Stop thinking about recovery and start searching for the new direction.
Innotribe 2019: London
The future of money
What is money? Is money a coin or currency that you have in your pocket? Is it the balance on your current account? Could money be the value of your stocks, shares or bonds? Or is money information and is information more than memory? How about M1, M2, M3 and M0. There is no simple definition, but money has characteristics and a future.
Thinking about the future of money offers two important insights.
- If the future of money is faster, quicker and cheaper the focus will be on efficiency and effectiveness in back office admin, operations and engineering/ tech. There are a myriad of startups and internal projects focussed on this already. The enormous effort and VC backing says this is a future of money.
- As money becomes more digital, conceptually this is more than bits version of the atoms, it introduces new characteristics of money. Traditional money has known properties/ characteristics which are well documented (Fungibility: Durability: Divisibility: Portability: Cognizability: Scarcity) but digital has to have all the existing characteristics and three new ones, which are:-
- accountability and responsibility as you can't hide from the data trail/exhaust/footprint/shadow; money can be tracked in real time.
- more humanity because of traceability , we have got to put people back in the equation and spend money humanely.
- programmability. I can programme money. I see somebody who needs some money, I can give them some money but I only want them to spend it on food - that money can now only be spent on food
Larry Fink, the founder and chief executive of BlackRock writes a letter to shareholders and investing companies every year and the past three, 2017, 18 and 19, highlight how the business world is changing. In 2017, the first big message to the market essentially said that if a board came to BlackRock to ask it to carry on supporting the business with funding, but presented a plan that shows underlying growth of 3-7% as a linear growth over the next 10 years, Fink would not back this. The reasoning he gave for that is that everyone has presented this for the past 20 years, and everybody has failed to do it. This was followed up with the second big message for business in the 2018 Christmas letter, where Fink wrote that organisations needed to demonstrate to him and his teams that they had a purpose for existing. "'Purpose' coming back into the words of the most powerful people in the world doing capitalism, that's big," The 2019 letter was that plan and purpose will come together in ESG reporting for environmental sustainability and we will report, measure and monitor.
The new model has the old and new characteristics.
Fink's focus is not on faster and quicker view of the world (more efficiency) but on new characteristics. ESG ( new characteristics of reporting) become very real as we have the technology to deliver it. It is not just BlackRock thinking this way either. The Business Roundtable, a US-based non-profit who's members are exclusively CEOs, interviews all of its members one on one once a year. Since 1978, the group has said that the reason for their business existing is to deliver shareholder value aka economist Milton Friedman thinking. In Aug 2019 this mantra was changed to a position that stated the purpose of the business is to create a sustainable ecosystem. As with Fink, this marks a stark change in business thinking and highlights the direction that organisations should be travelling in. In context with our current crisis and the global change in the growth economic model, it is possible to see a different and more balanced sustainable model will emerge.
Brad Smith, president and chief legal officer of Microsoft, published “Tools and Weapons” recently. His insights in the book highlight the importance of thinking about purpose - if you take a knife, you can eat food with it but you can also kill somebody with it. If you can take a pen, you can write and create the best pieces of music and art, but you can also stab somebody with it. In software terms, firms can either build a tool or a weapon - but how does a company ensure that what they are building is a tool? The book covers how to get those principles and governance into the organisation in writing. It is not just Fink and leading CEO’s, this is everyone who is in the Microsoft organisation and eco-system.
Ben Horowitz, co-founder of the venture capital firm Andreessen Horowitz, wrote “What You Do Is Who You Are.” This book addresses culture, and getting the culture right in the organisation. Culture, along with purpose, was something that went out of fashion when finance began dictating that everything must be faster, quicker, cheaper.
It is coming but we are not prepared
The point is that when you have the chief executive of BlackRock, the president of Microsoft and a hugely successful venture capitalist all stressing the importance of purpose and culture, corporate governance we can see the pressure for change building. Building on the old model but with new characteristics.
Are we prepared or are we even preparing?
What are the skills needed to access these new Data and Digital characteristics? An issue that companies face is that those in senior management and at board level have not had to and do not understand the new and wider data and digital skill sets. The captains of industry perfectly grasp finance data and analysis, but we need now to understand that finance data represents 3% of a company's data lake. Today that 3% of data informs over 90% of decisions. As 97% of data comes online we can make better decisions but also need to understand data. As time goes on our dependence on 3% of data for decisions may lead to naive decisions. This is all new and is about allocating blame, simply no team actually has the experience right now.
How do we better prepare? First by the allocation of resources at the board to make one board meeting this year 100% data only, by that we can bring up our skills and work towards better decisions.