Oikonomics: a social life of money

A magna carta for money?: reflections on a week of talking about 'the long now'

 
Many of the questions being raised by discussing 'the long now' of money and finance at SIBOS are existential ones.  Unfortunately I am not convinced that many if any banks are willing to consider existential problems; despite that being the elephant in the rather big room that is SIBOS.

It is hardly surprising, seeing how the most of the banks present at SIBOS seem to be feeling somewhat existentially challenged; reduced as they are to considering mainly short term issues of liquidity, capital (or lack of it), risk (see the previous two issues) and focusing on making money from the bread and butter of banking (payments).  The Long Now team will be prefacing their summary to the plenary session today with a video which points out how and why banks are doomed in the style of Hitch Hiker's Guide, only without the "Don't Panic" reassurance that there is a manual of 'how to get out of this hole".

I am not sure that this will elicit 'engagement' as such from an audience of bankers, which is a shame because asking these sort of questions might help them see beyond the present crisis and work out what sort of banks we need in the future - based on the binocular hindsight of the long now approach.

Our own long now conversations, detailed by the ubiquitous Chris "I know where the next party is" Skinner on his blog, shifted the emphasis back to what is happening "in the real world".  As individuals, we are looking for institutions who can make money solid and tangible, not merely in terms of seeing cold hard cash (although that is a start), but in terms what we do with money and constructed in a way that fits with its Long Now role of being a function of its social utility rather than its narrow economic definition and usage.

By framing wealth in terms of concepts like legacy and immortality (or at least of guarantees of succession) which expanded what we thought really constituted 'wealth' in a world of uncertainty, our discussion began to look at the motivations of individuals to use money for good works (one form of legacy).

The problem here is that modern money in its current incarnation cannot adequately convey the 'spirit' of a gift.  Modern Money reduces a transaction to a question of economic value (like leaving the price tag on a birthday present) which leaves no legacy or lasting imprint - it merely reflects the price of a thing at a particular time (it does not signify for example whether I was generous in the price I offered or stingy).

If banks are to maintain their position as the 'producers' of money (as opposed to just the pipes it flows and is stored within) then they need to work out how to construct money products which can confer permanence and legacy on the giver and communicate that also to the receiver.  Which I guess is one million dollar question coming out of the long now (for me at least).

Perhaps a bit frustratingly one of the best ways of thinking about money in the long now was presented by Paul Saffo who in 90 seconds summarised the concept of the legal 'long now' and raised questions of whether the crisis was the prelude to a change in schema (i.e. a new money akin to a new common law), constitution, legislation, regulation, enforcement regime or merely fashion (i.e. will this be solved by bloody revolution or a marketing refresh at the extremes)? You might argue that neo-liberal capitalism has been regulation masquerading as a schema or constitution and as such should expect competing forms of regulation of markets (and therefore different forms of market) to emerge from the crisis and challenge its claim to natural hegemony as merely a function of legal precedent and entrenched power relations.

In other words, who are the barons who will force the signing of a magna carta for money?

Building the big society will be more than just a matter of fact

It is a recurring debate within most financial services companies to ask "does this constitute advice?'.  Advice in financial services is highly regulated as a result of Financial Services somewhat chequered history on the matter.  You don't have to go very far back in history to find repeated examples of sharp sales practices masquerading as advice.  My main 'stuck record' when talking to FS companies is to try to convince them that such practices reflect their own skewed view of the world and have very little to do with the meaning and value of advice in society at large. 

I have come across this problem in a related field, namely social care; specifically regarding the advice given by professionals such as GP's, and the perceptible shift in the definition of advice away from common sense or normal cultural praxis and towards something which is rooted in the theme of rationality and evidence led policy thinking which has dogged so much of what purports to be innovation in the public sector.

This is more than just a philosophical debate, although policy wonks and practioneers need (and I think this would be a good thing) to be more philosophical about the nature of advice (and information) if we are not going to see the dysfunctionality of advice in the financial services industry repeated in other sectors of public good - such as health, social care and sustainability.

So lets look at the 'facts'.  Facts are the holy grail of policy making and service design in the public sector.  We treat facts as 'real' and they always trump a good hypothesis or theory. One of the projects of the solid modern world is to make sure that all information is produced in the form of facts - or perhaps more accuratedly, every thing is/can be reduced to a fact.  We even call them 'hard facts'.  A fact is a self contained statement - i.e. all of the necessary the meaning is contained within it.  The value of a fact is that it is an objective bit of stuff (or content) which can be 'transacted' repeatedly between the state/institution/professional and the individual. 

