Wednesday, March 28, 2012

Driving forward: Behrens's solid second effort

Published at thePhoenix.com


If there is a male equivalent to "chick lit," Peter Behrens's latest novel, The O'Briens, is probably it, a detail-rich, character-driven historical novel that lightly touches issues of family loyalty and individual aspirations. Less weighty, and less gripping, than his 2006 debut novel, The Law of Dreams, the present tale follows Joe O'Brien, the patriarch of the title family, from childhood in the late 19th century into his dotage in 1960.

Industrial and military history appear almost as characters — as does New York City, regularly and sometimes jarringly — guiding the human players along their courses, which are more beautifully embellished straight lines than twisting paths of plot.

Sadly, the deep echoes of Joe's failure to make his peace with a merciful action taken in his youth require Behrens to shallow out other aspects of his story. An early metaphor serves as an example: Joe gets engaged and then, moments later, he and his fiancée literally watch two people die in a plane crash. The moment is beautifully drawn, though, with precision and grace amid the tragedy.
THE O'BRIENS | by Peter Behrens | Pantheon Books | 384 pages | $25.95

Living history: An object lesson in research as storytelling

Published in the Portland Phoenix


John Brown's body may now lie a-mouldering in his grave, as the song suggests, but in life the Connecticut-born Kansan settler who led an assault on a federal installation in Virginia almost never stopped moving in his passionate zeal to rid the United States of the scourge of slavery.

In Midnight Rising, historian and master narrator Tony Horwitz tracks Brown, who was the country's most famous domestic terrorist until Timothy McVeigh, on his tireless travels between the western frontier where he began his campaign, the northeastern cities from which he drew financial support, and finally to the all-out strike near the national capital that led to his hanging in 1859.
In a meticulously researched account, Horwitz demonstrates his first-rate ability to weave documents together to form a compelling, well-rounded picture of how Brown's life, actions, and legacy resonated such that two years after his execution, he achieved his goal: to spark an armed conflict that would sweep slavery from America's shores, an epic battle that ensures Brown's soul is indeed marching on, even up to the present.

MIDNIGHT RISING: JOHN BROWN AND THE RAID THAT SPARKED THE CIVIL WAR | by Tony Horwitz | Henry Holt and Company | 365 pages | $29

Wednesday, March 7, 2012

Press Releases: Distant view

Published in the Portland Phoenix


Of all the coverage of Olympia Snowe's decision not to run for re-election this year, the Maine media should have been expected to handle it best. Close to home, with insider knowledge available and solid connections to sources on the ground — that's the best preparation for a breaking political story.

Sadly, though, the in-state coverage was neither as thoughtful nor as comprehensive as were the news items produced by out-of-state outlets. As I've said before, the Lewiston Sun Journal, mostly in the person of tireless reporter Steve Mistler, has had the best coverage in Maine (see thePhoenix.com/AboutTown for more).
But the cost of the other papers' sluggishness (and Mistler's comprehensive updating of lists of people taking out petitioning papers from the Secretary of State's office) has been a lack of exploration of the mess all these prospective successors to Snowe are vying to get into.
POLITICO broke the story of intra-party warfare going from cold to hot about the same time as Snowe's announcement, with Utah Senator Orrin Hatch targeting Snowe in a mailing seeking support for his reelection campaign, suggesting her moderation was undesirable even to a longtime friend and Senate colleague.
North Carolina political scientist Jonathan Weiler noted in the HUFFINGTON POST that reporting of Snowe's complaints against partisanship unfairly placed blame for polarization across the political spectrum, when it squarely belongs in the Republican column, where "right-wing extremism has gone mainstream."
STATE OF ENLIGHTENMENT political blogger Joe Joffe observed that Snowe's decision came in the midst of a massive battle over women's health and related issues — a set of questions that had largely been settled in moderate ways under the George W. Bush administration but have resurfaced because of rabid extremists' opposition to Obama's continuation of those policies.
And Maine's media also refused to depart from Snowe's own narrative that she was successful at being a moderate and in creating opportunities for real progress. Jonathan Chait in NEW YORK MAGAZINE, however, argued that while Snowe has been given great power in many political debates, "She has used it, on the whole, quite badly." That piece specifically criticized her for using the concepts of moderation and centrism not as a means to a public-policy end, but as "a matter of political self-preservation."
It takes a broad media diet to uncover reporting on all the various ways in which Snowe's decision either changes the political landscape or sheds light on how that landscape has already been indelibly altered. But you won't hear about that from any of Maine's daily newspapers, who repeatedly act as if they can — and should — be the only places Mainers get their news. (Distressingly, they often are.)
• Also missing from the local media was much digging into WHY SNOWE MADE THIS DECISION when she did.
The best summary of that reasoning came in a single paragraph at the end of a front-page New York Times article by Congressional reporter Jonathan Weisman, published the morning after Snowe's bombshell. It's worth reproducing in full:
"Ms. Snowe may have just grown fed up. At raucous Republican caucuses in February, her name was greeted with jeers from some Tea Party activists. Republicans had seized control of the governor's mansion and the State Legislature in 2010, but for the most ardent conservatives, it was not enough, Ms. [Georgia] Chomas [a cousin and close confidante of Snowe] said. Ms. Snowe had turned 65. Ms. Chomas's mother, who was like a mother to Ms. Snowe, had died, followed by the mother of Ms. Snowe's husband, John R. McKernan Jr., and the mother of her late husband, Peter Snowe."
Elegantly presented, well-reported information with strong sourcing close to the senator. That's what Mainers got by seeking media from farther afield.

