Cold Hard Cashless

and I'm Joe McCormick. And Lauren and Joe. Today we are going to talk about cash, cash, money, Who's making all the cash, who's carrying the cash, who's rolling Apparently you are know, I not not nearly as much as I would like people who couldn't see he was making the little fingers fingers yeah, yeah, but so, but so why does this why is this important anyway? Why is there a culture about who has cash? And why we

don't know why? And why do we even have cash? Well, all right, so let's let's think a little bit about about the concept of value. All right. So, in the concept of value, we're talking about things that people need or want, really want, proceeds need because you may both want it and need it, or you may just want it. Either way, you consider that something has value because you

want it. Correct, all right. So, Now, if we go way, way, way, way way back, human beings might be very good at doing certain things, and they're good enough so that it helps them, and maybe they're so good at it that they can help other people. So, for example, Lauren, turns out, you're really really good at hunting mammoths. That is actually a science fact. I am Lauren, who is how tall are you? Lauren? Five to? And she can take down a mammoth no time flat, Whereas I am terrible at

at at hunting mammoths. However, it turns out I've got a mean hand with a brush, and I make the most amazing cave paintings. They are phenomenal, and Lauren really wants to deck out her her cave with some great pains of a five foot to pixie taking down a mammoth with nothing but a stone knife. However, she can't draw at all, so she and I work out this this arrangement. I'm going to draw some stuff for her.

She's going to give me some tasty mammoth meat to help me tied over those long nights where I'm starving because I can't catch anything. And we have worked out this system of trade, wherefore a certain amount of work she gives me a certain amount of food. And that was kind of the way things worked. It was sort of a barter system. But then let's bring a third person in Joe. Now, Joe, Uh, what's your amazing talent in this crazy world? Or do you want me to

just give you one. I'm really good at setting things on fire, right, I have the secret from the gods, and I'm not going to tell anybody else what it is. Right, So, Joe has discovered the secret of fire, which both a mazes and frightens Lauren and myself. Now now Lauren, as it turns out, she really would like to have cooked mammoth meat. But Joe, however, has somehow fallen onto a store of salmon. It's just a huge amount of standing. He has no need for mammoth meat. However, Joe would

like some some cave paintings at some time. But me, I happen to like my mammoth tartar, so I don't really care about the fire thing. I'm okay, So you can't have any So, so we we've got these three people. Various people could really benefit from other folks uh contributions, But but there's no incentive to contribute. However, if we created some form of object that represented value, so that we would say x number of this is equal to one cave painting, or one portion of mammoth meat, or

one magical creation of fire. Then we could end up using that as a method of exchange between one another, and this would allow us to have to to uh to give each other the things they need without it actually being an altruistic gift. We're actually getting something back in return, and that's a representation of value that we can then use with someone else to get something we want.

That's the basis of cash, right, sure, well you so you're talking about the creation of an economy, But of course an economy exists before cash does, and cash is not necessary to have an economy. That's true, Um, but what does what exactly does cash do? It makes everything more convenient. By establishing one thing that everybody wants you, you cut way down on the amount of you know, middlemen you have to go through to make all the

trades you need, especially an allergen of society. I mean, because this is a very relatively simple, little example example that we've come up with here, but once once you, I mean, these days, if I want a new car, then how many chickens is that? Yeah? And I don't really grow chickens mammoth. I I edit things, and so you know how many how many papers? Is that? Yeah? No, it definitely definitely gets more tricky as it gets more complex.

So I've got a question here, Um, when we think about cash, we think about usually little physical objects that you have a quantity of, and each one represents a unit of wealth. How did we end up representing things that way? And how did we pick the things that we were going to use as as money as cash. It's interesting because if you look at the early forms of currency, they tended to be things that were uh, found in nature already. But we're really really nice or

pretty to look at. So like cowary sells, Right, what is a cowary shell? Well, it's a little calcium nugget that grows on the back of a snail in the ocean, right, Why why is that worth something? So because they're pretty, Yeah, they're kind of pretty. Yeah, I mean these are the sort of thing. Yeah, yeah, you've seen calary shells. Like, like you said in the script for the Deo, we did like on on bracelets and necklaces. I mean people make jewelry out of it. Yeah, I actually did the

the hang ten sign I did. Yeah, Hey, I love Hawaii. I love Hawaii. But yeah, so these things no intrinsic value, right, It's not like water or meat or seeds anything that has like a really practical use, is it. No? No, it's it's something again that just people wanted it. They thought it was pretty, and then it ended up being the representation for things that have direct value to us. And of course there's kind of uh when you think

