Oikonomics: a social life of money

The start of something new with www.abundancegeneration.com

I have been away from this blog for a long time but for a good reason.  After more than 2 years of effort, energy, bloody mindedness, up's and down's, battles, victories, set backs, surprises and not small amount of coffee, Leon lunch boxes and falafel consumed Abundance is finally ready to born into the world.

Abundance is a new way to think about investing money which aims to go to the next step after the likes of zopa and others in establishing an alternative way of using money that is fundamentally social democratic (i.e. open to all especially those with smaller amounts to invest) and sustainable, and like zopa, competitive in the mainstream financial services market.

Abundance is a community investment platform which allows retail investors to invest in renewable energy projects.  It is the product of the unlikely meeting of an anthropologist, environmentalist and an ex-banker, which sounds like the start of a joke, but has actually produced the first really new regulated financial product in more than a decade...

Exact timings of the launch are yet to be confirmed but you can sign up for email updates at our website which is www.abundancegeneration.com.

Because Abundance is regulated and authorised by the FSA you can find more details on the website and sign up for email updates directly there.

 

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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

Local liquid money? –the new Stroud pound, demurrage and ‘gift economy’.

It has been a while between posts, in the main because I have been grappling with the very real problem of creating a completely new form of financial product which promotes investment for the mainstream without conforming to the conventions of the investment ‘market’ of the City. However, the new Stroud pound was profiled by the BBC (here) but for me the report missed out the most important point which is that for the first time in the UK the currency will be subject to ‘demurrage’. Essentially it is negative inflation (-3% per 6 months) which requires stamps to be purchased on 1st April (3p per pound) to pay for the costs of running the currency and encourage its usage. Any currency without a stamp on that date will no longer be accepted as tender.

The pounds also cannot be exchanged for sterling – they have to be ‘spent’ and circulate in the local community.

While I have posted before about the benefits of such an initiative in the local community and the perception of money that is created, this example does begin to sound not so much as an alternative ‘money’, but rather the promotion of a form of gift exchange with a built in depreciation to pay for the creation of the gifts themselves. Each transaction is no longer an end in itself – the objective agreement of the value of a good in terms of a price between two individuals – but rather the beginning of a series of transactions within the community which, I would guess, establishes both social as well as economic relations and ‘capital’. A gift is not something to be hoarded and taken out of circulation but rather something to be passed on, like the well known examples of kula shells and potlatch ceremonies with Mauss’s own essay (and the excellent book "The Gift: how the creative spirit transforms the world"  by Lewis Hyde)

The store of value which is created by this currency is therefore in the social relations created by its usage. The Stroud pounds will come to represent the value of exchange between people who come to know one another rather than the anonymous exchange of the supermarket check-out. As such it aims to do more than some whiat I perceive to be slightly contradictory messages about ‘local consumption’ – there being no real guarantee that the participating businesses are truly local in their sourcing and environmental credentials.  Instead, the Stroud pound represents a form of capitalism which thrives from the creation of community rather than anonymous competition. The surplus therefore which creates this momentum and encourages the flow is therefore in the intangible social capital which these transactions represent – the hidden obligations and reciprocations upon which a local town survives and thrives.

So perhaps rather than the surplus being allocated to a local charity, which is admirable but merely replaces a function which can be carried out by sterling, the money should be used to create and promote further collaboration and collective enterprise which aims at enriching the social life of Stroud and transforming the nature of social relations between the individual and the collective identity which the town encompasses?

Post modern money?

Having spent yesterday talking about a new form of money that seems to chime with peoples’ needs and ideals, plus trying to get a research study of the ground, it is becoming clear that conventional mechanisms of money innovation and production are becoming increasingly irrelevant.　 By ‘conventional mechanisms’ I mean banks and related financial institutions which have dominated the production of modern money.　The problem is not down to a lack of effort or creativity on the part of such institutions, it seems that the problem is a cultural one in which banks in particular have found it very difficult to adjust to a post modern or "liquid modern" world.　