Thursday, March 1, 2012

Rating the #Snowe coverage - print and online


Published at thePhoenix.com

In the hours and days following last Tuesday’s shocker announcement that US Senator Olympia Snowe will not seek a fourth term in the Senate, the breaking-news ability of Maine’s mainstream press has been stretched in ways it hasn’t been in recent memory. This was no disaster/fire/accident story, where flames are visible and the players all gather in one place.

Rather, it was a political story, touched off by an email blast, with players around the state (and around the nation, if you count the major parties’ senate-campaign power brokers). And much of the early reporting was gut reaction (the governor swore; Dems rejoiced) followed by speculation about what it meant for not only the US Senate race in Maine, but nationally for the balance of power in the Senate, as well as statewide, regarding Congressional seats, and legislative ones too, as every political climber in the state saw real daylight above them for the first time in many years.

As such, it was a prime opportunity for the daily newspapers to step up and embrace what mainstream media outlets still quaintly call “new media.” Which is to say, the power of the Internet to reach and engage their audiences.

Unsurprisingly, it was the Sun Journal, led by energetic “new media director” Tony Ronzio, that led the pack, posting an early collection of reaction and preliminary analysis on Storify. (It included the pair of tweets breaking the news, from former SJ political reporter Rebekah Metzler, now at US News and World Report.)

The day after Snowe’s announcement, he hosted a CoverItLive chat with various political-watchers and several readers. The conversation was kept moving by interjections of facts, often provided by Sun Journal political reporter Steve Mistler (who also blogged up a storm) and regional editor Scott Thistle, but also supplemented by UMaine Campus editor Michael Shepherd. It was also supplemented by a series of ongoing polls on thought-provoking questions — about who can win (Michaud and Cutler tied, then Pingree, Summers, and King; Raye’s got no shot ), who in DC will miss Snowe most (Collins over Obama, with Mitch McConnell and Harry Reid tied for third), and who Snowe’s announcement hurts most (GOP over Dems, independents not at all)

The Bangor Daily News came in second, with strong contributions from the political blogs PineTreePolitics and PollWays (though neither is written by a staffer, and PollWays writer Amy Fried, a UMaine political scientist, was in the Sun Journal’s online chat), and a rudimentary — and uninteresting — online poll asking if readers were “sad to see Olympia Snowe leave her Senate seat.”

The Press Herald had a weak online showing, with several reported stories and columns, but for online-extras, there was just a slideshow of file photos of Snowe through the years and MaineToday Digital executive editor Angie Muhs’s Storify collection, which started about five hours after the news actually broke, leaving her posting just a bunch of reactive and speculative tweets, though admittedly grouped by theme (“caught many off guard,” “political speculation,” “reaction from those already in the race,” “Snowe was quickly praised,” and the like).

In related news, the TV stations’ general managers just saw their finances perk up considerably. Whatever happens, there’s going to be a massive amount of money spent on TV ads. How much? Snowe herself had about $3 million in the bank — to defend a secure seat. Now that it’s open, the numbers will be astronomical.

