Guillaume’s blog

Last week, Interactive Architecture ran an article about the Singing-Ringing Tree sculpture in Burnley, Lancashire, UK. The video resonated very much with some of my recent thinking on how public art that is part of the commons can be at the heart of community economic development.

First of all, it reminded me of an interview of Douglas Rushkoff about his latest book Life Inc where he tells the story of how Middle Age cathedrals were built:

The Vatican and central Rome did NOT build the cathedrals. The funds came from local currency. They were what we would now call “demurrage” currencies that were earned into existence. Towns ended up creating more value than they knew what to do with! They started investing in their infrastructure and their windmills and their water wheels; and also in their future in the form of cathedrals and other tourist attractions.

The second thought I have had recently is that a currency is a unit of contribution to a common goal, and it is this common goal that gives the value to the currency, because the common goal provides a social incentive for everyone to participate in their own way, some by contributing directly to the common goal and being issued currency, others by contributing indirectly to the goal by accepting it for goods/services. In my view, individuals’ common goals or common individual goals are what initially create community, more than anything else.

A public art piece like the Singin-Ringing Tree is such a common goal. It creates long-term value for local businesses like the cathedrals of the middle-age. It creates identity and pride for the local population. It also create jobs.

One approach to funding art is to seek grants from tax-funded government development agencies, but this approach can be viewed as quite inefficient since it requires tax collection, projects competing for funding with other projects, and a hierarchical and highly centralized decision making process.

Another approach could be to use a community currency dedicated to the particular art project. It would work like this:

• The art project would issue acknowledgments for in-kind or monetary donations made to the project. Issuance would be made public.
• Businesses could show their support by accepting some of these acknowledgments for partial payment of goods/services they provide.
• The notes, if printed in paper, could bear an artist rendering of the public art piece to be built.
• After it is built, the public art piece would likely attract tourists to whom the notes could be sold as a “piece” of the art piece, likely for many times the face value in dollar, since originals would be in limited supplies. This would provide a natural way for the currency to disappear from circulation, and be replaced by new ones for new projects.

This is the basic question that came up on a Flash Meeting titled “Open Money for Beginners” organized by Christophe Ducamp last Sunday. This is also a question that Eric Harris-Braun, Art Brock and I ended up discussing on a conference call last Friday night. So, I decided to take a shot at it, knowing that not everyone will agree at first, but hoping I can start a constructive debate and that we can agree on a definition at some point.

Etymology

One angle to start with, is etymology:

• In English, “currency” comes from L. currentum, pp. of currere “to run”.
• In French, the translated word is “devise”, which is essentially a motto, something you stand for, a rule you live by. In French, we have two words that are closer to the English word: “monnaie courante”, which means the money that is widely accepted.
• In German, the translated word is “Währung”, which according to the wikipedia page comes from a word that means “warranty”, but may also be from the verb “währen” which means “to last”.
• In Spanish, the translated word is “moneda”, which according to the etymology, means a coin minted with the mark of the issuing authority, which gives credit to its value.

So, three languages focus on the currency as something whose value is ensured by the reputation of its issuer. Only the English word derives from the consequence of this quality, which is that it flows easily between people.

Attempted definition

A currency is a means of payment denominated in a unit of value, issued, marked and ultimately redeemed by an issuer who guarantees (“backs”) its value. This guarantee is a function of the issuer’s reputation. The stronger the reputation the more the currency will be accepted and flow.

Why a currency is not a unit of value – See discussion between Chris Cook and Thomas Greco on P2P Foundation wiki.

Examples

Airmiles are backed by the airline company’s ability to redeem them for flights.

Twollars backed by EisoMac Ltd and sponsors’ commitment to donate one US$ for each donated Twollar.

Hours at time banks backed by the commitment of participants to deliver on one hours of their time.

Can we go beyond this definition?

There are many people that are streching this definition.

Supporters of the meta currency project, according to my understanding, view the above definition as restrictive and unable to correctly address forms of wealth that are not tradeable such as health. On this topic, I think that although I can’t trade my health, my heath or health-related activities can be tracked, and these have values to the welfare system I participate in. For instance, if I don’t smoke and I can back it up via a reputable issuer (either a doctor or a trusted device), that fact has value to the welfare system (less cost to them down the road) and could be the basis of a health currency.

