The New Capitalism of
The Capitalisms
circulating
sufficient
surpluses
sufficiently
Modern Finance teaches that the work of the financier is to allocate scarce resources to their highest and best use most efficiently.
Before our times, there was much truth to that. But in our times, the problems of scarcity have largely been solved. Industry supplies us with surpluses, both physical and financial.
The great work for Finance in these our times is to make sure the right enterprises are supplying us with the right surpluses, and that we are circulating those surpluses sufficiently, throughout the populations and across the generations.
In the patterns, pattern languages and places and for the professionals in Modern Finance, “sufficiency” is a lackluster word. It does not resonate with the experience of having enough and being well satisfied. Instead, it implies settling for less than all that can be.
In the patterns, pattern languages and places, and for the professional in Future Finance, “sufficient” is well fit to function, and right for its time.
Where Modern Finance wants to maximize efficiency in pursuit of Growth, Future Finance wants to optimize sufficiency, in pursuit of Peace.
How are we going to collaboratively co-create sufficient surpluses?
How are we going to circulate those surpluses sufficiently?
These are the questions for Finance and Investment in the new computer-connected, globally evolving adaptive networks economy of the 21st Century
The possibilities will be identified for us by enterprising individuals who have a vision of what can be made to be
When enterprising individuals need money to realize their vision, Finance provides it.
It is through Finance that society decides which visions of which enterprising individuals can, should and will be realized, or at least pursued, through enterprise and exchange.
This is the new capitalism. It is:
An historically evolving / uniquely and essentially human / complex set / of decision-making / social structures / for evolving prosperous adaptations / to life’s constant changes / through which an interconnected network of people / living together in a shared economy and society / chooses for themselves / from among the possibilities that are presented to them / what their future history can, should and will be made to be / through inquiry, insight, and enterprise for collaboratively co-creating surpluses / of insights put into action / that are shared with others through exchange / for a price paid in money or other value.
It is currently compromised of six different forms of Finance / six different moral and legal systems / of value-recognizing patterns, pattern languages, places and professionals / for aggregating savings from individuals for a purpose / and deploying those aggregations as investment in enterprises that are being valued by popular choice for the values that that form of Finance is created by design to value. These are the six Capitalisms. This is the New Capitalism.
This is a BIG STORY because it touches every aspect of people living and working together that we call the economy and society.
Let’s break this down, beginning with:
/ an historically evolving /
Conventional wisdom teaches that capitalism is a modern invention, dating back only to 19th Century England, 18th Century France or maybe Holland in the 17th Century
Truth is, capitalism is as old as humanity itself. From the very earliest days when the very earliest people first started organizing work and sharing surpluses, people have needed social structures for deciding how to organize and how to share. These social structures are the capitalism capitalisms. And there is not just one kind of capitalism. Different social structures for organizing work and sharing surpluses evolved over the history of humanity’s pursuit of prosperity, beginning with the consensus decision-making of aboriginal subsistence economies and evolving through the deistic/theistic decision-making of early grain agriculture economies to the aristocratic decision-making of estate based craft economies, the free enterprise entrepreneurship of colonial trading economies, the corporate bureaucracies of industrial mass-market economies to the currently evolving participatory stewardship decision-making in the computer connected, globally evolving adaptive networks economy of our modern times, in the 21st Century.
/ uniquely and essentially human /
There is a popular view among certain scientists that because chimpanzees are our closest genetic relatives that we should study chimpanzee behavior in search of insights into our own human behavior. The famous etymologist E. O. Wilson disagrees.
/ complex set /
Capitalism is a system made up of different subsystems, a whole made up of parts, each with its own sub parts. When the parts and sub parts fit together correctly, according as they were designed, the system as a whole functions correctly. When the parts and sub parts do not fit together correctly, the system as a whole falls into dysfunction.
/ of decision-making /
Each of the subsystems of capitalism is its own unique configuration of logic gates through which decisions get made by society about the future that can, should and will be made to through investment in enterprise and exchange.
/ social structures /
Many voices want to say that Finance and investment decision making are purely moral functions. They want to believe that all we have to do is change the personal values, shift the individual mindset or consciousness, of investment decision makers and they will make different investment decisions. That is not the case. Capitalism is a system of decision making subsystems each of which is created by design to value the values it is designed to value. If we, as a society, need to begin valuing different values through investment, we need to evolve new investment decision making subsystems that are created by design to value the new values we need to be valuing.