In the industrial / modern era, money sought to commoditize things, every "thing" had its price, even intangible things like culture. Money could reduce something subjective and relative such as 　"meaning" and convert it into an object of exchange and a store of value in its own right (such as a brand). Beginning with art, money became the means by which ideals and values could be authentically accounted for, owned, rationalized and objectively valued – ultimately as the new sources of power and status in the modern individualized capitalist world.　 The epitome of this development of modern money, was the use of this liberated money to create and value itself (rather than gold or some concept of state edict); all in the name of the modern ideals of freedom, efficiency, rationalism and maximizing returns on investment.　 The paradox of this achievement was that it required money to acquire social and perhaps irrational attributes of power, authority and trust – the basis of ‘confidence’ – to assert its status as both the right and natural for money to ‘be’ and ‘do’–ultimately despite its pretentions to independent creation and ontology (through central ‘banks’) this money was implicitly being underwritten and created by a state which was all too glad of it leveragability as a source of finance for its own goals and ends.

Modern Money inhabits a ‘macro’, largely abstracted, world where local or individual concerns were subsumed or flattened within a legal and rational framework of capitalist realism.　 In this world, profit is the only real measure of success – anything else was merely a by-product of or in service of profit.　 Profit was real because it could be objectively accounted for in terms of money. The desire for money, so long seen as ethically and morally empty (or even illegal if you consider the crime of usury) became the ‘demand’ for money.　 Demand became a function of ‘need’ not greed.

It is ironic that this rationality is often contrasted with the motivations of individual ‘consumers’ when demand for money becomes overheated.　 We are seen as somehow ‘addicted’ to credit, "crazy" for our obsession with the value of our homes, or irrationally exuberant in our belief in risk free returns.

Even the internet, or at least much of its content, has been subsumed and commoditized (and now largely controlled and administered) within this framework, contrary to the values and aims of its largely academic/scientific inception.　　 In fact, money has exploited the global reach and borderless communication channels of the digital space to increase its own power and reach.　 However, it is in the digital space where the confidence which is the basis of power and control of the means of production of modern money has come under its most sustained and effective attack.　 Imagine if the endowment miss-selling scandal in the UK had happened in the Noughties, rather than the relatively disconnected 80’s and early 90’s or if the Equitable pensioners were a bit more savvy ‘silver surfers’?　

Liquid money is not being created in the factories of the City or Wall Street but in the Sunday Supplements and journalistic websites of opinion formers, campaigners and even those paragons of "consumer choice"- price comparison engines.　 We have new ‘authorities’ whose critical judgment can make or break a financial innovation.　 Likewise in business the concept of the ‘social enterprise’ is slowly breaking away from its charitable roots and challenging the judgments of the ‘Masters of the Universe’ who can only view their ‘value’ in terms of profit (or social worth) but not both.　 Having a ‘mission’ and a ‘profit motive’ in the liquid modern era is no longer a contradiction.　 Liquid Money is now in service of culture and the creation of meaning not just economic value.　

Perhaps these new authorities represent something of a false dawn, merely being extensions of our current fetishisation of celebrity or popular ‘knowledge’ over scientific or common sense. 　　An attempt at a new power structure rather than the populist equality of their brand and personal ‘positioning’.　 Does Peston prick the conscience of the city for fame and fortune or out of altruistic journalistic zeal? Certainly much of this ‘discourse’ on money remains outside of the day to day dealings with money of many people.

Which brings me to things like Barcamp or my own efforts (watch this space) to create new forms of money which are in the service of wider social, environmental and cultural goals. Forms of money which relegate profit from being solely an end to being a means. Forms of money which will produce new forms of collaboration which represent a shift away from the concept of profit being the only ‘real’ return (or measure of collective value), and from the narrow rationalism of comparing outcomes via ‘basis points’ over the less black and white qualitative judgment of ethical and moral outcomes. In this world view, money has the potential to re-acquire a solidity and reality which is socially and ethically based.

Education and risk

It appears that teachers have beensquirreling away cash in the good times and now the government wants it back. My initial reaction to this story was my usual revulsion at the weird behaviours created by the bureaucratic attitude to budgeting; i.e. if you didn't spend it this year then you will get less that amount next year - plus we will claw back what you didn't spend. All sorts of requests for work come through about the time of 'year end' as a result which are merely designed to maintain budgets and rarely add any value as projects in themselves.

