Posted by Summary: This part covers why BCE has potential to upset the future, both in terms of economic frameworks and social structures
Putting value on utility, needs trust facilitating exchange
But this vicarious trust is not natural!
So, wealth is something we have conjured-up, and is not natural
The trust system today, and its shortcomings
Blockchain heralding a new trust system
More than change and BCE etc, we are itching for a change as a species
Onset of unimaginably massive wave of wealth creation
Putting value on utility, needs trust facilitating exchange
Putting a value on utility needs an exchange facilitating trust. Economic value is our perception of the utility, usually. Wealth is created when someone is willing to exchange something of value for something else of value. Then you will need some mechanism that you can trust to estimate the correct value. Our social structure would ensure overall deals are fair and both parties do what they say (or at least fair by the influencer class, which may not necessarily be just for all the masses). In that sense, the social structures are the vicarious trust for facilitating value sharing.
But this vicarious trust is not natural!
But this trust is something completely different from what our dear Mother Nature thinks. Our wealth creation is based on the principle of trust, unlike her constructs based on survival of the fittest. We developed the trust mechanism and the wealth concept itself based on the accidental mutation in her lab! More specifically, instead of living in the present moment bound to surroundings and situations like all other beings, which is the purpose of advanced communications in other species, we developed cognitive capabilities to talk about ourselves and things, both real and imaginary. (It’s amusing how being in the present is prescribed for us as a panacea for our stress, but it makes sense if you see our distress as the result of deviation from intents of Mother Nature. After all, it’s just 12,000 years ago that we discovered our cognitive capabilities, compared to over the last 2 million years since she began making us. We are still the majority of physical structures and vast swathes of hard-wired neurons in our brain made by her, and they indeed are not aligned to our new cognitive future).
So, wealth is something we have conjured-up, and is not natural
Once agriculture set in, wealth was off-course food and herd, triggering a knowledge explosion. Knowledge became more concrete because it could now be crowd-sourced; it was preserved as lore, no more like the knowledge of the matriarchal elephant getting lost along with her demise. The invention of money came in handy; we could monetize this collective knowledge along with our harvest and herd.
With the Industrial Revolution, we broke our money link with gold; we refined our trust systems so that we no more needed to tie our economic value to Mother Nature’s constructs. Service and knowledge industries created values beyond physical limits; how we value wealth has become more nuanced.
The trust system today and its shortcomings
We have fully monetized our commodities (food, fuel, gold, minerals) and have developed intricate layers of money as currency, bills, equities, futures, etc. Our market makers have evolved into a complex web of layers, banks, exchanges, credit card companies, merchant bankers, insurers, reinsurers, et al. Then there are the social systems of enforcing behaviors like regulators and several shades of Governments.
But this has a cost — taxes and transaction charges. We still need a third party with enough credibility (or financial clout) to value, facilitate value exchange, and enforce deals. That is centralization. All this is still tied to national physical boundaries, while the economy has become inter-dependent. Transactions take time (international wire, stocks settlement, capital flow restrictions). And with their financial clout, these trust keepers are not always good at their job. They cheat — Greece, for example. Deficit spending is a kind of government indirectly stealing from you.
And what about other non-liquid assets? How about art and antiques? Or opaque real estate. If you want to discount Invoices (Receivable or Payables), it isn’t easy, or the spread is too high. Precious metals, livestock, wine, artworks, and many more that have perceived value can’t be traded efficiently. It is funny when we talk about consistent market valuation, but other markets are hardly consistent except for the brute financial clout of Government bonds!
And then those digital artifacts coming up, books, and music albums have transcended physical form already. How you wish you could create only ten digital copies of your incredible voice or only 100 copies of the digital book, and every time someone adores them, a small fee flows to you. Or you could monetize that charity work you take pride in, or your painstakingly built up wonderful backyard mini forest, by selling to someone who needs carbon credit.
Why not? We are limited only by our structures, these market makers, Governments, and not but the least; our social ethos developed to support these trust systems is now like an IT legacy. They aren’t entirely trustworthy, costly, and stuck in time-wrap. What if you could trust me unconditionally? What if you and I can agree on something of value, anything, and instantaneously exchange in the next moment? What if it doesn’t require banks, governments, militias, boundaries, race and creeds, churches, and religion to create that trust?
Blockchain heralding a new trust system
Call it outrageous wishful thinking, but this is what exactly Blockchain seems to be enabling. I can trust you without the need for intermediaries; through a connected machines’ collective democracy. Own my data, control who sees, how much, and when — immutable, tamper-proof. With a digital address, all are equal; and at a cheaper agency cost.
Like ICOs, the ideas out there are genuinely out-of-the-box possibilities. Even if a fraction of them succeed, its enough to upset current economic models.
But along the way, there will be large-scale destruction. How do existing giants doing trust making business survive or adapt? How would the new governing structures look like, without the current level of frictional costs? What will be our business models be like, if even Amazon, Google, Microsoft are being threatened? What about social upheaval?
More than change and BCE etc, we are itching for a change as a species
Now that we have become our own Gods (don’t get me wrong, but we seem to have most of God-skills already, with all the genetic engineering and rapidly expanding ability to understand the world at both light-years and nano-meter scales), what will our social ethos look like, when corruption or favoritism becomes impossible? We have seen herds, gods, kingdoms, democracies, communisms from our ancestors. How could new governing structures take shape once we all get equal powers? Once we start living on Mars?
What about social structures? We are living far beyond our useful life. As the backbone of society, marriage is creaking uncomfortably; marriage was essentially an agrarian construct anyway. You could hold land or develop land only in a collective way to get enough returns for your cultivation efforts; hence a joint ownership construct like family was needed. Egalitarianism seems to be a new concept now with the advent of the knowledge economy. LGBT, socially responsible investments, etc., are emerging contemporary experiments, as did democracy and communism in the early 1900s.
These are far removed from Mother Nature; there is no egalitarian concept with her, its survival of the fittest. But we no more need her; we have bypassed her for our social needs. If bees have to get communism in their genes, they better wait for millions of years, but we have done and dusted that in a few decades.
Onset of unimaginably massive wave of wealth creation
But whatever this is, the way Blockchain ideas pop out, BCE will create a mother-of-all-waves of wealth creation. Not sure even if it is the biggest wave. It’s terrifying to see all these waves have one thing in common; they dwarf the preceding waves. And also, the time it takes to see the next big wave is proportionally shorter to its massiveness!!
But off-course, I am assuming we do not annihilate ourselves before as a species; the capability of being our own god can quickly deteriorate into becoming demons! Or what if Mother nature has an ace up her sleeve, sees us as cancer, and somehow trumps us? She has all the time in the world; we were here only an hour ago, maybe, on her timescale.
I have faint-hearted anticipation of the future, being on the wrong side of working age. But at the same time don’t want to miss riding the oncoming wave.
I currently work full-time at Swiss Re, Bengaluru. The blogs and articles on this website www.balajos.com are the personal posts of myself, Balachandra Joshi, and only contain my personal views, thoughts, and opinions. It is not endorsed by Swiss Re (or any of my formal employers), nor does it constitute any official communication of Swiss Re.