about how the first currencies get started. There has to be kind of a follow the crowd thing going on, doesn't there that? Um, only a critical mass, like a certain amount of the population has to decide that they

all want something before everybody wants it. Be cause, if I don't know what that number is, say maybe sixty sevent of people can be guaranteed at all times to want cowry shells, Well, then if you're part of that other thirty percent, you'd be stupid not to want them, also because you could trade them to all those people who do want Right. But if it's only five percent who find calory shells to be really pretty, then there's

no value to them to the larger society. Right, So, if for example, the United States suddenly decided that dollars and coins really didn't have any value to them whatsoever. We would be in an economic crisis. It's kind of crazy when you think about that, but it's it's a it's a belief system almost more than a more than anything else. It really is. It really is when you think about that, I mean, it's a popularity contest for

little objects. Yeah, and you know, in the United States historically, be quite a few years ago now actually, uh, the dollar was based off the gold standard, meaning that a dollar bill represented a certain amount of actual gold, so that that you can actually take it to the government, right, you can go to them and say give me my gold, right, yes, Because it was essentially a note that said this is worth this x amount of gold, and the gold was

in some reserves that were in the United States. We got off the gold standard, and some people got upset about that. I think that's really funny because the only reason gold has any value is because we think it's pretty and it's hard to get to That's the only reason. Right. There's nothing about gold itself that makes it a valuable thing in the sense of if I have gold, my life will be better. Because it's only because everyone else has agreed that gold is awesome. I mean, chemically it's

pretty cool. You can do some really interesting things with it, typically if you have the wherewithal But there's a practical scarcity. I think people who advocate gold say like that at least, like it's actually hard to get certain amounts of it right right, whereas printed money is you can just print as much as you want, right, which can cause some problems right when you relations Isn't that why I read that? So the first paper money showed up in in China, right,

I think in seventh century in the Tang dynasty. Um, And if what I've read is correct, like it got very popular, but then it went out of style because the paper money led to massive inflation. Right. Yeah. If if your answer to there's not enough money is to print more money, there's a problem because money represents wealth, and you don't actually create more wealth. When you create more currency, you devalue the currency that you have. You can't create wealth in that way. Right. The way that

the way that banks create wealth is through loans. They loan out money and then they charge interest, and in that way wealth is created. But without that you're not creating wealth. You have an x, you have a certain amount of wealth that this is representing, and then you just print out the currency and that devalues the currency. You're you're you're not creating more things that are actually

valuable like food and electricity and etcetera. Right, So, right now, I've got some US federal bank notes in my pocket. All right? Um, actually I don't I have none at all. But let's say for the one summer the purpose of argument, why would you just offer me money? I'm a little creeped out. Now there going to be somewhere in this building there's some bank notes, right, It's not just credit cards everywhere. Um, so, uh, why these things? And is it a is it a good idea to keep these around?

Or is this good currency? Well, it's definitely convenient. So convenience is a big issue, right, you know, and we've even seen people resist things that would be more convenient for one side of the equation than the other. Like in the United States, we have dollar coins, but there's there's a big resistance to move to the dollar coin. Uh. It turns out that if your government does not give you the does not does not remove the option to stick with the old system. People will just stay on

the old system. You pretty much have to stop making and circulating dollar bells if you want people to just rely on the dollar coins. Seems aren't there like huge basements full of dollar coins with armed guards right now? They are just sitting there because nobody wants them. Why would you need an armed guard if no one wants it? Well, clearly somebody would want items a pretty big waste of resources, Like,

here's the stuff nobody wants. Guard it with your life. Well, there are different there are different ways of saying how it's wanted, though, right, because clearly people would want dollar coins if they could get them easily. Um, and if if they had no other choice that you can. You can still always take them to a bank and get them redeemed for the paper cash that you do want. Doesn't want seems to mean people don't want to carry

them around in their pockets. They don't go. Coins are heavy, they're they're cumbersome, they make little jingling noises when you walk. It's you know, dude, I like to jingle jangle when I look. That's why I wear spurs and carry pocketfuls of coins. It's just more of the more science facts that we are dropping on you guys today. Uh. Well, to answer your question about you know, the you know, why would it be why why should we not want cash or physical money? Uh? So it's convenient because we

can easily hand this stuff over to someone else. Uh, there are all There are also some tax reasons I can get into. But um, you know, the downsides are things like, well, currency is something it's since it's physical, it can actually be damaged and even destroyed or stolen or stolen. Most people don't know this, but I think the federal uh you know, the mint, the U S Mint, they spend a lot more money um or actually I don't know if it's the mint, whatever produces dollars and

coins they spend. They spend more money producing paper money than than coins. And that seems counterintuit because like coins, so they're made of metal. You'd think that that's got to be more expensive than paper. But the coins stick around much longer, I think, so they don't need all that fancy like digital ink and water marks and crazy little electronic strips and all that sort of stuff that goes into the paper. Yeah exactly, Well, it's it's a lot harder to counterfeit a coin than it is to

counterfeit paper money. So there are a lot of reasons why it's easier to make them. The paper money is also just it's flimsier. It just dies sooner. Yeah. Sure, it's like it's your pet sea monkey instead of your pet dog. You know. It just yeah, it only lasts a short while and then and then it needs to be replaced. And in fact, that happens all the time.

