A few months ago, I started getting the feeling that we are in the process of moving into a post-boomer era, and highlighted some of my thoughts on the subject. This was a surprising change of pace to my readers, who are generally more used to my studying things with technology as my focus lense but it was the beginning of an evolution in my thinking.

As the first rumbles of the economic crisis started appearing a couple of years ago (HSBC, my employer at the time, was one of the first companies to aggressively write off bad loans), I started wondering whether the crisis in the mortgage space was only the beginning and thinking that the credit card crisis was probably going to dwarf the mortgage crisis if it ever happened.

At the time, however, I had been so focused on looking at the world with a technology focus that I was failing to find the words to really describe what I was witnessing. My gut was telling me that this was a big turn but I neither had the audience nor the vocabulary to express my thoughts in a clear fashion.

Furthermore, not being a citizen yet, I felt that it might be presumptuous of me to point to the ills of a country that was hosting me as a guest, a country that had offered me so much opportunity. So I kept quiet.

But I now believe that it’s time to attempt to highlight a few things that do not appear to be part of the debate surrounding how to deal with the current crisis. And since I have the luck of dealing with readers who generally are much smarter than I am (and many of them much more powerful than most people), I thought that maybe, just maybe, I could get some of the basic discussion started here, spreading a meme around the concept of a culture crash.

In this particular case, I think the issue is around the destructive culture of credit America has been cultivating with the rise of the post-WW2 generations. I am not saying baby boomers because they are only part of the problem, as my own generation ( Generation X) and the following one, are also involved in the same destructive addiction to credit.

At issue is the concept that over-extending oneself is a good idea. It may be because I am coming from a foreign country, or it may be for other entirely different reasons but I have always had an aversion to credit. When I took my first mortgage, I worked hard to try to repay more of the principal than was requested by the bank. My concept was simple: I thought that if I could repay my loans early, I’d give away less as interest and could then use that interest to pay myself. It turned out to be a smart move but I have no idea as to how I came around to that conclusion. The funny thing is that I had discovered the concept of, to put it in terms that are now being used by every pundit, “liquidity is king.”

Whether it is credit cards, mortgages, or other forms of loans (student loans, car loans, etc…), I’ve always been suspicious of the idea that one could spend more than they had. I was aware of the concept of assets but ultimately, I felt that assets should be, for the most part, tangible. And a bank account with cash in it is about as tangible as things get.

Living in the USA, however, I have always been surprised by how much of a credit culture the country has. When asking for a mortgage, I had to fight my bank to get a “lower” mortgage amount because they felt I was asking for too little. The idea of lowering the risk (both mine and the bank’s) of financial default seemed to go counter to many in the go-go run-up of stock prices in the dotcom era, following by the go-go run up of real estabe prices in the recent housing bubble. Sure, I didn’t spend a lot of time jetting around the world on a lot of vacations as I toiled to ensure that my mortgage was paid off (and it took me a few years to do so)  but I discovered that many of the people who had run up their bills based on the promise of paper fortunes represented by their dotcom options were the same people who were financially wiped out when those paper gains evaporated.

The same phenomenon seems to have repeated itself with the housing crisis, as people refinanced their houses to take cash out and traded those houses as investment vehicles up until the point where the virtual gains they had made in the run-up on prices evaporated.

The similarities between the dotcom crash and the housing crash are a little eerie and, with the benefit of having gone through one of those crisis, I am now starting to gain perspective on the other one.

Meanwhile, the risk of dangerous investment securities (the so-called structured investment vehicles) seem to have been balanced by taking a few bad loans and mixing them with good ones. The problem was that these mixes got increasingly complex and, as I was talking to a friend of mine involved in developing some of those products, my gut feel got stronger. The thing in my discussion with said person (who shall remain anonymous in order to protect the guilty parties) was that “no one really understands many of those investment products anymore.” It felt a bit like a house of cards to me but once again, I figured that I didn’t really know enough to talk smartly about it.

Until this current crisis.

Students of history are familiar with the concept of a run on the bank. As I was reading up on such issues as part of my preparation for a speech, I started thinking about how brittle our economic system really is. Ultimately, most of the financial markets are based on people’s perception of value and, if that perception changes, the whole thing can unravel pretty quickly.

