Long Finance · 2010-02-02 21:45
Yesterday I attended the Long Finance conference, taking some of the principles of the Long Now foundation and trying to apply it to capitalism and market economics. There were two panels, the first on the Long Now & long-term thinking with Stewart Brand, Brian Eno and Alexander Rose, and the second on enduring value and the eternal coin, with Edward Bonham Carter, Professor Sir Roderick Floud, and Bernard Lietaer. In between were a few other short presentations, and, errr, surprisingly successful attempts to get bankers singing.
Very very rough notes, with little attribution – the density of different thoughts, questions and ideas was quite something, especially when I’m not completely au fait with all the economic theory. E&OE.
Long finance – trying to answer the question “when will we know our finance system is working?”
There’s been a systemic failure in the current system.
How could finance look forward even one lifetime?
The recent crunch involved just 15 banks, 4 brokers, 3 credit rating agencies, and controlled a third of all money (200 trillion) – and the solution has been more consolidation – not a good market.
When can you recommend a financial retirement structure to a 20 year old?
Move from responsive to anticipatory governance.
Eternal coin – could a coin exist that doesn’t lose value?
Panel 1: Long Now
Brian Eno: the scale of things makes a difference to how it operates – Aristotle
Societies that thought in terms of weeks and months work differently to those who think in years and decades.
New York in the 70s – everyone was there just for a short period. Used the city as a springboard to somewhere else. Caused the city to stop functioning. A short now – exciting city but not functioning or smooth running.
Looking for long now societies.
Alex Rose: Making a clock that runs for 10,000 years.
Danny Hillis – wanted to make a monument scale clock.
Physical objects have an ability to change conversations.
5 design principles for the clock – but they are pretty good to measure anything against them.
solar time vs. absolute time – a problem for a 10,000 year clock
Purchased the site for the clock: Mount Washington in Nevada. Dark sky site, 5 hours drive to anywhere. Also home to some of the oldest living organisms.
Currently building machines to build the base.
Stair cutting machine – 9ft blade 32ft reach robotic chainsaw.
What foot pitch should the staircase have for 10,000 years time?
Rosetta Project – collect all the languages and transcribe them in stone.
1500 languages, 13000 pages microetched onto a tablet.
Why bother?
Maeslant Barrier in Holland. Designed for a 1 in 10,000 year event. Costs €600m.
Hurricane Katrina – a once in a century event – cost €10 billion.
100x leverage for thinking in these longer timescales.
Stewart Brand: Heinlein – Time For The Stars, 1956.
A Long Range Foundation – only spends money on something so big or so long a return that no government or organisation would touch – such as space travel, seems a good pit to pour money into. Keeps on making so much money, has to keep spending and investing more.
Puzzled by the economics of infrastructure. No good economic theory. Always – financial excuses are made, initial investors lose money, gets bought and re-bought. Normally the 3rd owner makes money. BUT – we keep on making them.
Bridges – make London possible. But the river is infrastructure too, and can be maintained in a similar way to built infrastructure.
Now got to scale up infrastructure management to the whole damn planet.
We need people to be comfortable thinking in long terms, and long finance to do this with.
Q: why 10,000 years? Not 50-100 years?
Peter Schwartz – Long View book. Towns started 10,000 years ago as the ice retreated. Always good to imagine being in the middle of things.
Can we think about the last 10,000 years in the same way as thinking about the last week?
Q: Does this relate to the average person in the street?
BE: Physicality, not just a thought experiment. Something to visit.
Building it lets us think of all the design problems. Even 1,000 years is further than anyone thinks.
Q: Our culture is increasingly faster and disposable, why look at the opposite?
Danny Hillis – built the fastest computer. Aware that horizons are getting closer and closer.
New College, Oxford – in 1860s the beams started to decay and started looking around for suitable wood to replace them. The woodsman at the College had planted trees 500 years ago when originally constructed for just this purpose.
As a person, we’ve never been more powerful, and less responsible.
Q: are people planning in decades less democratic?
AR: If a monarch, knowing you’ll have to run the country, you think longer term. There’s remarkable consistency in monarchy.
Democracy and finance work well in the growth phase.
Germany – was thinking (may have?) altered constitution to protect future rights of future generations.
Q: Generational equity?
SB: Problem of discounting the future. How do you finance a forest? 70 years investment for not much return.
Externalities etc. – not solved financing the future, long-term democracy.
BE: look at religions – remarkably long survival. Other rewards than monetary.
