Have you ever wondered why we still use money? These days when I see an armored truck outside a bank it seems like an anachronism.
Debt is personalized, but money is not. Why is that? We have bank accounts which are really just records in databases. There is no cash waiting for us at the bank. Banks actually hold only a small fraction of the deposits of their customers in cash. This is why the run on the banks in 2008 was so dangerous. The whole system is based on trust.
These days we have fewer and fewer cash transactions in our lives. Credit cards, debit cards, paypal and so on are basically just sets of transactions between databases.
Database transactions are fundamentally different from cash. They are frictionless, and can be carried almost instantaneously, any time, and anywhere. It seems strange that database transactions are more expensive to execute than cash transactions, when they would seem to have fewer costs associated with them (no armoured cars!), but that’s a topic for another day perhaps.
So cash is on the way out, and at the same time, the emerging global supply chain is creating a situation where someone can request a batch of products from a factory in China or elsewhere and have it shipped by air in a matter of days. People can shop online from home in their pyjamas, and demand from a group of people can be aggregated into an order which can be manufactured or assembled from the wholesaler, or even factory, fairly quickly. This is leading to a flattening of the retail value chain. This chain can only flatten further as 3D printing technologies advance and people can make sophisticated products in their own homes.
Direct, or almost direct, connections between manufacturers and consumers, and frictionless transactions of stored credits. What are the implications of these revolutions in how people purchase products?
A return to bargaining and barter! We already barter privacy for points on loyalty cards, but in future it will happen more explicitly perhaps. People have always bartered. A Christmas cake in return for a hand-knitted cap for the baby, and so on. But now we may have groups of people approaching manufacturers for special deals and for customizations of products (pulling from demand, not pushing demand as happens with services like Groupon). And when everything is paid for by stored credits, how long can it be before we have a kind of Peer-to-Peer financial transaction where we generate a sale to one or more people in our social network in order to pay for a different sale, and where multiple transactions in the social network are balanced against each other to maintain the financial equilibrium of the network. And if social networks can smoothly aggregate demand for sets of products, then perhaps we are moving towards a system where retail is driven by demand pull rather than production push. From an environmental perspective this should be very welcome, as fewer products will languish in warehouses or retail shelves, and fewer products will end up in landfill.