I think we are now at the tipping point of a major shift in the perception of what a good financial decision is. Wall Street may be the most impacted by this for now but I suspect that it will spread relatively quickly (my gut tells me the perception will be generalized globally within the next 3–12 months). The change is coming from the fact that growth may no longer be considered as valuable as tangible assets.

During the dotcom days, I received a couple of crash courses in perception management. The first one was going from VC to VC with a plan trying to raise around a million US dollars for a start-up. The company was slated to be profitable within 2 years and would grow at 15–20 percent afterward, per our projections. To say that our financing efforts were not going well was an understatement. The moment of realization came when, in another disastrous meeting, a VC told us “you’re asking for a million dollars, and will only give us 15–20 growth after the initial couple of years. Your plan lacks ambition.” The whole time, we had been basing our plan on realistic achievable numbers and I failed to understand why we were considered to not be ambitious. Things got worse and, in a fit of desperation, my business partners over-rode my decision of conservative growth based on solid revenue and created a projection set based on year on year tripling of the business, starting with an initial investment valuing the company in the 15–20 million dollar range. I thought were were going to be laughed out of the room by the first VC we presented this but something truly scary happened: not only did the VCs like it, but some of the people who had previously given us a soft no were now banging on our door, trying to get into the round. Of course, we took a first round, and a few more afterward, and enjoyed a nice liquidity event that achieved a nice profit for the initial investors. The company continued on air until the dotcom crash, which it didn’t survive as a going concern.

The lesson here is that VC investment, IPOs, the housing bubble, etc… all have one thing in common: they are based on the idea of future payout, due to year on year growth that is often based on numbers that are wishful thinking in the best of cases ( and outright fraud in the worst cases, as we have learned from Enron and Worldcom)

I think this concept is now hitting the wall. The problem is that it has yet to be replaced by something else as we are moving through the irrational stage that generally marks the end of every great cultural movement. So the operative word is “sell, sell, sell” and confidence has shaken some of the mightiest institutions on Wall street as it will shake up other institutions soon.

On Wall street, they are now well aware of that reality and some of the cooler heads are realizing there may be some ways to profit from the stampede by acquiring assets at fire sale prices.

However, I’d venture that both the panic and the cool reaction are relatively contained right now. Contained to people in the financial industry, the media (who have never seen a crisis they can’t hype), and the reacting investors.

A few days ago, I was at a party in the tech community, and the happy atmosphere reminded me of the euphoria I had experience in the late 1990s, only a few months before the dotcom bubble went crashing down. As I travel in the murky waters between Wall Street and the technology world, I was shocked by the contrast between the panic I was witnessing in the financial space, and the relentless optimism I encountered in the tech space. The assumption that the crisis is contained to Wall Street was well engrained (and may yet change as more people see their 401k go down) but I started wondering about the disconnect. When presented with the issue, one person pointed out that a lot of people would go to grad school, as had happened after the last dotcom bubble and the only thing I could think of, upon that remark was “and where will they get their student loans from?”

Once again, I was getting stuck in the credit mindset and it made me uneasy but it came from the realization that credit is a core basis for the current US economy.

What I suspect is now going to happen, after the credit culture crash, is a move to core value, with people working hard to save up in order to buy things in cash. Actually, I hope that that is the case because any other option only seems to provide a short term band-aid to a major problem. If we fail to take the opportunity to move beyond the credit mindset, the next crisis will make this one look as easy to deal with as the dotcom crash currently looks to us: a big deal for a few people but ultimately something we can get past.

And I’m afraid that we will continue to spiral down the road of an ever increasing amount of debt until such time as there is no other thing to do but crash the culture in order to reset it.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Culture Crash. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

So without further ado, here are my prepared remarks:

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Good afternoon,

I know many of you are probably wondering why a history of currency would be on the program at a Web 2.0 conference. So let me first dispel a few concerns you may have:

• History can be a useful indicator of what may happen in the future. Under a historical lens, Web 2.0 is pretty easy to predict as the natural descendent of community organizing and lowered cost of communication and mediation.
• Web 2.0 will impact currencies and that will probably be the biggest thing historians of the future may remember about Web 2.0

So, in the next few minutes, I’m going to take you on a trip through roughly 60 centuries of history (just the highlights, I promise) and will show you how each major shift in the evolution of currency reflects what we consider pillars of the Web 2.0.

Having done so, I will attempt to take you through the next 25 years and project how Web 2.0 may fundamentally redefine how we think of currency, and present some of the challenges and opportunities this historical change may present.