We see this in the evolutionary history of the different capitalisms, from the earliest aboriginal forms of consensus decision making for IMPACT through theistic/humanistic grant-making for MISSION to government taxing and spending for POLICY, banking and lending against PROFITS, and Exchanges and Funds speculating on GROWTH to the currently evolving new forms of Pensions & Endowments investing in POPULAR CHOICE through agreements on prioritizing cash flows negotiated with enterprise on Main Street, directly (and not just indirectly and derivatively, through Wall Street).
/ for evolving prosperous adaptations /
We begin with these two truths about our uniquely human way of being in the world
One. We are born into a world that is not of our own making.
Two. We are endowed with the capacity for inquiry and insight for figuring out how the world about us works, and through enterprise and exchange for collaboratively co-creating surpluses of insight put into action for sharing with others, giving ourselves choices for how we can take the world about us as we find it, and change it to be more a way we choose to make it.
New choices evolve out of new learning. New learning evolves through inquiry into the limits of what it is we think we know. The whole history of humanity’s pursuit of prosperity is a story of expanding inquiry and insight into the world about us, into which we are born, and that we did not make for ourselves, as well as also those social structures we do make for ourselves through which we organize our work of taking the world about us as we find it, and changing it to be more a way we choose to make it.
/ to life’s constant changes /
Literature sometimes tells us stories of people burdened with ennui because they feel trapped in the monotony of a life in which nothing ever changes. Truth is, our lives as humans are always undergoing constant changes. Life changes because we change it. Notwithstanding the constraints of social structures that can sometimes make us feel like we are suffocating and cannot breathe as individuals, humanity is always busy making new inquiries and generating new insights into how the world about us works, and putting those new insights into action collaboratively co-creating new choices for how we can choose to take the world around us as we find it, and change it to work more the way we choose to make it.
These choices to change our world are never made individually. They are always made socially, through enterprise, finance and investment: through the social structures of the capitalisms.
/ through which an interconnected network of people /
Inquiry and insight can be, and often are, solitary activities, but enterprise and exchange are irreducible social activities. Networks of connections between ideas are essential to inquiry and insight. Networks of connections between people are essential to enterprise and exchange.
/ living together in a shared economy and society /
People interconnected through enterprise and exchange live together in a shared economy. They do not live apart. They are not self-reliant. They are reliant on each other, to varying degrees. This is their economy, this network of connections for enterprise and exchange. It is also their society; the social order within which they live, of which they are a part, and that is a part of them. The choices we all make all get made within the context of the society and economy of which we are a part, and that are a part of us.
/ choses for themselves /
There are individuals who assert the choices that they make are willfully and even defiantly their own, but choices can only be made from among the possibilities that are present before us, and most of those possibilities are made available to us through enterprise and exchange, which, as we have seen, are irreducible social. So, it is more true that the choices we make are made socially, in conversation with other people in our networks.
/ from among the possibilities that are presented to them /
Our truth as human beings begins with this. We are born into a world that is not of our own making. In addition, we are endowed with capabilities of inquiry and insight through which to figure out how the world about us works, and how we can change the way the world works, to make to work more a way we choose. And, we are also endowed with capabilities of enterprise and exchange for putting insights about how the world works into action, taking the world about us as we find it, and changing it to be more a way we choose to make it.
The world about us is always changing. This is in no small part because we are always changing it. So, there is always new for us to learn, and new for us to choose.
/ what their future history can, should and will be made to be /
A while back, PBS produced a documentary about the famous sociobiologist, Edward O. Wilson. He’s the guy who studies ants. In 1975, Dr. Wilson published a book that he called On Human Nature. In this book Dr. Wilson shared his observations about how similar ant societies are to human societies.
This made quite a stir. At the time most anthropologists were busy studying chimpanzees, as our closest genetic relative.
E. O. Wilson pointed out that chimpanzee societies are not really that similar to our societies. Chimpanzees don’t collaborate the way we people do. In this way, people are more like ants, according to Dr. Wilson.
Dr. Wilson got the collaboration right, but he missed this other part. He missed the part about creativity.
Ants are not really like people, because ants are not creative. Ants do not have a history. The history of ants is that there were some ants, then there were some different ants. But they all just did the same ant things.
Ants do not have culture. They do not have civilization.
People do.
People make history. That’s what we do. Our lives today are very different than the lives that our parents lived, and those lives are different from the lives of their parents, and so and on back into the darkest recesses of Time, when Man first picked up a stick, and lit a fire.
Ever since then, we have been making things, and the thing we make the most is change. We do that collaboratively, as Dr. Wilson pointed out. We also do it creatively.
