07 Apr 2009, Posted by Matthew Reinbold in New Work Ways,Thought & Theory, 2 Comments

Rethinking Wealth, Value, and the Currency Between

Douglas Rushkoff, author of Get Back in the Box: How Being Great at What You Do Is Great for Business and the upcoming Life Inc.: How the World Became a Corporation and How to Take It Back recently spoke at the O’Reilly Web 2.0 Conference. His talk was unexpected given his venue. Instead of a buzzword lovefest or social what-have-you he presented a passionate plea to “reboot” business as normal.

He further elaborates on a number of the ideas in both a recent piece for H+ magazine and a previous radio show.

For those in a hurry and looking for the cliff notes the main points are:

• It is very easy to create alternate currencies that are earned into existence (value creation) as opposed to lent into existence (wealth acquisition)
• the printing press model of currency is based in artificial scarcity (even if doing digital transactions) in an age of digital abundance
• this period in time is an opportunity to create ecosystems of companies more interested in producing worthwhile things (“to build and keep businesses rather than selling them off”)
• the Internet remains a tremendous enabler for building value from the periphery – there are no centralized gate keepers

I’m not ready to declare the existing moors of investment and credit dead. However, the events of the last year has made it clear, if there was any doubt, that value is decoupled from wealth. Said another way, those that create the largest value for a society do not reap the greatest wealth. Rushkoff’s concern is that we’ve gone well beyond playful forays into speculative investment. He’s stating that 400 years of trading value for wealth has produced an increasingly precipitous foundation upon which to build a business. For example, consider a nation’s infrastructure; instead of re-investing currency in the institutions which produce value – roads for transporting goods, telecom for the administration of services and transfer of information, energy for cheaply and cleanly powering new initiatives Iceland became a hedge fund. They took their currency, leveraged every haddock they could find, and invested not in things that would produce future value but a ponzi scheme. Unfortunately, they’re out of players.

The interplay between value and wealth brings up the tricky notion of currency, or money. In order to better encourage these ecosystems Rushkoff advocates local currencies. Its important to clarify up front what these local currencies are not:

• they don’t free local municipalities to print their way out of monetary scarcity – nearly all are backed by alternate value, mainly a trust of dollars
• as such, they aren’t any more or less deflationary-proof than US greenbacks
• and they make tax time a bigger pain in the rear because the federal government still expects a portion, regardless of denomination – and good luck plugging “Vox Pop Pennies” into Turbotax

However, the creation of funds that are small in scope better cycle value through local economies. Rushkoff even hints that, like its historical inspiration, these local currencies should have expiration dates attached to them to discourage hording (saving rates are currently in the crapper anyway). There are several examples emerging including Detroit and Lancaster, CA (video embedded below) showing how these might work:

You wouldn’t be wrong in assuming that these local ecosystems would be indistinguishable from communities. Each community would interact with other communities by exchanging items of value. Rushkoff uses the example that maybe one ecosystem would be especially skilled in producing wheat while another is adept at manufacturing solar panels. The trick is that they wouldn’t be trying to maximize the amount of wealth in order to dominate a market. The rate of production dictated by money needed to pay back the bank (or VC, or public shareholder) is different than the rate required to meet demand. The goal of “normalized” production would be to create the most value in member’s lives. That quality of life – education, health care, recreation – consists of vastly more than net earnings.

It’s all extremely heady stuff and certainly not the kind of thing that I anticipated having to deal with as I slept through college economics. But the urgency of Rushkoff’s argument seems apt. If there is to be an alternate model for business growth and development now would be the time. Business will not return to normal tomorrow. What have we got to lose?

Update 2009/04/07
A brief, counter opinion on the re-emergence of local currencies. That thought goes that populism is cute, but people’s taste in products and services extends well beyond that of any city or region. Any local currency risks being perceived as worth less, even if backed by something else.