You treasure what you measure, and you measure what you treasure. Open money provides the tools to implement this maxim. What should we be treasuring in our culture and on our planet that we so far have no way to measure?
Throughout history, wealth acknowledgment evolved by becoming more abstract and less substantial. Open money follows this same pattern by being a meta-currency system, not just a new single kind of money. It enables the creation of many new types of money. It puts currency creation directly in the hands of communities so that they can create wealth-acknowledgment systems for tracking all types of wealth–tradable, measurable, and acknowledgeable–and so that they can tailor the tracking to fit their precise needs.
Open money works by providing a unified platform for the interchange of all these different kinds of wealth acknowledgment, just the same way that the Internet provides a unified platform for the interchange of all kinds of information. Just as the great shift of the Internet was in not specifying what kind of data can flow across it (unlike the phone network), the great shift of open money lies in not dictating which new form of wealth-acknowledgment people should use. Instead it provides the basic building blocks for communities to create new types of wealth-acknowledgment systems themselves.
Right off the bat, communities can use open money for simple things like Local Exchange Trading Systems (LETS), Time Banks, barter networks, carbon-emissions trading programs, baby-sitting co-ops, reputation tracking systems, business loyalty programs, etc. But the interesting stuff will happen when communities apply their creativity to invent new currencies that solve wealth-acknowledgment problems we don’t even have names for yet.
It would seem to me that the potential reach and usefulness of such meta-currencies is even greater in a world where the wiring of the social graph is no longer location specific and consists of an infinite number of overlapping communities. I think anyone that has worked – and certainly anyone who has been a manager – in a medium to large size corporation would instantly recognize the importance of (and inherent difficultly therein) of measuring and rewarding what the open money folks call “acknowledgeable wealth.” And indeed in many instances attemps have been made to create internal ‘meta’-currencies to deal with this. I’m not sure if my experience is typical (I suspect it is) but such attempts in places I have worked have never really succeeded. Thinking about it now – and this is a provisional hypothesis – I suspect this was mainly due to two failings. First, the efforts generally tended to be half-hearted especially with respect to creating a robust and transparent ‘accounting’ system. Often the excuse would be ‘to avoid adding yet more bureaucracy to the system’, however I suspect the real resistance came from fear of what accurate accounting would reveal. Second, these currencies never had negative balances. They were like Lake Wobegon dollars: everybody got paid, but nobody paid. You can see how this would struggle to gain legitimacy.
There is an open money pilot project for a community currency network which I think I’m going to play around with; it would be ideal if they created a Facebook widget that allowed me to create a currency network for each Facebook group – this would save the hassle of having to solicit (potentially multiple times, for different currencies for different groups) my connections to sign up ‘out of context.’ Indeed by writing a widget that could overlay on any type of social group (email address book), departmental or company directory, yahoo group, ning network, etc. you could easily create millions of very context specific meta-currencies. While there is no reason to think that large transactions are proscribed from such a system, the likelyhood is that it would probably have a much greater impact in driving a large number of micro-transactions, greasing the wheels of social reciprocity so to speak. (Although as an aside, such a boom might create all sorts of issues for the existing tax paradigm…) Indeed, one of the seedcamp ’07 finalists (disclosure: I am an investor in seedcamp) – facecontact.com (going live beta next week they say) – is something along these lines:
…is a simple and effective tool for referral tracking and reward administration for referring job candidates, clients, investors and other prospects. Currently in stealth (development)
They are giving us a demo on Thursday and I’ll be interested to see how it is similar/different to the concept I describe above.
Finally, part of the philosophy behind open money seems to exhibit a somewhat socialist or even utopian bent, and while I like their idea of “acknowledgeable wealth”, I firmly disagree with their “Why do we need open money?” reasoning. Basically, we might well ‘need’ open money – or more helpfully, open money might be a great tool, but not for the reasons they articulate. That said, in some specific cases I think there is merit in there first idea:
Modern money is inefficient and unfair. Because communities cannot create their own currencies they are beholden to, and fundamentally controlled by, whoever does, just as users of coins were limited by the amount of precious metal available. When communities can create their own currencies, they don’t have to export their own wealth to get money to use for trade. They can start trading right away and export later if they so choose.
