Virtual Currencies – Where Next?

Introduction

There’s a rush and excitement around virtual currencies.  Much of it is being driven by social media giants, and the expected virtualization of everyone’s wallet that NFC will soon bring.  But which virtual currencies have the greatest potential and do these pose any threat to the fiat currency regimes of the physical world?  This article looks at these topics in more detail.

Growth

“Measured in real-world U.S. dollars, virtual transactions total $2.1 billion a year in the U.S. and $7.3 billion globally, according to Sometrics’ founder and chief executive, Ian Swanson. That is up 61% since 2008.” ~from Bank Technology News.

Many companies, not just start-ups, are getting into the virtual currency market.  Facebook, Visa, American Express and even the big banks see the possibilities of owning, controlling and growing private digital currencies.         But what’s fueling this rise?  What is everyone getting so hopped up about?

Arbitrage –  The most obvious eye popping opportunity is exemplified by the rise and fall of BitCoin.  The graphic below comes from Wired Magazine, and shows the phenomenal investment opportunity you had for in 2010.

Tax Shelters –  Corporations, the rich, pension funds, hedge funds, and others with too much money are always looking for some way to hide their capital gains from the taxman.  What better way than to invest in digital assets using a virtual digital currency?  Talk about off the books.  But wait…. is that legal?  Well it’s not regulated, at the moment, but governments around the world are aware of this phenomenon and many are watching it closely.

Deflation/Inflation Hedge –  Particularly pertinent today, the potential for fiat currency de-valuation or appreciation in the face of mounting debts and uncontrolled deficit spending has given everyone with significant wealth an interest in finding a liquid, hedge to the big 3 ( dollar, yen, euro ).  Gold has been the traditional favorite in this spot, but with gold prices soaring and the threat of a bubble looming….the need for alternatives is strong.

Power – Less obvious on the radar is the sheer power that comes from managing an entire economy’s money supply.  A currency in isolation isn’t much.  The dollar without the U.S. economy is little more than paper.  What people find valuable in the dollar is the ability to buy goods and services from the single largest economy on earth.  For that reason the dollar provides a very stable store of value and means of exchange.  Similarly if a private virtual currency were to achieve such economies of scale…..say….dominating the global internet commerce business, then one could imagine the influence available.  Even large physical economies like the EU and Japan ( and their respective central banks ) would need to listen to the issuer of such a currency.

Who Will Lead?

So there are three types of virtual currency players in the market today:

The Wildcats  – These are the Ven and Bitcoin makers ( among others ).  They’ve built their virtual currencies and are asking people to adopt it.  It’s a hard road, with little incentive to convert your hard earned dollars, euros, or yen outside of arbitrage….it seems unlikely they’ll gain wide adoption.

The Closed Social Media Economies – With a captured market that has goods only purchasable using their currencies, these companies have modeled the very structure and incentives that make our modern physical economies today.  The challenge is extending this concept outside of Facebook ( or whoever ) to other sites.  But, the base is there.

The Banks – Ah….the banks.  Long ago, private currencies were common place in Scotland and the Wild West of America.  But when a bank went belly up…so did its currency….leaving all its depositors and paper holders staring down an empty well.  Banks have a ready made market in their dealings with the wealthy, corporations, hedge funds, pension funds, etc.

The Transaction Grabbers – This is PayPal, Google, and maybe Isis. They’re seeking a sliver of the transaction fee market from their mobile payment platforms.  But there’s no reason these players couldn’t introduce a virtual currency of their own.

So which group has the highest potential?  My money would be in Google Dollars and Goldman Sachs Coins.  This isn’t to say innovative new players won’t spring up, but the transaction grabbers and the banks already have the real audience needed to leverage a virtual currency and the financial wherewithal to make it a reality.  Clout is important here.

Challenge to Fiat Currency

Private digital currencies at the moment pose no threat to the world’s central banks.  But innovation has a way of challenging commonly held assumptions….especially ones as stodgy and long standing as government issued currency.  The internet has flattened the economic landscape and opened opportunities for global domination.  The digital, internet economy is owned by no country, no government.  There are no regulations guiding which currency an e-commerce site should use.  There’s nothing to stop someone from trying to capture this global digital economy and manage its money supply.  Therein lies the opportunity for those quick enough, connected enough and risk-averse enough to realize it.