However, on reflection while this may well be the cause of the 'claw back' we should probably look more closely at the intentions headmaster had for that money before being too judgmental either way (the £500m or so is the amount being axed from University budgets next year reputedly - maintaining the political myth that young minds deserve more help than older ones, utter rubbish in my view - young minds think they know everything, older minds are more fertile because they realise they don't - and if you think you quickly pass you prime in terms of 'ideas' just look at Zygmunt Bauman as a man for whom age is no barrier to original thought).

If this money is being held back for a rainy day then yes it does represent poor value for the tax payer. Smoothing out the up's and down's of budgets for consumables is probably much less efficiently done at an individual level (as people will tend to purchase less efficiently and will generally over-hoard rather than save just what they need taking money out of the system which should be used to convert young minds into productive thinking machines). However, if these headteachers are displaying a latent entrepreneurial spirit of 'investment' then we should we be applauding their initiative? - perhaps. I am not entirely convinced that headteachers have the experience, intuition and research to make good risk decisions on behalf of their students and as is found in other areas entrepreneurial intervention in the schools system, it is very hard to measure or predict the results of risk capital with such soft materials to work with - i.e. minds and in reality most of the money is sunk into infrastructure which is often questionable in its effectiveness at delivering improved educational results, although it does benefit local house prices.

And there we have the problem of using the word 'investment' to justify spending on infrastructure. Investment implies some sort of risk and return equation based on a bet that something successful will arise. The trouble with infrastructure, particularly 'public goods' like educational establishments or energy capacity is that the state cannot 'risk' that infrastructure not happening. The investment which best fits with infrastructure is a bond or debenture which provides a steady and ideally unexciting return over the long term of the infrastructure usage rather than providing risk capital style returns. My perception of PFI is that it often works more like a risk capital style return (i.e. at a significant premium to pay for the private risk) when in reality it is just a gilt edge security based on a very necessary and important public asset like a hospital. By mixing up metaphors and terminologies we get, again, all sorts of weird financial consequences.

So back to our entrepreneurial educationalists. What are they investing in? What are they risking? What is their return? If it is infrastructure then again hoarding cash and building stuff is highly inefficient. If it is 'investment' then surely they should be investing in the soft stuff - the kids in the schools themselves - to create radical new outcomes (and probably some failures) which benefit society as a whole. Who would argue against fasttracking the education of Newton or Einstein? What would the impact be if children were able to bid, zopa style, for individual investment to better themselves educationally?

Sadly, I think this is just a case of rainy day money that would be better spent elsewhere and not hoarded for peace of mind. However, if anyone is up for seeing what individual students could do with £1000 grant to expand their minds and make the world a better more enlightened place, drop me a line.

When did futurists get so pessimistic?

Reading a good little PR article for Visa’s contactless payment system - with some pithy and relevant comment from the man who knows about such things – Dave Birch – I was then surprised to read the accompanying opinion piece from a ‘futurist’ which essentially laid out a rather pessimistic and conservative agenda for a world where money is largely transacted in 0’s and 1’s. When did futurology become negative? Certainly at the beginning of the Noughties, we were starting to see the effects of pessimism on adoption of new services and the inherent value of ‘newness’ amongst respondents; essentially this is the first family producing generation who believe their children will be worse off than them perhaps since the enlightenment. It now seems that even futurologists, whose businesses are built on the idea of ‘progress’ and ‘trends’ have been infected by this largely Daily Mail /Express sponsored perspective (you know the score, everything will affect house prices eventually).

To address the concerns of the commentary article which focused on the lack of contact of ‘contactless-ness’ and the perceived security issues around digital money, while it is the case that removing cash from certain transactions does remove some sensitivities to the total ‘cost’ of a good or service, this is usually observed when individuals are buying lots of items simultaneously (such as in a supermarket) rather than "pricing" a single item (and perhaps a greater effect is created by the small point type used by supermarkets for all prices that are not ‘reduced’). However, contactless payment is targeting much more the small change transactions of daily life for which ‘cash’ is not necessarily the most convenient, secure or readily available solution (especially as the inflation affecting such transactions leaps ahead of the average basket). I don’t usually carry out £8 worth of coins so I can park at a station car park for example and the card machines don’t appear terribly reliable as they require so much ‘interaction’. So perhaps on second thoughts such ‘small transactions’ are not so small – and this is an opportunity for public services to carry on their price hikes on the quiet.

