to my reality).

 

What value does that money have for me anyway?  The advert doesn’t ask what I could do with the money only that I should save it – for what? A rainy day?  To have a flutter on the horses? Feed my children? Pay off my credit card?  Give it to charity?  Simon D-J’s postabout the value of thrift covers some of the more externalized implications of the transformation in our perception of the value of money.

 

So this poster is saying that the (compelling) cost of smoking is the money that it takes out of my pocket – but unless I am short of money why should that matter?  Isn’t it my choice what I spend my money on?  In a perverse way maybe I smoke to show that I can afford the habit?

 

I have always found the idea that accounting for what we do somehow makes it more real and tangible as based on a faith in accountancy to tell the truth which is not necessarily reflected in everyday life.  It assumes that the ‘substance’ of money is its value as a medium of exchange or store of value. While these are certainly ways that money is used and valued within the capitalist system it doesn’t necessarily translate into a meaningful value in the mind of the consumer.  This ontology of value is challenged in Simmel and from sociology and beyond.

 

It  is an overused term but perhaps what has been broken is not the connection between the real economy and the world of finance (as if the money of everyday people was somehow more real than the money that exists within the money markets), but the connection between economic activity and value created in the moral (meaning producing) economy of our everyday life.  Interestingly, until the credit crunch took over the news, we were beginning to connect our use of a different economic commodity with our moral economy – namely energy – my view is that money could learn from the mainstreaming of the sustainability agenda with a view to building this new ‘global’ (horrible word) order that was yesterday's headline.

 

Why we spend?

Are you are a glass half full or half empty person? Are you a bull or a bear? Are you pessimistic or optimistic?  Are you Libran or Pisces? Chelsea or ManUtd?

 

Time and again the assumption appears to be that appealing to some questionable psychological or behavioral notions is going to pull us out of recession.  I guess that a lot of it is grandstanding (being seen to be doing something, otherwise what do we pay you for/ vote for?) but it does rather divert attention from thinking about what really will propagate those ‘green shoots’ which are currently so taboo to mention.  Is it really pessimism that stands in the way of a new "global order"?

 

Perhaps more to the point, this recession is about ‘why we borrow’.  We are not the Germans sitting on piles of what we would call ‘dead money’ in our Sparkasse accounts. The only way that we can get spending again it to re-configure our relationship to borrowing and debt (or investment and credit as it has come to be know by everyone from the Chancellor down).

 

The transformation from borrowing to investment, from debt to credit offers some clues to how we might be able to avoid this recession becoming worse than it needs to be (worse in the sense of needless loss of jobs, skills, family breakdown, crime etc as opposed to a collective painful wake-up call….)

 

The driver of this transformation may well be interpreted as an infectious optimism (I once heard a senior director in a bank referring to her second home as her ‘pension’), but it could also be seen as an infectious search for meaning and identity.  The use of credit was no longer limited to ‘non-productive’ uses – such as holidays and food which only produced 'hangover consumption' where payment for goods consumed long ago literally hang over into the next months – but was associated with productive uses of money (specifically investment). 

 

Credit was equivalent to ‘wealth’ and generated opportunity for all.  This had the effect of cleansing all debt as ‘credit’ and creating a momentum which by default or design even that most thrifty and avaricious of organizational cultures, the Treasury, (with their creation of the language and world of PFI) embraced.

 

I am not sure that the transformation back (from credit to debt, from investment to borrowing) led by the banks and embraced by the man and woman on the high street has its roots in a sudden collective onset of pessimism.   The unraveling of the myths of ‘the end of history/uncertainty’ (specifically boom and bust), ‘banks being places to ‘keep’ your money etc has prompted a collective shift of perceptions of what money is for and more importantly how you use it to keep yourself healthy, wealthy and wise.  The new world order needs more than a mechanic - its needs a whole new philosophy of money (time to dive back into Simmel!).

 

It is interesting to note that (so far)  www.zopa.com – the market is not suffering from any psychological frailties that I can perceive.  Whether or not I am pessimistic in my outlook is not changing whether there are people out there willing to borrow my money as a rate I am happy to lend at.   