And and that's one of those things is that if it's going to cost you money to produce and circulate the currency, like if if it's going to cost wealth to do that, then that's not an incredibly efficient system. And in fact, you know, and your research you found that it cost uh was in it cost two cents to ment a penny and more than ten cents to mint a nickel, which means you're losing money making the currency and uh and so you know that that's a

big drawback. And then counterfeiting, of course huge drawback. If if the money you make the currency you make, rather if it's replicable, then people can make counterfeit versions of it, and then that either ends up devaluing the currency overall, or someone's just defrauding everybody until someone gets caught. If you think about just all the hoops we jump through

just to make banknotes hard to copy. I mean, like we're putting holograms on things, or maybe not us, but you know some some countries, well not the United States, some countries they put holograms on their money, holograms. It's I mean, this is not a Star Wars action figure packaging materials, exactly, why is there a hologram on this?

And it's because they're always desperately searching for a way to make these things harder to fake, right, Yeah, you have to stay ahead of the counterfeiters who turn out to be pretty you know, crafty people. So things like water marks and the micro printing stuff that's really difficult to replicate on at least a you know, a small scale.

You usually have to have a pretty you know, sophisticated operation to be able to replicate currency in a way that will actually fool people, right, and also to make it affordable. I mean, if you're spending way more money than you would just you know, going out and buying a dollar from, right, it's spending more money than you would like, or you're spending more time and effort than you would if you just went out and got a job. Then you'd be like, why am I? Why am I

doing this thing? Where it's like it's like the Supervillains, where like, you know, your plan is so inefficient. If you can make more money investing in coffee beans and just get like a franchise of a fast food restaurant or something you're gonna be, that would have been I would have been a really boring episode of Pinky in the Brain. Yeah, well I'd still watch it better than most stuff anyway anyway. So yeah, I mean, so we've got the counterfeiting problem, We've got the fact that it

costs money to create and circulate. How about this, it's uh, if you'll ever seen an armored car, Yeah, those are big, they're intimidating on the road. Yeah, you've got to think that these things are not cheap to operate, and yeah, they're not cheap to build, they're not cheap to operate, they're not cheap to maintain. Right, So somebody figures that they are going to lose less money paying these armored car operators than they would if they didn't go through

all these precautions. So what what would we say physical currency is easy to steal? Yeah, yeah, it's easy to steal, and it costs money to move it around like in bulk anyway. You know, if you're talking about a few dollars, then obviously it's not that's not an issue. But you're talking about lots and lots of dollars, like like the amount of dollars that a business gets within a week or two weeks or whatever whenever the armored car comes around.

Not that I'm paying attention, Uh, don't put me on a list. Wouldn't it be great at that scene and heat where they bust open the armored car and it just all these cowry shells pulled. Yeah right, that would money? That would be That would be pretty cool. So yeah, there there are reasons why why cash is is problematic. Right, it's not it's not an ideal means of of of exchange in the sense that it's actually costing you money

to keep it going, to keep the system going. So that kind of leads us into the discussion about the cashless transactions, and uh, there are a lot of cashless transactions that take place all the time. In fact, There are a lot of huge cashless transactions that take place at the corporate level, where you're talking about wiring money. Essentially,

you're wiring the promise of money between companies. But on the smaller level, like on the personal level, we're getting into a lot of cash less payments, whether that's with a credit card or debit card, or with something like an e wallet that you might have as part of your smartphone if it hasn't enough c chip, which stands for near field communication. I think even a check technically

counts as cash there you go to. Yeah, not as convenient because you're still carrying around a whole bunch of home but but near field communications stuff, I mean, that's kind of interesting. It's the this little radio transmitter that's inside um, your your smartphone if you have a smartphone with NFC enabled device in it. Uh, and it only works at very very short ranges, so it's not like

you are broadcasting out your payment plan or whatever. As soon as you walk through the door to buy, you know, cheetos. But you wouldn't accidentally pay for something, right you were just by walking through a store and be like, exactly, you know, why did I buy five copies of Time magazine. You're right, Yeah, you wouldn't have to worry about that.