Wednesday, February 29, 2012

The power of texting: Mobile phones and alternative currencies are changing how the whole world pays for everything

Published in the Portland Phoenix, the Boston Phoenix, and the Providence Phoenix


Money — crispy banknotes and jangly coins — is as old-fashioned as, well, mechanical typewriters. We all know what a typewriter is, and some of us — in a pinch— might even be able to operate one. But by and large, typewriters are quaint cultural artifacts fit for exhibiting in museums or selling at flea markets.
And so it is with greenbacks, cash, money.
Music has been digitized; so have movies, books, and most of the commodities we call media. And whether we recognize it or not, the way we buy and sell things, be it a cup of coffee or an automobile, is likewise being transformed and revolutionized.
Two recent books, Robert Neuwirth's Stealth of Nations (Pantheon) and David Wolman's The End of Money (Da Capo), show us different aspects of that transformation. It's a world with prices charged in prepaid cell-phone airtime minutes, and with earnings transferred from urban workers to rural dwellers in seconds over phone-to-phone money-transfer services like Kenya's wildly popular M-Pesa.
Wolman, who reads at the Harvard Book Store on Tuesday, March 6, at 7 pm, shows us that physical currency (paper banknotes and metal coins) are disappearing in the West, where savvy consumers walk around with PayPal and Google Wallet apps in their pockets — and in the world's poorest places, where even a very rudimentary flip-phone can send money safely across miles of rugged terrain, or let a tiny streetside tinkerer open a bank account.
Neuwirth, for his part, visits unlicensed and unregulated markets around the developing world and explores how they avoid government regulation while conducting massive import-export and street-market sales operations. While much of his book is about the cash-only model that has dominated what he calls the "informal economy," various scenes throughout his reporting illustrate the ubiquity of money-enhanced cell phones in even the poorest slums and villages.
Given their overlapping — and mutually enlightening — viewpoints on how money can and soon will be used by regular people the world over, the Phoenix got the two authors together by telephone. They talk about how mobile phones are the basis of a coming revolution in how money is stored, transferred, saved, and spent.
BASED ON WHAT YOU'VE READ OF AND ABOUT EACH OTHER'S WORK, I WONDER IF YOU HAVE ANY INITIAL THOUGHTS ABOUT THE OTHER'S BOOK, OR PREMISES.
ROBERT NEUWIRTH I'll start by saying there's cool congruencies and some differences. Being contentious by nature, I'll start with the differences. I think I'm writing about the people who avoid the tracked and scrutinized economy of the bitmap dollar, if you will. And so in my view, from what I gleaned from David's book, whether or not money as a physical form (the germ-ridden bills) disappears, there are going to be people who find alternative ways of doing business. And the folks that I've written about in my most recent book definitely depend on that kind of strategy, and I think for them it doesn't matter whether money stays in the physical form or not, they're going to find ways of doing business that get around all the reporting requirements.
DAVID WOLMAN I remember somewhere you said, Robert, that a lot of this economic activity is about flying under the radar of government. My thinking on that right away is, 'Well yes — except that most of it is conducted with the currency issued by the government.' So, in that sense, are the actors in the shadow markets of the world given a leg up by sovereign currencies in physical form versus electronic form? Or are they eager to see new, alternative ways to transact, whether it's with alternative currencies or whether it's trading in airtime minutes — which you write a bunch about, and which I touched on some in my book? I think you're absolutely right, this issue of commerce conducted under the radar and unreported, that will persist whether or not we finally put cash in the grave. But I find much more tantalizing the question of who might be helped once we put cash in the grave. It may be that the poor and the innovators who are involved in these shadow markets could do really well if they're, for example, moving faster to mobile payments than necessarily having to store and secure a little lockbox of their earnings there at the umbrella market.
It almost reminds me of these clowns who say get the federal government off my Medicare, in that they're not totally separate from the government in that they are using the government-issued currency. It's quite at a distance, it's true — they're not reporting, they're not paying taxes — but they're still —
RN They're patronizing the sovereign currency, exactly.
DW Exactly. And they all depend on it. I don't say that in a kill-the-Fed conspiracy theorist sense of it, but it's thought-provoking at least.
