The third degree

About a month ago, I got into a more heated discussion than I would have liked with someone.  We were in a group, having spent some time in a meeting earlier and out for that sort of dinner you have to bond with people at work, and this person – a woman in her mid thirties, upwardly mobile, successful, entrepreneurial – brought up her notion that banking would be eliminated by the rise of “blockchain.”  Her argument was pretty much what I’ve come to expect for intelligent people who use the word “blockchain” in a generic kind of way: a basic understanding – or more precisely, an intuition – that there is something fundamentally new about cryptocurrencies such as bitcoin or Ethereum or the like, and a similarly instinctual understanding that when something so fundamentally new comes along in our new world of reductio ad absurdum et acceleratum, chances are, our world will be disrupted.  Being roughly millennial, and having no real direct experience with banking beyond (as she admitted) her credit card, her checking account, and making payments with her phone, she took these two quite accurate intuitions and extrapolated out into the destruction of an industry which strikes her as antiquated, consumer-unfriendly, and monopolistic.

She was wrong about her observations, though, especially given that she is American and therefore faces American banks.  American banks are only antiquated, consumer-unfriendly, and monopolistic if you’re extraordinarily lazy or if you require certain specialized international banking services that trap you with banks with global scale who act much like their oligopolistic cousins in the rest of the world.  Otherwise, you have your pick of incredibly low-cost, incredibly competitive, and groundbreaking banks which ruthlessly compete for your business and are in living terror of the other 4000 banks and hundreds of quasi-banks trying to steal it away from them.  She was also wrong about what she called “blockchain,” which is simply a distributed, secure, and private ledger system which cryptocurrencies use to ensure the reliability and value of their currency.  The thing is, banking itself is also a distributed, secure, and private ledger system; each bank is a secure and private ledger keeping track of your (electronic) money, and enabling the periodic conversion of that private money into public banknotes or tax payments.  Arguing that banking would be replaced by blockchain, and thus will be destroyed, is like arguing that US “generally-accepted accounting principles” will be replaced by International Financial Reporting Standards.  Yes, Virginia, banks may employ blockchain to manage their internal ledgers and to communicate amongst themselves about their various ledger systems; but banks will still exist.

In any event, things got heated because of two things.  First, I have a strong sense that I was viewed as “mansplaining” – which I probably was.  In this #MeToo era, the rules of rhetoric have changed, particularly when you’re viewed as belonging to a privileged class: I’m white, male, middle-aged, and in banking, while she was white (no points there), female (subject to historical power factors which are still to be adequately addressed), young (in the eyes of youth, always a disadvantage – I speak from memory here), and in the non-profit sector (even if you’re making money in the non-profit sector, you still get to revel in the fact that your excrement is noticeably less pungent).  In that discussion, therefore, even if I had valid objections, I had to navigate a much different debating minefield, and I doubt that I did so particularly well.  I’m learning, but I’m not nearly fluent enough in the new art of persuasion to pretend that I can compete.

The other problem, though, only occurred to me after about ten minutes of verbal serve and volley.  It’s not that I thought she was necessarily pointing in the wrong direction with her logic: indeed, I agree with her fundamental intuition that the massive expansion of information technology will, eventually, transform how we think of the concept of “value” which has historically become bound to our monetary units of exchange and the system that enables it to be exchanged.  I don’t think blockchain will be the answer – for one, the computing power required to continually verify individual transactions seems to expand exponentially given the current instantiation of a distributed ledger system, which means it’s not sustainable as a technology – but I do think we’re on the verge in the next generation or so of a fundamental decoupling of “value” from a monolithic concept of “money.”  And that will change banking, or eliminate the need for it entirely, and in so doing it will bankrupt many individuals who have relied on banking as a source of power, as a place for storage of value, and as a means of usurping others who don’t understand it as a system.  I’m both excited and a little nervous about that day coming, but I was in total agreement with my younger, female, non-profit friend about it being not too far over the horizon.

What got me annoyed, and ended up with me moving away from simple point-counterpoint discussion and into verbal smackdown, was my perception that my discussion partner simply didn’t care about moving to that next level.  She was content – in my perception, smugly so – to sit back on her two primary insights, that blockchain is new and disruptive, and that new and disruptive things tend to destroy the industries that they disrupt.  Blockchain is disruptive, it’s about money, banks are all about money, ergo banks will die, and now let’s talk about how great it is to be in a non-profit.  Not that I don’t want to talk about how great it is to be in a non-profit – I’m on two boards and have spent a lot of my banking career working for institutions which are not profit oriented – but hold on sister: just because I shouldn’t mansplain doesn’t mean you get to assert patently incorrect statements and move on.  Granted, you’re young and vivacious and are a master of the new rhetorical norms, but even Alcibiades had to answer to the old guy at the post-symposium dinner party.