Summary

Virtual currencies are still evolving, but growing fast.  Watch for the Transaction Grabbers and Banks to start making big moves in this space as near field communication and e-wallets become ubiquitous. Historically wildcat banking thrived in the lawless west….today it is thriving in the unregulated digital frontier.

How Will Tablets Impact Your IT Strategy?

Introduction

Gartner recently unveiled the top trends that enterprise IT should be strategically focused on.  One of those is the growing use of tablets in the work environment.   This post will take a look at the implications of increased tablet and smart phone use in the enterprise and hopefully deliver some insight into this trend beyond just a capacity replacement strategy for PCs and laptops.

Implications of Tablets and Smart Phones in the Enterprise

Let’s skip the obvious background and trend information and launch straight into the implications.

1. Printer exit strategy – Think of tablets as electronic paper.  That’s one of their utilities. Plenty of technology gurus have struggled to manifest using technology in lieu of paper only to be vexed by the utility, versatility and permanence of the 8.5 X 11 parchment of industry. So what’s different this time?  Portability, usability and eventually….sharing.  Right now it’s a little cumbersome to share notes, reports, and other virtual-papyrus artifacts with everyone in a room.  It’d be nice if my tablet recognized all those other tablets in the meeting auto-magic-ally and allowed me to share documents with them with little more than a button click.  A kind of permanent “LiveMeeting” or “WebEx” with RFID/GPS type sensory to recognize my location relative to the meeting schedule for that room.  It’s not there yet, but you can see it coming.

That alone won’t shut down your printers and get rid of the reams of stock in your office closet. Nor will it stop “Ed” at IKON solutions from frequenting your micro printing press to unclog the jam of a decade.  It will take you, the CIO, pushing, selling and implementing a bold strategy:  get rid of them.  All of them.  I’m talking about your printers.  People won’t stop using printers unless they’re gone.  Once they’re out of reach….they’ll find, and use the alternatives.

If you’re Hewlett Packard or Lexmark,  yesterday would have be a very good time to rethink your business model.  Kodak is foreshadowing you.  Tablets will get thinner, more collaborative, increasingly better at power utilization, and super cheap.

2. Embrace video/audio recording – Does anyone else see the paradox in someone with a tablet typing or writing meeting notes on his device when it’s fully capable of recording the visual/audio representation of that discussion?  Tablets and other devices can transform how your organization captures information and knowledge and shares that with others.  Written/readable documents don’t go away, but moving an organization toward a video/audio strategy should improve the quality of your work.  So much context is lost in written notes, documents, requirements, and emails.  How much does that quality cost?

Go with this strategy and here’s what changes:

  • A premium on presentation and verbal communication skills becomes essential.
  • This strategy augments your move to paperless ( number one above )
  • You need more storage and network bandwidth to capture all the videos / photos / audios:  think cloud here.
  • A tool to version, track and search this knowledge will be essential.  A wiki makes an ideal candidate.
  • Digital video and editing skills are now a key requisite on resumes.
  • Corporate policies need to be rewritten.
  • You might want to invest in pico projectors for everyone, but I think eventually tablet and laptop makers will make this a standard feature.

3. From office to work lounge –  Look at your desk/cubicle.  If you’re mobile and paperless…why do you need this space?   Work places are still relevant.  Collaboration and communication happen best in a common physical environment.  Working from home is like working in a really thick cubicle.  But to encourage the freedom and interaction that mobility and paperless bring to the office, the furniture and interior should be living, playful and open.  Many employers have already made this move:  mobile whiteboards, open touch down areas, couches, plants, and open space with lots of natural air are some of the interior elements that seem to work well for a work lounge.

