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The natural order of society is that the system dictates the system

Building on yesterday’s discussion of how Fintech firms will eventually become banks, I think a lot of people overlook the humanity in the network.  What I mean by this is that there is a natural biological function that takes place with innovation, and it reflects how humans relate to each other.  Humans need order to work in groups of more than 150.  This point was brought home to me when reading the book Sapiens by Yuval Noah Hurari (which I’ve mentioned before).  The tenet of this area of the book is that homo sapiens dominated over Neanderthals and other early human forms, because we could work together in teams.  To work together in large teams, you need some form of societal order.  As a result, we created shared stories about gods, demons and monsters, to allow us to all believe in one thing and work together.  His book goes on to assert that companies, governments, money, everything we see today as the order and discipline of our world is thanks to shared beliefs through shared stories.  Google, Tesla, the BBC, HSBC and more do not exist if you take this structure away.  Nor does government.  It is purely that we have created shared beliefs about how large corporations work, how tax works, how government works and how law works, that allows our societies to work as they do today.  Otherwise we would function more like monkeys and apes, and no colony of primates survives with more than 150 members as that’s the maximum space for an alpha male.  Above 150 members of a tribe and the tribe splits in two, so that two alpha males can manage effectively.  Apes cannot share stories and beliefs and, according to Yuval, neither could other forms of early humankind until the homo sapiens appeared.

Then there’s another piece that comes into this thinking which is biology.  Biological networks have an inbuilt system to protect the body from virus attacks called the immune system.  Now I’m no expert in biology – more of an expert in buyology – but my basic understanding is that if something new is brought into the system, it may fester a while before being inspected by the immune system and, if it’s not meant to be there, attacked by antigens produced by white blood cells.

So now I think we can apply this to the network of finance we have today, and we can see that the mixture of order in belief and acceptance by the system are the two key factors in play for Fintech, blockchain and anything else we care to discuss in our revolution of finance for the ValueWeb (did I mention that’s the title of my new book?).

We have built a financial system based on an ordered structure of shared beliefs that allow us to trust storing value with these institutions. We know that these institutions are trustworthy because they are backed by our governments.  We know they won’t lose our stored value because they have licences.  Even if we don’t know that, we know that these are the only companies today that store value effectively.

Now, we are going through the Third Age Revolution of the Network.  Everything has moved from land to industry to the network, and we are shifting into a digital world.  Each time we have such a shift of commerce and society, we have a shift in value structures.  The Agricultural Revolution created money and the Industrial Revolution created banks, as I blogged recently.  In other words, when we enter a commercial and social revolution, our shared beliefs change.

So now we throw into this mix a whole range of cells of new business models for sharing and storing value, loosely amalgamated in the term Fintech.  These new cells are going to be inspected by the shared belief system and either attacked or absorbed into the body.  The white blood cells of banking are actively seeing if they need to eject these Fintech firms through antigens or accept them as an evolution of the body itself.  It is fascinating to watch for, if they become accepted, you form a new body.  A new form of commerce for the new networked age, and this is what I believe is happening.

We created money, then banks and now value structures that are trusted, immediate, secure, cheap and digital.  This morphs the old bodies into new bodies, whilst allowing new bodies to also join the system and work alongside the old system.  Banks did not replace money, but augmented it; Fintech does not replace banks and money, but augments it.  It’s a fascinating space.

Meantime, returning to Sapiens, humans work as a biological network not just internally but externally.  We reject structures that don’t make sense and create structures that do. This is why I always return to reject Libertarian ideals of society.  Society without governments fail because they resort to anarchy, and I’m not an anarchist and neither is Johnny Rotten these days.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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