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.




Tuesday, February 28, 2012

Snowe dumps on Maine

Published on thePhoenix.com; with research help from Deirdre Fulton


And you thought tomorrow's big news would be the threatening blizzard? Nope - Olympia Snowe is going to be the big headline. She's leaving the US Senate, in a move that apparently surprised even her own staff. It changes the political landscape in Maine and around the country.
She is a key Republican moderate whose vote was often coveted on both sides of the aisle (an influence she may have overhyped for electoral benefit).
Republicans were counting on her to hold her seat as part of their efforts to take the Senate. As an example of how this changes the political calculations around the nation, what was already going to be a hard-fought race for Ted Kennedy's old seat in Massachusetts (between Elizabeth Warren and Scott Brown) will now take on epic proportions.
Make no mistake: Maine is still essentially a Democratic state. (And to the extent that Governor Paul LePage's approval ratings are a barometer, more than half of Mainers aren't on board his train.) Snowe has won over and over partly based on her (apparent) moderation, and partly based on her ability to overwhelm opponents.
Democrats were ousted from control of Augusta in 2010 not because the Pine Tree State is dominated by Republicans, but because Maine's leading Democrats don't lead, and act like Republicans rather than providing alternatives. (Our Lance Tapley has written about this over and over and over, but still the Dems don't step up.)
Snowe's statement announcing her retirement says she does not expect the partisan gridlock to end in Washington anytime soon. And sure enough, a National Journal piece over the weekend suggested that now is, if not the most partisan time in congressional history, then perhaps the second-most partisan time.
Speculation has already begun about who might step up to replace her. Four Democrats ( state senator representative Jon Hinck, state senator Cynthia Dill, former Maine secretary of state Matt Dunlap, and political newcomer Ben Pollard) are already in.
Republican businessman Scott D'Amboise was planning to challenge Snowe in the primary; Tea Partier Andrew Ian Dodge left the GOP to run as an independent (he may rethink that decision now).
First District Congresswoman Chellie Pingree is clearly thinking about it - her statement on Snowe's announcement specifically said, "in the coming days I will carefully consider how I can best serve the people of Maine." Her counterpart in the 2nd District Mike Michaud has to be thinking about it too.
Former independent gubernatorial candidate (and Carter administration alumnus) Eliot Cutler is one of the few who could raise the needed money in the remaining time. And will former Congressman Tom Allen reappear? Other possibilities are being bruited about in the political echo-chamber, with new names being added to the chamber of bouncing balls almost by the minute.
It's also worth noting that two years ago there was big speculation about whether Snowe would leave the Republican Party. She didn't, but today's move essentially makes the same statement - that she does not believe participating in the Republican Party is useful for her.
Many questions are already being asked - and many more will arise over the next few days. Here, for those who like retrospectives, is our piece from the very first issue of the Portland Phoenix, looking at Snowe and Collins and their two-sided-ness.

Wednesday, February 15, 2012

Cash Injections: At union request, Sussman steps up for Press Herald

Published in the Portland Phoenix


It was not the owners of the Portland Press Herald who sought out Maine hedge-fund mogul S. Donald Sussman to proffer a cash infusion to save the ailing newspaper. Rather, it was the idea of the Press Herald's unionized employees.