In particular, I am thinking of Africa (which could be generalized to all countries with low per capita monetary wealth, especially where the state/financial system has a history of ineptitude), especially the Unchained Africa as described by George Ayittey:
I start wondering whether the developing world’s enterprises will derive value from Enterprise 2.0 and social software much earlier than their developed world counterparts, a legacy effect I hadn’t considered before. I start wondering whether the developing world will leapfrog the developed world in the use of social software in general, as they are appearing to do in the mobile and wireless contexts. I start wondering.
Putting these threads together, I wonder if you could give a community (village or town or region) access (via mobile of course) to a mashup of Facebook, (local language) Wikipedia, Tradenet.biz combined with open money widgets this wouldn’t lead to an enormous leap in wealth (in the broadest sense) and well-being? If anyone out there wants to get together and have a look at having a crack at something like this, let me know. You never know, it just might work. Just have to think of a catchy name…
I am fascinated by the application of modern information and communications technologies to help improve the lives of some of the world’s poorest and ‘infrastructurally challenged’ (don’t know if this term has been used before but seems to encompass the fundamental problem that holds back the people in developing countries from improving their economic prospects.) To be able to succeed (in providing meaningful, affordable, services) in such challenging environments to my mind offers great insights into how improvements can be made to how services are designed and sold in any environment – including the developed and wealthy western markets. A variation on the New York, NY theme of – ‘if you can make it here, you can make it anywhere’…
the Village Phone extends regular base station cellular coverage from around 15 kilometers to around 30 kilometers through the use of a village phone kit – an antenna and ten meter cable (shown above) and a coupler (shown below) connected to a regular Nokia 1100 mobile phone plus of course, a micro-finance loan. The net result? In a number of cases it provides the first convenient, reliable and affordable connectivity to the outside world for many rural communities as well as providing a stable income for the local entrepreneur that takes out the loan.
He also goes on to mention the development of essential services facilitated by access to mobile communications:
One example of the benefits of connectivity? Sente – the transfer of money via mobile phone that essentially also extends regular banking services such as the remittance of cash to these communities.
Another exciting initiative I stumbled accross (at the excellent Timbuktu Chronicles) is Sevak Solutions “commitment of developing the product specifications, business plans, and financial requirements to create an open architecture transaction system [for microfinance institutions.]” Rather than paraphrase, Sevak Solutions describe themselves as follows:
Sevak Solutions is a start-up initiative that has emerged from a consortium of microfinance institutions seeking to understand the role technology could play in scaling microfinance. Early work demonstrated a need for alternative, low-cost transaction solutions and business models that addressed the needs of microfinance institutions that do not have the client volumes required to afford, or piggy-back on, existing payment systems. Sevak Solutions is focused on interoperability, open architecture systems that can connect to cell phones, point-of-sale terminals, ATMs, or any other access devices available in the market. The company performs its own in-country research and development, supports technology innovators that are attempting to enter the market, and provides strategic and implementation consulting on a global basis. Sevak Solutions is interested in promoting a set of technologies and migratory path for microfinance institutions and microfinance banks to expand their reach to the unbanked.
So here is a non-profit organization focused on developing open-source solutions in order to open access to the formal global financial system to anyone, anywhere, irrespective of their wealth. Bringing banking to the unbanked. Historically one of the great impediments to economic progress has been the lack of a cost-effective and robust financial infrastructure, Sevak seems to be taking direct aim at contributing significantly to solving this problem. I hope they succeed. Will they build the equivalent of Linux or WordPress for banking/transaction processing? I hope so, I will certainly try to follow their progress and they are definitely on my ‘find out more’ list.
As if it weren’t long enough already, another initiative that bounced on to my ‘find out more’ list earlier this year when I read about it in the Economist is TradeNet, a new mobile2mobile trading platform for farmers and traders in Africa founded by Mark Davies:
TradeNet, a software company based in Accra, Ghana, will unveil a simple sort of eBay for agricultural products across a dozen countries in west Africa. It lets buyers and sellers indicate what they are after and their contact information, which is sent to all relevant subscribers as an SMS text message in one of four languages. Interested parties can then reach others directly to do a deal.
Listing offers is free, as is receiving the texts. TradeNet plans to earn revenue by putting advertisements in the messages, though it hopes the service will become so useful that recipients will eventually want to pay. For the moment, though, the company is busy signing up users and swallowing the cost of sending the messages.
I have to admit this is one of those ‘I-wish-I-had-done-that’ companies. The potential for this kind of platform seem to me to be enormous. I’ll leave it at that for now. Very exciting stuff.