Facts do not refer to or require context to be understood.  Facts are supposed to make things plain and simple so that people can make decisions without any undue influence.  Introducing context about the product or even asking about context (either of the product or of the individual) constitutes advice.

In Financial services I can only use facts unless I want to start giving 'advice' (and enter a painful world of costs, risks, liabilities, authorisations and bureacratic box ticking).

Advice in the solid modern world is enacted by introducing some element of context or personal details. I can identify that I have back pain to my GP or savings that I want to put in an ISA but the GP/FS salesperson will avoid moving to context of that condition/decision for fear of entering the realm of 'advice'.  In the case of a GP it turns a 10 minute consultation into an hour's conversation, and in the case of the FS salesperson (who is not 'trained in advice") it turns a harmless conversation into a regulated transaction of advice.  Advice is about more than the facts about a thing, it involves the application of some contingent context in which the thing will be purchased, used or chosen over another option.

I am sure that a philosopher would have something to say about this (or would assert the limits of what could or should be said), but understanding the gap between the way we define advice in theoretical and policy terms and the way advice is consumed in reality is fundamental to understanding why both the State and financial services are so poor at giving advice which is actually heeded and acted upon by its citizens/customers.

Of course, consumers in reality are less than comfortable with the idea that all they can have are facts about a thing; they are desperate for some context (theirs or someone like them) so that they can make a decision based on what they would define as evidence (i.e. experience).  They don't see the exchange as a finite transaction (one which will not be remembered the next time they interact with that insitution as this would constitute advice) but rather as part of the to and fro/reciprocation of a relationship building exercise.

It is like purchasing a work of art, such as a painting, without being able to know anything beyond what it is a painting of, what paints were used in its creation and what someone else paid for something very similar.  Information about the artist, and the fact that he / she may have painted similar works,  constitutes advice.  And advice is to be avoided.  We are left in the rather post modern state of being when the meaning of a thing is entirely constructed and enacted by the audience and the authors retreat behind a wall of facts about their work.  It is perhaps ironic that much of the rhetoric of the Big Society against the "Big State" is based on the falacy that the state was somehow interfering in everyday life.  The experience in many areas has been akin to the retreat of the financial services from our communities and high streets, i.e. the Big State has become obsessed with presenting only the facts and left the consumer to fend for themselves via choices. Of course, as you often find when marketing financial services products, the way you frame the choice (number of choices, use of brands and other symbols of trust, etc) can control the decision of the individual in much the same way as advice and this constitutes a much more insidious interference in many respects - an interference which could be framed as 'when nudge turns to prod'.

In fact, we are now faced with a system where even advice itself has been reduced to a transactional commodity, valued in temrs of work done to establish the context of an individual and recommendations (or at least priorities established) such that a decision can be made.  The problem is that the costs of this advice are so prohibitive that it is only worth seeking if you have sufficient money to afford it from the investment decision you are about to make.  Essentially the single digit percentage of the population with 100k + of net worth (not counting illiquid assets like houses).

And perhaps we come to the nub of the problem with my last post but one about the Big Individual.  Liquid Modernity delivers freedom for those with the resources to generate their own advice (technological, economic, social, cultural capital) while many are cast adrift in a sea of choices with little or no supply of such capital to navigate their own choices in any meaningful sense, recoursing instead to superstition (picking the third one in the list, picking the middle one) and habit/apathy (making no choice).

So perhaps it falls to researchers to stop selling the (mass) production of facts and start selling the search for meaning?  We only have to look at the essentially irrational behaviour of equity markets to realise the risks of relying purely on the production of facts to make sense of the world and decide how we are going to invest our increasingly finite resources. We don't need States to assume that Google is all the meaning we need to make decisions.  There must be a billion facts on Google which purport to be the 'meaning of life' each one, taken by itself, as useless as the last if you actually want to live that life.

Addendum:

This response from the Sustainable Development Commission to a request for evidence about Behaviour change seems to endorse the importance of changing contexts rather than changing minds and also points to a lack of research resource to understand the impact of interventions and policy changes.

Sustainable Development Commission Submission to the House of Lords Science and Technology select commitee

The Economics of Enough

A thought in progress which occurred when putting together a presentation on “The long now of finance” for SIBOS next week in Amsterdam. I will be presenting as part of the following ‘Innotribe’ whose remit is to think forward across the next century.  A slightly daunting prospect, as Bauman reminded us at his conference, “don’t make predictions, especially not about the future”.