Sussman, the paper announced late Friday, will lend the Press Herald and its sister papers between $3 million and $4 million in exchange for five percent of the company and a seat on its board of directors. Sussman is also a philanthropist and the husband of Maine Democratic Congresswoman Chellie Pingree.
Tom Bell, a Press Herald reporter and president of the local Newspaper Guild union representing many of the company's workers, confirms that neither the company's owners, Texas-based HM Capital Partners, nor Sussman himself who initiated the deal.
"We didn't speak to him directly," Bell says. "It was through a third-party intermediary," whom he declined to name. Another person (a fourth party?) had mentioned to union leaders that Sussman had some interest, so the union got in touch late last year.
"It was prior to our negotiations with Kushner and Harte," Bell says, referring to the bid by the 2100 Trust, owned by Massachusetts entrepreneur Aaron Kushner and former Press Herald president Chris Harte, to purchase a majority stake in the company and institute significant cuts and reforms. That effort, in which Harte and Kushner proposed significant cuts to union workers' pay and benefits packages, failed to get union support last month (see thePhoenix.com/AboutTown for details on that).
When that deal fell through, Bell says there had yet been "no sign" Sussman was interested. Rather, there were what Bell calls "two likely scenarios," one in which the company would go into bankruptcy protection, and the other in which Kushner and Harte would buy the company despite the union objections.
Then Sussman stepped forward, and the union's outreach efforts bore fruit. Even as far back as early 2010, when the Blethens were seeking to sell the company, union representatives had "spent a lot of time calling around the state" seeking investors, Bell says. Those inquiries hadn't turned out, but the attempt to pique Sussman's interest did.
What happens now remains a bit unclear. While the company's announcement of the investment said "one of the first steps . . . would be to hire a top notch CEO with media experience," Bell indicated that the existing interim CEO, Neil Heyside of rescue firm CRG Partners, was likely to stay for at least several months to oversee some in-house technology transitions.
That includes a new computers and new software that on the editorial side integrates story publication online and in print, and on the advertising side makes everything much clearer and easier. "We have a very Byzantine system that makes it hard to know on a day-to-day basis how the company's performing," Bell says.
Bell says the company and the union hope those changes really boost the newspapers into a much stronger position; the size of the required investment remains unclear, and the dent Sussman's loan to the papers will make in its existing debt is also uncertain, leaving the full impact of the new deal fairly foggy.
The deal may take "a few weeks" to close, according to Guild vice-president Greg Kesich, an editorial writer at the paper who sits on the board as one of two Guild reps (a third seat is shared by two smaller unions representing company employees).
Kesich also says the company's board will be reconstituted to accommodate Sussman's new position. It will still have seven members, and the unions will not lose any seats, Kesich says.
With the cash infusion, other changes may occur, including changes to reporting duties. The paper is planning to begin employing local correspondents, Bell says, who will be union-member part-time staffers that cover their communities closely, at meetings and other events. "We've fallen behind on local coverage," Bell admits. Help with more routine duties could free up full-time reporters to do larger projects and more significant stories.
What many in the newsroom are talking about are the ethical quandaries posed by having such a prominent, powerful, politically active investor in the company. It's a fairly new conversation, despite major local players like local real-estate mogul Robert C.S. "Bobby" Monks and his cousin, financial-services player John P.M. Higgins having backed the paper since 2010. They are part of the extended Sprague family of Cape Elizabeth, and are both active in local business, charity, and other pursuits.
Their ownership has been disclosed sporadically, and infrequently, in Press Herald articles. With Sussman on board, Bell says, "We need to at a minimum be transparent and mention his role in the newspaper," suggesting that failures to do so with Monks and Higgins are the result of management intervention and not omission of facts by reporters or copy editors.
Sussman's prominence has raised the idea of the company hiring an ombudsman to critique and comment publicly on transparency issues, along the lines of similar positions at the New York Times and the Washington Post.
"We'd welcome an outside critic to evaluate us. We think that would help give the public some assurance that we're doing our jobs," Bell says. He says he sees no difference in ethical concerns stemming from the union's role in attracting Sussman's investment, as distinct from any that would arise from his involvement by other means.
"If we feel that we're being leaned on in any way, we're going to be vocal," Bell says, including bringing the issue to the company's board of directors, as well as taking other steps (which could include withholding their bylines). He looks at the alternative — which is indeed the future, since he admits HM Capital, as an equity firm seeking profits, will sell "someday." "We could be owned by a corporation from another state." Instead, "we're going to have owners that are really here in the community and are business leaders . . . I think Mainers would rather the papers be owned by Mainers," even if that means additional attention to disclosing interconnections between the paper and other parts of Maine's small community.

Occupy Watch: Camp closes; curfew passes; activism continues

Published in the Portland Phoenix


Let's just say it: The first phase of OccupyMaine ended with a fizzle, not a bang. The showing at Friday's 10 pm deadline for Occupiers to be out of Lincoln Park was poor. There were three Occupiers and two journalists, standing near the park's fountain. No police, no city workers — they'd come by earlier in the day and cleaned up what was left in the park, with help from several Occupiers.

Two of the three at the fountain that night had just come from a satirical "Billionaires for Romney" event outside Portland Yacht Services, where GOP presidential hopeful Mitt Romney was speaking, hoping to garner support in the state's Republican caucuses. (He won, according to state GOP officials, though there is apparently some question about whether more votes still need to come in and whether they should be counted when determining how to allocate Maine's delegates.)
After all the promises and threats, including some people publicly pledging to get arrested rather than leave the park voluntarily, the protesters ultimately seemed mollified by the city's go-slow approach to eviction.
So it was a token crew — two women and a man, all between their 20s and their late 30s — who returned to the park to observe the deadline for people to leave or be held in violation of the city's ordinance against loitering in public parks at night.
They sat on the fountain, held signs, chanted, stood around, and even watched police cars drive in and out of the city garage — nothing seemed to attract attention from the authorities. One cruiser did seem to slow down for its driver to take a closer look; with a total of five people in the park, the officer likely assumed the gathering would peter out on its own if left alone.
Sure enough, after some jokes suggesting that the trio were committing "attempted loitering," and even "conspiracy to attempt loitering," the bloom was off the rose and the protesters departed by about 10:15 pm.
Nevertheless, the movement continues, operating from its base at the Meg Perry Center. A "reoccupation" rally at Monument Square and a "rededication" of Lincoln Park happened over the weekend, and served to bring together many of the core group as well as additional supporters, to keep the activism alive.
There was also a brief memorial for John Mutero, known in camp as "Big John," who was found dead in a doorway on Allen Avenue last week, under unclear circumstances; Mutero had run afoul of authorities and received a police ban from being in Lincoln Park. Police said foul play and cold weather were not factors; the state medical examiner is investigating.
The group expects to continue occasional use of the State of Maine Room at Portland City Hall, where a Tuesday press conference called attention to the loss of home-heating subsidies for poor Mainers, while wealthy people here and around the country bask in the warmth of government handouts. Other events along that line are in the works — keep tabs on what's happening at facebook.com/OccupyMaine, and attend the General Assembly meetings at 5 pm on Wednesday and Friday, at the Meg Perry Center, 644 Congress Street, Portland. 