On the security issue, it is interesting how quickly ‘theft’ becomes about the person (i.e. their ID) rather than the money. If someone steals your cash, you have to prove you had it in the first place and it is difficult to replace – but at least the perpetrator has no interest in you personally. In a digital theft, it is the ID of the victim which is picked (and with it access to their money) and this is something which makes digital money (theft at least) so much more personal. The money can be replaced relatively easily as there was proof of its existence (ironically the virtual 0’s and 1’s have a more "real" ontological status than solid cash) but what has been stolen is something far more valuable.

One final thought to leave with you on the subject of contactless payment migrating to the mobile phone. Such a shift is going to require quite a culture change at the mobile phone operators themselves as they become liable for the ‘security’ of devices which have access to quite so much of value. My wife’s recent experience of having her phone stolen and used overnight (before it could be reported as stolen) to ring some premium rate number in Algeria (costing a 4 figure sum) suggests that they have a long way to go before allowing such liabilities onto their own books.

Perhaps I am getting the pessimist bug too – must be the chaos of 1 inch of snow hammering local house prices.

Kiva and the nature of money

Listened to a very engaging conversation between Premal Shah and John Grant at NESTA last week. At one level it was an inspiring point of view from a successful entrepreneur, but I was left feeling that a lot of Kiva’s promise was going unrealized because of the way they constructed money and credit relations on the site.

Kiva’s aim was to transform the relationship between the ‘rich’ countries and ‘poor’ both in terms of economic injustice (which modestly Premal claimed to have had little real impact on at this stage) and in terms of the social relations between ‘rich’ and ‘poor’ countries. John Grant was very sympathetic on this point, citing his own experience of working with disaster relief charities which have the effect of painting all Africa "south of Tunisia" as victims and needy individuals.

Even this picture from my local Starbucks demonstrates everything I personally find abhorrent about the way we construct ‘need’ in Africa – the down turned headed, pleading eyes, lack of adults, lack of context (always need is personal and close up) – which may well be effective at picking the purses of consumers but also serves to distance us from the individuals (objectifying them as problems rather than encouraging a more productive, risk based assessment of potential – or capability). Why do marketers feel the need to justify their cause by quoting numbers? Is it particularly effective to reduce humans to statistics?

Back to Kiva. Premal Shah characterized Kiva as consumption rather than capitalist/productive experience. His illustration of why we feel ok buying things we don’t need when there is need elsewhere (i.e. it is literally distant), a distance which the stories and requests on the Kiva site eradicates and brings into our living rooms and laptops in a very personal and interactive way. His users display ‘addictive’ behaviours (checking status of loans at 2am) and seem to get a buzz from both the act of giving and getting the feedback of a successful loan application. This perhaps explains why people are so angry about the fact that there is little real connection in terms of money with the people you loan to in reality (the loan money is pooled rather than being supplied directly). However, this positions Kiva as just a more internet savvy, internet 2.0 charity experience rather than a ‘social lending’ site (I, and other zopaites in attendance, kept politely quiet when it was trailed as the ‘world’s first….’). Kiva is not channeling money as "investment", but rather encouraging us to consume for moral purpose (giving to another in need). Nothing wrong with this in itself, but I am not sure that it transforms the relationship between rich and poor – just makes the perception of inferiority personal.

For me, Kiva has missed a trick in encouraging people to take risks on others, driven by SEC regulatory fears rather than any philosophical bias, as this meant they had to make the loans interest free to avoid their being defined as ‘securities’ (which have sunk the aspirations of many social lending sites in the US). The problem is that this interest free status has the effect of transforming the loan to a simple donation. Now as Premal quoted, there are plenty of examples where loans exist without interest payments, but such systems are not without reciprocal obligation. As I have noted on this blog before, Athens had such a system of loans between family, friends and fellow demesmen called ‘koinonia’ finance; but in that case, there was an implicit ‘favour’ which could be called upon for a similar loan at a later date. There is no such obligation implied on Kiva. In essence, by writing off any sense of ‘return’ – beyond the return of the money which is then recycled into another loan – I am avoiding making any risk assessment on the loans instead judging them on their emotional pull or potential social value. I can do much the same thing through Oxfam (‘choosing’ what my money is spent on - although such choice is illusory).

