Thursday, February 05, 2015

Smarter Barter

We can't read each others minds. Individually or as groups. We aren't even that great at putting into words exactly what we want partly because we don't always know what that is. We are figuring it out as we go. We can end up having co-ordination problems. 

There is a story about how a broken window can lead to a series of exchanges. A hooligan throws a brick through a Baker's window. The Baker has to get it fixed and pays the Glazier. The Glazier then has money to buy some shoes. The shoe maker can pay for a massage. The Masseuse can buy a meal at a Restaurant. The Restaurant owner can then buy bread from the Baker! Boom. A wonderful circle of wealth created by a brick through the window. This doesn't really work unfortunately. The Baker could have spent the money he used to fix the window on something else. Perhaps the Baker would have bought a suit. The suit purchase would already have been a catalyst. At the end of the day he would have had a fixed window and a suit. Now he just has his birthday suit.

My Broken Window

Even the story that ends with the suit and the window misses something. It would be good if we could get the stimulus of the broken window, without breaking the window! There are lots of people who have the ability and willingness to work that aren't able to get things going.

It is a communication problem, not just a money problem. Governments try create stimulus by introducing money hoping that it will start a cycle. Like the 'Broken Telephone' game, money is a message being passed along to get things started that the government can just take out of the system at the end. If it isn't passed along, nothing happens. The governments tool of creating money does nothing if the banks can't find anyone to lend it out to. Since times are tough, they are nervous of lending it out, and borrowers are nervous of borrowing. Businesses are tightening their belts and are nervous of investing. Everyone gets scared. The message doesn't get passed along.

The thing is, we still have the ability to do things. We just need better coordination. Wouldn't it be awesome if artificial intelligence and fancy algorithms combined with smartphones to create a 'Smarter Barter' app. If you were able to put into an app all the things you could do, or were prepared to do. All money is in reality is potential. The problem with existing money is that it relies on the ability of the individual to convert their potential into money. That is a skill in itself. The artist has to become a marketer. The writer has to find a publisher, who has to sell the book. Converting potential into money requires business skills. It requires hustle. What about the people without hustle? The people who aren't confident enough to ask if someone wants their goods or services. Smarter Barter could do the work of co-ordinating various combinations of people to do the exchanges required. In a way, things that allow people to self-publish or remove obstacles between users and makers are smarter barter. Social Media is a potential smarter barter.

Most people don't have a buffer for when things go wrong. They feel recessions painfully because they live hand to mouth. Add a buffer and a little noise isn't a bad thing. It allows us to shift to doing thing better. It allows trial and error. It allows learning. When markets tumble, and GDP wobbles, we only really have to worry about things collapsing if potential has changed. If people are smarter, the world is more connected, we are more aware of problems we are causing, and various prejudices are decreasing then we have reason to smile.

I think we have reason to smile.

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