RN You brought up something interesting, which I actually didn't think about for the future. One of the biggest problems that the transnational merchants who are involved in the informal economy face is dealing with the devilish exchange rates, and the way in which a falling dollar and rising yuan can kill trade in a third country that's using the dollar and yuan to convert its sovereign currency into dollars, and then convert dollars into yuan to buy things from China and ship them back home. If there were something that kept its value and could be universally exchanged, such as mobile-phone credit or frequent-flier miles or something like that, that would definitely benefit the folks in the underground because they are definitely looking for ways they don't lose out on exchange rates.
DW In talking about the war on cash or the onslaught on cash, part of cash's death is by a thousand cuts. This is being inflicted by new technologies — mobile money and trading in M-Pesa in Kenya and all of that. But there is this whole other front in the war being conducted in the alternative-virtual-community-currencies world. And that's what you are talking about, that does go far beyond Disney Dollars and airline miles. People kind of have a knee-jerk response to the idea, thinking it's kind of kooky, in a way . . . but they work and they do hold a lot of promise for people in the developing world who have an interest now in challenging government's monopoly on issuing currency. I don't think that means we should pooh-pooh national currencies to the extent that we deny the incredible prosperity they have helped societies to build over the last century or more. But if you look at the euro crisis right now . . . I think there are strong arguments to be made that our wallets, and more specifically our financial lives, might not be hurt if we had not just other payment options, but other currencies. The key is, can you keep the exchange rate smooth and fluid like you're saying, because all this alternative currency stuff sounds like a crazy hassle, far less convenient than cash on the surface. I think the mobile phone can help us skirt around that if it can be programmed to help us conduct these exchanges in real time on the fly, even out there in the slums of Delhi.
RN One of the questions I have for you, since I haven't researched alternative currencies, David, is: I read some stuff about the Swiss alternative currency that's used by small businesses, and most of the alternative currencies I have looked into are pegged in some way to the national currency. I am wondering whether that is the norm right now, or do you see people breaking away from that?
DW I think the peg adds an aura of authenticity; you don't necessarily have to have it, but it doesn't really hurt them to be exchangeable, Maybe the way some alternative-currency innovators will get around that is if they are trading for example units of electricity, because that has "real" value in the physicists' sense of it — not in the gold enthusiast's sense of real value. It's a constant. This is really hard and heady stuff, but if we could ever find a way to be trading in kilowatts, it's going to take the same amount of electricity to light up a light bulb next week as it is 30 years from now, so that's real value that we can understand and we can predict. In that sense, I don't think you really need the peg, but for some of these other ones, again, going back to this idea of a rainbow of currencies at your disposal. If you can balance between Linden dollars and Bitcoin and Facebook credits and Malawi kwacha, why not do so? They're all floating anyway, and this is a much more macro point but it's all about accepting the faith of how currency and how money works, and if you've decided to believe in the value of Bitcoin or you've decided to believe in the value of Linden dollars, then you're on board already, so why not accept the changeability?
KEY TO THIS COMMERCE SUCCEEDING IS THE ISSUE OF TRUST. THERE'S GOT TO BE TRUST IN THE VALUE OF WHATEVER IT IS THAT'S BEING EXCHANGED — A CERTAIN NUMBER OF KILOWATTS OR A CERTAIN NUMBER OF OUNCES OF GOLD. WHAT YOU'RE SAYING IS THAT THE GOVERNMENT IS PROVIDING A CERTAIN AMOUNT OF LEGITIMACY OR BASELINE TRUST. HOW DO WE CREATE SOMETHING THAT IS TRUSTED SO THAT YOU CAN EXCHANGE IT, WHATEVER THE UNITS ARE, FOR AN UMBRELLA IN THE STREETS OF BRAZIL?
DW Number one is to acknowledge the incredible success of national currencies, just because they have achieved that universal acceptability that you're talking about. That universal fungibility — you can apply those funds to almost any use. For all of those operatives in the underworld economy or System D — I love that by the way — it's pretty interesting that, in a way, governments have let them down so much, but not necessarily when it comes to providing them with a means of transaction or a medium of exchange. This is where, Robert, you should chime in and hit this one out of the park. That enormous community is full of innovators. They are going to be the ones who see value in other types of currency and can start to apply them. We've seen this totally organically happen with trading airtime minutes as a currency. That is an alternative currency now that people in the developing world are using to transact and buy things — not just talking time for their phones — because they're so widely accepted, because they're all over the place, because they're easy to work with, and because they're a lot safer than cash. I see that as a single example of what I suspect could be a lot of different alternative currencies sprouting up in the developing world. But, again, Robert, correct me if I'm wrong —