The implication of work lounges and the increased interaction is that work is not work anymore.  People aren’t laborers, they’re….well….people.   Work, fun,  friends, co-workers, ideas, and profits will begin to blend.  This poses some challenges to stodgy HR policies and Tayloristic views of management.  Those who’ll succeed in this environment will be leaders, not managers and the org chart will flow around them in an organic way.   Corporate empire builders beware.

4. Office supplies / telecommunication equipment reduction –  In addition to dropping your printers and paper supplies you can now chuck your sticky notes, paper clips,  desk phones, and almost everything else in that closet.   Again, if you keep it around people will use it.  If you dump it, then they’ll get creative and use the tools they have.  Force the change.  Be the leader and save the company money.

Office Depot, Staples and others should plan their exit strategy.  Maybe they begin selling the work lounge concept and the supplies for that.  To date, I see little evidence they *get* this.

5. Killer App Coming……Plan for it -> Intersection of Identity / NFC – An earthquake is coming to the landscape of identity and access management.  Check out my earlier articles on this for background.  Your mobile device is an abstraction of you.  People will come into your employment with their credentials and data already digitized and ready to be transferred and used in your environment.  You’ll pull this data from LinkedIn, Facebook or Google+…….and using those same tools you can give them rights/permissions to systems on your cloud.    Kaboom!

In time this destroys internal LDAP systems, multiple id and password issues,  corporate HR systems and physical security access control.  These will be thrown into a social mobile nfc blender and become the domain of mega vendors.   The tech war to control the identity market will have no comparison to previous epic battles.  Those who scale this out will capture the lucrative enterprise IT market.

The implications are vast and will touch every corner of the enterprise IT market.  Plan for this NFC hurricane to shake out vendors through 2012-2013.   You’ll want to embrace those software vendors that do NFC, cloud and social identities for access.  My prediction?  Microsoft’s collapse is right around the corner.

6. Build vs Buy vs…….Download for Free.  The implication of app markets is that you now have a third generic system strategy:  download for free.   Any options analysis for system planning should consider this.   While it hasn’t happened yet, that i know of, we could well see a big vendor crash as a freely available mobile app does the approximate functionality for none of the cost.

The download for free option should also be used as a development strategy.  Maybe you find something that ‘kind of meets’ your needs.  Download, play, experiment, trial and get a feel for it.   Then, approach the developers of that app and say you have some ideas to improve it.  They might do it for free.

App markets are consumerization of IT writ large.  Our work force will be our IT department, and our IT department will turn into technology strategists, gurus, enterprise architects.  High caliber, well paid business technology talent will replace the ‘system analysts’ of today and IT departments will shrink.  Invest in your best.

7. Email’s days are numbered – Email gave us a huge productivity boost in the 90s.  Indeed it was the killer app of the first internet explosion.  But as we’ve moved through time its weaknesses are costing us.  The loss of context in email, as apposed to physical presence undermines quality of work.   Mis-understandings, multiple interpretation, cultural differences and poor writing lead to *email threads* that are a semiphore of poor quality.  Think ,just for a second, how many issues you deal with daily that revolve around clarifying what someone meant in a cetain email?   It’s astounding and it’s holding us all back.

There’s a better way, but it hasn’t been built yet.  Google’s Wave initiative is a bold attempt at remaking communications tools.   It’s close, but the email replacement will incorporate the cameras, microphones, and NFC chips that are built into tablets and smart devices.

Any CIO will want to watch this space and price out the latent, untapped potential cost savings in boosting communications quality across the enterprise.  Combine this vision with implication #5 above, and you can see the scale of change coming towards us.

8. POS industry: look out you’re about to be remade –  Tablets can be turned into POS terminals.  Enough said.  If you’re a POS vendor and you don’t realize this: what in the name of clam chowder have you been doing the last 2 years?  With NFC in 2012 an avalanche of slim, mobile terminals will usher in tap-pay while still accepting swipe pay.

Cash and checks will be digitized too and while the exact shakeout is still fuzzy to me; private digital currencies ( Ven, BitCoins ) are going to play a role here.  As I professed in my article about the externet ( internet of things ), the combination of an amorphous, unaccountable virtual world and the ability to pay with a tap lower and free the barriers to entry for those enterprising enough to believe they can challenge the global fiat currency oligarchy.  Nation states, banks, and the overlords of international finance will surely capitalize on this opportunity in some way.  Watch my blog for future posts on this….I’m still noodling on it.