So here we go…

About 4000–5000 BC, the basis of most trading was something called barter. Barter is simple to understand, really. At its most basic level, it goes something like this:  “I have fish and you have some chickens. How many chickens will you trade me for my fish?”

The other guys says he will give me 5 chickens for my 10 fish and, if I feel it’s a fair trade, we make the exchange.

So that’s all good but one can’t live off fish and chicken alone. And eventually, I go back to the guy and he tells me he’s not interested in fish but if I can find a cow to sell him, he’d be willing to exchange 50 chickens for it. So now, I’m out looking for someone who will give me a cow in exchange of some fish.

That may work for a couple of goods but you can see how inefficient an approach it is.

Back then, people started realizing the same thing and so there was a move to find some way to simplify things. Communities started gathering around some goods that they would agree were useful as a basis for trade: grain, honey, rice, etc…

And, through these actions, the concept of money was born… and with it, the basis for what defines a currency was established:

• It provides a standard measure of value for goods and services
• It serves as a medium of exchange
• It serves as a method of storing value

Let me get into those points in more details before we move on.

A currency provides a standard measure of value for good and services. If I go back to my example of chickens and fish, I can look at currency as a go-between. By establishing that a fish is worth 1 pound of grain and a chicken is worth 5 pounds of grain, I can then extend the model to a cow is worth 100 pounds of grain and a house is worth 1 ton of grain. From this data, I can infer that a house is worth more than a cow, which is worth more than a chicken and so on…

However, none of this can happen if there isn’t an agreement amongst everyone that a particular currency has value. You could call that a certain wisdom of the crowds and that’s where currency starts overlapping with web 2.0. We’re going to get to more details about that later.

The second point is that a currency serves as a medium of exchange. Because everyone agrees that grain is a great way to make those comparisons, I don’t have to go around and try to make conversions from one item to another. I trade the item against grain and then can use the grain to “buy” something else. In that sense, I can exchange any good for grain and grain can be exchanged against any other goods.

Once again, this only works if people agree on it as a medium of exchange. And that, in turn, represents a form of metadata about a trade. Sort of like if people were to tag an item with the same term. And once again, we get to a position where it overlaps web 2.0 as the crowd is now working together to establish value and therefore define markets.

And because currency is metadata, it can also serve as a way to store value for future use. For example, if I fish, there’s only so long I can keep my fish before it spoils. By selling it immediately (ie. Trading it for its currency equivalent), I can avoid that spoilage and store its value for future use. So, in a sense, currency serves as a storage medium.

But the fact that it works as a storage medium can be both an advantage and a disadvantage. As storage for value, the currency itself become valuable. And when something is valuable, well, some people try to acquire it through means other than production. From here, we end up with theft, pillage, war, etc… And from all this carnage, we get to the point where people try to find ways to protect their currency (and, almost as often, their lives).

In around 3000 BC, in ancient Egypt, some people come to the insight that, by storing their currency together and agreeing to share the cost for an army to protect that currency (which, at the time, is grain), they may be protecting themselves from loss. Along the banks of the Nile, granaries start to appear and they become a place for storing currency: people come in with the grain they received as a form of payment for whatever it is that they sold. And the first accountants appear, keeping track of what amount of currency people have in their accounts.

Everybody is happy and celebrates as they have discovered a fantastic way to store their currency and keep people from threatening them. Across Egypt, people pat each others on the back until, well, until the first currency crisis.

Around 2200 BC, severe drought made grain more scarce. The result was that disbursements (taking grain out) started to move at a higher rates than deposits (putting grain in). And some people found themselves in a situation where they had spent all the grain they had and had a hard time producing anything they could sell. In this case, the value of the currency (grain) increased because the currency became more scarce.

Eventually, the problem affected the top of the economic food chain, aka. The pharaoh and, as a result, local people started opting out of pharaoh rule and attempting to take control of their own currency. When all was said and done, about 200 to 300 years later, grain was abandoned as a currency as it was considered that a currency that can be eaten is a currency that can have a problem. So metals, which could be turned into tools, which themselves could be melted again to turn them back to metals, started emerging as the dominant form of currency.

This is important because it finally moves currency to something that is more abstract. Metal may be a commodity that, without any work, could be considered of little value but, as an abstract construct of value, it works. And for the next few centuries, that’s the case.

