To understand them and what they’re fighting for, it’s important to understand the system they’re challenging.

Our money system is underpinned by national central banks and treasuries that issue foundational “base” money. This includes the physical cash in our wallets and also reserves, the special forms of digital money that commercial banks hold in their central bank accounts, which are inaccessible to us.

These commercial banks then boost the money supply by issuing a second layer of money on top of the central bank money layer, through a process called credit creation of money (sometimes called “fractional reserve banking”) to create commercial bank money, which we see as bank deposits in our bank accounts.

The details are subtle and complex ― especially at the international level ― but the interaction of these players issuing money and taking it out of circulation makes the money supply expand and contract as if it were breathing. Monetary reform groups target different elements of this. Here are five of them.

1. Government Money Warriors

Stephanie Kelton, professor of public policy and economics at Stony Brook University, is one of the leading lights of modern monetary theory.

We say that the sun rises, but in reality the sun stays fixed and the illusion of sunrise is created by the Earth turning. Modern monetary theory argues that a similar delusion occurs in our thinking about government money ― we often claim that a federal government “raises money” through taxation and then spends it, but actually it is government institutions that originally issue money by spending it into existence and then withdrawing it from circulation by demanding it back in taxation. If the government issues money, then why would it have to raise money by asking for it back?

The idea that a federal government can run out of money like an ordinary household or business is an illusion, argue advocates of modern monetary theory. A government can only run out of money if it either does not issue its own sovereign currency (like the European nations, which have opted for the euro) or if an artificial political limit has been placed on how much money it can issue. In the latter situation, governments must first recall money via tax (and other means) before reissuing it elsewhere.

This is why modern monetary theory advocates are incredulous about conservatives who want to block spending on education and health care by saying we don’t have the money to pay for it. “Governments with monopoly control over their currency can always pay for their policy priorities,” says Pavlina Tcherneva, an economics professor at the Levy Economics Institute at New York’s Bard College.

Under modern monetary theory, if there are unemployed people who want to work and material resources for them to work with, a federal government can issue new money without causing inflation because the increase in money supply will be met with an increase in production. “The goal is to use the public purse to serve the broad public interest without accelerating inflation,” said Stephanie Kelton, professor of public policy and economics at Stony Brook University and former senior adviser to Sen. Bernie Sanders (I-Vt.).

2. Bank Money Reformers

Bank money reformers want to target the powers of commercial banks to create money.

Other reformers target the commercial bank money system. They argue it creates economic instability, over-indebtedness and concentration of power in the hands of banks ― the very banks that led us into the 2008 financial crisis.

Bank money reform groups include the American Monetary Institute, Positive Money, and the International Movement for Monetary Reform.

Commercial banks create new money when they issue loans. The moderate wing of the bank reform movement argues that, because the government grants them this privilege, banks should be subject to greater democratic scrutiny over their lending. The hard-line wing believes bank creation of money should be banned altogether.

The movement to curtail bank money is politically more diverse than modern monetary theory; it’s been supported by certain libertarians, including the late economist Murray Rothbard, neoclassical economists such as Irving Fisher, as well as left-wing proponents, such as the U.K.’s Green Party, which believes bank money-creation leads to environmental crises and corporate domination.

Their prescriptions are not uniform: Positive Money, a research and campaigning organization in Britain, calls for the power to create money to be granted exclusively to a democratic, accountable and transparent public body, creating a “sovereign money” system in which we might all have our own accounts at the central bank. This is distinguished from full-reserve banking, which would require your bank to have the reserves to fully back your account.

3. Cryptocurrency Crusaders

The Bitcoin logo on display at the Consensus 2018 blockchain technology conference in New York City on May 16.

Cryptocurrency crusaders not only reject both national and bank money systems, but also reject the entire concept of credit money (money that is “created from nothing” through law or social agreement), calling for it to be replaced with “commodity money” (money that is “created from something” through production). They have inherited the baton from “goldbugs,” who called for gold to be money.

The movement, which began with Bitcoin, argues that the best money system is one that’s outside of human politics. This comes from a philosophical tradition that says systems should be governed by the boundaries of God, physics or math, rather than laws set by politicians. With gold, for example, these natural boundaries would be geology: how much gold can be found and extracted. In Bitcoin’s case, the boundary comes from the fact that the digital system sets a hard limit on how much digital money can be issued and then forces participants to “mine” it as if it were a commodity.

Because Bitcoin hard-liners believe true money is a limited-supply good that must be extracted through production, they claim that fiat money ― created by banks or countries ― is artificial or deceitful money under the control of corrupt powers. There’s a puritanical edge to these cryptocurrency crusaders, who mistrust human institutions and trust in an abstract ‘godlike’ order of mathematics and markets.

While theories like MMT hinge on collective human political institutions, crypto crusaders see politics as foolish. This distrustful attitude shows: The movement sometimes seems as much at war with itself as with the fiat money system, with bitter in-fights between supporters of different crypto-tokens.

They are, however, the richest of all monetary reformers, with many crypto users having ironically become millionaires in the fiat currency they claim to dislike so much.