 

The difference is that my money means something different on zopa to anywhere else I might keep it (increasingly in accounts which are less productive than a mattress).  The old cliché ‘making your money ‘work’ for you actually feels true on zopa, in the sense that my return is connected directly to the efforts and employment of others who repay my help of a loan with money.  I may be realistic that some people are going to default on my individual £30 investment in their pursuit of whatever it is they want to pursue but that it built into my expectations already.  Zopa was never sold to me (and never claimed to be) a panacea to ‘boom and bust’ – it is just an alternative way of humans getting together to ‘make money’.

 

One of the challenges of launching zopa was finding language to describe what it meant to lend and borrow between one another – I think that it is getting clearer by the day that putting the social back in ‘social lending’ is perhaps something that other areas of the economy would benefit from as well.

P2P finance. Ungeeked. - NESTA seminar last night

A short, but stimulating seminar last night hosted by NESTA on P2P finance provoked some fresh thoughts on how to make sense of the experience of being ‘on zopa’.  I think that the overall aim of the blog www.webank.org.uk   is valid in trying to balance the technological debate (be it business models or platforms) with some insights into the experience of being a lender or borrower on a p2p network.

 

While feeling a little bit like a Labour back bencher (with my obvious loyalties to the zopa approach) asking a question, it was driven by the good intentions or nagging doubt that there is still something missing in the external analyses of p2p finance.

 

The clue is in the language.  Money is not just finance. Or rather finance does not have a monopoly on the meaning of money.  Banks create a particular form of money (credit essentially) which is important for making our economy go round, but this shouldn’t fool us into thinking this is the only meaning of money that has currency in everyday life. 

 

As mentioned below, Athenians differentiated between eranos loans whose ‘interest’ was contained in a potential future reciprocation by the recipient of the loan (with interest – as conforms with Mauss’s analysis of gifting) as opposed to lending for ‘profit’ where interest replaced the reciprocal obligation between strangers (as strangers were unlikely to do a favour in return).

“Interest” on zopa is a hybrid between the impersonal and the personal (for a great pamphlet on this read Keith Hart’s "The Hitman’s Dilemma") between the idea of profit and gifting. As such, my money invested (and borrowed) from zopa has a different meaning and value to my deposits in egg and I have a different motivation in my desire to make a return. 

 

A further thought which I want to develop - the idea of the 'sustainable economy'.  The growth of ‘zopa’ is based on the size of the community (which actually increases its sustainability in my view) rather than the growth of profit (which ultimately would not be sustainable and would create a market correction…..). 

 

Money (as profit) is not the only good … and therefore not the only justification for my actions as an individual.

Classical Allusions - Lending and Borrowing in Ancient Athens

I am re-reading Lending and Borrowing in Ancient Athens by Paul Millett – a scholarly read to say the least but then classical social history never claimed to be ‘sexy’ as such! However, Millett’s insights on how attitudes and experiences of credit and finance in the ancient world do provide some interesting perspectives on ‘contemporary’ money.  Most of his evidence comes from the Athenian law courts, but he also highlights Plato’s Utopias (Republic and Laws), which deal with the question of credit.

 

Plato makes a distinction between the archaic/classical system(s) of ‘eranos’ credit – lending without interest between friends, family and kinship networks is allowed in Plato’s ideal state as it was seen as key to preserving citizen solidarity.  Plato’s objection to more formal credit relations (based on interest loans or loans via banks/money lenders) reflects his conservative (small c) politics where …

 

“Socrates identifies interest bearing loans as responsible for destabilizing the oligarchy, leading to democracy.  In brief the wealthiest citizens are presented as abusing their positions of power by encouraging the less well off to spend heavily and run into debt.  This is done deliberately so that the wealthy may lend them money  (eisdaneizontes) as a prelude to buying them out, so becoming still richer and more powerful.  The outcome is a large body of disaffected people burdened with debt, but the danger they pose is ignored by the wealthy (555E):

 

“these money makers (chrematistai) with bent down heads, pretending not to see them, but inserting the sting of their money into any of the remainder who do not resist, and harvesting from them in interest as if it were manifold offspring of the parent sum, foster the drone and pauper element in the state”

 

… Plato’s broad preoccupation with interest bearing loans arose out of the threat he perceived that they posed to the unity of the polis – the rich get richer and the poor get disenfranchised.”  (Millett, Lending and Borrowing in Ancient Athens 42-43).

