“An investment in knowledge pays the best interest.” – Benjamin Franklin.
In the last post we discussed why it was important to improve association to solve wicked problems. A social contract facilitates the structure of better associations and aligns preferences. But we must pay attention to how the members of a community negotiate with each other to reconcile their priorities. In many cases, currency is the preferred means of facilitating this process.
The value of money is its role in solving the coincidence of wants problem. Without money, the cobbler who wanted bread had to find a baker that needed new shoes. The cost of the discovery process was high and not assured. The presence of a medium for exchange eliminated this risk. Money provides a solution along one dimension for aligning priorities among members of a community.
Evolution of Currency Into Information
It was Dee Hock, one of the founders of Visa International, that noticed that money had evolved in the latter part of the 20th century. Instead of being currency or metal, in the digital age money was alpha-numeric information. Further, Hock postulated that:
“[a]ny institution that could move, manipulate, and guarantee alphanumeric data in the form of arranged energy in a manner that individuals customarily used and relied upon as a measure of equivalent value and medium of exchange was a bank.”
It is no coincidence that the history of banks closely mirror the history of currency; the two conventions have a symbiotic relationship.
If money is alpha-numeric signals, what makes it different from other information, such as data circulated through the federation? Individual units of currency retain value regardless of the context. Whether I am hungry or trying to solve world hunger, money is a useful tool. On the other hand, the value of single facts are dependent on the situation; knowing how to swim after you fall off a boat is more valuable than that same knowledge in the middle of the desert. The value of information has a “coincidence of wants” issue because you have to be able to find the information that is appropriate for the situation. Currency does not have that issue because most everyone accepts it at the same valuation.
Search Engines and Intention
However, modern technology makes this coincidence of wants issue as it relates to information easier to overcome. By networking people, data, and resources, the process of discovery decreases dramatically in terms of time and expense. Exchange of resources, especially information, is not significantly restricted by geography any longer.
It makes less sense to accumulate exchange tokens when you can use a search engine to “negotiate” for exactly what you need. There is less of a need for translating what you have into currency and then converting that currency to getting what you need. The challenge is no longer a coincidence of wants, but whether you can articulate your intention of wants as a query.
If information is a knowledge federation’s currency, then institutions will serve the function of banks. To be specific, these institutions will not act like a central bank that issues currency, but as a brokerage entity. The majority of information differs from financial capital in that it is not rivalrous; with some specific exceptions, use of information by one party does not limit its value to another. The value is derived not from an individual data point, but from the organization of a variety of information to provide novel perspectives. There must be institutions that not only undertake the responsibility to ensure that people find what they are looking for, but that can provide insight into the potential synergies of the information they are viewing.
Further, certain processes must be done by separate and distinct entities to avoid distorting incentives. Glass-Steagall established a separation of functions between different classes of banks in the US to avoid distortive economic effects. A new federation must establish similar guidelines to mitigate the risk of distortive effects of information exchange. Checks and balances between stewardship entities must be imposed.
Information To Benefit All
The above presupposes buy-in from individuals and organizations that generate information. The federation has to make it worth their while to contribute their information. This means that the structure and flow of knowledge capital must facilitate the generation of other capitals, including financial. The federation must commit to developing multiple business models that will provide for the success of their members without the negative externalities from previous systems.
The next posts will discuss some possible options in relation to these questions. We intend to establish a frame of reference on how capitals could flow through the federation to benefit all members. We can then address expectations in relation to rights and responsibilities of all involved parties.