4. The Localists

A note worth 10 Brixton pounds, an alternative currency in London, is illustrated with an image of David Bowie.

There’s a whole history of alternative non-government money prior to cryptocurrency. These original alternative currency variants include mutual credit systems, timebanks (where time is used to measure how many credits you earn), local community currencies, such as the U.K.-based Brixton pound, and systems like the Swiss Wir, a currency used between businesses.

The tradition is also skeptical of large-scale government-bank money systems, but rather than calling for them to be replaced by a robotic algorithm, they believe small-scale communities should take control to issue money locally.

Unlike cryptocurrency advocates, they have no problem with money being “created out of nothing.” Rather they have a problem with who gets to do that and at what scale. They believe large-scale systems alienate people and dissolve close-knit communities.

A mutual credit system like Sardex in Sardinia, for example, does not reject the idea of money expanding and contracting, but it brings together an island community to decide on what terms that occurs.

While the other movements are outspoken, local complementary currency enthusiasts are often humble and below-the-radar, working for low pay to build resilient community structures.

“Local currencies change how money is issued,” says Duncan McCann of the New Economics Foundation, “how it circulates and what it can be spent on in order to re-localize economies, encourage environmental behaviour, and promote small businesses.”

The crypto-credit alliance looks to merge older, alternative currency systems with blockchain technology.

5. The Crypto-Credit Alliance: Mutual credit meets blockchain technology

This is the least-known or developed of the movements, but is perhaps the most exciting. Nascent initiatives, such as Trustlines, Holochain, Sikoba, Waba and Defterhane, seek to hybridize older alternative currency systems like mutual credit with the blockchain architectures that underpin cryptocurrencies. They share common ground with both modern monetary theorists, who also see commodity money as regressive, and cryptocurrency advocates, who wish to bypass the government.

Cryptocurrency unleashed a lot of creativity, but much has been wasted on toxic speculation. On the other hand, localist mutual credit movements have powerful ideas but often struggle to get heard or to spread. Crypto-credit innovators are exploring the creative possibilities of merging these two to solve flaws in both.

Originally published in the Huffington Post

The post These 5 Rebel Movements Want To Change How Money Works appeared first on P2P Foundation.

None of these involve monetary exchange. We do not use the term “sharing” to refer to an interaction like this: “I’ll give you some food if you pay me.” We call that buying. We don’t use it in this situation either: “I’ll let you temporarily use my toy if you pay me.” We call that renting. And in the third example, while the farmers may have come together initially to purchase a common resource, they don’t pay for subsequent access to it.

In light of this, we should call out Uber for what it is: a company in control of a platform that originally facilitated peer-to-peer renting, not sharing, and that eventually transformed into the de facto boss of an army of self-employed employees. And even as “self-employed employee” might sound like a contradiction, that’s the dark genius of the Uber enterprise. It took the traditional corporation, with its senior managers responsible for controlling workers and machines, and cut it in two — creating a management structure that need not deal with the political demands of workers.

So, how exactly did we get to the point where business executives at conferences can talk about Uber as a “sharing economy” platform with straight faces? How is it that they don’t feel a deep sense of inauthenticity? To understand this, we must return to the roots of the actual sharing economy. It is the only way we can wrest it back from those who have hijacked it.

Monetary exchange takes the form of, “If you give me money, I will give you a service.” There’s always potential for rejection in market offers, which creates uncertainty, and some people fare better than others. Those who undertake the heaviest burden of production don’t necessarily get rewarded commensurately. Individual competition appears to be — at least at first glance — the defining mark of monetary exchange.

There are, however, three major but inconvenient truths that seem to get glossed over when we talk about the market economy. The first is that market systems feed off an extensive, underlying gift economy in which people transfer ideas, goods, services, and emotional support to each other without requesting money. Unpaid childcare is one example. If your mother watches your two children while you’re at a job, that’s the gift economy in action. In fact, without friends and family it’s unlikely that you could even maintain the desire to go to work. Even in professional settings we share common resources with business colleagues. Companies rely upon this internal collaboration to produce the very products they then competitively exchange in markets.

The second inconvenient truth about the market economy is that its products are not really desirable unless we can use them within non-market systems. What’s the point of all this stuff getting produced if we can’t share it, compare it, gloat about it, or enjoy it with others? Friends, family, and various community systems make having material goods meaningful.

And third, many commercial market exchanges are actually hybridized with non-commercial elements that add richness. Take, for example, flirting with a bartender as they serve you drinks, or having a discussion about politics with the stylist you’re paying to cut your hair. Not only do market systems rely on non-market influences in order to work, but their products feel pointless and empty without them. Recognition of this, however, is uneven.

In small community settings it’s often easy to see a balance between market and gift economies. The shop owner gives a spontaneous discount to a retiree, or allows friends to lounge in a coffee shop long after they’ve finished drinking. Commercial exchange is but one element in a broader set of relationships, and this means the exchange takes longer. Economists call this inefficient; we call it enjoying life.