Some interesting alterations in terms of the ways money is stored and carried happen during that era. For example, in a number of countries like China and Sweden initially, people realize that metal may not be the most portable of currency for large transaction and so places where currency is stored (now called banks, because, initially they were sitting on river banks) start issuing the equivalent of paper receipt for storage and people start trading those receipt. Here, we see the emergence of two key components of a more modern system:

• First, the concept of representative money, where a piece of paper can be redeemed for a certain amount of metal, therefore representing that metal.
• Second, the emergence of paper as money, creating another layer of abstraction in the transactions.

With the move to paper, currency becomes sort of an I.O.U., representing a certain value but not possessed of that value in itself. This shift, called the shift to representative currency, is important because it establishes currency as an even more abstract concept. The piece of paper you receive is basically a receipt that can be redeemed for some equivalent amount of metal but it isn’t the metal in itself. So here, we see currency basically becoming free-floating metadata, asserting worth without necessarily showing it.

The problem is that the distance from a bank where the paper note can be redeemed becomes a factor in terms of exchanging the banknote.

Enter John Law.

Law is an interesting character: he’s a Scottish economist who, at age 23, shoots a man, is tried and found guilty of murder. He’s thrown in jail, manages to escape and lands in France. While there, he gambles a lot and comes upon two major observations:

• People have taken to trading the paper bills as if they were coins
• Paper is divorced from the metal it represents

From there, he deducts that whoever could control the flow of paper bills could start issuing more IOUs than they have metal for.

With this, he comes up with the concept of a reserve bank, assuming that he could have a bank with only 75 of the cash reserve needed to cover the IOUs it had issued. But there’s a problem with that: in order to control the flow of paper bills, he needs support from a government. And initially, most people think it’s a crazy idea and won’t go for it. But Law convinces some more junior people that it’s a good idea and, eventually, one of his patrons hits the jackpot: Philip D’Orleans rises to power and quickly realizes that he’s running a country where the government has a substantial deficit. So he puts Law in charge of creating a national bank and law sets out to create the first government controlled reserve bank, issuing more paper than it has metal currency for.

It’s a pretty radical idea. Law is dealing with a society where everyone agrees that what you see is what you get as far as currency goes but then he leverages the agreement that paper is a representation of what you get and, after having taken over control of the currency flow, he turns that into what you see is what you get if no one rushes the bank.

Because with his second insight, John Law creates the concept of fractional reserve banking, which basically means that the bank, at any given time, only holds a fraction of its obligation.

But fractional reserves can be a little scary: they work well as long as people trust that the bank can repay them. And most of the time that’s not an issue because while a person needs to pick up their gold or silver or whatever other metal the currency is traded against, another person probably doesn’t need his or hers. So it balances itself out in some sort of common good.

Where the system can fail is when everyone decides to take their metal out at the same time: remember, the bank doesn’t have enough metal in its safe to cover all the currency it’s distributed. That problem is actually an echo chamber problem.

A run on a bank, the situation I’m talking about, generally begins with a whisper: somebody has heard that the bank is having problem and concludes that money you’ve deposited there is no longer safe. That whisper starts spreading and, thanks to an echo chamber type of effect, people worry that their money is no longer safe in this bank. Since they don’t want to lose that money, they run to the bank and withdraw all their money from the bank. Problem is, they are not alone and quickly tens of thousands or more people start doing the same. Because of that massive onslaught, the bank no longer can meet its financial obligation and actually does fail.

This happened in the 1920s with the great depression and it’s happening now (that’s why the government is busy bailing out a number of financial institutions.

But let’s return to history. In the 1940s, after World War II, the Bretton Woods accord established some global rules for currency exchange against gold. But most of the reconstruction of Europe ended up being backed by US dollars to the point where the US held somewhere around 65 percent of the global gold reserves. In 1960, an economist called Robert Triffin figured out a problem with what had happened: there were more dollars in the marketplace than there was gold to back it up. In the early 60s, an ounce of gold was worth about four to five dollars more in London than it was in New York.

Due to many political and economic events throughout the 60s, the possibility of a run on gold and a run on the dollar started increasing and on March 17, 1968, the possibility became reality, creating a substantial money crisis. The whole financial system teetered on the edge of collapse during that era and eventually, the Bretton Woods accord was abandoned. On August 15, 1971, US president Richard Nixon announced that the US would no longer convert dollars to gold. In fact, he added the US would not convert dollars to anything.