RN Well, first of all, just on the example you bring up, although I used cash to buy it, I transacted a low-level bribe in mobile-phone airtime when I went to the Alaba market in Lagos, Nigeria. The merchant that I spoke with basically said, "Why should I help you? And before I help you, buy me airtime." So, I gave him airtime — it was a tiny increment of airtime in relative terms, but that was what greased the wheels to get me to the leadership of the Alaba International Market. He didn't want the cash. I could have given him the cash, but he wanted the airtime.
DW Oh my God, this is like music to my ears. This is music to my ears, I love it.
RN I do think that there's a lot of potential for airtime. I do think the issue of trust is a difficult one, but I could certainly see the trust that has been generated in certain informal markets being leveraged up to run their own kind of alternative currency. Cru Da Vinci Cinco de Marzo in Brazil, or Alaba International in Lagos, could leverage the trust that people have of their merchants to create their own currency, and basically run their markets either in cash or in their own currency. That would be a way of furthering the market, and jacking up the amount of trade that they could do. It would also mean that if you buy Alaba currency or Alaba units or whatever they would be, you would have to continue shopping in Alaba if you have any left over, so you couldn't go to some other market, which would lock people in, which I think the merchants would really like.
DW This also gets at premium on utility, among these people who in many ways who are just getting by. Robert, you mentioned this in your recent Wired interview [, that these people don't think of themselves as underground operatives. They're generating income so they can take care of their families and put food on the table. That segment of the population will jump to options that provide increased efficiency in their economic lives, or the corollary to that is reduced friction in their economic lives. And that's why the airtime minutes thing is so popular, and for example the mobile-money stuff that is so popular in many parts of Africa now, especially the M-Pesa program that just took off like wildfire in Kenya. I hate the business-speak of this turn of phrase, but it's real: the value proposition of it is so clear to those people.
For us, we can toggle between cash and electronic money fairly freely and we don't really sense that friction quite as much. But people over there, it's just so glaringly apparent.
RN I was going to ask you, do you think that frictionless environment will change over time? The guy you wrote about in India, the transactor, if you will, of all these mobile apparatuses that create savings accounts with the State Bank of India, he's collecting a fee, right?
DW Right.
RN I've noticed here in the States that sometimes when I try to make a payment electronically, transfer funds from my bank to somewhere else, suddenly credit-card companies want to charge me, for that. So instead of what started out as a frictionless place where you're not getting interrupted by these excess fees — which basically make it more cumbersome and more difficult and more like cash, if you will — you're getting extra fees put on. I see the same thing going on at gas stations, where if you want to gas up a car, you can now pay less if you pay in cash and more if you're paying electronically. Do you think it's natural that the people who administer these things — because right now they're being administered by for-profit entities — are going to ramp up the fees, which take away the very benefit of the frictionless environment that is supposed to be so much better.
DW I think it'll be a cost-benefit analysis for each case. My book is not a Valentine to the credit-card companies. Their outrageous fees are a huge problem. But I actually think that as the question of cash's shelf life comes into the sunlight, maybe people will actually scrutinize the operations of credit-card companies more as they learn about and demand better payment options that don't charge such steep fees.
But more specifically, back to the guy in India whose company is sort of the "software" between the mobile-phone user in the poor slums and the no-frills bank account at the State Bank of India. There's a guy who I write about in the slums who I was talking to at a local pharmacy while he was doing a transaction, about the value proposition of this thing that he's doing. He's depositing some cash in his bank account by just taking some earnings after repairing somebody's radio and he walked across the street, and with a little bit of texting from him and from the pharmacy owner, suddenly that money is now in his bank account.
I asked him about the concerns that everybody here in the States asks me about. Which is, are you worried about hackers and identity theft? And if financial crime is just as bad, if not much worse, than physical crime, why are you trusting them so much? And then I'm also asking about the fee, because this company, Eko India Financial, they get a fee skimmed off the top of his transaction. Which is a super-modest transaction, by the way, and a super-modest fee. And he looked at me like I was from the moon! He said the benefit of this compared to what his financial life was like previously is just so unquestionable. Specifically on the remittances front. He was one of those people who had to ride a bus for a day and a half to go give money to family members in the countryside. And to come back is another day and a half. That's three days of lost income generation. It's the bus fee. It's risking what might happen to his shop while he's away, his merchandise.