Meanwhile, in megacities such as London or New York there’s a tendency to strip all non-commercial elements from market interactions. This is the hallmark of what we refer to as commercialization. The large-scale mall and corporation are designed to maximize exchange while offering only a shallow appearance of sociability. The McDonald’s employee is forced by contract to smile at you, but prohibited from taking time to have a true conversation.

This phenomenon is even more acute in faceless internet commerce, where clinical, transactional precision dominates. While hyper-efficient exchanges play into our short-term impulses — initially feeling exciting, convenient, and modern — they gradually begin to feel empty. Sure, it’s frictionless commerce, but it’s also textureless.

When detached from a community foundation, markets can bring out people’s most anxious, petty, arrogant, and narcissistic sides, encouraging them to fixate on their individual strands of the overall economic picture, as if it were the whole. The defining qualities of a market economy — like uncertainty and unequal monetary reward — get exalted, and in this frame, everyone else is either a stranger to do battle with or a temporary ally to assist in your personal gain. Socializing becomes “networking.” Non-commercial ties such as friendship, sex, love, and family are either rendered invisible, or presented as kitsch advertisements designed to promote more commercial exchange.

It was in this context that the original sharing economy platforms emerged. Amid the competitive, individualistic rhetoric of the corporate state, people looked to use technology to foreground sharing, gifting, and community activities that were otherwise overshadowed.

One aim was to extend activities between trusted friends to strangers. Friends have long crashed on each other’s couches, but the Couchsurfing site wanted it to happen among strangers. Freecycle allowed you to give gifts to people you didn’t know, while Streetbank let you lend items to strangers in your neighborhood. These platforms encouraged sharing between people who might otherwise be isolated from each other.

All of this was built using the infrastructure of the internet. The ubiquity of interconnected computers and smartphones in the hands of ordinary people allowed them to cheaply advertise their locations and showcase offers. To catalyze a digital platform, all someone needed to do was set up a website as a central hub for aggregating and displaying offers for others to accept. It makes sense to centralize similar information, rather than having it scattered in fragmented locations. This, in turn, builds network effects, meaning that the platform becomes more useful — and thus more valuable — as more people use it.

Attempting to introduce sharing principles into networks of strangers isn’t easy. Our lives are built around large-scale market economies, and many people have internalized the principles of monetary exchange. In the context of huge global supply chains, the rural idyll of community production is long gone, and attempts to reverse-engineer authentic sharing relationships between people we don’t know can feel stilted.

While we might be willing to let a friend borrow our car for the day, we generally don’t trust strangers enough to share our most crucial possessions with them. We may, however, be game to share things that we don’t often use, like a basement that’s only half full or the backseat of a car that could have someone in it while we’re driving to work anyway.

We’ll probably be even more willing to offer this idle capacity to a stranger if there is some third-party assurance that they are legitimate, or will experience some consequences if they behave badly. Likewise, we may be more open to accepting gifts from strangers if such assurances are in place. This is, in effect, why sharing economy platforms developed identity and reputation-scoring systems, adding layers of formality and quantification into non-monetary gifting.

Herein lies one source of corruption, as the very act of earning quantified reputation for gifting adds a feeling of market exchange. But it was building technology to identify and quantify spare capacity that really set the stage for undermining the sharing economy. “Why not get the stranger to pay for the gift as a service?” was a question that couldn’t be far off.

The move from sharing spare, underutilized assets to selling them can be subtle. In hitchhiker culture, a person offering lifts might reasonably expect a fuel money contribution from someone getting a ride — and if the hitchhiker leaves the car without offering it, the driver may be a little irritated. The money though, is never a condition, and until they explicitly say, “If you give me fuel money, I will drive you,” it’s not a commercial relationship. Note, though, how easily the phrase—once uttered—can become generalized into, “If you pay me, I will drive you.”

A new wave of “sharing economy” startups bet on just this concept, as their businesses came to be characterized not by sharing, but by showcasing spare capacity for rent, with the platform taking a cut as broker. So, too, began a hollowing out around the language of sharing. New entrepreneurs feebly hung onto the sharing story with the claim that market mechanisms could re-engineer the very community ties that the markets themselves had eroded. In reality, they were doing nothing more than marketizing things that previously hadn’t been on the market. If anything, this only undermined existing gift economies. A friend calls to ask if she can stay with you, but gets told, “Sorry, we have Airbnb guests this weekend!”

Ah, but there’s another twist. Far from merely facilitating the renting of spare capacity, these platforms grew to such a size that sellers of “normal” capacity started using them—as in, people running professional bed-and-breakfasts migrated to the Airbnb platform, and so on. The irresistible lock-in of network effects dragged the old market into the new, and voilà, the platform corporation emerged.

Let’s be unequivocal here: A platform corporation really only owns two things. It owns algorithms hosted on servers, and it owns network effects—or people’s dependence. While the old corporation had to get financing, invest in physical assets, hire workers to run those assets, and take on risk in the process, a corporation like Uber outsources its risk to independent workers who must self-finance the purchase of their cars, while also absorbing losses from their cars’ depreciation or the failure of their operations. This not only separates corporate managers from ground-level workers, it places the major burden of financing and risk on the workers.