That announcement is appropriately called the “Nixon Shock” because with it, Nixon puts an end to the concept of a representative currency established by John Law. In its place is now the concept of a Fiat currency, a currency that is traded not because it has a guaranteed value but because the government says that this currency MUST be accepted as a form of payment.

And so currencies now float, not based on a physical value but based on what people think that value ought to be: today, dollars, euros, pounds, and yens have a particular value not because it is set against actual goods but because people believe that the government that backs those currencies will continue to do so in the future.

So let’s go back to our fundamentals of currencies: they have to be an agreement and that’s where we get to web 2.0 and its impact on currency.

Which gets us to more recent times. During web 1.0, a number of companies starting thinking that the internet, because it was global in nature, needed a global type of currency. So technologies like Digicash, Cybercash, Ecash, Flooz, Beenz, appeared in an attempt to mirror cash and create new currencies.

But they had many problems. First of all, the different systems were hard to use, often requiring software to be installed on the users’ machine. That limited participation and, if you remember one of the fundamental rules of currency creation is that users generally agree on using a common currency.
The second part was that the systems actually went too far in trying to emulate cash. So, just as you need to go to an ATM to get cash today, most of the system used the concept of a purse that was to be refilled from a different area. But why go to an ATM to withdraw cash when you’re on the Internet? Why not say, “I have money in my account, refill my wallet if it’s empty. ”

The third, and probably most important part, was that once spent, the currencies were transferred back into some real world currencies like the dollar or pound sterling (and no euros because this is all happening before the euro became a consumer currency.) That was the biggest mistake because currencies weren’t really traded.

The dotcom bubble crashed and, along with it, most of the virtual currencies that had been introduced. It wasn’t a very big deal because people didn’t hold much money in those currencies.

Meanwhile, a parallel development having absolutely nothing to do with currency creation took form across the internet: because of its global outreach, the net was a perfect place for people to play games together. At any given time of day or night, there was always someone interested in a game of chess or backgammon or something else. Some games went beyond the basic board games and leveraged the concept of role playing games that had been so attractive to so many computer geeks.

And over the years, as computers became more powerful, the quality of the graphics improved. And as the games improved, new point systems were created for each quest allowing to trade work (game-related achievements) for goods (better weapons, magic potions, housing, etc..)

Those points took various forms. So games like World of Warcraft or Lord of the Rings online, which are set in a medieval-like type of environment, turned to gold as their achievement point systems. Linden Lab, with created Second Life, created the Linden Dollar, and so on and so forth.

But then… then something really unexpected by most of the game makers happened: people started exchanging those virtual currencies for real world ones. Looking back now, it seems to make total sense: the challenge, for a lot of those games, is that it takes a lot of time to acquire virtual currency.

Here, in the developed world, time tends to be at a premium. Most of us are multitasking constantly because we just don’t have enough time to do everything that we would like to. But because we spend a lot of time working or doing other things, we don’t have much time to play games. On the other hand, we tend to have more disposable income than people in underdeveloped countries.

For example, in 2005, the average annual salary (and let me make this clear, I’m talking average annual salary) for a Vietnamese worker was 1200 dollars. That’s 1200 dollars a year. That same year, in the Guangdong province of China, that number was $2,778.

Some of those people are in their early 20s and when they get out of work, they go out and spend some of their money to play video games. At some point, a few entrepreneurs around southeast Asia realized that if they paid ANYTHING to those players, they might be able to get past some of the more boring tasks and resell the accounts to people with little free time. A new economic model was born and all of a sudden, World of Warcraft gold started getting traded against US dollars and euros.

Students of currency history could have predicted this. Remember, currency is a social agreement on the value of something and here, those virtual currencies became an agreement on a value of time.

While initially the phenomenon was one of supply arising from southeast Asia to meet North American and European demand, it eventually went around full circle. When China decided to start requiring that people register their work occupation as “virtual workers” for people dealing with that type of trade, over 750,000 people applied in the first quarter. That’s three quarters of a million people in China alone claiming to make the majority of their living from creating goods they sell against virtual money.

And Asia is where it actually gets very interesting because frictions between the government and virtual currencies are becoming more common.