I have always found it challenging to describe ‘what is going on now/here’ let alone make any assertions about the shape of the future. Perhaps that is the best to hope for, just as we write our histories for the present so we write futures.  One thing which is ‘going on now’ is an increasing instance of ideas of collaboration and inklings of new consumer moralities emerging under the banner of sustainability.

The economics of enough are bubbling up all over the place, not so much new era economics as “new age” currently, but then so was Gaia theory and environmentalism not so long ago. I have seen it used in the context of rethinking Thailand’s economic strategy post the 1997 Asian crisis and trying to assert some new moralities of economic endeavour through recourse to Buddhist teachings.

For me the “economics of enough” reflects a fundamental optimism of what we do as individuals in an open, transparent and social context.  It is a function of the compromise between individuality and security which Bauman places at the heart of all social contexts.   The Gordon Gekkos of this world thrive behind the opaque doors of regulated financial markets which enshrine and legitimise greed and ruthless competition in the name of liberalisation and the pursuit of money as an end in itself.  In many ways in the long now of finance, modern money has been an interesting and roller coaster interlude powered by a sixties style revolution of individual credit (the “pill” that liberated consumerism) and the glamour of an ultimately self absorbed and hedonistic elite (LSD replaced by CDO’s and other ‘exotic’ derivatives). Lehman’s was the gorilla /butterfly crushed by in this case a wheel of its own making. 

We are now prepared to consider the idea that you can have ‘enough’ money and be happy, it doesn’t leave you empty and wanting more.  Those who believe you always need more money are those which betray the stresses of the reality of servitude that underpins modern money’s promise of liberation.

However, the “economics of enough” are not just a closed loop of self reliance and drawing in of ourselves to our nearest and dearest, but about how individuals will negotiate their share of market returns and rewards for risk when it becomes clear that some investments needs to be made collectively to produce economically enabled social goods, and as such need to be made fairly and transparently to ensure that both sides of the bargain get a fair return or reciprocation.

Big Society of Big Individuals?

A stimulating day spent in search of evidence for the Big Society at NCVO left me feeling that rather like the term “social enterprise”, “Big Society” will end up being another interesting contradiction in terms that feeds the intellectual interest of policy advisers but leaves the ultimate beneficiaries – i.e. taxpayers, citizens, etc – rather cold.

Perhaps it is worth a minute to consider the view from the other end of the telescope.  We have spent the last two decades embracing individualism, (and the twin trends of personalisation and consumerisation of everyday life) both fueled and enabled by the equivalent of a consumer contraceptive pill of the 1990’s, the credit card.  The liberator of your money, because in your heart of hearts you know that it isn’t your money.  At the same time, technology has enabled us to live increasingly independent lives of personal choices and freedoms which hitherto were both unthinkable and unworkable. I look at my own freelance career, seemingly living without the need of a nurturing corporate body, constantly shifting from project to business, following my own interests in money, consumerism and sustainability and at any moment able to say “tomorrow, I will do something else” on the basis that my time, as a freelancer, is not sold in advance for a salary but paid by the day or even the hour.

Of course, the alternative to this narrative is the atomised individual cast adrift from the institutions and communities upon which previously we had relied and tyrannised by endless choice and so-called consumer ‘liberation’.

And, Ok, I am probably not typical. (Although my work for zopa showed that such lifestyles, which we called ‘freeforming’, were emerging as a significant trend which would foster new forms of social and economic activities and collaborations).  What is evident is that compared even to when I started as a freelancer, 11 years ago now, technology has leapt ahead to make living a ‘liquid modern’ life more accessible, more efficient and cheaper than ever before.  And perhaps more importantly, more ‘solid’ or ‘tangible’.

The same goes for the businesses which seek to harness such technologies for the creation of new low cost business models.  A business really can be built from your bedroom, something reminiscent of what started the rot in the music industry at the end of the 90’s when anyone with talent or an ear for a mash up could produce professional sounds from a laptop. 

Into this context comes the ‘Big Society’ which when understood from this liquid modern perspective appears to be an assertion of some of the very vested interests and traditional institutions which individuals have sought to subvert and undermine.  But I think this is perhaps just one interpretation of just what the Big Society is and a real danger sign that if it is isn’t defined in a meaningful and practical way (or as praxis) soon then the vacuum will be filled by the status quo which adopts BS as a new brand ‘marque’ of legitimacy for their public and private demands for power and resources.

