This morning I gave the opening keynote for an internal future strategy session at a large insurance company. A group of 40 executives from across the organization, as part of a six month program, are spending two days immersing themselves in thinking about how the structure of the economy could change in the years and decades ahead, and the implications for their business.
My presentation gave a very big picture view of selected elements of the economic landscape that could result in a substantially different business environment.
One of the topics I covered was alternative currencies, including virtual currencies, Bitcoin and other anonymous currencies (more on that another time), and the idea of attention, reputation, and other intangibles as currencies.
However the idea of intangibles such as these acting as currencies is a step further, suggesting they can replace financial transactions. Is this a valid idea?
First we need to revisit the definition of money, which in essence plays a role as a:
• Medium of exchange
• Measure of value
• Store of value
A currency plays the first of these three roles, as a medium of exchange. To do this well it needs the following characteristics:
• Hard to counterfeit
The missing characteristic which means reputation, influence, and attention are not true currencies is that they are not fungible, and by extension not symmetrical. A person’s influence, when used to ‘earn’ goods or services (for example being given special offers due to a high Klout score) is a unique situation, not replaceable by another’s influence, and influence quite likely would not be accepted in return.
Attention can certainly be used to pay for services, and the value can be readily quantified by comparing the cost of free ad-supported services with their ad-free alternatives. However the value of attention is unique to the individual, and also the context in which it is applied.
Certainly it is valid and useful to think about how economic structure will evolve given that key intangibles are increasingly important elements in measuring, storing, and exchanging value. There is more work to do in uncovering the mechanisms of the reputation and attention economies.
However it is not as useful to talk about, for example, reputation as a currency.
We will definitely have more ways to exchange value, including virtual currencies, and what I expect to be (relatively briefly) a plethora of anonymous currencies that are fungible and fully tradeable with real-world currencies. Reputation, influence, and attention will not be among those currencies.