What would happen is that, you know, you would get rung up at the cash register, just like you would if you were using any other form of payment, and there would be a little pad there for you to tap a phone or or whatever. You could have a tablet that has these two I have both. I've got a tablet and a phone that both have NFC in them. And uh, normally there's some form of verification that you have to enter before you can actually make a payment.

So it's usually a pin and that you have to enter as well, because you know, they people worry like what if someone just came up to you and uh, what if your phone accidentally tapped against something? Would you accidentally pay for something? No, you have to actually actively say I'm going to pay for this with this method some kind of digital signature, right yeah. Yeah. So once you put that in, then the transaction is complete. Your

the money is deducted from your account. And the nice thing about a lot of these programs, like the Google Wallet programs a great example, just because it's one of those that has a lot of the features built into it. It has things like coupons built into it. It has a loyalty program stuff build into it, so that if the vendor uses Google Wallet, if they accept this form of payment, then you can automatically not just pay for whatever it is you're getting, you can get those extra

rewards that way too. Like you get the coupon discount automatically applied, you can get the loyalty visit automatically applied. And uh, it means that you don't have to manage that stuff on your own as much. Um there are a lot there are people who worry about it. There's worries that, you know, you might be able to hack a system. It's a little challenging because again it's near

field communication, but the security is always an issue. And then there's just a fact that not that many vendors offer this right now, especially in the United States, and uh, some vendors are um reluctant to enter into it one because there's not a standard version of this that's out there that everyone's using yet, right, So so the vendors then like, well, then which one do I go with? If I support one, is it going to support the other? Uh?

The other versions and if it doesn't, then you know what percentage of my of my customers are actually gonna be able to use this versus the ones who are like, well I would use that, except I have a totally different wallet. Sure. Yeah, it's not as clearly pretty and desirable as a cowry shell, for example. So yeah, yeah,

it's it's it's a little more complex. So and and also it just costs money to throw to put those systems into place, So vendors have to have to believe that it's more valuable to offer the service than the cost it would it would require them to install it. Right. So if they're like, yeah, I could install this, but the number of customers I get who would use it would would not even justify the cost of installing it,

then they're not going to do it. One thing to consider is, uh, I don't know if there's been any research in in this area or not, UM, but surely there will be certainly market research UM to find out if if the pain of paying thing affects digital payments, right, because that seems to me like that could motivate vendors to adopt the system of they they if they think your buyer doesn't feel the pain of paying by tapping the phone in the same way he or she does,

by removing the money from the wallet right where where you would you would get that. Uh you know that that spontaneous purchase would happen more frequently if people weren't thinking, oh, I have to take some of my dollars from my wallet to do this, and now I have fewer dollars in my wallet than I did when I walked in here.

I mean that there's something psychological to that. There is, but i'm you know, according to an extremely small and unscientific study of a few of my friends talking about it, so not scientific site, this is anecdotal, but that's right. Yeah, you know, it's some people, I think, find giving up

the money a lot more uh uh weighty. And some people check their bank accounts every day all the time, once every few hours even, and make up crazy spreadsheets for that kind of thing, and therefore have a bigger problem giving up money digitally because they're like, no, every time I swipe a credit card, I get a notification on my phone and I'm aware of it. If I have twenty bucks in my pocket and I spend it, then I just get cool stuff. Well, and then again

that brings us to the tax thing as well. That's one of those other things. I I even hesitate to bring it up, but I know people who like to do a lot of their transactions in cash because it's not it's not there's no trace of it. Mafia friends, Uh, I will say that. I will say, they're in a family business. Why are you, Joe, don't go digging where you don't want to find stuff? Okay, you don't. You don't want to take off the renaissance fair mafia. I

can tell you that they have quarter staffs. They are serious. They may wear tights, but they are they are tough people. I can't say that, actually no, but there are there are plenty of vendors out there who, like I have run into vendors who will tell you that the price for something is one thing for cash, but another thing for a card because again the card leaves you know. They're like, well, I can't there's no way to cook

the books. If there's a if there's a record of the transaction, but if it's if it's cash, then who knows what happened? And also if you know, for a small independent businesses like I'm sure that people have noticed that a lot of coffee shops and etcetera will have have a no cards under five dollars because of the because of the fees that they're charged by the credit

card companies. Which is another problem with the entire digital cash thing is that you know, most of these things are just getting more and more complicated and involving more and more third parties, four fifth parties. Right, you have transaction fees that that that either one part of the