Other examples given by the meta currency project are: right to vote. Voting can be viewed as something issued to each voter for a particular ballot and that they redeem to the issuer when voting. There is indeed some flow of wealth here, backed by the ability of the issuer to implement the voted proposition, but voting rights cannot be transfered. School grades are another example. I see these processes as reputation-building processes that in turn can back a currency, but not as currency themselves.

I have also heard people like IdentityWoman talking about identity infocards or as a currency. This is a topic I have addressed in a recent blog post. I don’t think that my “date of birth” or “email” is a currency b/c if I issue 10 tokens that can be redeemed for it, without accountable privacy policies, one party redeeming it devalues it for the 9 other token holders. Plus having more than 1 token is useless. Plus I only want the person I share it with to redeem it. On the other hand, I can see possibly how a blogger could issue tokens denominated in blog posts or tweets that could be redeemed by the holder to access restricted content on the blog.

In online multiplayer games, there are currencies that are not use to trade goods with other players, but that can be only exchanged with the game itself. An example is influence, which some games dispense quite generously and are a parameter to the success of some operations in the game. But obviously, these games operate in a virtual context that do not have the limited resources of our real world, so that may be not such a problem.

What is your opinion? should the world currency be kept to something that can be used as a form of payment in a trade, or should it be used in a wider variety of social contracts/games/processes? more importantly, will it help people understand and adopt new currencies or will it make things more complicated and backfire?

I spotted an ad for some photographic equipment for sale on Craigslist this morning that had the following post-scriptum:

I have to make rent and times are tough. So make an offer.

And this morning in my taxi, next to the “No Check” sticker, a yellow sticker woud read:

I am Self Employed Independent Contractor. I’d appreciate your repeat business.

One way to look at this is that it is a form of “Authentic Marketing” but I prefer to describe it simply as adding meaning to transactions, in the above cases: helping someone possibly unemployed, or rewarding someone who is contributing via its small business to a wider diversity.

These are examples that while exchanges are fundamental for mutual wealth, exchanges aren’t just about money. Exchanges preceded money, and even when first monies appeared, it was not uncommon for multiple of them to exist concurrently, each with its distinct role, or meaning. Money as we know it today (standardized, government issued) has had a huge objectifying influence on our subjective values, an effect that authors like Georg Simmel have described as completely objectifying and alienating. Others, more recent, authors like Viviana Zelizer in her book The Social Meaning of Money argue that subjective values have had a largely underestimated influence on our money as well, with people relying on a variety of techniques to give back social meaning to the colorless government-issued money, such as using different jars in their household for different uses. To Zelizer, under the surface of a single fungible government-issued currency, people use what amounts to a myriad of different currencies: they all flow differently even though they are all denominated in dollars.

In other words, old habits die hard and humans strive for meaning in everything they do, something the game designers try to satisfy as much as possible in their alternative worlds. As people look to compensate for less transactions with more meaning per transaction, we ought to see a wide range of solutions that will help them do just that.

Without going to a different currency, one example based on the above could simply be for users to expose part of their identity (unemployed) to a trusted party in a way that guarantees buyers on Craigslist that their money indeed goes to a person who is unemployed, and not someone deceiving to get an unfair advantage. That trusted party does not need to be an institution, but simply a social network.

If we think in terms of a new currency, one thing to keep in mind is that while money is a very powerful leverage tool, it is not what will drive people to exchange. A currency does not enable exchanges, it facilitates them, and one way it can facilitate them is by having built-in meaning.

Today, Eiso Kant, the co-founder of Twollars announced that he had been working lately on a multi-currency version of Twollars, and that “soon everyone can start their own currency on Twitter”. This could be an interesting development for Twollars, which have so far acted as a multiplier and allocator of the generosity of the sponsors US dollars donations: Twollars are backed by commitment of sponsors to donate real US dollars to the charity of the donator’s choice (the first $1,000 was sponsored by Eisomac Ltd, the creator of Twollars themselves, and it seems they are now looking for a new sponsor for the next $10,000).