This is a venture capitalist’s wet dream. Give a startup minimal capital to hire developers and run media campaigns, and then watch as the network effects ripple over the infrastructure of the internet. If it works, you’re suddenly in control of a corporation built with digital tools, but extracting value from real-world, physical assets like cars and buildings. The entity holds itself together not via employment contracts, but rather by self-employed workers’ dependence on it to access the market they rely on for their survival.

So, now here you are, staring at your Uber app with irritated sighs because the driver is two minutes late. This is a market transaction. To the driver, you’re just another customer. There is no sharing. You’re as isolated as you ever were.

We have a hard time seeing systems. We find it easier to see what’s tangible and in front of us. We see the app, and we see the driver’s car icon moving along the streets on their way to pick us up. What we can’t see is the deep web of power relations that underpins the system. Instead, we are encouraged to fixate on the flat and friendly interface, the shallow surface layer of immediate experience.

If you’re a driver, that interface doubles as your boss. It doesn’t shout at you like the jerk boss of old corporations. In fact, it shows no emotion at all. It’s the human-readable incarnation of a robotic algorithm that calculates the optimal profit-path for Uber, Inc. As a driver, you have no colleagues and no union. There’s no upward mobility. Uber wants you to leave as soon as you build any expectations of progress. You and thousands more eke out enough to survive, if you’re lucky. This all while the owners of the platform get richer and richer, no matter what.

Of course, if you want to put a positive spin on this kind of work, you can call it flexible, decentralized micro-entrepreneurship. But pan out, and it looks more like feudalism, with thousands of small subsistence farmers paying tribute to a baron that grants them access to land they don’t own.

So, what is to be done? For one, let’s first understand the problem. Innovation and change are pointless unless they’re coming from a real analysis of what’s gone wrong—especially when we’re being made to believe we’ve actually gained an asset. Only then can we rebalance the power.

If we are going to turn ourselves into a sprawling network of micro-entrepreneurs, micro-contracting via a feudalistic platform, let’s at least cooperatively own the platform. In doing this, we might even retain one definition of sharing — the common usage of a shared resource pool, like the farmers who collectively manage a reservoir.

This is the origin of the platform cooperativism movement, one possible counterforce to the rise of platform capitalism. In principle, it’s not that complicated. Spread the ownership of the common infrastructure among the users of that infrastructure, give them a say in how it’s run and a cut of the profits that emerge from it.

The platform cooperativism movement is a new one, with many of its proposals still on paper and yet to be released into the wild. Many have seen the potential to use blockchain technology, whose original promise was to provide a means for strangers to collectively run a platform that keeps track of their situation relative to each other without relying upon a central party. Some, like the blockchain-based ride-sharing platform La’Zooz, have already released apps and are iterating away in the background. Others, like the blockchain-based proposal for an Uber-killer called Commune, are still in their conceptual stages. Arcade City, another attempt at an Uber alternative, has been dogged with controversy—and a split in the team has led to the creation of Swarm City.

Meanwhile, big corporates have increasingly encroached on blockchain technology with an eye toward using a pacified version of it within closed and controlled settings. There are, of course, plenty of talented and idealistic blockchain developers looking for opportunities beyond corporate life.

Either way, fancy technology isn’t a magical recipe. The equally important work involves building a community willing to back new platforms. A Dutch proposal for an Airbnb alternative called FairBnB is making a start as a Meetup group, and food couriers are organizing gatherings to discuss how they can set up cooperative alternatives to Deliveroo.

In the face of massive commercial platforms, aggressively backed by venture capital money, these initial attempts might seem idealistic. But as digital serfdom only expands, we have little choice but to start small with underdog pilot projects that galvanize action.

It’s a new mentality that needs building. In a world where we’re told to be grateful receivers of products and the opportunity to work on them from heroic, demigod CEOs allegedly “democratizing” the workscape, we need to see straighter and expect more. The entrepreneur is still nothing without the underlying people who make their enterprise work; and in this case, their wealth comes directly from skimming money off vast collectives. Let’s fuse the two forces into one, and build collectives with actual sharing in mind.

This post was commissioned by Medium.com for its magazine series, How We Get To Next,  published under Creative Commons CC BY 4.0 .

Image credit: Darren Garrett

The post Reversing the Lies of the Sharing Economy appeared first on P2P Foundation.

Note: I published a shorter version of this in Nesta’s magazine The Long+Short as You Are the Robots. This is a modified and extended version, published under Creative Commons

A banker in 1716 had two main tools: a ledger book and a quill pen. A customer – perhaps a prominent carpenter – would enter a branch, request a withdrawal or make a deposit, and the banker would make a careful note of it within the ledger, editing the customer’s previous entry to keep authoritative score of exactly what the bank promised to them.

ACCOUNT LEDGER BOOK OF 17th CENTURY BANKER EDWARD BACKWELL

Fast-forward to 2016 and we’ve entered into a world no longer dominated by tools, but by machines. The crucial difference between a tool and a machine is that the former relies on human energy, while and the latter relies on non-human energy channelled via a system that replicates – and accentuates – the action of a human using a tool. The carpenter is now a furniture corporation using computer-programmed CNC cutters. Likewise, the bank that keeps score of that company’s money runs humming datacentres with vast account databases. These are digital equivalents of the old ledger books, drawing upon fossil-fuel generated electricity to write and hold information as magnetised atoms on hard-drives.