Banking over mobile phones in Africa. Very nice. We get it already.
Clearly this is a fascinating a very important development for what it is. But my interest goes beyond the obvious or first degree impact or consequences. My interest is stoked by the belief that this trinity may be the nexus of a new way of experiencing financial services. For anyone. Everyone. Call it pervasive finance. Ubiquitous finance.
Why Africa? Well it’s not New York, NY…but if you make it here…can you make it anywhere??? What can one learn from doing business in Africa and other markets where most people are poor and physical and legal infrastructure is often lacking? If you can provide a service or a product in such a difficult environment, certainly one should be able to offer it anywhere? If you can provide a service or a product profitably at a price point that works for a sub-saharan farmer, certainly one should be able to be a price leader anywhere?
I have a suspicion that most businesses in developed countries continuously underestimate their customers, and indeed when their customers don’t respond to a product or service the default attitude is all too often that it must be due to some shortfall in the customer – their understanding, their purchasing power (or more pointedly lack thereof) rather than a problem in the product or the way it is presented or packaged. At the risk of over-generalizing, I think most people in most places are smarter than businesses give them credit for. They may not be able to clearly articulate what they need or want all the time, but they know what outcome they want most of the time. Give them the means to acheive these outcomes and they will respond. And they don’t need to know, and often really don’t care to know how you do it – it is the result that matters. Financial services (albeit in no way unique) are particularly prone to this somewhat patronizing approach to their customers. To successfully do business in Africa implicitly one has to have faith in the potential customers.
(from The Economist) Companies are being started and successfully built in many African countries, especially in banking, retailing and mobile telephones. The region’s economy is growing steadily (see chart 1) and could expand by 5.8% this year. In part this is because of a commodities boom and debt forgiveness. But more peace, political stability and better economic management have done their bit, too.
…When Celtel, a mobile-phone operator, set up in Zambia eight years ago, it concentrated on the densely populated corridor between Victoria Falls (on the border with Zimbabwe), Lusaka and the industrial copper belt. This was thought to be the only area in which to do business. Yet in 2003, the company decided to invest in rural services, too, and was astonished at the result.
Although most rural customers had never used a telephone, they were keen to have one. This encouraged more people in the cities to obtain mobile phones to talk to relatives in the countryside. The introduction of Me2U, a service that allows callers to use text-messaging to send airtime credit to other mobiles, provided a further boost. Most people do not have bank accounts and the service has become a convenient and cheap way to transfer money. In villages it has also emerged as a substitute for cash, with people using airtime to pay for their shopping. Shopkeepers cash in their accumulated phone credits with people who make money by offering callers use of their mobile phones as a sort of public phone. Within the past two years, Celtel’s Zambian customers have grown from 70,000 to over 1m.
Celtel found that it succeeded if it adapted products and services to local tastes, needs and small budgets…
Although many Africans are poor, they are willing to pay for what they need. (my emphasis)
Adapting to local conditions and habits is critical to success – the humility not to assume what works elsewhere will work everywhere. This kind of open-mindedness can breed success even in the face of scepticism as to your customers’ ability to understand your product:
In Ghana Barclays, a British bank, started working with “Susu collectors”, who gather savings daily from informal traders without access to banking, to keep their money safe. There are an estimated 5,000 Susu collectors in the country, each working with an average of 400 clients. This is a $140m market that exists below the traditional banking radar. Barclays now offers special bank accounts, training and lending to the Susu collectors, who can provide credit to their clients. The bank was taken aback by the amount of money, sophistication and willingness to save in the informal economy.
The keys to success in Africa are not fundamentally different than the keys to success in the developed world; the difference is that if you get any of them wrong in Africa, you don’t survive. In developed countries however you can often get away with getting many things wrong and still muddle through given a much more forgiving and less challenging business environment. What’s the point? That perhaps there is a lot to learn from businesses operating successfully in Africa.
Another interesting angle when looking at doing business in Africa or other developing regions, is to consider the effects of technological “leapfrogging”. Again the Economist does a good job summarizing:
The lesson to be drawn from all of this is that it is wrong to assume that developing countries will follow the same technological course as developed nations. Having skipped fixed-line telephones, some parts of the world may well skip desktop computers in favour of portable devices, for example. Entire economies may even leapfrog from agriculture straight to high-tech industries. That is what happened in Israel, which went from citrus farming to microchips; India, similarly, is doing its best to jump straight to a high-tech service economy. Rwanda even hopes to turn itself into an African tech hub.