I’ve been this way for a long time.  I can remember a study group at Georgetown when I was a way-too-young, way-too-angry sixteen year old freshman from Maine, where I verbally eviscerated some rich kid from New Jersey about the plot of Jamaica Kincaid’s A Small Place, her searing memoir of growing up in the West Indies, doubly a slave, first born of the descendants of slaves and now enslaved to a tourist economy that only offered jobs as waiters and maids and cooks to the rich visitors from their former colonial master countries.  The kid talked about how the standard of living in Aruba and Bermuda and Jamaica was only made better by integration into the global economy – not a false point, obviously – and, my Maine roots, my memories of New Jersey fathers looking at me at the mall wearing my fast food garb during the summers like I was a lesser being as they casually ordered for their brood and then yelled at me for taking too long, asking my friends to talk slower because they couldn’t understand their Maine downeast accents, all of it came roaring into play as I told the kid that he lacked both perspective and intelligence, and then gave a three-minute lecture on what it was like to come from the periphery, to have to watch the money come in every summer and leave every fall, to read the New York Times on your break and realize no one who read that paper cared about where you were from except to wonder how the lobster would taste there next July.

That came back to me, talking to the blockchain woman.

It comes back to me despite the fact that I still feel like I’m wrong about most things, despite the fact that listening to the blockchain woman made me think of new things and learn new things.  Even New Jersey boy at Georgetown made good points: without tourism, Maine would basically be northern Manitoba, and if you ask the people who drag themselves into Winnipeg – stabbiest city in North America – to get away from the black flies, mosquitoes, flooding, winter, and lack of everything but especially opportunity to be a valued human being, you don’t want to be northern Manitoba.  Tourism – and some government-subsidized shipbuilding and a few legacy businesses and the odd entrepreneur – is what allows Mainers to raise their children and hope they can be more.  It’s what allowed me to realize a dream and work away from Maine, in the world, in understanding and developing a view and perspective on the world, for the last twenty-five years.

New Jersey rich kid, in other words, had a good point to make, and I took it in, much though it annoys me to this day to admit its provenance.  And the blockchain woman was making a fundamentally good point: we live in a disruptive age.  I need to take that intuition, well stated by her, and apply it to all the things I think about, that Viktoria and Mark and I write about.  And, dammit, I’m doing that, and it’s been fruitful, and I’m playing with new ideas because of it.  Lots of those ideas are, candidly, terrifying, but it would be intellectually dishonest not to play with them and explore them.

But I’m still left with this frustration that many people – not all, but the overweening majority – take their two or three TEDtalk intuitions and then start making their assertions.  They don’t then spend the time to listen, to explore, or to challenge those intuitions from as many angles as they can.  They start laying down conclusions instead of exploring potentials.  They are clever, they often position two or three ideas that I’d never think of, let alone juxtaposition against one another, and they make magical new potentials emerge.  But annoyingly, they then start to conclude.

I’ve talked a lot about recursion in these pages, and I think what bothers me most in these discussions is that these people, boldly concluding and asserting their way through powerpoints and after-work dinners, are wasting their own precious capacity for recursive thinking.  Consciousness, sentience, consists of layers upon layers of potential.  There is creativity – the ability to imagine and posit things which have never existed in reality but can exist within our capacity for abstraction.  There is analysis – the ability to take both concrete and abstract things and see how they interact, see how they cause or affect one another.  But then there is the third degree: recursion, the ability to take both creativity and analysis and apply it to the fruits of each, to continually dive and swim and force interactions time and time again.  It’s the counterpoint to concluding, to asserting: it’s the questioning and inversion of the conclusions, forcing them to stand on their heads and repeat what they said backward to see if it still makes sense, to see if it still works.

Looking back on my reading of late, which has been a bit immersed in works on consciousness and the structure of mind and its implications for the design of artificial intelligence systems, I’m actually shocked that the word “recursion” has very rarely (or at least, not that I’ve seen) come up.  I learned recursion when I was a pup computer programmer, working COBOL on mainframes in one of the few truly non-tourist supported companies in Portland (naturally it was bought by a competitor from Chattanooga not long after I left home).  It was a basic action for exploring data, and it’s become a kind of basic action for exploring everything for me.  If you come up with a concept, explore its implications, including the implications of the concept on the concept itself.  As a human being, if you think something about someone else, apply the same thought to yourself – what do you find?  What do you see?  If you judge someone, judge yourself through the same lens; if someone judges you, apply that lens to the other.  And repeat.  Look in the mirror, then return the gaze.  And repeat.