We will have to wait until more details emerge, as there are many different ways a multi-currency platform could be implemented.

In the meantime, I’d like to share some thoughts on the concept of a Twitter Time Bank, something I’ve been thinking about in the last few days.

Overview

The goal of the Twitter Time Bank is to allow people to bring the reality to the idea that “time is money”, and allow anyone to issue their own time-based money they can use to pay others for products/services or to donate to others.

Here is an example of how it would work:

“(from @glebleu) give @receiver 1 hr for …” would give the receiver the right to schedule 1 hour of my time with him/her/them, through an operation called “redeeming”. Alternatively, they could transfer the time/money I gave him/her/them to someone else via the following Tweet: “(from @receiver1) give @receiver2 1 @glebleu hr for …” (receiver1 gives one hour of glebleu to receiver2).

Give syntax

Anyone is free to give their own time money to anyone else they want for whatever reason they want. They can give as much as they want (but there is an obvious limit, as each person’s time is limited). Anyone is also free to transfer other people’s time money they received to someone else. Here is the syntax:

Short syntax (@giver = @issuer) “give @receiver 5 hr ….”  or  “give @receiver 10 mn …”

Long syntax (@giver <> @ issuer) “give @receiver 5 @issuer hr” or “give @receiver 10 @issuer mn”

units supported: hr or mn

Accept syntax

Although you are free to give your time money to anyone for something, they are also free to acknowledge it or reject it. Acknowledgment would be done via the following Twitter syntax:

Short syntax: (@issuer = @giver) “accept 1 @giverissuer hr for …”

Long syntax: (@issuer <> @giver) “accept 1 @giver hr from @issuer for …”

Creating fungibility with community currencies

“Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution.”

Personal time money is hard to get accepted, obviously. With the above scheme, each time you are given some time money, you need to review the issuer for the value of his/her time to you and his/her creditworthiness.

To make personal time money useful, we need to make it fungible, but obviously all people’s time is not fungible. It is only within specific groups/communities that it may be.

To create mutual substitution, we need to allow people to spontaneously mutually agree to make their time money substitutable with one another. This agreement is a currency. In Twitter terms, @user1, @user2, etc. create a community whose currency is for instance called #bernal (say for the Bernal Heights neighborhood in San Francisco to support neighborhood “barn raising” events). In the community currency configuration, the community admin can decide:

• how people can be accepted in the community (ex. unanimous vote, cooptation from a minimum number of existing community members, verification of affiliation, etc.)
• the limit on each community members’ un-redeemed issued time.
• whether the currency can be sold for US$ to highest bidder (note that there is no way to prevent it from happening, so it’s better for the process of buying/selling currency for US$ to happen in a way that can be tracked and users protected from theft).

Once this is set up,  community members can issue community currency backed by their own personal time money. For instance, if I’m a member of #bernal, when I tweet “give @receiver 1 #bernal hr for…”, I automatically have an additional @glebleu hr that is accounted for in my un-redeemed issued time. If I exceed the personal issuing limit set for my community, the issuance is rejected (the received can’t accept it).

Web service

A Web service would provide a Web version of give and accept actions, as well as the following actions:

• reports:
  • un-redeemed issued time,
  • un-redeemed (but scheduled) issued time,
  • total redeemed issued time
• search profiles of people that you can redeem your personal money or community currency with
• request redemption (schedule time & location, or redeem for US$)
• confirm redemption
• bid in US$ for redeemable personal time money or community currency
• personal profile/preferences
  • auto-accept given money (default is no for personal time money, can be configured on a per community currency basis)
  • authorize personal time money issued to be sold for US$ to highest bidder (default is no, but there is no real way to prevent it to happen)
  • community currencies joined
  • schedule w/ booked time.
  • geo location, services/products provided for 1 hr, delivery (F2F, online), etc.

Business Model

The business model would quite simply to take a % of the time money sold for US$ (the system would allow users to prevent their issued time money to be put up for sale in US$ if they’d like to).

Like many community services, Access SF, San Francisco public access station might close its doors because of a $500K budget cut.

