The Future of Money and the Future of Business
December 10, 2018
If you had told a Chinese man 3,000 years ago that Cowrie shells would be replaced as money he would have laughed at you. If you had informed an American Indian in the 1600’s that Wampum would cease to be money you would probably gotten the same reaction. How about your grandparents or great-grandparents? If you had told them in 1932 that FDR would seize all their Gold coins in 1933, and force them to take worthless Federal Reserve Notes in their place, they would have thought you were crazy. Gold and silver were the only legal money, according to our Constitution.
So why do people react this way when faced with change? It’s call normalcy bias. It’s also known as the Ostrich Effect. Often normalcy bias is seen when people face a catastrophic event. They refuse to believe it will occur, even in the face of solid evidence. For instance, “Our family has lived here for generations, and that volcano has never blown. Why should it erupt now?”
Normalcy bias is also seen in the “We’ve always done it that way” syndrome. While not a disaster per se, when people are faced with a disruptive technology that has the potential to change their lives dramatically, they tend to act the same way. “We got along for hundreds of years without the Internet. I can’t see it having much of an effect on my life.”
People often think of the word “disruptive” in a negative way. But a disruptive technology most often has positive effects – even as it disrupts people’s lives and makes them uncomfortable with new ways of doing things. The Internet was the first truly disruptive technology to impact our nation since the automobile. Some might argue that the airplane was more of a life-changer. But you could live without flying. Many still do so today. But the automobile, followed by other vehicles that used internal combustion engines such as the truck and the bus, changed everyone’s lives. Even the people who refused to buy one when they first came out saw major changes to their way of life as a result of automobiles.
Likewise, very few people were early adopters of the Internet. It was invented by our military (sorry, Al Gore) and co-developed with universities. That was Internet 1.0, and it was mostly used by scientists to share ideas with one another. Even the people involved with it every day had no idea that Internet 2.0 would become such an immense force in our society. Who could have envisioned a society where institutions established hundreds of years ago would either have to close down or significantly change their operations? Just a few examples are travel agencies, tax accountants, newspapers, bookstores, clothing stores, major TV networks, and even the US Postal Service.
When was the last time you called a travel agent to book a flight? You did it online, didn’t you? Did you use TurboTax or an accountant to prepare last year’s tax returns? Newspapers and the big TV networks lose market share daily. Over two-thirds of Americans get their news from the Internet. 205 Billion Emails were sent last year; the Post Office never saw anywhere near that many letters in any year. And what about shopping? It’s December, but if you go to your local mall today you’ll probably find it half deserted. Last year was the first year when more Christmas presents were bought online rather than in stores.
All of which brings us to Internet 3.0 - the Blockchain and CryptoCurrencies. I received an email today in response to an article I had written about the Blockchain. “Dear Dr. Barrett: CryptoCurrencies and Blockchain are new words for us old people. Hopefully we can find out more of their meaning and understand them! Thanks for your interesting article.” My reply to her: “I believe CryptoCurrencies are the future of money. Since the government can't get its act together, and the nation now borrows 42 cents of every dollar it spends, it's causing the dollar to lose value. Crypto can't be controlled by any government, which is why I describe them as the money of the future.”
That’s it in a nutshell. Governments have never been able to handle economies efficiently. Washington implemented crazy rules that allowed investors to buy $100,000 worth of stocks with only $10,000 in cash, causing the Great Panic of 1929 - which in turn gave us the Great Depression. Sometimes they have raised interest rates too much, resulting in massive inflation (remember the 18% CD rates under Jimmy Carter?). More recently, our government required mortgage lenders to give mortgages to people who could never afford to pay them off. This resulted in a crash of real estate, mortgages and the stock market itself – the Panic of 2008.
Whenever there has been central control of money (and as a result, the economy) disaster was just around the corner. We can see the result of a command economy in the Soviet Union, which broke up because of the economic chaos caused by Socialism. Apparently Americans didn’t learn much from that, because we just elected dozens of avowed Socialists to Congress. Richard Nixon, a Republican, instituted wage and price controls in 1971 – the first time since WWII. The effects were disastrous.