 

Millett’s thesis – that Athenian 5^th and 4^th century BC finance was complex and sophisticated without being ‘proto-capitalist’ or free market in its ethos (instead reflecting the complex situation of social relations as they evolved in the polis over centuries and the complex mix of social ideals and practical compromises that make up the Greek or any other cultural context) is an important one when considering the source of ‘where next’ for money in the 21^st century AD.

Goldsmith's Performance Conference

My brain’s performance is a bit below par today as a result of performing a sustained effort to absorb what was a very stimulating conference organized by Goldsmiths on "performance".

For me the sign of a good conference is that is gets you thinking – and it was an extremely useful warm up to starting some fieldwork on the social life of money. I have used performance for thinking about brands for a long time (more as an analogy than any theory) mainly to break away from the idea that the written account of the brand should be privileged within a company but it was useful to watch a performance of economic (and other) sociologists talking about the concept in many different ways.

One area which I think could still to be addressed (and hence why I want to spend a year in the daily life of money in the UK) is to expand the analysis of performance beyond synchronic accounts (the ‘live’ account of being in the audience whether as actor/agent or actor/ethnographer etc) to more diachronic analysis of the creation of meaning through performance and specifically ritual (which was mainly alluded to in some papers in terms of habit/disposition).

A thought which came (as they often do) after the event, was the recent minor controversy about Yorrick’s skull. A quote from the theatre that decided against honouring the will of a dead pianist highlighted an interesting element of how performance works as a social or cultural activity in the creation of meaning or experience:

"As a company, we all felt most privileged to be able to work the gravedigger scene with a real skull... However, collectively as a group we agreed that as the real power of theatre lies in the complicity of illusion between actor and audience, it would be inappropriate to use a real skull during the performances, in the same way that we would not be using real blood, etc. It is possible that some of us felt a certain primitive taboo about the skull, although the gravedigger, as I recall, was all for it!"

Consumer confidence as the suspension of disbelief?

The need for a point of view

About 4  years ago, I sat down with Richard Duvall – at his home in a barn conversion that served as an office and ‘thinking space’.  He had left egg a few months previously when it was taken over by its backer, the Pru, because it no longer offered the opportunity he had originally envisaged – namely to change the financial services market for the better.  His problem was not what to do next, he had many fingers in many different corporate pies, but rather a nagging feeling that he lacked what he called “a point of view”. 

 

When he co-founded egg, he said, he always had a really clear point of view on what was needed by customers for their money.  Consumerisation was the watchword of the internet boom and bust, whereby customers were using ICT to take control of their service and financial services were no longer being perceived as some form of exclusive club based on traditional institutions. He felt that my work ‘deep hanging out’ with consumers offered the opportunity to develop that point of view in conjunction with academic thinking on the impact of technological innovations and revolutions on markets and creation of economic value.

 

The problem with consumerisation was that a number of banks and brands had not respected the underlying social and cultural contracts that underpinned their institutional status with customers as demonstrated by the sheer number of miss-selling scandals which had hit the industry in the previous 20 years – from endowments to payment protection insurance.

 

The arrival of other escapees from egg led to the creation of Zopa (www.zopa.com) which was the product of the development of that point of view.  Zopa was based on the simple insight that ‘consumerisation’ was a misnomer.  The reality was that individuals weren’t content with just being ‘customers’ of a brand – they wanted to be part of the story – to co-create ‘meaning and value’ using the new technologies and connections afforded to them.  The driver of this trend was the desire for ‘authenticity’ – the perception that our choices reflect and create ‘who’ we are both to ourselves and to our social networks. If ‘being a customer of a brand’ is the best that I can create from my choices in the high street then I will go somewhere that offers a more personally meaningful experience.  These relations, it was hypothesized, will take on a meaning and value in their own right which will transform the perceptions of the money and money products which enable them ( in the case of Zopa – borrowing was seen in terms of a more equal reciprocation and collective strength of individuals in the mode of friendly and building societies of the Victorian era).

The credit crunch is in part a product of a collapse of trust in the models (economic, business, strategic) WITHIN the banks which created them and also a collapse in trust in the authenticity of relations between banks and their customers.  If we are wrong about the world, the thinking perhaps goes, then who else has it wrong? The resulting loss of loan capital is driven by this collapse in social capital.

Research therefore, must do much more than just tell companies what ‘customers are thinking and doing’, it now plays a role in establishing the basis for the recreation of the necessary social and cultural capital that will enable money to ‘flow’ and ‘form’ in new ways again.