Human history is the history of our creative collaborations in taking the world about us as we find it, and changing it to be more a way we like it to be. This history is creative. It is collaborative. It is also adaptive. And evolutionary. Dr. Wilson missed that also. Ants don’t evolve. Generation after generation, ants are just ants.
In some ways people are just people from one generation to the next. In other ways, each generation is also unique, the creation of its own creations.
And these creations are always getting better, generation after generation.
That’s the evolutionary part. Every time one generation makes a change in one thing, that creates both the need and the opportunity for other generations to make other changes, in other things.
By choosing the changes that are right for their times, from generation to generation, humanity chooses what our future history can, should and will be.
/ through inquiry, insight, and enterprise for collaboratively co-creating surpluses /
There’s a lot of creative collaboration that goes into this process of making evolutionary changes.
It starts with knowledge and new learning. Let’s call it Science & Technology.
Then, there is Art & Design. Imagining what might be, before it even is, and figuring out how to make it fit its intended purpose.
After design, there is engineering & construction: actually making the things we imagine can be, according to the way we have designed them.
Next there is enterprise, and exchange. Selling things, and buying them. Commercial activity in all its many forms
Lastly, there is finance. When commerce needs money, finance provides it.
Finance with a capital F is how we as a society decide which possibilities for our future can, should and actually will be made to happen.
/ of insights put into action /
Enterprise is how we put insights into how the world about us works into action taking the world about us and changing it to be more a way we choose to make it. Insights are gained through inquiry into an experience that excites our curiosity.
Enterprise for putting insights into action requires a concentration of effort. It produces a surplus of artifacts of human ingenuity, in the anthropological sense as “the work of human hands”. These surpluses can be shared with others, in exchange for a share in the surplus of artifacts of their own enterprising efforts. In this way many people working together, each concentrating their own efforts on their own enterprising insight, can live better than any one ofuscould going it alone.
/ that are shared with others through exchange /
Charity does not make communities prosper. People will not do the work of creating surpluses and sharing with others if others do not share surpluses they created in exchange.
/ for a price paid in money or other value /
Money confuses many people more than it should. A good definition of money comes from Michael Mainelli of Long Finance: “money is a technology that communities use to trade debts”. Debts are created when one person or group of persons (an enterprise) shares surpluses with another. That creates an obligation on the part of the receiving party to give equal value in return. Sometimes equal value can be returned in kind. More often the obligation – or debt – gets evidenced by a token that we call money. An obligation, or debt, evidenced by money as a token of value owed is freely negotiable, which means the token can be given to a third party, who then becomes entitled to the value represented by that token. This is the purchasing power of money. That purchasing power is earned when work gets done that generates a debt that is owed by another. It gets spent when that token is given to another in payment for a debt.
Money as a token of indebtedness has no value in itself, unless some form of commodity is used as money. Then, the money had value as both a measure of indebtedness and as a commodity. That can get confusing. For example, when gold coins are used as money, those coins have value as money and they also have value as a commodity. Rarely are those two values the same, because the value of a gold coin as money is fixed by The applicable laws of legal tender; but the value of that coin as a commodity is fixed by the laws of supply and demand in the applicable commodity markets.
The money value of a token is relatively stable because the laws of legal tender only work correctly if the value of legal tender is held constant.
The value of money that is also a commodity will fluctuate with market forces.
People who insist on believing that the value of money does or should come from its value as a commodity or it’s ability to be converted into a commodity will always be confused and confounded by money.
People who accept the simple truth that the value of money is determined by the laws of legal tender will not.
/ currently comprised of six different forms of Finance /
Modern Finance, Economics and Politics all talk as if Capitalism is just one thing, although no one can really agree on how, precisely, to define that one thing.
More clarity is achieved by seeing capitalism as the social structures of Finance through which society decides what our future can, should and will be made to be through inquiry, insight, enterprise and exchange, each created by design to value the values it is designed to value when it makes the choices it makes.
Currently there are six different forms of Finance that make up Modern Capitalism. Each is created by design to value it values in enterprise and exchange. They include:
Family & Friends investing for IMPACT;
Church & Philanthropy investing for MISSION;
Taxing & Spending investing for POLICY;
Banking & Lending investing in PROFITS;
Exchanges & Funds speculating on GROWTH; and
Pensions & Endowments investing in Peace.