As someone who is essentially optimistic about the ability of liquid individuals (or “freeformers”) to produce meaningful and moral outcomes through new forms of collaboration, the opportunity of the Big Society is to encourage individuals to become ‘big’ rather than replace one set of institutional interests with another.  At Zopa we used to talk about the ‘individual revolution’ of which zopa itself was at the vanguard of new ways of individuals getting together to achieve personal and social goals.  If Big Society is going to be more than a badge, then government needs to adopt a whole new set of beliefs about the potential of the individual and trust in their ability to shape their futures in a way that does not just maximise their pleasure but makes for a more sustainable and fundamentally human response to the needs and challenges of being a good society.

8 Habits of Successful, Authentic Brands

Being authentic in a super premium or local niche is becoming just “the ticket to the game” for marketing savvy consumers.

As niche brands, they benefit from the value of being ‘discovered’ and ‘secret’ and can afford to invest in developing complex and deep reciprocal relationships with individual customers.  These brands (such as Rapha or my own "baby" Monkey Shoulder) also benefit from the investment customers are themselves prepared to make on behalf of a brand over which they feel a sense of ownership.

Encouraging such reciprocal ‘investment’ is vital to brands who want to build and maintain their authenticity as they become ‘mainstream’.  Mainstream brands that rely on authenticity need to develop new habits to avoid becoming standardised and commoditised in their approach.

Habit 1: Turning discovery into currency
First Direct was made service part of its ‘authenticity’ – and succeeded by delivering key moments of truth which had their own social currency for their customers.  In the years following the launch the constant refrain of the First Direct customer centred on the fact that they could call them whenever they wanted.  This investment in 24/7 service was reciprocated many times over in word of mouth marketing and brand building by their customers.

Habit 2: Having a good memory (and mining the data)
Starbucks relies on customisation (and its customers) to deliver the illusion of personalisation.  An authentic barista will remember your drink by the third time you walk in.  Customer data enables brands to tailor the experience and choice to their local customers but it is made all the more powerful when those customers feel that they have left their mark on a place – the retail equivalent of a favourite chair in the pub.

Habit 3: being generous – gifting with interest
Anthropologists know that there is no such thing as a ‘free gift’.  Gifts always carry an implicit obligation of future relationship (and payback with interest to acknowledge that relationship).  Brands which give away stuff that is valuable create customers who want to give something back.  Financial incentives and discounts do not carry the obligation of a gift unless they are connected to the recognition of a relationship (and hence undermine value in the long term) but there are plenty of things of value which a brand can give for free which do create value in the long term.

Habit 4: Giving employees a sense of ownership and responsibility
Retail brands live in the hearts and minds of their people – but only if those people see the brand as something they have a part in creating and not just a constant constraint on what they can and can’t do.
Brands like Innocent and Leon benefit from making their employees part of the story and (mythical) history of the brand and by maintaining that connection even after they have left (and left their mark) on the brand.

Habit 5: A conversation from the ‘front of the stage’
According to the science of semiotics, it is useful to understand the brand’s relation to its audience as if it were the actor in a play.  Conventional mainstream brands stand at the back of the stage where like the gods and kings of theatre, they speak over the heads of their audience.  The front of the stage is where the likes of Falstaff josh and banter with the pit. Authentic brands maintain that front of stage approach even when they are crowned king of their market.

Habit 6: Shared experiences – a sense of community
Consumption is fundamentally social.  Shared experiences between customers are as valuable as experiences between the customer and the brand.  Brands which facilitate the creation of connections and community between their customers give customers a greater sense of ownership over what the brand means to them and greater salience by playing a role in the creation and maintenance of their social network.

Habit 7: Creating a language (but don’t forget a lexicon)
Authenticity for the mainstream consumer needs to be accessible. Any customer should feel that the language of the brand, its people and its customers should be both a rite of passage – you learn the lingo to feel part of the brand experience – but also easy and intuitive for new members to pick up and use.

Habit 8: Making fans rather than managing failures
It is a well established myth that customers who have a problem resolved are more loyal than those who have never had a problem.  However, measuring the loyalty of the lucky against the apathetic majority does not create customer advocacy.  Successful authentic brands don’t try to please all of the people all of the time but rather focus on making fans of their customers – as their recommendations will count far more in the long run.