I think Community Way might be a good model for them to raise these $500K. Here is how it would work:

1. Access SF issues Access SF dollars.we could also call them vouchers or coupons
2. Access SF negotiates with local businesses to get Access SF dollars accepted as payment for part of what is owned by customers. For instance: a local restaurant would accept 10% payment of the bill in Access SF dollars. Access SF explains that they will advertise Access SF dollars benefit on their channel and Web site, which will attract new business.
3. Access SF sells Access SF dollars to SF residents on their Web site and at their office. These US dollars are used to fund the $500K.

Local businesses get advertising. Local residents get to support a community service without losing purchasing power. The community service gets its real dollars.

If Access SF sells $50 worth of Access SF dollars on average to 10,000 local residents, they’d get their $500K.

From the Untergunggenberger Intitut Wörgl blog in Germany Austria, here is a video on the Palmas community currency in Nord-east Brazil, launched several years ago, which has enabled this impoverished community to build and retain wealth locally. Just to give an idea of the scale, Banco Palmas has 2100 associates… 60% of which are below the poverty line.

A very detailed description is available. Here are the specific points I noted:

• Banco Palmas, which was started and is managed by local residents, functions as a local credit union that issues low interest rate loans in the alternative currency, the Palma, and provides also a credit card for payment convenience.
• Access credit does not require documents, but only requires that local resident voucher for the loan. In other words, instead of relying on high-tech PhD risk analysis algorithm, CDS, securitization, and the likes, credit risk analysis is socialized.
• The bank funds consumption and production reports to be able to better determine what is needed by the community and provide market research for entrepreneurs.
• The alternative currency, the Palma, is backed by the national currency, and convertible at a 1% fee.
• The bank has established partnerships with local businesses, and many are providing discounts when paying in Palmas.

Here are also some amazing numbers from the report:

• In Ceará, sales in commercial establishments in the community increased by 40% In Ceará, sales in commercial establishment in the community increased by 40%
• Bankruptcy for local businesses involved with the Bank has never exceeded 3% Bankruptcy for local businesses involved with the bank has never exceeded 3%
• Crime rates in Ceará, compared to other neighborhoods in the city, are 5-6% lower Crime rates in Ceará, compared to other neighborhoods in the city, are 5-6% lower
• 900 new jobs were created in the formal and informal sectors since the beginning of the project 900 new jobs were created in the formal and informal sectors since the beginning of the project
• Of Banco Palmas clients, 82% feel more responsible; 95% consider the Bank an agent in the eradication of hunger and promotion of jobs and income; and 54% feel more solidarity with the community Of Banco Palmas clients, 82% feel more responsible; 95% consider the bank an agent in the eradication of hunger and promotion of jobs and income, and 54% feel more solidarity with the community
• 11 other municipalities are currently receiving training from Banco Palmas technicians to implant community banks in their cities 11 other municipalities are currently receiving training from Banco Palmas implant technicians to community banks in their cities

Chris Woebken has created some pretty curious new ways of interacting physically with digital or plastic money.

In May 2007, Civil Economics, an economics research company specialized in sustainable prosperity has issued a research note titled San Francisco Retail Diversity Study (Full Study
Executive Summary
Talking Points).

The main conclusion of the study is that

A 10% shift in consumer spending, from chains and internet to locally owned retail, would create nearly 1300 new jobs and over $190 million in increased economic output for San Francisco. Consumers don’t have to spend more, just spend differently.

Guillaume here: something not mentioned in the analysis is that more jobs and more economic output in a specific geography where you own a house means that your house increases in value (or keeps its value or decreases relatively less). In other words, by collectively chasing deals online and saving $100 in Christmas gifts, a neighborhood may be actually be contributing to a decrease in their wealth. It would be nice if the money system was making this link more obvious.

Anyway, it seems that Association of Alternative Newsweeklies heard about this study and launched a national campaign that

urges their readers to spend at least $100 of their holiday money this fall at locally owned stores in their communities – a move that could pump more than $2.9 billion into urban economies during this recession-plagued season.

(full press release).

