[Dave Birch] We touched on the world in 2050 at the 2012 Digital Money Forum. You might recall (if you were there) that Gill Ringland talked about her exploration of the world of financial services in 2050 from the report "In Safe Hands" (published at Long Finance) that I wrote about earlier this year.
To do this she used an interesting pairs of axes to set out a 2x2 matrix: the “Washington consensus” vs. “Community-based values” on one axis and “mundane” and “virtual” (essentially) on the other axis to reflect the extent to which real or virtual communities come to shape the economy and therefore financial services.[From Long and longer]
Having listened to Gill and the audience response to her scenarios, I'm more convinced than ever that the world of the "C50" (the organisation of the 50 richest city-states that will replace the G20 as the mechanism for "managing" the world economy) which comes from her "Many Hands" scenario, will be the most likely basis for the future economic organisation of a successful, functional world.
“Many Hands”, which I can’t help feeling is the most likely, sees society reform around city-states. This panders to my long-held appreciation of Jane Jacobs work on "Cities and the Wealth of Nations".[From Long and longer]
A world economy built up from cities and their hinterlands will obviously demand different financial services and institutions from one based on national economies. This Jacobs-influenced city-centric perspective came to mind when I happened to read
The city has achieved a status in contemporary culture as a focal point for counteracting the Global Mindset that has emerged as a result of digital culture. As a result of the emphasis on connectivity and the cloud, people are anxious to lay down roots at a local, physical level. This report explores the role of the city as an increasingly important identity anchor – particularly for youth...[From Canvas8 - The city as an identity anchor]
What this means to me is that the future sense of identity will be city-centric, with people seeing themselves as Londoners and New Yorkers rather than Brits and Yanks. Their loyalties will be more local than ours and the relationships between cities will replace the relationships between countries as the most important tensions and dynamics. Cities will undoubtedly form defence alliances and trade pacts and so forth with each other but I wonder if they will give up any real sovereignty? It's an interesting and enjoyable area of speculation, which is why it went down so well with the Digital Money Delegates this year.
What will be the model around that city-centric identity? How will those identities related to trade, commerce and society as a whole? In discussing that C50 scenario, Gill makes a passing but powerful observation on this future, saying that individuals will protect their "personal identity, credit ratings and parking spaces" at all costs and that since monetary arrangements (nation-state fiat currencies) will have collapsed, the commercial paper of global corporations will be used as international currency.
In the language of digital identity, digital money and digital networks (in other words, the language of Consult Hyperion) Gill is predicting a reputation economy anchored in the mundane, a world in which the monetary guidebooks already at hand (e.g., Hayek's "The Denationalisation of Money" and De Bono's CSFI pamphlet "The IBM Dollar") take us through a landscape animated by new technology but shaped by physical as well as virtual communities.
Personal identity. I might take issue with Gill here and say "personal identities" but I know what she means. Privacy, identity transactions, reputation management and so forth.
Credit rating. The commercial reputation that means that you can buy or sell, whether an individual or an organisation will be central to economic existence. In a networked society, this is more likely to be something that comes from the social graph than the conventional credit rating of today.
Parking spaces. I'm going to talk to Gill about this in a future podcast, but on my reading of the report I take this to mean the right to live in a particular place. These rights will certainly be of critical importance to the individual, since their own identity will be closely related to the city (and hinterland) of residence.
What does this all mean for transactions? Gill explains in the report that in order to create scenarios (i.e., internally-consistent views of possible futures) for a generation from now, she found it useful to look two generations back, and consider the asset classes managed by the financial services industry in 1930. These were broadly commodities, cash, equities and brains. Looking forward, she adds a fifth asset class based on demographics for 2050. This seems to me especially interesting in the C50 context because, for example, a permit to reside in a desirable city could well become a key tradable commodity.
Transactions, therefore, become the exchange of these asset classes (but in digital form, of course). So Hayek or de Bono? Banks issuing private currencies or commercial paper? I wonder if there is an automatic implication that the "cash" of cities will become the most important kind? In other words, having abandoned Sterling for London Lolly and US Dollars for New York Notes and LA Loonies, will these be sufficient to provide the medium of exchange for the future economy. Right now, almost all transactions are local and even at the national level only 1%-2% of European transactions are cross border. If I live in London and use London Lolly for the train, for lunch and at the supermarket, is it such a big deal to convert it to Moscow Moolah to buy something online? Especially when your phone does it for you?
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