9. Healthcare – Goodbye clipboard, hello iPad.  It’s all over the place, and doctors and nurses are demanding that all their software tools run on tablets.  FINALLY technology understands healthcare’s unique needs.  God bless Steve Jobs and the Apple-neers.  Steve, this was truly your greatest gift to the world…..not the iPhone.   You’ve given doctors a tool that will help them treat and solve the very problem that took you from us too early.  Rest in peace.

Taking this further, digitizing medical records and sharing that with patients is the bonfire lit by the meaningful use regulations passed in 2009.  NFC, smart devices and tablets will make the sharing part real time and collaborative.  People will really know and understand their health.

Summary

Surfing the waves of enterprise tablet integration has great possibility for the visionary C-level executive.  Will you be one of them?   My consultation to you:  tear up your current IT strategy document and vest your talent with the authority and energy to make these nine implications happen.   If you don’t…your competitors will.  You can be sure that some of the finest minds in IT are reading and following this blog.  Numbers don’t lie.  Be part of the revolution rather than a victim of it.

Social Networks…….or………Virtual Countries?

Introduction

We commonly refer to Facebook, Twitter, and LinkedIn as social networks.  But couldn’t these communities also be seen as virtual countries?  This article attempts to explore the latent power behind these organizations and how they might effect, maybe even challenge, the traditional nation-state.

Community or Country?

What’s the difference between a gathering of people and a country?  Boil it down and there isn’t much.  Maybe scale?  Maybe not.  Knights of Columbus claims 1.8 million members.  The country of Luxembourg….511,846.

What about Geography?  Countries typically own and occupy land…right?  Yep…but what about the Vatican?  Isn’t that a religous organization?  Why do the Catholics have their own Sovereignty?  Putting that aside…there’s plenty of organizations that own massive tracts of land.  What would prevent Facebook from buying up thousands of acres and calling it ‘Facebookville’?

How about taxes?  Surely countries differentiate themselves on this level.  But, alas,  they don’t.  As a member of LinkedIn you can join free, but more privileged services require you to pay.  This is true of the nation state as well.  Many citizens live free of taxes due to poverty levels, while others pay more than their share and receive better treatment in the eyes of the law.

How about the ability to issue currency?  Nope.  Many social sites now offer their own private virtual currencies.  If you’ve followed some of my tweets on @goldzee…it’s becoming clear that these currencies, unlike the early days with Flooz and others, may actually have legs to stand on ( the eWallet will enable it ).  Furthermore, through virtual currency exchange sites,  these virtual currencies may become convertible and trade-able.

Probably the one area where nation states can and do differ from online communities is the ability to enact rules that, if broken by a citizen, and found guilty of breaking them, the citizen’s rights can be curtailed by force.   Nation states can do this….I have yet to see an online community do that.  Yes, Google could take away your Google + account, but you’re not in a prison cell after that action.

Social Networks as bold experiments in redesigning the nation state?

The similarities between countries and social networks are sufficiently complimentary to ask the question:  are we experimenting with new ways to organize and manage a population of people?   In other words…is this becoming more than just sharing your experiences from last friday night and making new friends?   Is Facebook a challenge to the world order?

There is evidence for this.  Take a look at the recent Arab Spring.  I wouldn’t dare propose that Facebook, Twitter, or Google caused this event.  Such a view is absurd, but it can’t be doubted, as was reported by many media outlets, that the community of  people in the Middle East who helped launched this revolution found *means*, even refuge  in these social services.  An abstract concept expressed in a virtual world…exploded into the real.  That can’t be taken lightly if you’re a national government.