In the Portrero neighborhood of San Francisco, local merchants have adapted the campaign into a drawing of lots for a prize whereby people can “buy” tickets for the chance to win gift certificates from local merchants by sending an email with a pledge to spend $100 locally.

Here is an example of the emails circulating.

The Potrero merchants are running a promotion, giving away $1000 worth of
gift certificates to locally-owned, independent businesses. The drawing is
this Thursday; all you have to do to enter to win is to pledge that $100 of
your holiday spending stays here in the neighborhood, with locally-owned
merchants.

Send an email saying “I pledge” to pledge@potrerohill.biz and you are
entered into the drawing. Someone will win $500 worth of goods and
services, and thanks to local merchants, there will be two 2nd prizes: $250
worth of goods and services.

So… think about redirecting just $100 that you might have spent at
Amazon.com, or Macy’s, or on Starbucks gift cards. And help the local
economy — find out more at www.potrerohill.biz

And please — forward this to others you know who live and work in Potrero
and Dogpatch. OK sure, it will slightly reduce your chances of winning the
drawing, but it’s great for people to learn more about our local
businesses.

Guillaume here: I think this is a great step towards local community currencies. I think I would have liked the Portrero Merchant association to go a step further and let merchants issue merchant branded “Portrero Bucks” that merchants would have sold for real US dollars, with say $100 “Portrero Bucks” for $90 U.S. dollars. These would have acted as a guarantee for the pledge, and would have been a first step towards the creation of an actual community currency.

Chris Skinner just posted a new post on “Social Money” in which he writes about the challenges of online currencies or real-life complementary currencies. I commented at length and making a connection between currency independence and money independence.

Money is fundamentally social. Which is why the social Web can be expected to impact banking/payments much more than it has so far operationally. I personally view the monetary system we live in today as a sort of AOL of money where one central organization and its affiliates have effectively a monopole on what is money and how it is created. I think that at the time of AOL, people had a difficult time imagining what an open, decentralized and resilient AOL would be, and how much it would force them to transform. Today, in my opinion, we are in the early days of this new decentralized money. We haven’t figure it’s version of HTTP, HTML, browser, SSL and DNS yet, that’s all.

With regards to runs on communities’ money. I think it makes it very clear that an independent community with an independent currency should seek not just a 0 or positive balance of payments, but a balanced current account. As Paul Volcker (I think) said: “Trade matters”. The strength of a currency in other words depend on the resilience on the local economy to outside events. In the real world, free trade ideology and negligence of deficits has already cost some real countries dearly (Iceland) and many other countries including the US are at risk.

With regards to adoption of community currency, I would argue that it is not just a problem of trust. The success of real-life currency is not because people necessarily trust them. It is primarily because demand for it is created by making it the only to pay for tax debts. One way to create demand for a currency is to have local businesses (i.e. org/people with public reputation) issue it and have community member agrees that the non-profit community service entities get their donations only in this currency.

Change.org is a movement of citizens inspired by the presidential campaign who are now submitting ideas for how they think the Obama Administration should change America. It’s called “Ideas for Change in America.”

I’ve submitted an idea and I’d appreciate greatly if you read. If you like it, please visit my idea’s page on Change.org to vote for it.

Establish a Research Center on Money

Money is at the center of our economy and fundamentally shapes our relationships as humans and the value system of the society we live in.

Recent financial, ecological and humanitarian events have increased popular intuition that there is something wrong with our current money system itself, and that policies will have limited impact unless the money itself we use is changed.

History has shown that money can exist in various shapes and forms. Some grassroots efforts in many communities in the U.S. and outside the U.S. have shown that alternative/complementary community money is a powerful way to increase local wealth, increase social capital and keep economic activity going in times of recessions/depressions. Last, technology advances such as the Internet, open security and collaborative development efforts have made it easy more than ever before to create new forms of electronic money.

Yet, there is little scientific research, whether theoretical or empirical, available on alternative forms of money, whether based on units of sustainable energy, hours of work of people, online reputation, or commodities.

A Research Center on Money would fund scientific economic research on alternative/complementary forms of money and how they can benefit our communities from neighborhood to cities to counties and states. It would be a tremendous resource for communities to confidently start using money as a powerful tool for change.