THE 21st CENTURY BANKER’S LEDGER BOOK

We call the process of moving from manual tools to machines automation, and it appears in various forms within everyday financial life. The ATM, for instance, is an automated version of the bank teller of old who would have to exert energy to check your account, hand you cash, and alter your accounts. I use an interface to interact with this ATM, which gives me some form of control, but only within the inflexible rules of whatever it will allow me to do. This actually requires energy on my part, so while the machine seems to ‘do things for me’, the process also seems to be ‘self-service’.

Automation is creeping into more and more of personal finance. The glossy adverts of the financial marketing industry put an appealing spin on the future world of contactless payment, branchless banking and cashless society. They focus the mind on problems that are apparently being solved through new technology, but they simultaneously divert attention from the dark side of the automated financial regimes that are emerging around us. To get to grips with these processes of automation – and the sub-field of ‘digitisation’ – we first need to establish some definitions of machines, robots, and algorithms.

Financial machines vs. financial robots

I COME IN PEACE TO HELP YOU

Machines tend to require us to manually activate them towards a singular repeated action that they do no matter what, like the way a kettle always boils water if I manually push the ‘on’ button. The ATM is a multi-function machine that can do different things if I push different buttons on the interface, like ‘give me £30’ or ‘show me my balance’. It doesn’t, however, seem to ‘make decisions’ or have any ability to autonomously react. To make it feel like a robot, it must show some nominal agency to make decisions based on external information.

To understand what a financial robot looks like, we need to sketch some general characteristics of robots more generally. We might think of a traditional robot as a system comprised of four parts:

1. Body: An assemblage of mechanical parts
2. Mind: An algorithmic ‘mind’ that can compute or analyse information
3. Senses: Sensors that can detect external data
4. Energy source: For example, electricity

The traditional robot might take in data from sensors and compute it through an algorithmic mind that can activate the mechanical body, provided there is electricity. For example, a robot could be a vacuum cleaner (mechanical body) that receives data from photocell sensors (senses) to be processed through an algorithm (mind) to calculate its position, which in turn sends orders for the body to move around the room, thereby ‘autonomously’ vacuuming your lounge by ‘making decisions’.

Importantly, though, it may not be necessary to include the mechanical ‘body’ part at all. A robot might simply be a software-based algorithmic ‘mind’, taking in data and sending orders to other entities to act out its ‘will’. We might call this an algo-robot.

Let’s consider an Excel spreadsheet model that is used to estimate the fair price of a financial instrument like a share. A person armed with a pen and pad might take hours or even days to go through the relevant data and do the calculation manually. The spreadsheet model on the other hand, directs the electricity coursing through the hardware of a computer to do the same calculation in a fraction of the time. This is a financial machine, automating manual human calculation processes.

To make this into a robotic system, though, we must allow it to receive perceivable external data – such as a price feed from the London Stock Exchange – and allow it to process the data through its ‘mind’ of algorithmic formulas, and then give it the ability to make executive decisions based on its calculations (like the ability to send buy or sell orders back to the stock-market). And, voila, this is precisely what algorithmic automated trading is. The spreadsheet model has turned into a trader algo-robot. From this point the algorithmic coding can be developed into more ‘human’ forms, for example by equipping the robot with machine learning capacities and ‘evolutionary algorithms’ that can adapt to changing circumstances.

The algo-robotic managers of digital finance

ROBOTS: NO LONGER WORKERS and NO LONGER BODIES

‘Algo-robotic’ systems are particularly adept at accumulating power. Unlike the simple machine that offers static options via an interface, an algo-robot – or a series of linked algo-robots – have a greater ability to react in multiple ways in response to multiple data streams, and therefore to organise and co-ordinate. This trait makes senior corporate management warm to them, because, after all, reacting and co-ordinating are core elements of what a manager does.

The old hierarchy within a corporation was one where owners used managers to co-ordinate workers and machines. This gave rise to the traditional battles between owners and managers, managers and workers, and workers and machines. The emergent hierarchy is subtly different. The owners – often a disparate collection of distant shareholders – grant power to high-level management, who increasingly use algorithmic systems as ‘middle management’ to organise their workers and more basic machines.

And this is where we see the changing conception of the robotic system’s ‘body’. Rather than being a mechanical assemblage with an algorithmic ‘mind’, the robot could be an algorithmic mind co-ordinating a ‘body’ constituted out of ordinary employees, who increasingly act like machine parts. Think about the Amazon deliveryman driving the van to act out an order sent to him by an algorithm. This ‘body’ doesn’t even have to be constituted by the company’s own employees, as in the case of self-employed Uber drivers co-ordinated by the Uber algorithms.