Wednesday, February 8, 2012

Occupy Transition: As encampment fades, protest shifts back to core issues

Published in the Portland Phoenix


Even as Portland city officials continue to pressure OccupyMaine to leave Lincoln Park, they have done the Occupation a great favor, perhaps unintentionally. By extending the deadline for the encampment to end until Friday from its previous Monday-night limit, they have given the Occupiers a chance to retake the media narrative of their departure.

Had Monday been the final day, the lasting image of the encampment would have been of one man's decision to burn an American flag. Unless he repeats the deed later in the week, that will no longer be the final scene, striking though it was.
As some Occupiers packed up their tents and other belongings, and others stood around in the morning chill talking about Citizens United, austerity measures, the poverty level, and other issues of economic injustice, Harry Brown — one of the four individual plaintiffs suing the city of Portland for the right to stay in Lincoln Park — drew the lens on himself, announcing that while "it might not catch like I'd like," he was going to try to "dispose of" an American flag.
He affixed the flag to the flagpole in the center of the encampment, and after several tries managed to ignite it with his cigarette lighter. The flames burned brightly as photographers converged on the scene, jockeying for position.
As it happened, and even afterward, other Occupiers present were careful in discussing the matter. The flag-burning was Brown's "autonomous act," came the common refrain, and while others said they might or might not have done the same thing or support his choice, they all defended his right to express himself in that way. (A discussion on the OccupyMaine Facebook page was less restrained, but included several impassioned defenses as well as some strident attacks on the action; a woman who stopped by Monday night's General Assembly was extremely upset by the action, but paused her tears long enough to hear Brown's defense, which amounted to him saying he thought he was doing the right thing by the flag.)
Respect for individual differences has been the hallmark of OccupyMaine — and the Occupy movement as a whole — since its inception. People of wildly divergent belief systems and political views have come together and engaged with each other, civilly, thoughtfully, and passionately. And they have often come to consensus on what to do in response to the economic, social, and political injustices that pervade American society today.
That has only happened when people of differing views have come together in good faith, though the Occupiers are resolved to give everyone a chance to truly engage — even detractors.
A passerby in Lincoln Park on Monday afternoon scolded the protesters for breaking laws and told them "the way to protest" is to walk around with signs, and then told them to "stop protesting; start doing something that makes sense." Occupier Evan McVeigh walked along with him, offering to involve him in the conversation the man had interrupted with his crankiness, and responding to his criticism with thoughtful — and passionate — rejoinders. The man wouldn't give his name, and only after several questions did it become clear that he disagreed with Superior Court Justice Thomas Warren's ruling last week that the encampment was in fact free expression.
Warren's ruling essentially declared the encampment was indeed free speech worthy of Constitutional protection, but said that the city's safety concerns about how the encampment was physically laid out were strong enough to override the protection given to free expression. Despite ending in an order to vacate the park, the ruling was a major win for the Occupiers. (Read more on the specifics of this at  thePhoenix.com/AboutTown.)
The support found in Warren's ruling, as well as renewed public support — and discovery that despite councilors' claims to the contrary, the overwhelming majority of Portlanders who contacted the council to express an opinion about OccupyMaine were supportive of the encampment — appears to have breathed new life into the Occupy flame here.
The activism is continuing — two video series (including an ongoing program on Portland's Community Television Network), rallies, marches, and other gatherings are scheduled for the next couple of weeks already, with more in the pipeline. A "Tiny Tent Task Force" is also forming, to continue the tent-based nature of the Occupation, albeit on a smaller scale. Other projects in the discussion phase include Occupying foreclosed properties, turning Lincoln Park into an urban garden, and expanding visible protest throughout the city in various ways.
The efforts to house the needy are also carrying on; some members are forming a commune they hope will be self-supporting, while some will take advantage of the city's extended deadline to further their search for more permanent shelter.
With a base at the Meg Perry Center, the OccupyMaine group is expecting to expand and reinvigorate its activities. More than one long-term Occupier said energy that had gone into maintaining the encampment can now be used for things that are even more productive. What form those take remains to be seen, but the commitment seems solid.