David Birch talks about the ideas behind his new book, ‘Before Babylon, Beyond Bitcoin’, covering and questioning a multitude of concepts from trust to identity to nation states to currencies.

• Trade cannot exist without trust, and it is hard to trust strangers
• As society scales beyond the ability and trust of individuals, we have to come up with other ways of increasing prosperity
• The transition to online-centric life means we might need to rethink money’s modus operandifounded on managing bits in a structure of central banks and fiat currency
• Online life makes identity, reputation and trust the drivers of an economic revolution but identity fraud is at an all-time high
• Nation states are institutions not suited to the economy of the future; e-residency of desirable cities will become a valuable right
• New forms of money may arise that map more closely to the values of the communities they serve

In his book “Sapiens”, the historian Yuval Noah Harari writes perceptively and entertainingly about things that are fundamental to our economy and indeed our society: money, trust, reputation and those sort of things. I found his idea of the “cognitive revolution” quite compelling, especially where he talks about human beings gaining the ability to communicate information about relationships and therefore reputation (or, as I might simplistically label the basket of concepts linked together here, “identity”).

Harari talks about the ability of the neolithic clan to remember the mutual obligations that bind people together when they can grasp the idea of a future, and how memory does not scale into the settlements of the agricultural revolution, thus necessitating the invention of money. But it’s stupid money. It knows nothing. Harari writes that “when trust depends on anonymous coins and cowrie shells, it corrodes local traditions, intimate relations and human values”.

The problem, as he frames it, is that trade cannot exist without trust, and it is hard to trust strangers (but easy to trust their money – indeed he later talks about this saying “if they run out of coins, we run out of trust”). As society scales beyond the ability of individuals, the local (including the money) is given up to the global. When we cannot share memories of information about identity, relationships and reputation we have to come up with some other way of increasing prosperity.

New approaches to trust in trade

First we came up with things made from atoms (e.g. silver and cheques) and then we came up with bits about atoms (e.g., electronic funds transfer and special drawing rights). Since the end of fthe gold standard in 1971, however, all we’ve had are bits.

I have often speculated that the transition to online-centric life means we might need to rethink money’s modus operandi founded on managing bits in a structure of central banks and fiat currency. As Mervyn King, former governor of the Bank of England wrote in his “End of Alchemy”, those are “man-made institutions that reflect the technology of their time“.  Perhaps their time is coming to an end.

My view is that online life makes identity, reputation and trust the drivers of an economic revolution. As a consequence, given that the way we think about identity now is simply not working (identity fraud in the UK is at an all-time high and still rising), we need new ideas.

New ways to think about identity

The always fascinating Jan Chipchase pointed me to this section of a very thought-provoking Medium piece on identity by Dan Hill: “How might we be able to think more richly of ‘both/and’ in terms of identity, of being part of nations, cities and the world, of respect for both the local and the global?”

Yes, yes, yes. The future is more identity, not less. I am not a number, I am a whole bunch of numbers (that ought to be unlinkable without my consent). In my previous book “Identity is the New Money” I wrote how social media and mobile phones and cryptography restoring the reputation economy of the neolithic clan but at scale, making the point that while our ancestors lived in one community, we live in many. Community is no longer geography.

New approaches to community

In my new book “Before Babylon, Beyond Bitcoin” I explore the intertwined evolution of technology and money, which I hope will provide the general business reader with some useful structure for thinking about the future of banks and Bitcoin, leading to an exploration of community and value. I finish by putting forward the idea that the multiple monies of the future will be linked to the multiple communities we will inhabit and, as the quote above makes clear, the multiple local and global identities of the future. As Hill goes on to say “our identity is framed in terms of street, neighbourhood, region, nation, biome — all are meaningful, alongside various forms of communities of interest”.

My personal suspicion is that while this is certainly true and that these identities will all be meaningful, a generation from now the city identity will be the most important. I’d add the nation state to the list of outdated institutions not suited to the economy of the future. Indeed, Dan Hill goes on to say that “Europe has functioned via urban centres for millennia, rather longer than our modern understanding of states. In some respects, this is a more meaningful form of organisation than that relative latecomer, the nation state, for all the benefits that the latter has accrued.”

Dan makes the point that Manchester and Estonia are similar in population size and while we are all familiar with e-residency of the latter perhaps, rather as Gill Ringland suggests in her financial services scenarios for 2050, e-residency of desirable cities will become a valuable right and the basis for one of a number of demographic assets classes. Hill goes on to speculate, as I have done, on whether a new Hanseatic League or a new Mediterranean Economic Union might be viable structures. I’m not sure I agree with his views on EU e-residency (because the EU is rather an artificial structure) but it’s certainly an interesting position to discuss, not least because it forms a money-issuing community of the kind that I discuss.

My general view is that we are returning to Harari’s “local traditions, intimate relations and human values” as the basis for trade because those new technologies (mobile phones, social networks and so on) mean that we can recreate the clan, the widespread and diffuse memory of obligations, on a population scale. Hence it is not implausible to imagine that new forms of money will arise that map more closely to the values of the communities they serve.

You can buy an advance copy of the new book (which will be launched officially at Money2020 in Copenhagen next month) for £17.50 for a signed copy. The pristine, signature-free copies are £22.50. Reserve your copy at London Publishing Partnership.