Oikonomics: a social life of money

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.

Share your music taste and your guilty pleasures on mflow

Well, it seems 10000 people can't be wrong.  With hardly a marketing big gun needing to be fired mflow is really taking off - all down to succinct creative, clever PR and media packaging. Shows what you can do when you listen out for what culture is telling you.

I have 50 invites to give away - just go to www.mflow.com and enter the code FREELUNCH.

I am hoping that they will soon start a flow called 'guilty pleasures' where everyone can recommend anonymously the tracks that they listen to but don't always admit to - whether you are an indie fanatic with a penchant for girls aloud or punk lover with an ABBA collection, the research says you are not alone. We all have guilty pleasures in our playlists and now you can earn free music for owning up to them!

Hummus and Money

Pragmatist beat me too it with the historical account of Thomas Barker’s meet up on Wednesday for open finance.

I am not sure if I answered the advertised question – i.e. why is banking like the music industry of the nineties? – but we did have a thought provoking debate about the meaning of money in contemporary UK culture nevertheless – specifically around people who are (in my view) ‘living without money’ in what one recent research respondent called ‘the waiting room of life’.

Pragmatist is also right to focus on the two things which banks (and the music industry) don’t get or don’t want to get about our relationship with money. We don’t exchange (or share) money solely like rational economic beings and importantly neither do we aspire to be such. This is the disconnect of the Neo-liberal economic project (if such exists) – I don’t want to be an actor directed by my rational judgment, to paraphrase Life of Brian – I want to be an individual (or something meaningful in a cultural sense at least). Trying to convince me to act or be otherwise will generate counter intuitive and counterproductive responses which are designed to subvert the perceived lack of control over my own destiny (which this ironically liberal inspired philosophy requires). Rational decisions don’t make you free – just free to choose from what I am given. Discuss.

Secondly ‘financial services’ is a construct of the old model of consumer culture – the one based on material value of goods produced by willing consumers who seek a Whiggish form of utility, social progress and personal development. The problem with this model is its inherent contradictions (which Marx correctly identified would create its own self destructive tendency) but that is not too say that the death of the consumer means the end of consumption as we know it. Money can be created in the image of whatever normative values your wish for as a society as can the desire to consume. Money and consumpton are merely the means to an end - they are an Obama style 'blank canvas' upon which we can project our own values.

The shift I was trying to communicate was from what a product does to what it creates. Moving to this alternative value equation creates the opportunity for new business models and entrepreneurial activity which challenge the status quo with a new avant garde of money.

It is interesting that the most common google search that brings someone to a site discussing money is ‘Living without money’. There are forms of money it is possible to live without but to do away with the concept of money completely is to misunderstand its potential for the creation of new social and cultural value to fill the hole created by the financial crunch.

Learning to question; a question of learning?

One of the little secret successes of the internet is Oxford University’s Continuing Education department. They put on a series of online courses on a wide range of subjects which on the basis on completing two philosophy courses (and just starting a new one on Political Philosophy) make some of the best use of the web as a collaborative, mind expanding medium that I have seen for some time.

The experience is driven by an open source software called ‘Moodle’ which handles the presentation of content and the forums for discussion. Each course is moderated by a post-grad (some web savvy, some finding their feet) and runs over 10 weeks – each week having a different lecture and discussion topics. Students are encouraged to follow a simple set of netiquette rules to make the forums flow and you can very quickly find yourself engaging in a stimulating discussion on the nature of mind with a Professor of physics in Brazil, a freelance writer from Greece and working mum in Canada.

It really does explode some of the myths of social media needing to be 'rich' - instead Conted supplies a simple and structured canvas which allows community to create itself rather than be 'strategized' to death.

My initial skepticism was quickly allayed when I found that people were genuinely interested in the open debate of ideas – and very quick to moderate any individual attempts to ‘wow’ the community with the philosophy lexicon they had just swallowed. I can genuinely say that each course has taught me a huge amount about a topic that had always interested me while studying Classics but I never got the time to really tackle with any degree of rigor. What has really struck me is the level to which that thought and debate has then filtered into my working life – not explicitly – but in small ways challenging some of my assumptions about the world and introducing new points of view and ways of asking questions about the world. A refreshing change from my previous experience of education and need to ‘produce’ answers at the end of your study. Only one teacher of mine ever encouraged the ability to question over the search for an answer – my classics teacher at school – now the internet is providing just such an education experience – long may it continue.

It is obviously a wild hope that any ‘financial education’ will promote such a questioning mindset over the ‘easy answers’ approach – it is very hard to measure the value of a question.

Zopa - originality is creatively forgetting your sources...

Zopa had a good write up in the Times on Saturday.  Alongside the news that it stands out for offering solid returns in the current turmoil is news that the Treasury are taking an interest in its model to help with the problem of the blocked drain that is our credit market.