Those who anticipate and facilitate leapfrogging can prosper as a result. Those who fail to see it coming risk being jumped over. Kodak, for example, hit by the sudden rise of digital cameras in the developed world, wrongly assumed that it would still be able to sell old-fashioned film and film cameras in China instead. But the emerging Chinese middle classes leapfrogged straight to digital cameras—and even those are now outnumbered by camera-phones.
It seems clear that mobile phones (as opposed to personal computers) will be the most important device for access and connectivity in the developing world, and probably everywhere eventually. But access to the internet and computing will become more and more common everywhere, with many different initiatives – both technological and financial – focused on bringing down the cost and expanding the market for computing in the developing world.
As has been written many many times before, mobile phones are changing everything. From politics to business to culture. The digital generation is but a subset of the connected generation, a worldwide phenomenon. Again, this is probably being felt more strongly in developing countries – not so much because the effect is greater or different – but because the contrast with what came before is that much more marked. This extension of connectedness enabled by mobile telephony taps into something that is inate in humans; it extends our ability to form communities unbounded by geographical or even political constraints.
(from The Economist) In short, the use of mobiles in protest and politics and even banking (see article) is evolving faster than governments’ efforts to control it. Academics also find the phenomenon baffling, though they are studying it hard. Four eggheads with links to California’s Annenberg School of Communication will publish next month a book based on a two-year study of mobile phones and society. Their punchy conclusion? “When the dominant institutions of society no longer have the monopoly of mass-communication networks, the dialectics between power and counter-power is, for better or worse, altered for ever.” True enough, though the average teenage texter might put it better: “whn u cn fon u r in chrge 4vr”.
Once power migrates to the edge, the edglings are unlikely to give it back.
I will finish by highlighting the growth of mobile phone banking in South Africa. Once again making reference to a great article in the Economist, (I guess I should really have a link on this site to send them potential subscribers ) South Africa is a particularly interesting laboratory for considering and observing the nexus of finance and mobile telephony, with aspects of both developed and develping worlds existing in the business environment.
About half a million South Africans now use their mobile phones as a bank. Besides sending money to relatives and paying for goods, they can check balances, buy mobile airtime and settle utility bills. Traditional banks offer mobile banking as an added service to existing customers, most of whom are quite well off. But Wizzit, and to some extent First National Bank (FNB) and MTN Banking (a joint venture between Standard Bank and a mobile-phone network), are chasing another market: the 16m South Africans, over half of the adult population, with no bank account. Significantly, 30% of these people do have mobile phones. Wizzit hired and trained over 2,000 unemployed people, known as Wizzkids, to drum up business. It worked: eight out of ten Wizzit customers previously had no bank account and had never used an ATM.
…In most of Africa, meanwhile, only a fraction of people have bank accounts—but there is huge demand for cheap and convenient ways to send money and buy prepaid services such as airtime. Many Africans, having skipped landlines and jumped to mobiles, already use prepaid airtime as a way of transferring money.
They could now leap from a world of cash to cellular banking. In Kenya, a pilot scheme called M-Pesa is being used to disburse and pay micro-loans by phone. Meanwhile Celpay, which FNB bought last year from Celtel, a mobile-phone company, is offering platforms for banks and phone companies in Zambia and Congo.
This is all pretty interesting and exciting in its own right, but I get most intrigued and excited about the ability to extend this mobile financial platform to a converged set of financial products beyond payments and basic credit (loans and deposits.) With a foundation payments infrastructure built, the ability to offer trading, insurance and other risk management products to anyone, anywhere in the world doesn’t seem too daunting. Indeed developing markets may also see financial ‘leap-frogging’ as the lack of incumbents, inertia and regulatory capture leads to the adoption of truly modern and converged financial services.
Clearly I am not alone in my fascination for microfinance and financial services generally in the developing world. It’s importance was probably for too long underestimated, but with Muhammad Yunus winning the Nobel peace prize for his role in promoting financial services for the poor, clearly this is no longer the case. But Grameen Bank (and phone) are just the beginning and I don’t think we’ll have to wait more than a few years before business models defined and refined to prosper in the harsh light of emerging markets are exported to the developing world. We are used to giving the lessons. Will we be better students than teachers?
This is why I’m so excited about going to TED Global in Tanzania next June. The theme is Africa: The Next Chapter. I’ll be taking notes.
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