Meet Tencent. Cute little penguin, right? Well, that little penguin is currently at war with the Chinese government. It started relatively innocuously. Tencent provides an IM system and offered a virtual currency, the QQcoin, to be used so one could upgrade their online avatar (an avatar is basically what your online character looks like) and allow for people to give gifts to other avatars. Not a big problem until a few other web sites started accepted QQcoins as payment for services, and eventually for goods. In May 2007, the Chinese authorities started issuing warnings about the QQcoin. By November 2007, they were blaming it for impacting the Yuan, the national currency.

That industry, which people have called the virtual world economy, real money trade, or RMT, currently represents anywhere between 2 and 4 billion US dollars of transaction flow a year. That’s up from inexistent less than 5 years ago.

So let’s keep that number in our minds and move to the next set of influences Web 2.0 is having on currency. As you know, Web 2.0 in increasingly about giving power to the user and increasing peer to peer relationships.

I talked earlier about the virtual currencies that popped up during the web 1.0 phase. There was one company which, at that time, came up with the idea of moving currency from one Palm device to another. For those of you in the audience who may not remember that time, Palm devices where the spiritual grandfathers of the iphone or most smartphones today. Well, the Palm thing didn’t work out for them, so they figured they’d start moving money via email. Oh, and they renamed the company around the name of the product: Paypal.

I think everyone here knows the rest of the story. Paypal has become a leader in moving money on a person to person basis with something as simple as an email address in terms of identification. That simplified transactions and many people around the world are actually using paypal today to move money from one currency to another.

And while many may snicker at the idea that moving money from something as ridiculous as the Palm, well, it was just a question of timing and marketplace. Currently, in Kenya, M-PESA is doing the equivalent of 10 million US dollars in daily person to person transaction on mobile.phones. That 3.6 billion dollars a year.

That’s real currency right now but why does it have to be a real one? After all, it’s just virtual money as it moves from an electronic device to another.

Meanwhile, marketplaces like prosper.com and zopa have started allow users to make loans to each other via a web interface. It’s called peer-to-peer lending, basically, people lending money to other people, or as most of those companies claim, they’re Ebay for money.

According to the online banking report, it will be a US$9 billion a year business by 2017.

That’s real currency right now but why does it have to be a real one? After all, it’s just virtual money as it moves from an electronic device to another.

So if we take the trends we’ve just explored:

• Virtual currencies have grown to be traded as if they were real currencies
• People are moving money from one person to another via the internet or mobile devices

We may be able to come up with the conclusion that where this is going, in the long run, is an area where exchanges could be set up either online or on mobile devices to use virtual currencies are real currencies.

And if we assume that this first step is possible, then it’s not too far away from the next step, which is an explosion in the number of currency offerings we may see in this world.

What we’re seeing here is the first shot in what I think is the next evolutionary step in the history of currency and it’s an evolution that could either be a transitional phase without major disruption or a massive change in the way people are interfacing with currency: this could be our generation’s Nixon Shock.

The issues around this new world are significant.

The first issue is around who is controlling those currencies. For most of history, currency was under the control of the currency issuer. But in the last couple of centuries, there’s been an increasing trend towards government control of currency.

How will government react when their own currency is challenged? And will their reaction matter? After all, the Chinese governments actions to date, as far as the QQ is concerned haven’t stopped trading.

What will happen in terms of tax collections? Will government have to start accepting currencies beyond their own as agreed form of payments? And if they accept other forms of currency, will they have to accept other government-run currencies as form of payment?

How will criminal behavior be dealt with? Today, criminal elements can be tracked because whenever they have to deal with some currencies, they have to eventually deal with banks. And because banks are regulated, criminal behavior can be intercepted. What happens when those money flows move outside of the financial institution control? Shouldn’t governments think about regulating those institutions as money transfer operations ?

What happens when the number of currency explodes? Sure, computer systems can do the conversion without problems but how will WE assess the worth of a currency?

And, as currency initially proliferate, there will eventually be a move towards an agreed upon set of new currencies because remember that currency is ultimately, about an agreement value by all of us. But when some of those currencies die, what will happen to the people holding them? Will the dead currencies be converted to emergent ones? And what happens if the dead currencies are ones that were controlled by governments? Will they fight for survival?

I unfortunately don’t have any of the answer to those questions but if there is one thing I know, it is that where questions exist, opportunities abound.