I have often put forward the view that Zopa is much more than a clever business idea – it works because it challenges the orthodox view of what money is (and fits with the way we use money in everyday life not abstract market models).  Working through Geoffrey Ingham’s book, “The Nature of Money”, I was struck by a thought experiment carried out at the start of the last century where Wicksell, an orthodox economist who envisaged a thought experiment where you had two markets – one based on a pure cash economy the other a ‘pure credit economy’.

The commodity theory of money which underpins the orthodox economic way of thinking was unable to cope with a pure credit economy (which is a very prescient description of zopa) even as a logical possibility – a very familiar response to the original conception of the zopa concept.

In Wicksell’s thought experiment the borrowers and lenders bartered to produce what he called a “natural rate” of interest.  This reflected the supply and demand for loans in the real economy.  This has implications for the orthodox views of monetarism and the manipulation of ‘money rates’ of interest vs. the natural rate determined by the demand for capital in the real economy.  Not least of which is the idea that ‘fixing’ the system will solve the long term problems of credit supply (and how it is distributed to individuals and businesses).

Arguably treating credit like a [consumer] commodity created tensions and contradictions in our society which eventually produced ‘money rates’ of interest (and costs of borrowing) which bore little relation to any market defined rate (one based on need / supply /demand etc).   In Athens the ‘natural rate’ of interest was 12% - with small variations for individual deals – a rate that stayed the same for 500 years through boom, bust, war and peace.  Confusing or blurring the distinction between cash money and credit money sits at the heart of the rupture in our banking system.

An addendum link on the zopa blog - it seems that the idea of the 'pure cash economy' may also fail under logical scrutiny! 

Star crossed credit

Tom Stoppard’s Shakespeare in Love is a love story within a play within a film about putting on a play – but the humour of its complex and twisting plot wouldn’t function without debt and credit. The opening scene finds the theatre producer with his feet dangling over the coals as his main creditor demands payment of a loan. Most of the actors are creditors of one form another – from a stammering tailor to the debt collector himself – ‘I’m the money’ he says when challenged about his presence on the stage by the returning lead actor Ben Affleck/Mercutio.

Throughout the producer is always on the edge of bankruptcy (not least because Will Shakespeare has writers block) but is driven by a firm belief that it will turn out ok in the end – "it’s a mystery, he says repeatedly, "but it always does".

Personally, I have always found the story to be the closest I can describe the feeling of being an entrepreneur. If your feet aren’t hovering over the coals, then you aren’t trying. But I think it has a wider meaning for our current attitudes to credit and debt.

It is the informal debts and obligations of everyday life that allow the play to be created, performed and something of value created. Money and credit are more than a means to an end, they are part of the story. In many ways, our system of credit relations has become disconnected from our social networks (traditional or emerging). In part this was because credit was freely available to all – it no longer represented an obligation as such, only an opportunity. But it is also a function of a gradual ‘formalisation’ of the credit process driven by the good intentions of the regulator to make credit safe for customers. In doing so, many of the human criteria for lending (and method of repayment) became a function of good bureaucracy rather than good banking.

Banks are facilitators (not the only ones but very big ones) in the creation of wealth – as such they are part of the story. But as English cricket have found to their cost, if you are only in it for the money then the value of the whole enterprise is only measured by such criteria. What is needed are new ways of facilitating the creation of wealth through a system of credit that isn’t reduced purely to a question of money.

P2P St. Petersburg style - peer eats peer?

While working on study of the meaning of money in Russia, I was struck by how the traditional social institutions (particularly religion) which communism was supposed to have washed away had in fact never disappeared. What was also striking was the level to which ‘collectivism’ was part of the cultural ‘common sense’ of ordinary Russians when all my external perceptions of Russia suggested that they had embraced the ways of competition and western capitalism.

As usual it was never as simple as that, however, my co-researcher and guide through Russia put it simply and in a suitably Russian macabre and dramatic way - "We can remember when survival meant eating your dead friends" - a reference to the epic sieges which turned the tide of the Nazi advance. As a result, the idea of the individual looking out for No.1 is not seen as a way of "living well".

This cultural memory (often writ large on the "new" churches reconstructed all over Russia) lives on in the fundamental Russian distrust of ‘competition’ as a means of organizing themselves, their markets and their networks. Jumping the queue is seen as a peculiarly western model of social behavior reflecting a naivety – so the Russians would see it – about the ability of the individual to succeed in an uncertain and potentially unsupportive and uncaring material world. The oligarchs are held up as examples of the inherent folly and short-termism of this strategy.

Perhaps this is the function of bubbles and the perceptions of abundance that feed them, that we start to believe in the idea of the "individual" and move away from our traditional social networks and support mechanisms which we relied upon when times weren’t so plentiful?

If the creative destruction wrought by the Great Depression created a space for the creation of the of a welfare structure of industrial scale (the NHS, Unemployment benefit etc) then will this recession provoke a similar collective response but powered by the individualised technologies of the 21^st Century?