So for him it was so much better. You're right that the fees and things are cause for concern. But I'd like to think that everyday consumers will be like this guy, Sonu Kumar, and see the benefit of it. And if they don't see the benefit, or if the fee is way too high for them, well, then they'll just walk down the street to somebody else who's offering a better payment option. I hope.
RN It may also be that the benefits for them will outweigh fees, but the fees are still going to be in aggregate terms low, but in percentage terms maybe pretty high, the same way that Procter & Gamble charges a lot more for a single sachet of Downy fabric softener than they do for a huge 23-pound box. But the single-sachet people are willing to pay the higher profit margin on the single sachet, because that's all they can afford and they want that Downy fabric softener.
I'm not saying that's wrong, I'm just saying that the fee may wind up, once again, being more onerous on the poor people, even though it's still a benefit to them because it outweighs standing on line at the bank or taking the bus for three days across India to go see mom.
DW I think that also cuts to the core of how we feel, ethically or emotionally, about the role of money or the role of payments. Is the currency is like a utility, or something the government should be providing to all of us? And processing a payment — is it fair to charge a four-percent fee to process a payment when really the merchant and the consumer are doing their part in that transaction to help grow the economy anyway?
RN There is an interesting argument to be made that the payment processing could be nationalized. And then done for free.
DW You just invited all kinds of hate mail from the Big Brother types — who have been writing me non-stop, by the way.
RN What's the difference between Big Brother doing it or the big kahuna of American Express doing it? It's still a large entity with interests in controlling and monitoring our behavior.
DW I think that's totally fair. Another way to say that is, as another economist who wrote a review on a book had said, "People trust governments more than they trust banks." Which isn't saying much, but it's true. I think that's fair, and I'm not eager to dismiss that anxiety because I feel it, too. I don't think it's just American Express, though, it's American Express, Visa, MasterCard, Discover, PayPal —
RN Oh yes, yes.
DW — and a whole host of new payment processors, square from this guy Jack Dorsey from Twitter is coming on. I think they will eat at the fees of the credit-card companies in a pretty substantial way. It's promoting innovation, and it's up to the consumer to go find the start-ups that are behaving more ethically, toward them and with their money.
RN It would be really interesting to see some of the "fixers" who operate between China and Africa for instance, coming up with their own way of solving the exchange-rate problem, by trying to have an African hawala system, where money gets transferred without the currency transaction that destroys a tremendous amount of value in the African currencies. Where somehow without all the profit centers with each transaction so that they can just do it once, and send their money there, and their money is there when they get to China.
YOU GUYS ARE BOTH NOT ONLY TALKING ABOUT ALTERNATE METHODS OF PAYMENT, I.E., CREDIT CARDS OR CASH, WHICH WOULD BE TRANSACTED IN DOLLARS OR EUROS OR POUNDS. BUT YOU'RE ALSO TALKING ABOUT COMPETINGCURRENCIES SO, I COULD PAY YOU BY PHONE IN AIRTIME MINUTES, OR BY THE HAWALA SYSTEM, IN SOME OTHER UNIT.
DW I have a nice anecdote, which gets past the wonky talk. The ability to bounce between currencies is going to be fabulous for people in ways they can't even conceive, and I think it strikes at the heart of this question of what is real value. The example in the book is you have an upcoming family trip to Disney World, so maybe you want to get paid in Disney Dollars from someone, so much so that you would be offering a discount on the actual price of the thing, if they are willing to pay you in Disney Dollars.
RN The difficulty with all of this in my thinking of it, is the universal acceptance of the thing. So, for instance, I can see that everyone on the MTN or Globacom or other network in Nigeria being able to trade minutes. The problem is how do you trade minutes with China Mobile? The costs are different, and so you still need a unit of exchange and you're still dealing with a kind of currency, it's just virtual, it's airtime.
DW Or it's a US dollar even. Part of my thesis isn't to get rid of national currency, I mean I bring up the idea, but it's more to get rid of the analog, physical representations of it. Maybe to bounce from MTN airtime minutes to China Mobile, you want to go through a national currency because they've achieved this great level of universal acceptability, and that's just not so bad.
RN The fallacy of that is that not every national currency has achieved universal acceptability. That's why the Nigerian merchants have to convert their naira into dollars and their dollars into yuan, because the Chinese won't accept naira. And presumably there are a lot of other currencies, most African countries' for instance, that China is not interested in transacting currency exchanges in. They might take rand, maybe, but I'm not even sure they convert rand.
