(Speech) The changing nature of value

New World, Blue Mountains NP, sunrise, last week

“All that glisters is not gold;
Often have you heard that told:
Many a man his life has sold
But my outside to behold:
Gilded tombs do worms enfold
Had you been as wise as bold,
Your in limbs, in judgment old,
Your answer had not been in'scroll'd
Fare you well: your suit is cold.'
Cold, indeed, and labour lost:
Then, farewell, heat and welcome, frost!”
William Shakespeare, The Merchant of Venice

This speech was prepared for a lecture to university students later this month. It is about a revolution in the fundamental nature of value.

1. Are the accepted notions of value under challenge?

Most of us think we have a pretty good idea of value. Mostly, we think of value in terms of gold, cash and coin, the most obvious daily expression of value. Value is practical. We all buy real things with it: bread, wine, cars and entertainment. We seek to accumulate it, and hold to beliefs such as: 'quality increases value' or ' scarcity increases value'. But "All that glisters is not gold". Lots of things do not have a cash value, although we happily accept that they still have value. Indeed, gold, cash and coin are just convenient tools with which to nominate a value, and to trade items. Without cash we would be thrown back on old barter systems to exchange a loaf of bread for say three hours of manual labor. It is not just bread and work that have value. We assign value to almost everything we see around us, or which can be created. We assign value to existing or future paintings, photographs, crochet, songs and movies. We use the convenience of cash to acquire these. Of course, it goes without saying that we never have enough cash to acquire the things we need or want. This is because a relatively small number of people hold most of the gold, cash and coin. These days, value is brought home to most of us through wages or social security payments. Our time is 'valued' and at the end of a period of work, we get a wage in cash. This is so pervasive, it is hard to conceive of it being otherwise. But, just below the veneer of a cash economy is a different social-value economy. In fact, the cash economy is a fairly new arrival. Until recently, writers did not get paid for writing books. They did it to acquire a different type of social value - call it influence or fame - within the social-value economy. In fact most people in society operate outside the cash economy in the wider social value economy. Mothers, children, older folk all find that while their contribution to society is highly prized, but it has never been part of the cash economy. At the end of the twentieth century we started to see traditional job disappear across a wide range of markets. The pace of those job losses have grown and the range of jobs disappearing has increased. Today whole sectors of normal retail trade have disappeared, and employment classes have morphed into different jobs or disappeared altogether. Many old jobs have been replaced by technology. Book binders have been replaced by online books, film processors by digital film and journalists by electronic news gatherers. Some of these changes have been for the benefit of humanity (the disappearance of journalists, literary critics and telephone cleaners might be hailed as one of the greatest achievement of the new age). But most of the changes have just left people underemployed or starving. We all treat the relationship between cash and things that have value as seamless. But all is not what is seems to be. Last century, a couple of philosophers from a school of thought known as the Scandinavian Legal Realists pointed out that cash has no intrinsic value. It only has the value we all imagine it has, a sort of tacit agreement that it is worth what we all think it is worth, which is fine except when a proportion of the population stops believing. This has happened a couple of times in recent history both world wide and in particular countries. Challenges to value occur when a large proportion of the population cannot find work, when fear spreads that the currency is being manipulated or when a local economy collapses. Sound familiar?

2. What happens when there is a challenge to accepted value?

Two different problems arise when there is a challenge to accepted value. The first is that the tradeable commodity, cash, stops working the way it normally does. This might result in hyperinflation, with the value of money diminishing rapidly, or in it becoming worthless. Secondly, because parts of the population rely entirely on investments, there is a tendency to resort to fire-sales as people desperately try to survive, and there is a collapse in the value of non cash items (eg, houses/businesses loose 'value' and some assets become worthless).

3. Are there modern alternatives to accepted value?

In the past, societies have fallen back on social value. But that is increasingly difficult for large urban populations where it is no longer possible to walk into a field and plant a crop to see you over a period of no food. Recently we have seen the successful emergence/re-emergence of a couple of alternatives to notions of accepted value. At the two extremes: a. Direct barter, the oldest form of tradable value never disappeared. Today we have seen the emergence of a whole range of cooperative arrangements that are 'cash-less', and accommodate a whole range of subsistence-type living arrangements that see the value of work and produce identified and traded directly. b. Bitcoins are at the other end of the technological equation. Bitcoins are 'mined' within a computer environment and then traded in the real world, much like money, for goods and services. Bitcoins have a particular attraction because they are invisible to state actors, and have been used for a variety of schemes designed to avoid income tax and criminal investigations. Welcome to the geekcrazy world of the blockchain, distributed ledges and cryptocurrencies. Both of these expressions of value depend, like cash on the acceptance of 'value' by those using the mechanism. When challenged (eg, Bitcoin has been particularly susceptible to value fluctuations with rumors of product manipulation or state crackdowns or 51% attacks on the block chain) value certainties can crash in a split second. Between these two types of value, they are many explicit and implicit expressions of value. Many of these come to public attention only because they are identified by state actors as taxation evasion mechanisms (eg, the partial barter of house furnishing together with the sale of a house might satisfy the parties concerned, but the visible taxation consequences of the arrangement might be disadvantageous or attract the attention of state actors).

4. The perfect storm

This year we will see more job losses, a continuance of the very rich becoming richer and the collapse of local economies. We are coming ever closer to a perfect storm. Central banks are preparing for this, requiring banks to hold more cash reserves. But if cash becomes worthless, the reserves will be to no real avail.

5. Social Media

So what does this have to do with social media? Social media does something that we cannot program machines to mimic. For good or bad, people on social media make choices about quality. Sometimes the choices are awful. Sometimes artful. But they are human. In making those choices or engaging in the building of creative products about which choices are to be made, humans expend energy every bit as incisive and time-intense as a day time job. That is, social media has within it the germ of a economy of producers and consumers, and we are now starting to see the emergence of meaningful unique indicators of value. Within the plethora of social media platforms, one platform (Google Plus) has been able to successfully plug into and unlock the value of a vast store house of Community intellectual Property. (CIP) Value? How did that word get in here? Has it snuck in by error? No errors. Real assessments of human effort and real assessments of human qualitative assessment quite rightly are a measure of value. Google has tried to build value scheme previously, but they (like all of the other social media platforms) were susceptible to being gamed. Initial Google Plus assessments of viewer activity were 'not real', and so had 'no value'. No one believed it. The new Google Plus assessment of value (influence) is a different kettle of fish. In time we may here have a powerful indicator of value, far more potent than a mined bitcoin. I hear you say, but i see no bitcoins or block chains here, and i will agree. Bitcoins are a bit of a blight. The value of a Bitcoins relies on happens-chance and investor greed. But most of all, it relies on a link back to the traditional economy. If the traditional economy goes pear shaped, the Bitcoin dies with it. A single successful 51% attack will burn it to the ground. A measure of value, that depends on linkages back to the traditional economy or is an vulnerable as the Bitcoin to attack are like central bank required cash reserves - worthless in a crisis. Interestingly, unlike other social media providers, Google has not tried to tie its emerging measures of value back to traditional markets. There is no ad revenue here. The value of CIP is internalized to those people in the information system. This system is within a heartbeat of finding a way of making the leap from implicit value to explicit value.