These arrangements are often difficult to perceive, but algo-robotic systems have been embedding themselves into everyday forms of finance for decades, not necessarily ‘taking over control’ but often creating a hybrid structure in which manual human actions interact with automated machine-robot actions. For example, the investment bank trader might negotiate a derivatives deal over the phone and then book it into a partly automated back-office system.

“GOOD MORNING, HOW CAN MY MACHINE HELP YOU?”

The quintessential example, however, is the retail bank branch. You can talk with employees behind the Barclays counters, but often they are just there to enter data into a centralised system that tells them how to deal with you. To some degree these employees have agency – the ability to make quasi-autonomous decisions – but the dominant trend is for them to become subservient to the machinic system they work with, unable to operate outside the bounds set by their computer. Indeed, many bank employees cannot explain why the computers have made the decisions they have, and thus they appear as the human face put there to break the news of whatever the algorithm has decided. We might even say they are a human interface to an otherwise algo-robotic system that is accountable only to the senior corporate management, who you will never deal with.

NOTE: If you have enjoyed this so far, you might like my book

From hybrid systems to self-service digital purity

CHARLIE WAS LAID OFF FOR BEING TOO HUMAN

But, ‘human interfaces’ like that are actually quite costly to maintain. People are alive, and thus need food, sick leave, maternity leave and education. They also have a troublesome awareness of exploitation and an unpredictable ability to disobey, defraud, make mistakes or go rogue. Thus, over the years corporate managers have tried to push the power balance in this hybrid model towards the machine side. In their ideal world, bank executives would get rid of as many manual human elements as possible and replace them with software systems moving binary code around on hard drives, a process they refer to as ‘digitisation’. Corporate management is fond of digitisation – and other forms of automation – because it is a force for scale, standardisation and efficiency – and in turn lowers costs, leading to enhanced profits.

The process is perhaps most advanced in the realm of electronic payments, where money is shifted with very little human action at all. Despite recent talk of the rise of digital currencies, most money in advanced economies is digital already, and tapping your contactless payment card sets in motion an elaborate automated system of hard-drive editing that ‘moves’ your money from one bank data-centre to another. This technology underpins talk of a future ‘cashless society’. Bouncy startups like Venmo and iZettle have got into the payments game, adding friendly new layers to an underlying digital payments infrastructure that is nonetheless still dominated by the banking industry and credit card networks.

HORRIFIC DARK AGE INEFFICIENCY

In the case of retail banking, an ideal situation for banks might be to get rid of the branches altogether, and to push for a world of ‘branchless digital banking’. This generally means slowly dismantling, delegitimising and denaturalising branches in the public imagination, while simultaneously getting people accustomed to ‘self-service’. Indeed, many banks are cutting branches, and many new forms of financial services are found only online, like digital banks Fidor and Atom. Digital banking startup Kreditech claims that bank branches won’t exist 10 years hence, “and neither will cost-intensive, manual banking processes”. “We believe algorithms and automated processes are the way to customer-friendly banking,” the startup declares confidently.

Such digital banking is but one strand in the digital trajectory. Digitisation is starting to be applied to more specialist areas of finance, too, such as wealth management.Wealthfront, for example, now offers automated investment advice for wealthy individuals. In their investment white paper they state that sophisticated algorithms can “do a better job of evaluating risk than the average traditional advisor”.

Digital systems like Wealthfront are often promoted as cutting out the middleman – assumed to be human, slow, incompetent and corrupt – and therefore as cutting costs in both money and time. Some startups use this to build a narrative of the ‘democratisation of finance’. Quantopian, a system for building your own trading algorithms, comes with the tagline: “Levelling Wall Street’s playing field”. Robinhood draws on the name of the folk hero to pitch their low-fee mobile stock-trading system.

It seems uncontroversial that these systems may individually lower costs to users in a short-term sense. Nevertheless, while startup culture is fixated upon using digital technology to narrowly improve short-term efficiency in many different business settings, it is woefully inept at analysing what problems this process may accumulate in the long term. Payments startups, for example, see themselves as incrementally working towards a ‘cashless society’, a futurist buzzword laden with positive connotations of hypermodern efficiency. It describes the downfall of something ‘old’ and archaic – cash – but doesn’t actually describe what rises up in its place. If you like, ‘cashless society’ could be reframed as ‘a society in which every transaction you make will have to be approved by a private intermediary who can watch your actions and exclude you.’ It doesn’t roll off the tongue very well, and alarms the critical impulses, but nevertheless, that’s what cashless society would bring.

Forcing the ‘inevitable progress’ of digital finance

WHEN DOES ‘PROGRESS’ FINISH?

Part of the reason for the pervasive acceptance of these developments is the deeper ideological narrative underpinning them, one which is found within the tech industry more generally. It is the idea, firstly, that the automation of everything is inevitable; and that, secondly, this is ‘progress’: a step up from the inefficient, dirty services we have now. In this context, questioning the broader problems that might emerge from narrowly useful automation processes is ridiculed as Luddite, anti-progress or futile.

Of course, ‘progress’ is a contested term. If you’re cynical, you may see it as shorthand for ‘the situation an organised set of commercial interests view as desirable in the short-term’. It doesn’t necessarily mean ‘the thing that would be good for the broader public in the long term’.