And with that said, I would now like to open up the floor for discussion.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Coins to QQ at Web 2.0. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Background

“People are concerned about your blog.” In the hushed world of banking, this was a clear sign that I was in trouble. People didn’t like my blog and it could become a career issue. At issue was the fact that I had an identity outside of the corporation and people were worried that what I was talking about on my site would be associated with the corporation in spite of my specifically mentioning that all opinions on this site are my own.So I was left with a couple of options: be quiet and keep progressing my career or find a place that would be more friendly to my blogging. I tried the former but, as more and more stories popped up, I found it harder and harder to be quiet. I wanted to comment, I wanted to write but I had to balance that against the idea of being gainfully employed in what was an otherwise good job.At the same time, I was getting a little antsy. I wasn’t happy with the workload. I was also thinking that I needed a change of scenery since I’d been at the firm for a long (in my view) time. I didn’t want to become a lifer and my options in terms of career growth were to move to London or Hong Kong, both open options but neither really appetizing to me. I wanted to stay in New York and I wanted out of finance. The goal became to restore a good work/life balance, to continue being creative and to be given enough flexibility in terms of what I could do in my private life.So I started putting out feelers to see if there were ways for me to gracefully get out and find something more in line with my media background.Why did I want to go back to media?In order to answer this, I have to give newer readers a little background about me. I’ve been involved in the media space since the early 90s and in the internet commercial media space since pretty much its inception. It is, and has always been my first love.

Why I went into finance

When I went to the banking side of the world, the attraction was two-fold:

• one, I wanted to learn more about money flow and how money moved around the world once you had sent it to a credit card clearinghouse.
• two, I wanted to work on large scale global project because they seemed much more challenging and therefore more interesting.

Along the way, I learned a whole lot of things. Six years in the financial world taught me how to properly manage global projects in a widely distributed environment. They also made me more understanding of the need for strong project management, the issues around regulations and a lot of legal stuff that I was aware of but had never experienced first-hand.All said, it was a great learning experience that made me a stronger project manager and allowed me to really understand how large organizations work and how to work within them. It also allowed me to mature as a manager. I have to admit that when I joined the bank, I may have been a good startup guy but I was not equipped with the proper skills to work in an organization with hundreds of thousands of people. Through a mix of great mentoring, amazing educational opportunities and lots of hands-on experience, the bank allowed me to acquire skills few people have.In this process, I also learned that transaction flows were actually relatively simple to understand, once you had properly dissected them and it gave me a couple of insights as to the nature of money (more on that soon).Fast-forward to today and there are a number of things on the horizon that gave me pause about the future of banking:

• Regulatory constraints have made banks hyper-conservative: this makes it very difficult to try to do anything innovative within the context of a large financial organization. The innovators generally tend to be smaller more agile players who don’t have as much to lose initially.
• The mortgage crisis is just the beginning: In talking with people who trade financial instruments, it is becoming clear that no one really understands the magnitude of the current financial crisis. People know it’s bad and expect it to get much much worse but no one has any idea as to how bad.
• Transactions are easy to understand but much of the innovation in finance is actually coming from non-financial actors. Margins on money transfers are dropping as regulatory costs are increasing and competition is increasing. At the same time, the real value of transactions is not in the transactions themselves but in the metadata associated with the transactions.

So looking at all this, I had to balance whether I wanted to stay in banking or do something else. That was the easy decision. The tough one was figuring out what something else would be.

Back to Media

I had options: with a second Internet renaissance looming, it seems that I could pretty much go to any startups. And, in putting out feelers, it was interesting to see how many were interested. What they were interested in were my ability to understand large scale projects, my strong project management background, and my understanding of large scale transactional systems.As they highlighted those facts to me, it became clear that the banking experience was a great entree in any area. So I had to choose.Fortunately, I also had a good background in media and the recent changes seem to line up with my thinking and skills:

• Media is increasingly becoming about transaction. For example, if one looks at the recent success of Google (an advertising company with a side business in search) and Facebook (and advertising company with a side business in lead management), it is clear that media is all about facilitating more and more and smaller and smaller transactions.
• Couple the previous point with the fact that most media is moving to the models that were established by the internet (or revenue is being siphoned from those media to the internet directly, as we’re seeing with newspapers) and it is clear that marketplaces will exist to mediate relationships between buyers and sellers.
• Large media companies could manage this change but they are still beholden to the formats they have stakes in. We’re seeing that with the music industry still thinking it sells plastic CDs instead of of its content, the movie industry thinking the same and the print industry being wedded to its printers.
• Because of that, the change will have to come from an industry that is not weighted down by a particular distribution medium.
• Traditionally, the industry that sells messaging and figures out distribution is the advertising industry. Media buying is the arm of that industry that is most likely to enact (and therefore profit) from the change. Large media buyers are uniquely positioned to help their customers present their message in a more effective fashion across media and, due to the unique expertise they are accruing across media are also the best ones to understand where the market opportunity may lie.

