Sunday, September 20, 2009

Currencies are Numerical

I am going to make another soft claim about currency. Namely, that all currencies are numerical by nature. Now, having said this, I fully endorse the idea that things like marriage licenses and USDA Organic Certification are currencies through and through. IMHO, both of these instances are numerical since they describe binary states. I either have been certified organic by the USDA or I haven’t. 1 or 0. I either have a marriage license or I don’t. Again, 1 or 0.

With USDA Organic Certification, there is a long and complex process before the currency can be issued. The USDA inspects a variety of things about a given farm /product, and, based on a formula, determines whether what is being inspected deserves the USDA seal. However, the seal itself does not tell the whole story. The USDA seal is a shorthand for the public, so we may efficiently take in information about our food and base our purchasing decisions on it. If the USDA produced a ten page document for every farm / product it inspected detailing the complexities of how that product is produced, we would have much more complete information at our disposal, but most of us would not have time to make sense of it all.

I would assert therefore, that a currency streamlines information into a numerical representation, so sensible decisions can be made on the fly without knowing the whole story. While currency can profoundly increase the coordinative capacity of a group, some of the potential perils should be obvious.

However, before we get deeper into this, let’s take a moment to ponder the nature of counting. What is it about the eggs on my kitchen table that allows me to count three of them? Why do we apply the term “three” to these eggs? I would suggest that counting anything presupposes that we are able to filter for similarity of both pattern and context.

First, these things on my table all match the pattern “egg.” A piece of wood in the shape of an egg does not count since it doesn’t fit several of the key egg criteria. If I had two chicken eggs and an ostrich egg, I would still count three eggs (assuming I knew what the ostrich egg was). The ability to count presupposes my ability to recognize a given pattern as distinct from another pattern. It also presupposes that I can make adjustments to the pattern I am counting to fit my needs. For instance, I want to make a cake, so I am counting chicken eggs and not ostrich eggs.

Second, the eggs I am counting are on my kitchen table. I am not counting all the eggs in my house, in my community, or in the world. I am making a semi-conscious choice about the context of my counting. And that context is also adjustable. If I don’t have the right number of eggs on my table, I can expand my count to my house. If I don’t have the right number of eggs in my house, I can expand my count to the store, and so on.

So a necessary prerequisite of currency is the ability to count instances of a given pattern in a given context, but that is not the only characteristic of a currency. I can count eggs on my table, but how do I communicate that information to my community. Does the community agree on the definition of an egg? On a trusted “egg”spert to determine if what I am counting are really eggs? On whether the egg is on or off the table? And so on. Implicit in a currency therefore is a community agreement on how to count.

In the case of the number of eggs on my table, probably no one cares that much. But in the case of USDA Organic certification, a great many people care. So how to count involves an authorized issuer of the currency, i.e. the farmer can’t issue his own USDA seal. And, hopefully, there is openness about the pattern of what is being counted (i.e. the standards that the USDA has for its seal). And, there is openness about the context (i.e. the USDA is looking at my farm and not my neighbor’s).

Let’s look at one more example of how this numerical definition of currency works. An 18 year old is home for the summer from college and needs some pocket money to go out with his friends. The elderly woman next door needs her lawn mowed and offers to pay him a little to do so. While, the money isn’t very good, he has always liked his neighbor and agrees to do so. After the lawn is mowed, she invites him in for a lemonade. They talk a little about college, life, girls, etc. She gives him a hug, thanks him, and he is on his way. Let’s think about what value is created in this transaction and what currencies we might use to express it.

The most obvious value created is that the lawn is mowed. Our 18 year old does not do as good a job as a landscaper would, so he is paid less for his labor. Using dollars as our only metric, less value is created than would have been with the landscaper. However, a social bond is reinforced that wouldn’t have been otherwise. And, more importantly for the purposes of this discussion, this social bond may have implications for the rest of the community. For instance, the more connections with her neighbors the elderly woman has, the less resources from the community at large may be needed to care for her. She may even be healthier since she is happier. The benefit of our 18 year old having good relations with his elders may also have community benefits. He may be less likely to commit crimes, or more likely to accept helpful suggestions from his elders in other contexts.

So, let’s think about how to encode this important value for the community in a currency. We have already encoded the value of the lawn being mowed through the use of a monetary currency, so let’s look at some of the others. What about the value society receives by having to put up less resources to care for this elderly woman?

Perhaps there is an acknowledgment currency that is issued by the elderly for positive experiences they have with their neighbors. A simple public thank you. We count the number of thank yous received from the elderly, and are able to provide some benefit in return (perhaps a free bus token for x number of thank yous). Perhaps we don’t offer anything in return, other than public acknowledgment. If, later on, the 18 year old tries to get a job working with the elderly, this would be a useful metric to have. In either case there is an authorized issuer: the elderly. And we COUNT the number of thanks issued thereby.