What annoyed me (to the point of becoming petulant) about the blockchain argument was the fact that the other person had a good idea but didn’t bother to apply her insight to the concept itself.  Yes, blockchain is disruptive – but so was fractional banking, and in fact, fractional banking was the original distributed privately secured ledger system.  Blockchain is banking in a semi-automated way – which, really, is banking, which itself is only semi-automated.  Blockchain is a new technology in the same way that computational data stacks replaced double entry hand written ledgers as a core tracking technology.  But looked at through that recursive lens, blockchain isn’t a new form of banking, it’s just a new technology for use in banking.  Banking, the exchange of value in fixed units defined socially and made abstract through the use of ledger systems to track possession by individuals or their proxies, hasn’t changed and won’t simply because it’s got a supposedly better software package: moving from Lotus 1-2-3 to Excel didn’t change the world, even though macros in Visual Basic made it move faster than backslash keystroke commands.

The discussion I wanted to have with the blockchain woman was about what happens when we no longer require fixed units.  What if we had enough data – and enough instantaneous computational capability – to not require the exchange of unit quantities of dollars for goods and services, but instead could exchange goods and services – or potential future goods and potential future services – for themselves directly, without intermediation through units of currency?  We’ve constructed layers upon layers of systemic intermediation to allow us to exchange across time (bonds, stocks, deposits, interest paid or capital gains made on such instruments) and across location (currencies, differentiated value for similar goods in different places, markets, Amazon.com) and across societal perception (a man’s wage is greater than a woman’s for the same talent or skill or output, some goods are priced openly while others are priced in the dark).  Each of those layers allows for greater abstraction in the higher level of exchange, but it also allows for some information loss, and also allows for what really bothered the blockchain woman: the extraction of economic rent for the privelege of operating each exchange layer.  What if we could exchange with one another all the things that we want to represent materially in realtime with no intermediation – and thus no enrichment of bankers, only the utility cost of maintaining the master system?

Blockchain wouldn’t work for that; instead there would need to be a kind of universal and yet individually tunable and constantly updated price list, a kind of total menu of things and concepts and abstractions that could be exchanged at once.  Blockchain is just a lame, incredibly energy-exhaustive title insurance scheme; what I’m talking about is a way to exchange a Picasso for so many hours of my future writing output, or my new house in South Portland for a collection of old automobiles and model trains and a top-up of yardwork.  A single, universally valid exchange for all goods and services.  And if we had that, wouldn’t we be able to focus that much more time on the things that aren’t value-able, that cannot be conceived of in terms of value – like the value I put on the love I feel for my son, that I felt when I woke up in a motel in Blue River, British Columbia, and realized that at some point in the night my dog had curled up on the bed around me, the value I seek in writing this, in meeting Viktoria and Mark and realizing there is another soul interested in what I have to say and who will require notice of their own words?

That would be interesting.  And thinking of the implications – recursively, referencing the implications of the system over and over again – is terrifying.  There would be some of us who would simply try to get more “stuff” than anyone else – although arbitrage would close out most of that quickly, but not before some people had been taken advantage of and effectively enslaved themselves by selling more of their future potential output than they could ever recoup in terms of material well-being.  Some other of us would underutilize our potential and sit constantly realizing more value than they could spend – that wouldn’t be arbitraged away, it would just be a permanent waste.  The process of constantly updating and recognizing value – the menu-build algorithm – would need to be  made aware of all transactions at once – hence, I think, why some people look at blockchain as the building block of such a system, although again I see the energy demands as precluding that – and would also need to understand concepts of logistical transfer of goods, services, and people in a similarly constantly updated way, such that you can begin to see how all-consuming such a marketplace would look like.  Much, though, in the way that the market consumes most of what we experience in life today.

I’m sure anyone reading this can imagine further implications.  And you’ll start to see that the market which eliminates money is so all-consuming that it would by definition need to eliminate privacy, demand openness, in a way that most of us would be uncomfortable with – hence my own discomfort with it, even as I can imagine such a system emerging over time from our predilection for automation.  Indeed, what I see in such a world is the very opposite of trust, of acceptance, of love – it’s the elimination of trust in favor of complete openness so as to allow that master menu, that master algorithm of instantaneously transferable value, to be updated appropriately in realtime.

That, in fact, is how the argument about blockchain ended.  The woman talked for a bit about how banks were untrustworthy – throwing in an all-too-obvious Wells Fargo reference for good measure – and how blockchain would allow us all to trust one another by knowing that every transaction was verified instantaneously.  I told her that I thought quite the opposite: blockchain represented a material step towards the elimination of trust.  Trust requires the idea that you might be lied to.  You can’t lie when everything about you is already subject to the awareness of the blockchain.  She paused and said that was interesting.

Then I said it was also too energy inefficient, with blockchain mining already consuming some significant fraction of worldwide energy consumption and thus contributing to global warming.  Being a millennial, she agreed that global warming meant blockchain wasn’t the answer.  I sighed and asked for another beer.