Perhaps if Kiva was more creative about the way it characterizes the concept of return (and made into something which the recipients of the loans can return to their backers) then it could get around the regulatory issues. It would require them to deal with the distribution issues they have faced from their local lending partners in each country but surely it would be more in keeping with their overall philosophy.

The Practice of Everyday life - strategies and tactics

Reading Michel de Certeau’s the Practice of Everyday life has proved very fruitful for thinking through a potential study on the social life of money. His criticism of Social Science’s ability to examine the ways in which individuals appropriate and subvert meaning (strategic meanings of institutions and power vs. the (unconscious) tactics of the individual navigating their own paths) mirrors my own view of consumers as ‘producers of meaning’ and consumption being merely seen as a means to an end, not an end in itself.

Where I diverge, perhaps a function of the liquid modern, connected context we now inhabit, is the level to which individuals do not possess conscious strategies of their own which oscillate between conformity and subversion (often simultaneously as individual life projects) and are unconscious tacticians using a form of cultural common sense. The ‘brownian motion’ of tactics as De Certeau characterizes it, seems too random, and in its own way deterministic and limited, in its vision for the modern individual. Surely the existential angst we feel is a function of broadened horizons, new technologically enabled freedoms and the creation of long term goals which often conflict with our short term, tactical needs, desires, faults, mistakes, habits, addictions, etc. Given the right context, any individual can articulate their strategic ideal and trajectory to the level of an institution or brand, but they often lack the confidence and mutual support to carry it through. In other words, we carry the means and capabilities to produce a "kingdom of ends", but are often held back from expressing them through inherited deference to authority, repression or merely lack of self esteem and confidence.

Last week’s debate on money played out just such conflicts in the minds of bankers and bureaucrats of money, and likewise a similar rich vein of this experience is being exposed by the personalization initiatives in adult social care. Perhaps what MdC and others underestimate is the level to which individuals not only subvert but appropriate brands for the furthering of their own strategic aims and ideals, not just ‘surviving and navigating’ the city, but increasingly shaping and seizing control of it.

Realizing the potential of brands, and other vehicles for the creation of social and cultural meaning, for liberating the praxis of individuals (as well as repressing or oppressing it) will create the bridges we need to achieve the new goals of society; such as sustainability, fairness etc.

Is it better to be a customer of a big bank or a small bank or both?

The plan to break up the state subsidized Lloyds and RBS is being positioned as in the interests of competition and safety for the retail banking market – things which should, on paper at least, be beneficial to the consumer.  Will customers hived off in these new banks be happy to be a small fish in a small pond or will they shift their accounts back to the parents whence they came?  Given the experience of smaller institutions in the mutual sector and the mantra of efficiency of scale which created these behemoths in the first place are we merely turning the clock back to a time when ‘banks were boring’ and part of that boredom was to be less competitive and rely on customer inertia and apathy to maintain margins.

Perhaps the energy market is a good analogy here.  There is little evidence which I have observed that ‘choice’ and ‘competitiveness’ run hand in hand.  There is in reality a limit to the number of choices a consumer is prepared to consider and much of the vaunted ‘switching activity’ which is used as a signifier of competition is driven by a small number of people who if they are honest actually like to switch – it makes them feel thrifty. There is quite a large alternative segment of that market and the financial services market for whom switching is seen as rather pointless (better the devil you know) and it takes quite mind boggling stupidity, rudeness and sheer bloody minded cheek to get a customer to switch their allegiance to another brand.  Smaller brands also tend to be disadvantaged in the switching process even if they are competitive in terms of price because customers decide to go with the ‘next best biggest’ as a trade off between price and trust (trust in this sense means being able to blame someone if it all goes wrong).  Rather than being a signifier of competition and better deals, switching is a signifier of almost catastrophic failures of customer service.