Q: Can this be achieved through the free market?
BE: No such thing as a free market – there’s always restrictions. A free market would be utterly chaotic. It’s a spectrum from total control to total freedom. Where do you want to be?
SB: Land as sustained value. Cities have lasted even longer than religions. Cities have longevity and adaptability.
Want to see an economic theory of infrastructure, an economic theory of the informal economy, and an economic theory of real estate that reflects history.
Q: Copenhagen?
Countries don’t play ball.
192 countries with veto power. Set up for failure.
Have to make things “more expensive” – especially coal. Need to look at game theory.
Q: Some countries don’t even see the benefits of trade. Stronger international regulation?
SB: Geoengineering – the engineering is easy. Hardest is political problem. $300b to regulate the climate – nothing. And some countries may just do that – China? Need international regulations to work out the norms. Global governance.
BE: People are terrified of the idea of global governance. BUT we’ve been living with it for ages – e.g. the Universal Postal Union, set up in 1874. It’s a very sophisticated mechanism. Reciprocal agreements of 165 countries. International agreement for genetic labelling of mice – 59 countries.
Q: If an eternal clock had existed before industrialization what would have changed?
AR: There’s a thought that if we dig, we’ll find the clock already there. Neal Stephenson’s book Anathem.
SB: Want to make long-term thinking automatic and common.
BE: Images and metaphors last for very long periods.
****
Bernard Lietaer – the Terra mechanism
Using value discounting and positive interest automatically discounts the future.
Demurrage = time-related charge (the opposite of interest)
Need diversity – another currency for value in long-term.
Used in Dynastic Egypt – “Age of Cathedrals”
Terra – a standardised basket of a dozen key internationally traded commodities & services. e.g. oil, copper, wheat, gold, carbon emissions.
4x less volatility, inflation resistant, fully backed by inventory receipts.
Storage costs = 3.5% demurrage paid by bearer.
No central bank, just an accountant : Terra Alliance.
Would be countercyclical.
Terra makes countertrade/barter trade bankable.
Sustainable capitalism is an oxymoron. Needs something like this, need to realign shareholder interests with societies.
Regulation never works (lobbyocracy), and never been an example of preventative care of the economy.
****
Panel 2: enduring value
Edward Bonham Carter: reminds me of the marxist theory I studied at university. If changing systems, you have to reduce perceived short-term pain. Not capable of organising ourselves because of the short term. Need a system of incentives for change. As human beings, you react to the incentives you’re given.
Prof Flagg: Glad that history is being taken seriously. We’re all very bad at predicting the future. Gresham College – long term thinking to educate the city of London.
Q: are there benefits of volatility?
GDP down 6% in current slump – but still a lot more than when we were born. 300% more than 68 years ago. Now at 2005/6 levels. Is this really the end of the world?
UK Economy has had 1.8% growth for the last 150 years (with peaks and troughs).
World without crisis – less dynamic, creative.
e.g. wars – when do the disturbing aspects outweigh the innovation and creation? Positive and negative aspects to most things.
Human nature – not a patriarchal society. Multiple currency environments. Programming another incentive scheme.
Q: isn’t one of the problems the definition of GDP?
PF: Has a perverse effect on happiness. Long term stability – reflected in other factors: height, longevity.
(argument about whether the tallest women were now or in the 12th century)
EBC: Ecological/sustainable investing – trying to find the right metrics.
Asset inflation – after a crunch. Always need more money the later you fix something.
Q: Incentives – systemic mis-allocation of money. Is the financial system working for society?
Has to be servant of its clients.
Worst system, but it’s the best we’ve come up with.
More intelligent use of privacy system. Use short-term thinking.
Dubious relation between monetary system and rate of growth.
Capitalism doesn’t think. It’s in the heads of many individuals.
Egypt: was long-term thinking for the benefit of a very small few.
12th Century: King’s currency, invalid when king dies, with 25% tax.
Q: the dollar?
Dominant currencies will change. New emerging markets. Disallocation and reallocation of resources.
Need to think in longer term. That’s what governments are for – recovery plans are long-term thinking.
But Gvts not good at long-term thinking that’s preventative. Should we meddle with the future?
Gvts can mitigate effects of economic exuberance.
Short-term democratic system. Most people vote on deferral of pain. Market failure is a discount mechanism in the long term.
Q: What eternal coins do people want?
Eternal coin of knowledge (universities are another structure that has lasted long-term)
Eternal coin of atoms. It’s where we end and where we came from.