DW I like hearing this from you because it gives me the sense, I hope, that you liked the chapter in the book about Iceland and questioning the relationship between a sovereign currency and a sovereign state, and does it really make sense to have every single country have its own currency? No one wants to hold Malawi kwacha as a source of wealth, let alone the Chinese aren't going to accept it as payment for anything. So these are tricky questions, but then of course you turn it right on its head and look what happened in the Eurozone with the consolidation of national currencies and now these central bankers can't really do anything but write white papers at home because they don't have any tools at their disposal to help remedy their economies in Italy and Spain and Portugal.
RN If you're going to have a transnational currency, you need in some way a transnational government. What was the old line, disarmament requires world government? It's very tricky, the currency issues are very tricky. I'm certainly willing to pay you some gigantic stones from Yap if it goes on, but I don't think in our lifetimes the national currencies are going anywhere.
DW I don't think so, either, but I think there will be some further consolidation, but I'm not denominating my child's very modest college fund in Thai baht or anything like that.
RW No, I certainly concede that argument.
A REALLY INTERESTING THING THERE IS THIS IDEA OF CURRENCY AND GOVERNMENT. OBVIOUSLY YOU'RE TALKING ABOUT THAI BHAT AND DOLLARS. WHO IS THE "GOVERNMENT" OR GOVERNING AUTHORITY OF AIRTIME MINUTES? IS IT THE COMPANY? WHO WOULD DEFINE OR DEFEND THE VALUES OF THE UNITS BEING TRADED?
DW I think what you are hinting at is that, if airtime minutes are a currency in this way, the issuing authority of the currency is really the company. It's a private entity and is that safe and okay? I think there are real concerns about that because steering the money supply is a tricky game. And so with airtime minutes as a currency, you imagine some people out there right now may be sitting on a mountain of wealth denominated in airtime minutes. But what if for whatever reason, the issuer of those airtime minutes — MTN or someone — was just suddenly giving them away for free? With an oversupply of this form of money it hyperinflates it overnight. Now people who actually sold clothing and cows based on the idea that this is a safe thing, now they're hosed. Their value goes up in smoke.
But the machinations are just the same as regards swings in value of national currencies. But the central bank of a government has more tools at its disposal to try and keep the economy in check and control the money supply. This is the big fear, whether it's airtime minutes or even Ithaca Hours, but it doesn't make it any less real of a form of money. I think your concern about who is safeguarding that money supply is a real one because it's a private corporate entity, and not necessarily a government, which circles back to that idea that people seem to trust governments more than banks or let's say big telecom companies — which maybe isn't saying so much, but it does say something.
I ALSO WONDER ABOUT NOT JUST THE TRUST IN THE MONEY SUPPLY, BUT ACCOUNTABILITY. IF CHINA MOBILE WANTED TO CHANGE THE PRICES THAT IT CHARGED FOR ITS AIRTIME MINUTES, LET'S ASSUME THAT BETWEEN THREE AND 12 PEOPLE NEED TO SIGN OFF ON THAT DECISION AT THE HIGHEST LEVEL TO MAKE IT SO. WHO ARE THOSE PEOPLE? WE DON'T EVEN KNOW THEIR NAMES — AS OPPOSED TO GOVERNMENT. EVEN THOUGH THERE'S A CERTAIN AMOUNT OF UN-ACCOUNTABILITY OR DELAYED ACCOUNTABILITY BUILT INTO THE FED, FOR EXAMPLE OR THE WESTERN EUROPEAN CENTRAL BANKING SYSTEM, THERE'S SOME. WE KNOW WHO BEN BERNANKE IS AND OUR REPRESENTATIVES CAN GO HOLLER AT HIM, IF THEY WANT TO. WE HAVE THAT RIGHT, WE HAVE A LITTLE BIT OF TRANSPARENCY. ISN'T THAT THE REASON PEOPLE TRUST GOVERNMENTS MORE THAN THEY TRUST BANKS?
DW I think so. Or at least I think that's the idea. The worrier in me says you're exactly right, the top-brass China Mobile could be that could just be horrible increasing the fees like that and nobody knows who they are and can go after them. But the technologist in me, without sounding too much like a Pollyanna, would hope that there are just enough options in the future when it comes to varying forms of currency that if people found they're getting charged too much for such-and-such that they would just jump. They would jump to another currency, another national currency maybe, or whether it's kilowatt hours, or airtime minutes of another carrier or something like that. I know that sounds a little bit simplistic, but we could see enough start-up activity and technology activity to make those options available. But if we don't, I think you're right. How do we know that these businesses will act for the benefit of the masses, and not necessarily for themselves? That doesn't bode well.
ROBERT, IMAGINE THERE IS SOMEONE IN GUANGZHOU WHO HAS 10,000 AIRTIME MINUTES. THAT'S PROBABLY A LOW NUMBER OF WHAT SOME OF THESE PEOPLE'S BALANCES ARE LIKE. WHAT IF THEY SWAP AND THEN THEY HAVE TO TAKE PAYMENTS IN MULTIPLE TYPES OF AIRTIME MINUTES? THAT BRINGS BACK THE FRICTION THAT THEY'RE TRYING TO ESCAPE.
