Currency, brands and quasi-tech feudalism

Way back when Saddam Hussein was captured in 2003, he had a backpack filled with US dollars – the money of his arch-enemy, and the major trading currency of the world.

Every year a number of lists are created by business journals with the world’s richest people, the most valuable companies, and the world’s most valuable brands. They provide an unsurprising sense of symmetry. The most valuable brands reside in the most valuable companies, which are owned by the world’s richest people:

• Coco-cola, Berkshire Hathaway and Buffett
• Microsoft and Gates
• Zara, Inditex and Ortega
• Amazon and Bezos
• Alphabet, Google and Page / Brin
• Instagram, Facebook and Zuckerberg
• Tesla and Musk

But rarely do we regard non-consumer goods as ‘brands’. My view is a little different, the world’s most valuable brand (up until very recently) was the actual US dollar.

It was the one thing people priced all international goods in, the one thing its own enemies trusted. It was all that represented western democracy, stability and modernity, up until now that is.

The US dollar was a proxy for the trust people put in the United States itself, and that corporation, the USA, is flailing. If brands are all about trust, then brand USA is one that is facing decline.

It’s not without a sense of irony that the new breed of dominant brands all come from the technology realm. Software is eating the world and leaving yesterday’s hero brands such as Coke, Ford, McDonalds et al in their wake.

But the big brands of the industrial era, actually added strength to brand USA – they were in some ways the brand children of brand USA – even as they crossed the globe and injected themselves into every feasible market, they brought power back to the world’s largest economy, the USA.

But when it comes to technology brands, it seems they are having the opposite effect – they don’t seem to be creating wealth and status for the homeland in which they were born, but dematerialising it. We’ve now entered a new era of technology feudalism.

Feudalism was historically a system of land ownership and duties in the middle ages. While the king owned all the land, the king would give some of their land to lords and nobles who would help him fight his battles. These were called vassals and the gifts of land were called fiefs. The kings knew they needed the resources of the lords to fight their battles, to stay in power.

Today, we have governments and presidents who also need the resources of our technology lords. They need their social media resources, access to their digital infrastructure in order to connect with the populace and fight their verbal political battles. And the technology lords know this. They’ve actually become more powerful than the kings they are supposed to serve.

While the recent actions of Trump have incited crime and violence in the Capitol, the timing in removing him from their ‘social media territories’ was let’s say, impeccable.

Trump being banned from Twitter, Facebook and a number of other technology platforms had far less to do with him finally violating the terms of use, (he even threatened nuclear war in tweets!) and far more to do with his days being numbered – the king is dead.

Big tech have become king-makers and breakers.

If you had any doubt as to the power of big tech, it’s time to remove that doubt – they don’t just create the shape of the wider stock market, they also shape the political discourse which then shapes our market reality.

The question that does remain is whether brand USA can recover from a calamitous four years.

Back to brands and technology

Ask any crypto disciple where to put your money and Bitcoin will be atop of their list. Many now purport that it is on a path to replacing the US dollar as a liquid financial safe haven.

As I write this a single Bitcoin is worth a little over US$38,000. While we measure its worth in US dollars, I wonder how much of its price represents the decline of brand USA, as opposed to the value of the coins themselves. It’s easy to forget that currency valuation is a two-way street where it can reflect a comparative downside more than its own upside.

In any case, Bitcoin now represents more of a speculative investment than it does a currency.

I wouldn’t even call Bitcoin digital gold. The power of gold has never been its capital upside, but its ability to maintain and store value. In fact, one ounce of gold has had the purchasing power of a tailored suit, a pair of leather shoes, and a belt for over 1000 years.

At a current trading price of $1850 USD, it’s still around that mark. Bitcoin on the other hand is volatile with incredible capital upside via heavy market speculation.

Currencies are of course are a form of technology. They do tend to match preeminent technologies of society. So, it does make sense that our global economy will eventually have cryptocurrencies of some form that dominate commerce.

But, for anything to be considered a currency it needs to retain six key metrics: scarcity, divisibility, portability, acceptance, trust and stability. Bitcoin has all of them, except stability. It is not stable enough for general use and I can’t see this changing and it ever becoming a currency used by a general population.

While a globally embraced cryptocurrency will require all six elements of a successful currency, I’m going to propose it will also need a seventh element:

Programmability

A truly significant cryptocurrency will need to be what is known as ‘Touring Complete’ – that is, also have an ability to use and manipulate data and be computable – read here, be used to create smart contracts and self-execute against them.

The Ethereum cryptocurrency has this ability. It's also relatively stable compared to Bitcoin. But, any government that doesn’t own or control its own currency, will of course lack the sovereignty we’ve come to rely on in the industrial era.

It’s time governments around the world got serious about moving towards cryptocurrencies, which may also present a chance for a financial reset as the world drowns in deficits.

If anything – the instability we are seeing in markets, governments and the money we trade says that we have an outdated government ‘operating system’.

We need an upgrade, one which is designed around a digital economy and the tools we use to trade, communicate, and live. If we don’t do this, then we can count on an elongated period of uncertainty.