Money, the Startup

We've been using a broken MVP for 2,500 years. What comes next?

If money were a startup, there would have been a pitch deck that would start by identifying the opportunity. So what is the opportunity with money? To get rich? Nope.

The startup opportunity for money is to make it possible for people to share things under conditions where it isn’t easy. People naturally want to help each other (and themselves) by sharing things. For example, family members and close friends will share just about anything with each other and certainly don’t need money to do it. Not even the most crypto-maximalist would suggest paying Grandma for thanksgiving dinner. That’s because with family and our closest friends we share unconditionally, without any need for record keeping. With a broader circle of friends and associates, we also actually don’t need money. Instead, we casually issue credit. Like when we say “You paid last time, let me get this one.”

But the case where the invention of money could actually be useful is the one where you want to share with someone you aren’t likely to see again. Say you met someone in an airport and you had an old laptop you weren’t really using and wanted to offer it to them. In this particular case you have a problem. They don’t have something of roughly a laptop’s value to give you in return. Since you aren’t likely to see them again, casual credit - or saying “I owe you one” - won’t work.

But wait… MONEY solves this problem!

Like any startup, there is a lot of complexity and execution risk embedded in this sentence. But let’s start with the starry-eyed opportunity. If (and this is a big if) everyone could agree on and have equal access to some standardized and portable token of value, then our stranger in the airport could just give you a few of the new-fangled tokens in exchange for your old laptop! People that didn’t see each other often enough to reciprocate when given things would still have a way to trade fairly… MONEY!

So we imagine the investors are excited and fund the seed round (presumably in some non-monetary fashion, haha) and now it’s time to… build the MVP. How to come up with a standard token, and how to get it out to people? And of course this is tricky. There aren’t yet any smartphones. But… well… our entrepreneurs stay up late and conduct focus groups and look for target markets and eventually give us… something.

So, like so many MVPs, this one goes WAY off the rails from the original pitch deck. It’s almost as if you’d given the first two slides to a sinister AI and asked it to come up with something that worked, no matter what the consequences.

The unfortunate ‘early adopters’ were farmers and other producers in cities captured by invading armies (the Romans are most memorable, but other war-making ‘entrepreneurs’ came up with similar ideas at around the same time). Instead of just taking their crops at spearpoint, the Romans instead gave coins to their soldiers that the conquered people had to remit as taxes. In this way, the soldiers would get housed and fed in exchange for the coins. But the coins could also be passed around hand-to-hand in exchange for goods and services - hence creating the MVP: MONEY, version 0.1, if you will.

This unfortunate MVP was the beginning of money, and believe it or not, we are still using it today. You have to get your coins by providing services to the government (or by borrowing them from banks who borrow them from the government), and you also have to pay your taxes in that same currency. It’s no wonder that people find the whole idea of money rather off-putting! At it’s core, the current version of money is still a way to capture taxes with a threat of violence (or ‘protection’ as they say in organized crime) from a citizenry.

In the age of smartphones and the internet, we can of course move beyond this barbaric MVP, but why haven’t we? Obviously one reason is that the existing system has made a lot of money for a lot of people (and governments). Those same people have also helped reinforce some false mythology about the nature of money. For example, we have been conditioned to believe that money is something that you have to earn from someone else, rather than money being something that you create by doing things (as is the case when you buy dinner for your friend with the knowledge that they will buy next time). If money is a means of sharing, everyone should have the capacity to print it, in proportion to the useful things they do for other people. Similarly, we are led to believe that unless a central agency (governments, banks, credit card companies) is empowered with printing and distributing and otherwise managing money, things will go terribly wrong. But these are just myths - myths that help make and keep a small group of people wealthy.

Next time, I’ll go into how crypto doesn’t yet move beyond the MVP, and what sort of approach might.