RN There are all sorts of problems built into it, but I would argue that some of these things could benefit by starting on the local level and then seeing whether they scale up. For instance, I can see a particularly vibrant and big street market having some alternative payment system. Whether it would be mobile-phone minutes or something else really almost doesn't matter, but I can see them doing that, and trying to do that in the way that avoids the kinds of fluctuations that you're talking about. Then, once it's accepted on that local level, they can see how that would interact with other kinds of operations. It's not automatic that everyone trusts each other anyway. The Chinese merchants don't necessarily trust the African merchants, so what they trust is the trusted currency right now. For instance, I could see in China where a Nigerian merchant could pay his fixers (the either African or Chinese guys who take him around to different factories to see where he can get stuff manufactured), I could see that merchant paying in mobile-phone credit or some other kind of alternative currency. To scale that up to some sort of larger transnational kind of thing, I think would be much more difficult.
DW You're exactly right, Robert, about this stuff being born at the community level, and in a lot of ways there isn't a huge need early on for it to expand further, and in many ways, that's what this whole idea of community currencies is about. It's sort of like the "eat local" movement. So you want to use your Ithaca Hours locally, or you want to use you MTN airtime minutes locally within that city, or region or country, but if it has an exchange rate to the dollar or something else then for those who do need to jump out to buy something from overseas, or transact overseas, they can, but they don't really have much of a need or a motivation to locally (especially if they get a little bit of a discount by transacting with this local currency that is there to kind of hyper-drive local commerce).
HOW WOULD THAT AFFECT THE INTER-RELATIONSHIPS? ROBERT, YOU TALK A LOT ABOUT THE CHINA-AFRICA TRADE. THERE ARE LOTS AND LOTS OF PEOPLE WHO ARE IN AFRICA, IN THEIR VARIOUS COUNTRIES, WHO NEVER LEAVE THEIR COUNTRIES OR NEVER GO FAR FROM THEIR VILLAGES — AND NEVERTHELESS ARE BUYING DOWNY OR RADIOS OR CELL PHONES THAT COME FROM OTHER COUNTRIES.
RN Most of the time the deal starts with someone who goes. So there is an African guy who goes to China — or an African woman. The relationships are made face-to-face, initially. Once you develop trust face-to-face then everything is possible. But it's really based on the trust you can develop in person. In that way, it's no different from what I did. If I called up a Nigerian merchant who does business with China and just tried to ask him questions over the phone, he'd never answer me. So what I had to do was go there. I had to show up and develop trust with people and give them a reason why they could think that I'd be honestly presenting what they do with a degree of dignity for them. And so as long as they can do that then whatever alternate currency they are willing to transact in would be probably fine. I mean if China Mobile offered an M-Pesa type service, I'm sure that the African merchants who did business with Linda Chan — who I mentioned my book who is a relatively small-scale dealer in auto parts in Guangzhou (and when I say relatively small-scale, it's more than a million dollars a year, but that's still small scale compared to some major factories) — with the merchants that she knows she would then be willing to accept payment that way because she would trust the merchants would be open and aboveboard because she knows them and they come recommended by people that she knows.
SO THAT'S WHERE YOU GET SOMETHING STANDING IN, AT LEAST IN PART, FOR THE TRUST THAT COMES FROM — AS DAVID SUGGESTED AT THE VERY BEGINNING — A GOVERNMENT-ISSUED PIECE OF PAPER.
DW The magic of it. Maybe it's because I'm not an economist but it doesn't cease to amaze me.
WHERE DO YOU GUYS SEE THESE THINGS LEADING? WHERE ARE THE INTERSECTIONS BETWEEN THESE FORMALIZED SYSTEMS IN THIS INFORMAL WORLD?
RN Yeah, I mean, so far, money is a formalized system, right? And that's what everyone has trusted to be the medium of exchange. And I'm not sure there's going to be any kind of haphazard medium of exchange. I think that markets may look at these kinds of things and determine that you can make a better profit using them than doing business with suitcases full of cash. But I'm not necessarily sure that there's any non-formal entity that is going to be able to develop that kind of huge amount of trust. The company in Paraguay that dealt with smuggling computers and peripherals into Paraguay and then smuggling them out into Brazil did handshake deals worth millions of dollars with American companies. But of course the reason was because those companies had trust in them and because ultimately the payment was made in dollars. So I don't necessarily see that changing.
DW I have to bolt in a minute here. Believe it or not, I have to get a rental car to go to Seattle.
RN How are you paying for that?
DW Plastic. I don't adore them but I'm like you, I travel a lot, I like the airline miles, even though I know it's a gimmick to keep their hooks into me, there is some value in it. And it's quick and I don't want to have cash on me.