So why does it make sense for the government to exercise iron-fisted control over our money? It doesn’t. In 2009 CryptoCurrencies were created partially in answer to the government ineptitude that caused the Great Recession of 2008. The appearance of Cryptos was eerily reminiscent of the first issue of bullion coins (the Krugerrands) by South Africa in 1967. Prior to then, only governments and the wealthy could buy Kilo bars (31.15 ounces) of Gold. The one ounce Krugerrand made Gold democratic. Now everyone could protect their assets using Gold.
Crypto has also democratized money. Regular people determine how much a particular coin is worth, and how much CryptoCurrency they will charge for their products or services. The government has no ability to control the values of digital currencies, so they rise and fall the way any money should – driven by market forces. The more government controls anything, the less efficient it becomes. Markets are only efficient when they are free markets.
You may be thinking, “Since this is coming, I guess I’m going to have to figure out how I can get involved and profit from this huge wave.” Actually, you’re already involved. You just have to figure out how you want to participate so that you can take advantage of the huge opportunities in Crypto. If you’ve ever used Apple Pay or any other payment app on your cell phone, you’ve used a form of Crypto. Unless you live in a cave far out in the desert, you’ve used a debit or credit card. Those are digital transactions. Banks use a special Crypto coin called Ripple to transfer funds from one bank to another.
People often ask me, “Isn’t CryptoCurrency just smoke and mirrors? Isn’t it all just bits and bytes on a computer?” I tell them to look at the “money” in their wallets. Only about 6% of all U.S. money is printed on paper. The rest is “all just bits and bytes on a computer.” And the paper money has no more value than the money that’s printed. Neither is backed by anything. It all boils down to one thing: Trust. If you believe that your U.S. Dollar will buy you something of value, then you trust it. If you believe that you can buy a house, a pizza, a car or Gold with Bitcoin (as millions have done), then you trust it.
Just as CryptoCurrencies are the future of money, because they’re more efficient, and you can move value around the globe much more quickly; so also is the Blockchain the future of business. In the not-too-distant future, most contracts – especially international contracts – will be executed on the Blockchain. Medical records will be stored on the Blockchain. In fact, eventually all sensitive data will be on the Blockchain because of its superior security features. And those are just the tip of the iceberg. We’ll delve more deeply into the Blockchain’s thousands of business applications in a future article.
Friends, CryptoCurrencies and the Blockchain technology that makes Cryptos possible are coming of age. Be an early adopter. Early adopters of Internet 1.0 as it transitioned to 2.0 made millions and millions of dollars. The meteoric rise of the stock market in the 1990’s – ten straight years of unbelievable gains – were powered primarily by the Internet. While millions made millions, most Americans stuck with their grandfather’s stocks – GM, energy companies, and financial companies that went bankrupt – and missed the great opportunities.
You don’t hear the phrase “The early bird gets the worm” very often today. After all, unless you’re going fishing, who needs worms? But with CryptoCurrencies, the early adopters will be the early birds who reap the rewards. Don’t be “That guy…” You know, the one who tells all his friends in the retirement home how he almost learned how to invest and trade in Cryptos – and moans about what could have been.
He has written thousands of articles that have been republished in national newspapers and on hundreds of websites, and is a frequent guest on radio and television shows. His weekly Conservative Truth article (which is read by 250,000) offers a unique viewpoint on social, moral and political issues from a Biblical worldview. This has resulted in invitations to speak internationally at churches, conferences, Money Shows, universities, and on TV (including the 700 Club).
“Dr. Tom,” as his readers and followers affectionately refer to him, has a passion for teaching, as you can see from his ministry website (www.ChristianFinancialConcepts.com); his patriotic site (www.ConservativeTruth.org); and his business site (www.GoldenArtTreasures.com). Tom's friend Dr. Lance Wallnau wrote of him, "Tom Barrett is a Renaissance man with a passion for subject matter ranging from finance to theology and American history."
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