Or perhaps we track the number of hours people put into caring for the elderly. We might be able to use these hours as a partial payment for care of our own parents (Japan currently has a system very similar to this).

Or perhaps we offer tax breaks to those who have amassed a certain number of hours since they have alleviated the public burden of care.

As you can see there are a number of ways to measure the value created in this transaction, but I think you will find that they all involve counting in some way or another. If they didn’t, the elderly woman could simply post a blog entry telling the story of her experience. While that might be a valuable thing to do, I do not believe it is currency until we have counted it using our filter of pattern and context.

In the case of counting thank yous, even though the thank you itself may be subjective, we are counting instances of it in a given context, and so have a number that has some quantitative meaning. We may apply different filters to our counting these thank yous so our data takes on fuller meaning. For instance, we may count only so many thanks yous from a given person a month to prevent cheating. And so on.

How we count what happened gives us the ability to adjust our actions to fit the story being told.

Friday, September 18, 2009


The following is a reprint of an email I recently sent to some of the other metacurrency folks. I would love to hear thoughts.

Lately, I have been reading some pretty amazing books on
games and game design. These books have really helped get my thoughts in order about currency, games, and so on. So I would like to take a minute to go deep here. These are some pretty foundational questions I think we must address (or at least consider).

First, after reading these books I have come to a soft conclusion (meaning I could be argued out of it :) ) that currencies and games are NOT the same thing. Some (but not all) games USE currencies, and some currencies exist outside the context of a game. So let's revisit our definition of currency: a formal system that allows a community to interact with a flow. I still think this definition is accurate, but let me restate it from a different perspective:

A shorthand way of recording information about something that HAPPENED in such a way that other people who understand (or use) that currency can adjust their future actions to appropriately fit the story being told.
So, there is WHAT HAPPENS and THE STORY WE TELL ABOUT WHAT HAPPENS. There are two categories of rules in games. Rules that tell us what may happen. Rules that tell us how to record what happens.

Many of the first kind of rules have nothing to do with currency. For instance, in baseball, for a pitch to be counted as a strike, it must be in the strike zone (between the knees and the shoulders). That is a rule that is outside any currency. For the purposes of the currency, we just need to know that the umpire issues strikes. The umpire is the person who may officially tell the story of the pitch. That story is then recorded in a currency: the strike. There are also rules about how the story that can be told. The umpire cannot, for instance, tell the story that "the pitch was pretty good but kind of a cheap shot since the pitcher looked like he was throwing a fastball but didn't." The umpire may only say strike, ball, etc. The game of baseball FLOWS from the stories we are allowed to tell about it.

What is complicated about this situation is that the rules about what MAY happen are often contingent upon the STORY we told about WHAT DID HAPPEN. This is the marvelous interplay and feedback loop between currency and action.

So, games MAY employ currencies. To me, the currencies in the game of baseball are things like runs, hits, errors, strikes, balls, outs. They are the things that tell the story (in shorthand) of WHAT HAPPENED. In other words, what are the important things to record in the game of baseball so that other players know what to do next?

So, by this definition, I am doubtful whether chess employs any currencies at all. What do we count in the game of chess? What story do we tell about the game that allows the players to adjust their next actions? There is a board and pieces. That is sufficient in and of itself for the player to make their move. They don't need to know the history of the flow. There is no story other than what is on the board now. We don't keep track of how many pawns are lost, what their relative value is, what the SCORE is. There is NO SCORE. Therefore there is no currency.

I have been struggling for a while to figure out why the entire legal code isn't a currency. I think this explains it. The legal code is about what may happen. Currencies are about how we record what did happen and communicate it to others. There may be rules about how we record what happened. There may be rules about what we may do that are contingent about the story we tell, but they are external to the currency.

Let's take a simple example. I try to make a purchase with a credit card, and my card is declined. There is no rule about what may happen as a result that is internal to the currency. The vendor may decide without breaking the rules of the currency to give me the product anyway since she knows me and trusts that I will get her back tomorrow. Or the store may have a strict rule about not giving people stuff when they can't pay. But again, the rules about what happens as a result of the story are EXTERNAL to the rules that govern how the story is told. The whole of the game includes the rules that are both internal and external to the currency. So a currency CAN be part of a game. And a currency may not have a game associated with it at all (i.e. the card is declined and the store doesn't really care since the owner just won the lottery and is feeling generous).

There is lots more to say about all this, but that may be sufficient to ponder now. :)