I got into a debate about currencies the other day. A colleague said that the future of money was power. Well, all power is based upon money, and his point was that money would be based upon power. The energy industries. Oil, gas, electricity. These are the key industries providing energy to the world.
True, and you could add on wind, solar and other renewable energy providers to this list, but is this the future? I even speculated a long time ago [2008] that water would be the currency of the future. Anything could be a currency. But then we got into a discussion about currency and I pushed back, arguing that the currency of the future would be reputation.
Reputation is the key currency, as reputation creates trust. If I trust you, I can trade with you. If I don’t trust you, then I won’t.
This hit home with me years ago, when I got ripped off by a fraudster that I trusted. Money and investing has little to do with assets; it’s all about trust. What is it that backs your investment? What is it that reinforces your trust?
This gets interesting as we were talking about what is it that backs anything of value. When you buy something, can you guarantee it will be delivered? How can you believe in this thing you are buying? When you invest or buy anything, you have a belief that this is of value, but is it really?
Whether it is bitcoin, the US dollar, a work of art or a rare commodity, the core of any trade or transaction is your belief that this has value. That belief is based upon trust. That trust is based upon reputational history.
This is why Gene Rodenberry’s idea of Trekonomics gets interesting. Trekonomics is the Star Trek utopian future, one that I refer to often, and I realised as we debated reputational currencies that this hit the nail on the head. Gene Rodenberry got it right!
The only reason we accept a currency is because we trust it. The only reason we invest in something is because we trust it. If you buy something, whether it be a Picasso painting or an Amazon book, you trust it will be delivered. Obviously it makes a difference when it costs $100 million versus $1, but the trust in the follow through is the key.
And how is that trust built? It’s based upon reputation. You have to have a reputational trust to attract investment.
By way of illustration, I got ripped off years ago when investing in property. How did I get ripped off? First, the company had celebrity endorsements from Steve Redgrave, Geoff Hurst, Rory Underwood and more. Second, the sales team made me feel warm and happy. Third, the company had all the aspects of endorsement from governments and markets.
After investing, I discovered that the celebrities were also ripped off; the sales team were all perfunctory and sacked; and that the endorsement from governments was Delaware, USA, which allows shell companies to trade without trust.
I don’t trust many after that experience and realised that trust and trade is purely created through reputation. Reputation is created by track record. Reputation is maintained through consistent actions and can be lost in a second.
During our debate about currencies, reputation and trust, we touched upon Prince Andrew. Prince Andrew’s reputation was trashed overnight by his BBC interview. So, think about it. Before that interview, would you have accepted an investment or a currency backed by Prince Andrew? After that interview, how did your view change?
This is the core of all monetary and market movements and investments. Do you trust it? What’s the provenance? Can you accept its reputational value?
Gene Rodenberry recognised something I only just realised myself. We do not trade in commodities, assets, products and services. We trade in trust, backed by reputation.
So, there is a currency of the future.
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