/ six different moral and legal systems /
Good laws give legal meaning and consequence to moral principles that express the common sense and common wisdom of the people. Giving these accepted moral rules the force of law empowers civil authorities to deal with individuals who refuse to conform to common sense and common wisdom, and do harm to the peace and prosperity of the community by their refusal.
Each of the six forms of Finance that make up modern Capitalism has its own unique set of moral principles for seeing value in enterprise, and its own laws of investment decision-making, some of which become actual civil laws (through the regulation of Finance) that protect the integrity of that form.
/ of value-recognizing patterns, pattern languages, places and professionals /
Each form of Finance is built to recognize its own unique pattern for prosperity. Each has its own language (sometimes encountered as jargon) for talking about those patterns. Each has its own unique physical place where it does its work of recognizing patterns for prosperity in enterprise, and its own specially skilled professionals who are expert in those patterns and that pattern language, and who do their work in those places.
Family & Friends recognize value in IMPACT, primarily positive impact on perpetuating and increasing family wealth, but also other values touching on social standing and status. This form of Finance is the least formally structured, frequently co-opting the places and professionals expert in other forms, and adapting them to their purposes.
Church & Philanthropy recognize value in MISSION, making grants to fund enterprises .
Taxing & Spending by governments recognizes value in POLICY, for advancing the interests of the governed, when government functions correctly, or for advancing the interests of the governors, when government falls into dysfunction. Governments pursue their policies in general courts, for making laws, and judicial courts, for enforcing laws against those who do not voluntarily choose to conform, as well as administrative offices where policies are executed, and records are kept.
Banking & Lending recognizes value in Profits that can be used to repay loans, with interest. Much of banking is really accounting, and there are specific places where banks keep their accounts, and from which they make their loans, staffed by professionals who are expert in accounting and lending.
Exchanges & Funds recognize value in Growth in the future selling price of shares in corporations or other financial instruments traded as commodities in public or alternative private trading markets. There was a time that Exchanges were physical places where market makers kept their books of offers and bids, and executed trades, but increasingly computers are being used to effect trades, and physical exchanges are less critical to the process.
Pensions & Endowments should be recognizing value in the Peace of a fairly shared prosperity in an economy that generates sufficient surpluses, and circulates them sufficiently, prioritizing cash flows that provide at least minimum fiduciary adequate cash flows to the pensions and endowments while valuing the values society needs to be valuing in inquiry, insight, enterprise and exchange today.
There is a problem here, however, because right now we have our pensions & endowments trapped inside the Exchanges & Funds form of Finance, investing in pursuit of Growth, and not Peace.
This is a problem that needs to be resolved, because it is causing pensions to fail, and all of Modern Capitalism to dysfunction, de-valuing values in enterprise, replacing popular democracy with a new corporate aristocracy, oppressing the people and despoiling the planet.
/ for aggregating savings from individuals for a purpose /
Each form of Finance functions through the same two primary movements. The first movement is to aggregate surpluses saved by individuals for a purpose.
Family & Friends aggregates surpluses saved for caring for our own.
Church & Philanthropy aggregates surpluses saved for caring for others.
Taxing & Spending aggregates (under the compulsion of law, as taxes) surpluses for the public health, public safety and public welfare.
Banking & Lending aggregates surpluses saved for money money management.
Exchanges & Funds aggregate surpluses saved for opportunistically increasing wealth.
Pensions & Endowments aggregate surpluses saved to programmatically provide certainty against life’s uncertainties.
/ and deploying those aggregations as investment in enterprises that are being valued by popular choice for the values that that form of Finance is created by design to value
The second movement of Finance is to deploy aggregated savings as investment in enterprise. Each form of Finance uses its own unique mechanisms for deploying aggregated savings as investment in enterprise and its own unique patterns, pattern languages, places and professionals for selecting enterprises to invest in.
Family & Friends deploy their aggregations through Patronage, for IMPACT.
Church & Philanthropy deploy their aggregation through Grants for MISSION.
Taxing & Spending deploys their aggregations through Contracts for POLICY.
Banking & Lending deploys their aggregations through loans against PROFITS.
Exchanges & Funds deploy their aggregations through speculation on GROWTH.
Pensions & Endowments deploy their aggregations through agreements on prioritizing cash flows negotiated with individuals leading creative enterprises, directly (except that, as previously noted, Pensions & Endowments are currently trapped within a Wall Street monopoly of Corporate Finance, investing almost exclusively in individuals leading enterprises for executing pre-agreed strategies for speculating in designated public or alternative private NPV Growth trading markets, which is degrading Corporate Finance into Corporate Gigantism).