Already we are seeing differing collective responses to perceived ‘injustices’ of the recession – from the louder voices of Unions, business networks and federations. In the private sphere (and increasingly, I would expect leaking into the public sphere) there seems to be the beginnings of a collective turning outwards to social and technological networks through which our personal ‘risk’ can be managed and protected against. This reflects in part the difficulties of official institutions of the state and the market in engaging with the individual. These institutions have found it difficult to adapt to a social economy that is increasingly being re-constructed around the "individual" rather than the traditional social blocks they were originally intended and designed to serve – the "ranks" (sic) of the employed, the unemployed, benefit recipients, etc.

Even in the boom years, I was experiencing firsthand the difficulties and frustrations of those who saw themselves and acted as individuals in their dealings with ‘corporations’ or the state. That disconnection is becoming starker now that we are more actively looking for outside help to maintain our well being and sustain ourselves in the new economic reality which in turn is driving the creation of alternative networks of social and political (with a small p) action.

Our rational response may well be to retreat and retrench in the face of the relentless bad news of the recession – our individual well being may well depend on how we are enabled to turn outwards, give freely and collaborate with others to find a new way of creating wealth and well being. Perhaps it will be through the accident of meeting together in a coffee shop (as per Lloyds insurance market) or through a more structured or sponsored approach to innovation?

The inspiration for oikonomics as a name came from the classical treatises on economic survival and success, in particular Xenophon’s self help manual and business guru book in one (with Socrates as his mouth-piece) along with Aristotle practical ethics. All of them are clear – the successful individual is the one who responds to his neighbours’ call for help with the expectation of benefit in kind if / when situations are reversed.

A social life of Money at the Digital Money Forum (31st March - 1st April 2009)

My first public presentation of some of the findings from this year spent deep hanging out in the social life of money will be at the Digital Money Forum. Dave Birch, from Consult Hyperion (whose blog brings together an invaluable point of view for anyone keeping up with the usage and technology of money) runs the show and offered the chance to be interviewed as part of his podcast series.

Conducting ethnographic research can be a solitary experience at times, so it was great to be on the other side of the microphone for a change and be made to think hard about my own point of view. The podcast link is here on the Digital Money Blog - listening to it I realise that Dave has perfected the art of the 'nice but tough' line of questioning based on his own deep knowledge of the subject. Next step is to go back and polish some of the rough diamond insights that are beginning to emerge from the confusing and contradictory world of money in everyday life.

Thanks to Dave for the opportunity to reach a wider audience with the social life perspective - and watch this space for more updates.

The spirit of the barn - BarCampBank London 2 - 14th Feb

HP has its garage, zopa had its barn, specifically Richard Duvall's "New Barn" where proto-zopaites (we didn't know that is what would become of it all) would meet for coffee, organic cookies and conversation (or ping pong/pool if we ran out of ideas...).

The spirit of the barn was open conversation so I was pleased to see that an ex-zopaite - Thomas Barker was running something with the same spirit.

BarCampBank is holding its second session on 14th Feb  - basically an all day workshop of technologists, innovators and industry insiders discussing the impact of emerging technologies on the financial space.

More info and the wiki for the event can be found at http://barcamp.org/BarCampBankLondon2

 

Registration takes place on eventbrite: http://bcblondon2.eventbrite.com/

progressive eco-nomics

The Economist reports on the latest addition to the burgeoning world of online collective action – Carrot Mobs. The difference here is that the mobs are no longer envisaged as providing a collective stick to beat ‘nasty’ corporations with – but rather providing a carrot to ‘ethical’ companies (in this case environmentally sustainable energy companies). By forming collective ‘buying groups’ the aim is to present brands with a ready-made market for their goods.

It highlights how these groups are looking for more than just new ‘choices’ – they are looking for an authenticity of approach which is currently out of the reach of many mainstream organizational cultures. However, the implications of this kind of progressive collective action go far wider than putting up some solar panels in trendy areas of San Francisco.

Given the current ‘stick’ mobs cropping up around the UK with their reactionary messages it is easy to see collective action in the context of its historical ‘class war’ paradigm of social protest. However, it was interesting that the attempts of the BNP to influence this group were roundly rejected. Perhaps this proto-revolutionaries would do well to get out of the cold and get on the internet if they want to influence the buying decisions of companies who are looking for skilled workers in the UK? I am not sure how the narrow political interests of Unions (with their official capital ‘U’), with their conventional institutional responses (such as ‘talks about talks’) can really serve their long term individual prospects.

The re-engagement of the ‘political’ and ‘economy’ (via Anatole Kaletsky) represents an opportunity to evolve new economies of interest rather to retreat to previous social institutions – namely to find new ways of creating political economy which take into account the advancement of individual empowerment through communications technology which offer the opportunity of social networks evolving beyond the current limited ‘lifestyle’ paradigm and starting to acquire greater market and political power.