That said, many people have more than one bank account now (the better off because of the limit on savings guarantees, others as a result of chasing deals).  Perhaps these mini-banks will specialize into specific product segments? The problem is that each one will be saddled with a branch network of (heaven forbid) the second choice branch locations which their parent may be only too happy to get shot of.  Given Lloyds in particular stepped back from the brink of closing its C&G branches, I can see one or two of those heading back under the auctioneer’s hammer before too long.

What will make banks competitive is for banks themselves to see the benefits of competition and for one of the bigger brands to adopt a more forward looking and challenger mindset – i.e. to be anything but a boring bank.  A co-conspirator of old and bank innovator Richard Duvall would have jumped at the chance offered by the current banking market stasis to start his version of the individual revolution.  I hope that others stand in the wings  to fill his big shoes and emulate some of his big ideas.

What's your financial IQ?

Working with an internet bank a few years back, we tried to come up with a segmentation based on the different answers to the question ‘being good with money’. It was designed to be a remedy for the stuck record of financial services segmentation which produces such conformist responses to perceived consumer problems – such as Halifax thinking that people will prefer to pay a fixed daily fee for an approved overdraft rather than an interest rate! I was reminded of the findings of that segmentation, and the reaction by some individuals within the bank, by the Channel 4 programme tonight about race and science in which Rageh Omar set out to explode the myths of the scientific link between IQ and intelligence. The point he made – in the round about grand tour style by which documentaries assert their perspectives in the limited medium of television - that IQ is a measure of our adaptation to modernity (and our aspirations for success defined by modernity) rather than a measure of any innate ‘intelligence’, has wider implications than highlighting the cultural ‘handbrake’ which affects many children of ethnic minorities who feel that in order to be ‘intelligent’ you must act ‘white’.

Time and again, this and past governments have sought policies which seek to ‘educate’ consumers about money and financial services. However, before you can set out such a policy you need to define what ‘being good with money’ actually means. Too often, it was the ideal of rationally led scientific progress which informed the opinion both of what money is and therefore the definition of ‘being good’. At other times, a nostalgic conservative agenda has come to the fore encouraging us all to act like ‘’er indoors’ and stick our money into jam jars.

In reality, our liquid modern culture defines being good with money in many more ways than that (and for that matter measures of success). There are as many ways of being good with money as there are high end brands of fashion, types of whisky, cars, front door styles, flavours of fabric conditioner, in fact anything from the pantheon of consumer experiences which define success in some form or other. Front doors are bread and butter to an ethnographer working in the UK – just look at your own and think about what it says about you and trust me there will be people who a) notice and b) care about what it says, most of whom, it must be said live on the Cheshire borders of greater Manchester!

 

Having just re-read Bauman’s classic sociological text, Culture as Praxis, in preparation for constructing a research proposal, the issue of culture sits centre stage in our attempts to create wealth and social well being through our usage of money. In general, such policies fail because they adopt too conceptual /theoretical perspective on money or alternatively, see money as something practical or technical – a tool that is fixed in its purpose. Conceptual approaches treat money as representative of an ideology (currently one based on freedom and liberation) that by definition exists in a world that is fundamentally disconnected from human experience and perception of reality. A world where bankers and economists live in the blinding light and we sit transfixed on the shadows and puppets playing stories on the wall – or at least on daytime television which is as close to Plato’s cave experience as you will find in the modern world. Technical/Practical approaches are usually characterized by overly deterministic and materialist in their definition of money reducing both currency and user to the role of billiard balls on the snooker table of life – ironing out the inconvenient ambiguities and uncertainties of culture. Currently it strikes me that the Bank of England seems to be siding with its comfort zone – the theory of money – the FSA with the technical/deterministic view of ‘evidence based’ policy. As anyone who regularly pops in to read this blog knows, my particular soap box is that they are both in denial about both the way society makes money and the way money makes society.

I will have opportunity to put my view at the next CFSI event on the ‘non-bank sources of consumer finance’ – I may leave the word praxis out of my talk but I certainly hope to introduce some ambiguity into the proceedings in an attempt to get elements of the audience to appreciate how liberating money is not about disconnecting it from everyday life but appreciating how it is fundamentally entangled in the human stories and experiences which shape the social life of things.