one of the two or maybe both parties has to pay. Uh, And thus you have just you know, complicated matters even more so, um, there could we could come to a point it's it's it's feasible, or at least it's it's something we can imagine getting to a future where physical currency no longer exists. But there there seems to be a psychological barrier to that as well. You know, people like the idea of I say people, some people like the idea of being able to hold a physical representation

of their wealth in their hands, right. I mean there's some people who don't even use banks. They put all the money under the mattress or yeah, definitely, and then there's uh, I mean there's the example I gave, which is that we all secretly geet down would love to be able to convert all of our wealth into coins so that we could swim in them. Scrooge McDuck, by the way, don't actually try to do that, because if you dive from like twenty feet into a pile of coins,

really you're just gonna go splat. Yeah, it's not if even if you managed to get under the coins, I would think the weight of them would crush you. Well, I can tell you from personal experience that it is not nearly as much fun as screwch McDuck made it look like in in duck Tails or any other cartoon that they showed up in an others sad, sad fantasy

of mind dashed by reality. But anyway, one one of the other things we were going to mention, just very briefly to kind of wrap this up, is the idea of what if we moved into a future where, because we have solved problems like where do we get our energy from? And where do we get our food and

water from? Let's let's assume we've we've entered into this world where three D printers can make anything that we need, and that essentially all of our needs and wants are catered to because we have technologically solved the problems in that world, Does money even make sense? Well, it seems to me that wealth is a product of scarcity. Yeah, so there's no scarcity right Well, I mean so if you just imagine, what are the core ideas behind economics,

it's supply and demand. If you're living in a world that is infinite supply, Um, how do you, I mean, what role do is wealth even play? It makes It's it's hard to imagine because I mean it's even in even in Star Trek, there are still wealthy people. I mean, and hypothetically that society has done away with with money and clothes that aren't jumpsuits, but but you know, but there's still people who intrinsically are running around with I

don't know, fancier spaceships or right. Well, that it seems to me that even if everybody has everything they could ever need and there's just just plentiful resources, lots of people are still gonna want to maintain their status, so they'll seek I think, uh, symbols. You know that that wealth will become a thing about ways of buying things that show your wealth. Essentially, it's a you know, it's

just a circular feedback loop. Well, I mean the example I gave before we started talking on the podcast was, well, we were still going to have artistic expression, right, We're still gonna have people who can who can create things artistically that other folks will find value in and that it brings them some sort of emotional response, whether it's joy or sadness or whatever. And if you're living in a world where the artist doesn't need anything, we don't

have the poor starting artist anymore. Right, that that trope is gone because all resources are plentiful, then what is there? First of all, is there incentive to create art? I mean I would argue yes, because as someone who considers himself an artist with a lower case A, uh, that that what what drives me to create art is not uh not the hope for monetary gain, but it is nice. But if you remove the incentive, will people still create art? And if they do, then is there any form of exchange?

And the and I said, well maybe it'll come down to Lauren ends up making a beautiful sculpture and I make a gorgeous painting, and I really like her sculpture, and she really likes my painting. We decided to trade the sculpture for the painting because there's no other thing that we can really do anymore, because you know, money doesn't really matter. Other resources don't matter, which means that we get back to bartering all the way back to

what we started with. Yeah, because I would hope, I would think that that everyone would in that kind of situation create art or invent gorgeous new things of one value. I can imagine the currency of the future is clearly the most beautifully embroidered jumpsuits. Right. Well, I was thinking that Lauren would make a statue of a five foot two tall woman killing a mammoth, and I would make a painting of a guy painting a cave wall, and we would exchange, and the gods would tell me the

secret of creating space fire. In fact, can it's gonna it's gonna be it's gonna be like the Star Wars crawl. It's gonna be really small text Well, anyway, that that's kind of it brings us full circle, but it also brings us to a close on this discussion about the cash less world and what cash represents and what we can expect from the future. Uh, I'm I'm curious to see how many countries start to move more and more toward a cash less world and uh and whether or

not the various people's will accept that. Uh. It's I'm genuinely curious. I can see us going just from my own personal behavior, I can see us going more and more cash less, but I definitely see resistance amongst certain

members of the population. Anyway, if you guys have any anything you want to chime in on with this discussion or even other discussions, if you have suggestions for things that we should talk about in future episodes of Howard Thinking I highly reckon and you get in touch with us. You can go to f W Thinking dot com for the main website, and there you're going to find links to everything. We have links to the video series, to the to this podcast. We have links to our blogs.

We've got links to all of our social media so you can get in touch with us via Twitter or Facebook or Google Plus, lots of different ways of getting in touch with us. Let us know what you think. Thank you so much for listening, and we will talk to you again really soon for more on this topic and the future of technology, visit forward thinking dot Com, brought to you by Toyota Let's Go Places,