Indeed, it is apparent that many people don’t respond to ‘progress’ in the way they’re supposed to. We still find people insisting on queueing to use the human cashiers at big supermarkets like Tesco, rather than diligently queueing up for the automated checkout. Likewise, we still find people stubbornly visiting the bank branches, making manual payment requests; even sending cheques.

Perhaps this is because there is something deeply deadening about interacting as a warm-blooded individual with a soulless automaton trying to sound like a human. The hollow fakeness of the cold clinical checkout voice makes you feel more alone than anything else, patronised by a machine clearly put there to cut costs as part of a faceless corporate revenue circuit.

The ongoing challenge for corporate management, therefore, is how to push automation while keeping it palatable. One key technique is to try to build more ‘human-like’ interfaces, and thus in London we find a hotbed of user-experience (UX) design firms. They are natural partners to the digitisation process, combining everything from ethnographic research to behavioural psychology to try to create banking interfaces that seem warm and inviting.

JESSICA SPENDS A SMALL FRACTION OF HER CORPORATE ENDORSEMENT EARNINGS ON COFFEE

Another key technique is marketing, because people often have to be ‘taught’ that they want something. In the case of contactless payment on the London Underground, the Mayor of London, Barclaycard, Visa and the Evening Standard have formed an unholy alliance to promote Penny for London, a thinly veiled front-group to encourage people to use the Barclaycard-run contactless payments system rather than those ancient Oyster cards. Sports stars like Jessica Ennis-Hill and Dan Carter have been co-opted into becoming the champions of automated finance. Signs have been popping up proclaiming ‘contactless is here’, as if it were something that people were supposed to be waiting for. These subtle hegemonic messages permeate every financial billboard in the city.

The dark side of digital finance

One key to developing a critical consciousness about technology is to realise that for each new innovation a new trade-off is simultaneously created. Think about the wonderful world of digital banking. A low-level bank branch manager might be subservient to the centralised system they work for, but can also deviate subtly from its rules; and can experience empathy that might override strict economic ‘rationality’. Imagine you replace such an individual with an online query form. Its dropdown menu is the digital equivalent of George Orwell’s Newspeak, forcing your nuanced, specific requests into blunt, standardised and limited options. If your problem is D, a system that only offers you solutions to A, B, or C is fundamentally callous. A carefully constructed user complaints system can build an illusion of accountability, while being coded firmly to bias the interests of the company, not the user.

Indeed, if you ever watch people around automated self-service systems, they often adopt a stance of submissive rule-abiding. The system might appear to be ‘helpful’, and yet it clearly only allows behaviour that agrees to its own terms. If you fail to interact exactly correctly, you will not make it through the digital gatekeeper, which – unlike the human gatekeeper – has no ability or desire to empathise or make a plan. It just says ‘ERROR’.

This turns out to be the perfect accountability and cost cushion for senior corporate management. The responsibility and energy required for dealing with problems gets outsourced to the users themselves. And lost revenue from unhappy customers is more than compensated by cost savings from automation. This is the world of algorithmic regulation, the subtle unaccountable violence of systems that feel no solidarity with the people who have to use it, the foundation for the perfect scaled bureaucracy.

So, in some future world of purely digital banking we find the seeds of a worrying lack of accountability and an enormous amount of user alienation. The loan you applied for online gets rejected, but nobody is there to explain what hidden calculations were done to reach that decision. To the bank management, you are nothing more than an abstract entity represented by machine-readable binary code.

THAT’S YOU, AS MAGNETIC ATOMS

So where is the financial AI?

NARCISSUS TRIES HSBC’s PLATFORM: “THEY UNDERSTAND ME SO WELL”

Of course, the banks don’t want you to feel like that. In the absence of employees, they will have to use your data to create the illusion of some type of personally tailored service. Your historical interactions with the system will be sold back to you as a ghostly caricature of yourself, fed through the user-experience filters. And it is here that we find the emergence of new forms of financial artificial intelligence.

Let’s return to the earlier – somewhat blurry – distinction between machines and robots: robots are essentially machines that take in data from sensors and process it through an algorithmic ‘mind’ in order to react or ‘make decisions’. Likewise, there is a blurry line between robots and artificial intelligence. At its most unambitious, AI it is just a term for any form of calculation done by robots. It really comes into its own, however, when referring to robots that have adaptation and learning capabilities which allow them to show creativity and unexpected behaviour. Rather than merely responding to your actions or to external stimuli, the system begins to predict things, offer things, make suggestions, and do things without explicitly being asked to do them.

Imagine, for example, an ATM booth that uses facial recognition technology to identify you as you approach and make suggestions to you. Notice how the power dynamic changes? With a normal ATM I am still an active body, choosing to trigger the machine via the interface. In this new scenario, though, I’m a passive body who triggers the machine without any explicit conscious action on my part. It seems to ‘take the initiative’ and to direct me. It’s only when we start to feel this as a power dynamic that we start to get closer to the feel of AI. The more you move towards AI, the more you feel increasingly passive relative to the robot (a passivity that is beautifully captured in this video).