So with all that, let me get to the real announcement relating to all this:

I HAVE LEFT HSBC AND WILL BE JOINING GROUPM ON DECEMBER 3rd. 

Who is GroupM? What will you do there?

GroupM is the media investment arm of WPP, one of the (if not the) largest advertising groups in the world. In other words, it’s exactly the place to be if you believe in and are interested in the kind of change I highlighted above.Thanks to the great formation that HSBC has given me, I will be joining groupm as the project management office director for the company. In that capacity, I will head the company’s PMO and will work on a number of really interesting initiatives. Based on my discussions with the people there, I’m very excited about the opportunity and it also looks like I’m joining a pretty amazing team of very smart people (I hope I can help insure that the average smarts are not lowered by my presence).Also, I’ve worked closely with my new manager and the folks in H.R. to ensure that special provisions have been made relating to my blogging. The terms are fair to both sides and it will ensure that I can basically start blogging again in my spare time. However, I suspect that a lot of my blogging will go to more discussions of the changing nature of finance and money. The reason I had not written about that in the past is that, due to my working in a financial institution, I steered clear of anything that would relate to that world. But I did learn a lot about it and, more importantly, I did develop a few theories about it that I have not seen written about in too many other places. Now that I’m freer to blog, I think I can start writing more about it.At the same time, I might be more careful in my writing about advertising since that’s the world I’m moving back into. People hire me as much for my insights into a particular industry as for my other skills and I want to make sure that the keener ones are kept as a proprietary advantage to any employer.

Conclusion and Thank Yous

So there you have it. I’m moving to groupm; I’m leaving HSBC.However, before I close this out, I’d like to add a few thank yous to the people I have worked with at HSBC:

• First, I’d like to thank Kevin Newman and Raymond Cheng for giving me the initial opportunity. While both of them have moved to other parts of the organization, they were instrumental in bringing me on board and they are responsible for my initially joining and then staying on much longer than I had initially thought I would. Mark Martinelli also provided a fantastic guiding hand and a tremendous amount of sponsorship that probably ensured I’d stay on for an even longer period.
• I was also blessed with having to deal with a great management team. Over the years, mentoring by Rob Mian, Fred Hoysted, Gene Lavis, Bill McCloskey, and Mark Hibbard helped me better understand my own strengths and weaknesses and become a much more effective manager.
• I was also very lucky to deal with understanding internal customers like Larry Campbell, Daniel Hallac, Ian Haynes, Chris Walsh, Michael Artley, Joe Garner, Jeffrey Hughes, Bahvya Shah, Julie Lakha, Matt Dooley, Joe Garner, Julian Soper, Bev McArthur, Megan Heinze, Tom Cannon and Verity Coe.
• Internal friends worked hard to help me shape the best approach to problem resolution and, while it is hard to get every single name recognized, I’d like to also thank Satinder Sadhar, Simon Cox, Stewart Nacht, Kelly Hair, Fernanda Cabas, David Ruiz, Serge Besch, Vadim Permakoff, Venkat Lakshminarayanan, Aditya Kommaraju, Rajnish Jain, Amichai Lichtenstein, Stuart Bain, Pedro Crespo, Celia Bradley, Sarah Carroll, Sreenivas Duggiraala, Ainsley Rattray,and many others… It’s amazing that I could actually do all this off the top of my head and a testament to the amount of really great people working at HSBC these days…
• In 6 years, there are countless others I’ve interacted with who have made me a much better person. They’ve seen me grow as an individual and as a manager, they’ve forgiven some of my mistakes and they’ve taught me important skills. I will miss one and all but, at the same time, I’m excited about the new challenges coming ahead.

So looking back, it’s been a fantastic time at HSBC and I assume that it will be even better at groupm. There we have it, the big secret is out. I’m looking forward to the new challenge and I’m sure the new job will keep me very challenged and very busy but, at the same time, I’m also thrilled to be able to say that the blog will get more lively: I’m back baby and this time, I’m gonna stick around.…

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Transition time. You can follow him on twitter here or receive his weekly newsletter by subscribing here.