More evidence goes to population sizes.  Facebook claims 750 million members as of writing this article.  That puts them just behind China and India.  Freak you out?   It should.  Let’s say the average Facebooker has a salary of $10,000.00 a year.  That would make Facebook’s GDP;  $7.5 Trillion.  In third place behind the U.S. and EU.  The ability to influence, communicate and coordinate 750 million wealthy people ( I realize many be inactive users ) is nothing to be ignored.   If influence is power than those who wield over the Facebook world are emerging titans.  The population numbers point to how much people enjoy just being a part of Facebook.    There’s no tangible product here.   It’s not like billions and billions sold at McDonald’s.   People aren’t coming to Facebook for consumption or service.  They want to connect, communicate, and be part of something.  Something.

Cultural norms are something that identify a country.  But increasingly the world is becoming one culture.  The U.S. probably jump started the global culture thing, but a quick look at Facebook and Twitter shows how music, art, jokes, news, sayings, etc all flood through through their networked members at hyper speeds.  Indeed these social networks are owning the global culture.   Something that’s popular and gets tweeted gets re-tweeted exponentially and people talk about later.  “Did you see that video clip on YouTube…HA!”.   These things become our identity, our representation.   More and more the world’s cultural borders are melting and we see more in common with some fellow 3000 miles away in Kazahkistan than we do with our neighbor next door.   This is an unmistakeable challenge to physical countries today.

Ultimately though,  a grouping of people need a way to make decisions; voting in our physical countries.  We use representatives ( proxies ) today to handle our decision making.  But its been well known for decades that technology could circumvent the need to have politicians.  So is there a way to decide and bind those decisions in a meaningful way?  In some ways..yes.  You can ‘Like’ something and Facebook has opened up some of its website governance to its users.  But these are far cry from tough decisions like whether to go to war, send someone to prison, or enact a new law cutting healthcare benefits.  Perhaps governing a virtual world is less demanding than governing a real one.  But if we think these virtual communities could provide an experimental new society…then they’ll need to prove they have a way to manage these tough nuggets.

A real virtual country

So is there experimentation going on that resembles nation crafting?  Yes…..but probably only as a side effect to pacifying member wishes.   A real virtual country has yet to come.

But, What would a true virtual nation look like?  Let’s take a ludicrous stab at this in the hopes of provoking debate:

1. A reason for being –  A virtual country would need to have a reason to exist.  People would have to feel truly compelled to abandon their physical countries for an alternate new virtual one.  An example of  such a reason might be the current fiscal issues facing many sovereign countries today.  Such an issue, in its severest form, might be enough for people to say “We can make something better.”

2. Open and Beneficial for All –  A true virtual country would be open.  It wouldn’t be a place that was owned for the benefit of a few people.  It would exist for the entire community.  Facebook exists for it’s shareholders…like it or not.  It’s motive is profit for them, not the people on the social network.   A virtual country would change this by making each contributor a shareholder/owner of the network too.  They would participate in any costs and share any profit.

4. Economy – Like any successful country the virtual one would require a market economy whereby owners find means to pursue their interests and livelihood.

5. Justice and Rule of Law – A way to mitigate disputes and resolve issues  as well as a body of laws that provide guidelines for behavior are equally important.  We often take these for granted, but let’s face it….no one wants to live in a country where everything boils down to how many armed men you command.  Anarchy is the abscence of organization.

6.  Legitimacy – Any social network hoping to claim itself as a  country would need to seek legitimacy in the eyes of organizations like the IMF, United Nations, and others.  This is a massive challenge because each physical country would see some threat in the inclusion of virtual countries.  Would someone be  a citizen of Zimbabwe, Virtual Nation X, or both? Could a virtual country claim each member’s home as sovereign territory?  Would virtual citizens refuse to pay taxes to the physical country if they were doing so to the physical one?

Conclusion

Ultimately, today, the social networks are businesses; not countries.  They are seeking profit and they do this by satisfying their members desires.  The more views, the more advertising dollars, and the wealthier they become.  While each social network has some of the makings of a nation state….they aren’t directed on that purpose.   The virtual world is not tied to Facebook, Twitter, or Google.  It’s the other way around.  It’s probably more likely that these networks will remain just a new abstract organization of people, but it’s fun to think of what could evolve and that was the purpose of the article.