CAN YOU PLEASE LET ME FINISH BEFORE INTERRUPTING?

Consider the customised ads Google feeds to us. We don’t actively try to make them appear, yet it’s still our actions that trigger the system to target us with specific information. That’s more like AI. There are many scenarios where this process could creep into finance, from machine-learning trading algorithms to creepy health insurance contracts that shift their prices according to your mobile payment data. “I see you paid for two chocolates today Brett. I will raise your premium.”

But this can go beyond a single machine. Just like a robotic system may actually be constituted by an algorithmic ‘mind’ that coordinates a ‘body’ of people – like Uber drivers acting out the will of their invisible algo-boss – so the body of an AI may be fragmented, decentralised and hard to perceive. It could be a network of interacting algo-robotic systems that direct the actions of people who are unaware they are triggering the system. No individual node may be in control, but people may collectively become locked into reliance upon the system, pulled around by forces not immediately apparent to them, being manipulated by their own data. The AI could be a ghost in the collective machine, the manipulative ‘invisible hand’ in a technologically mediated market.

WANNA PLAY?

Don’t panic, but don’t not panic either

“DON’T WORRY, YOU CAN STILL PLAY FRISBEE IN THE MATRIX”

When thinking about the future of digital finance, the issue is not necessarily whether these services are narrowly useful to an individual. Sure, maybe the contactless card is cool if I’m in a hurry and maybe I can get a decent deal from the AI insurance contract. Rather, the issue is whether they collectively imprison people in digital infrastructures that increasingly undermine personal agency and replace it with coded, inflexible bureaucracy; or whether they truly offer forms of ‘democratisation’.

It is easy to overhype these scenarios, though, because while it is true that payments, trading and retail banking are increasingly subject to automation, finance as a whole may not be especially amenable to it. Large loan financing decisions, complex multistage project-financing deals, exotic derivatives and other illiquid financial products cannot easily be standardised. They require teams of lawyers and dealmakers hashing out terms, conditions, and contingencies. Finance is an ancient politicised art of using contracts about the future to mobilise current action, and the dealmakers cannot easily be replaced with algos.

Furthermore, attempts to create more advanced and intuitive automated systems frequently fail. Semantic analysis algorithms – designed to read text – are terrible at understanding irony, sarcasm and contextual ambiguity within language. They may create feedbacks that thwart their own purposes, as in when people learn to game a credit-rating algorithm. High frequency trading falls apart under its own excesses and becomes less profitable. And there are customer backlashes: Metro Bank, the first new high-street bank in Britain for 150 years when it launched in 2010, has grown precisely because of its explicit focus on human-centred branch banking.

Nevertheless, it would be unwise to ignore the fact that the corporate trajectory is very much towards trying to automate as much as possible, and people need to come to terms with both the implications of this, and the vested interests behind it. It is not a neutral, ‘inevitable’ process. There are particular parties who seek it out. Take a moment to investigate who is on the board of Penny for London, that altruistic charity that insists contactless payment is a great way to help those in need. It includes hedge fund mogul Stanley Fink, and previously included the ex-CEO of Barclays, Bob Diamond.

So how should one respond? One approach is to ride with the technology, rather than to resist it. In intellectual leftwing circles the accelerationist sect advocates an embrace of automation, standing against sentimental calls for more human, local systems. It’s an abstract position, founded on beliefs that automation will create conditions ideal for the downfall of capitalism. At some point it intersects with the cult of the Singularity, popular among evangelical tech entrepreneurs and transhumanists.

The ideological ambiguity is perhaps most acute in the emergent field of blockchain technology. Such systems potentially offer a way for strangers to freely interact with each other without central human intermediaries getting involved in the process. They may use blockchain systems to issue shares, enter into insurance contracts and form digital co-operatives, but the systems are underpinned by an extreme version of automation, one that is essentially autonomous. Indeed, the deep-level mission of projects such as Ethereum, a decentralised platform for ‘trustless’ transactions, is the replacement of human systems of institutional trust – like the legal and political systems that normally underpin all contracts and markets – with automated ones apparently detached from the human ambitions of those who historically have run such systems (‘the politicians’, ‘the regulators’, ‘the bankers’). Libertarians long for an automated ‘Techno-Leviathan‘ to replace the human sovereigns we have now, but it is a big question as to whether such automated systems truly provide a more ‘democratic’ infrastructure for interaction.

More down-to-earth are those who want to allow more creative interaction with the existing digital infrastructure. Take the Open Bank Project, for example, which wants to facilitate third-party customisation of digitised banking processes by opening up bank APIs, in the same way that independent developers might build third-party Twitter apps that draw data from Twitter’s API.

And, finally, we have those who authentically seek to harness digital technology to bypass and challenge the standard economic rationality of large scale, short-term profit-seeking financial beasts, taking advantage of the lower startup costs of a digital setting to promote peer-to-peer finance, alternative currencies, crowdfunding platforms and non-monetary sharing platforms.

So, the scene is set. One thing is for sure: , presiding over increasingly passive and patronised users.

Photo by Tech in Asia

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