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While having a meal the other day, the topic of “what a post-capitalist society will be like” came up. But we did not have the opportunity to discuss it in depth due to lack of time. I made some vague comments like, “I personally feel that such and such would occur because of technology,” but I was unable to organize my thoughts the way I would in writing. Luckily I happened to be flying to Israel and the one-way flight of 20 hours gave me time to collect my ideas.

Money was created as a medium of value exchange

Before moving to the subject of capitalism, I would like to begin by looking at money and why it was originally created.

Money was created in order to serve as something that could be used to exchange that vague concept known as “value.” Money can be said to serve the roles of storing, measuring, and exchanging value. In order to avoid complicated definitions, let us define “value” as a resource needed by other people.

It seems that originally money was developed as a system to compliment the inconvenience of bartering. Since food quickly goes bad and could not be transported long distances it was important to have some medium for exchanging value. The medium of value exchange has changed substantially over time and has taken the form of shells, metal, and paper during different periods.

For now let’s say that if you could trade money for someone else’s important resources it enabled you to quickly make exchanges when you needed. Money was convenient because you didn’t have to worry about it spoiling and it was relatively light to carry. The oldest form of money that has currently been discovered is shells dating back to 1600 B.C. Money has been a part of human civilization long before the development of capitalism.

Money takes a leading role in society (capitalism)

Money, which has had a long history, did not always have as large a presence as it does now. In previous epochs humans placed more value in God (the church) or kings (social position) instead.It was 300 years ago, during the 18th century, when money first took center stage. This in turn led to a dramatic increase in the speed at which society changed.

A number of revolutions occurred, concepts such as freedom and equality spread, and individuals became able to freely make decisions about how to live their lives. At the same time, the Industrial Revolution took place and there was a transition from agriculture to manufacturing as the dominant way of life. The general classification between people became workers, who traded the value of their labor for “money,” and capitalists, who used “money” as capital and owned factories.

Meanwhile the influence of social status, such as the aristocracy, was fading due to the Glorious Revolution and money–the resource for building factories–became incredibly important. Money also became extremely important for laborers, as the means of subsistence.
This led to a power shift between “social status” and “money” and money assumed the primary role as the leading actor in society (capitalism).

In time money went from being a method to the purpose

I believe the following explanation of capitalism’s development is rather extraneous so I have tried to be brief, but try to get a sense for the profound way in which people’s relationship with money changed during this period.Originally, money was a “tool” for carrying value.
However, as money became central to society and people began to consider how to provide value many realized that it was more efficient to find ways to derive money from money.

Rather than hire labor to manufacture products to sell on the market in exchange for money and then use the money to purchase something, it was clearly easier to earn an income from money itself. You will understand this point if you consider the size of today’s financial markets.

We can see that money, a tool for exchanging value, began to become disconnected from value. The creation of schemes such as securitization and being able to sell money as financial products accelerated this process. With greater securitization, the separation between consumption in the real economy and the system in which it is only money itself that circulates continues to advance.

Increasing money, which was created as an efficient means to exchange value, became the end in itself. The term for this is “making a method more important than its purpose”; however, this was a natural development when one considers the importance of money in capitalism.

The birth of IT further advances the diversification of mediums

The creation of new technologies like IT cannot help but influence the way humans think. For example, along with “money” as a medium of value, we must also include methods for recording the written word and for communication.Until then paper had been the primary form of recording writing. The development of IT enabled humans to record and freely transmit text electronically so that paper become just one of multiple alternatives for recording written information. Looked at another way, one could say that the dominance of paper fell dramatically due to the emergence of IT.

Furthermore, IT is also a technology that enables value to be exchanged electronically, which created the potential for “money” to become just one option of value exchanging mediums.
When there is only one method of achieving an objective it is best to thoroughly master it. The situation changes, however, if there are multiple methods to choose from.

Let’s consider the example of selling a product. If the only sales method is retailing through stores, the position of entities like wholesalers and supermarkets becomes very strong because it is so import to sell through as many stores as possible. In such cases, it is more logical to focus one’s resources on being able to display one’s product in a monopolistic manner in many stores than to invest in improving the product’s quality. On the other hand, if you are able to sell your product to consumers directly through the internet the product itself becomes more important. The internet enables consumers to compare various items and purchase the cheapest, best quality product. When the means become more diverse what people concentrate on changes.

The above example also applies to mediums of value. If it were to become possible for people to exchange value in other ways besides the currency now issued by national governments then people would be able to choose the most convenient medium of exchanging value for themselves. The medium would be different depending on the person. It might be, for example, a currency issued by the country, points created by companies, a cryptocurrency like bitcoin, or a direct exchange.

However, due to the tendency for the means to become the purpose, it is likely people would begin to move away from “money,” as a medium of value, to new sources of value.

People would be able to use multiple channels when they trade for other types of value if value were maximized. “Money” would be just one form of value in the way that there are multiple channels for selling products.

For example, imagine there is someone with no money in the bank but who attracts attention by having over one million followers on Twitter. If that person wants to start some kind of business they can quickly attract followers and raise money through crowdfunding. If there is an issue they cannot resolve he or she can utilize the expertise of followers.

Someone like this can take advantage of “the interest of others,” which is difficult to convert into currency, in order to exchange for other types of values like human resources, funding, and information whenever he or she wants. While opinions may differ regarding which is better, having $1M or one million followers, it is clear that the methods for measuring, holding, and exchanging value have become more diverse.

From capitalism to the value principle model

How will the economy change by diversifying mediums and shifting focus to maximizing “value” (the root of capital)?In the current era one can say, “money = capital,” but by maximizing the basis of that value one would be able to employ a variety of means to store and exchange value. For this reason, it is likely that business would be transformed.

For example, Facebook’s acquisition for $19B of WhatsApp, a company with yearly revenue of $20M, appears too expensive when looked at in terms of capital. However, the deal could be considered reasonable when one considers its value as an infrastructure that supports the communications of four hundred million people around the world.

Although there is currently no structure for converting WhatsApp’s value into “capital,” it is a matter of time until it appears. The “value” of Facebook’s close to $180B market capitalization is derived from supporting a social graph used by 1.2 billion people. I think paying $19B makes sense when one looks at the basis of the capital that comprises Facebook’s value.

Take Google as another example. Google’s market capitalization is $400B. This figure is greater than the market valuation of the entire Japanese IT industry. With total revenue of five $50B for 2013 and profits of $10B, Google’s evaluation feels quite expensive when just looking at the numbers (there are Japanese companies that are bigger than this).

Google accumulates data through its search engine, Android, and YouTube and has the means to convert this information into real profits through its Adwords advertising system. One cannot include information (server logs) as a resource using current accounting standards, so I feel there is major discrepancy when we consider Google’s scope in terms of PL/BS and its influence worldwide. Google is moving in the direction where information as “value” and profits from revenue are the same thing only measured in different units. I think their amount of information would be worth approximately over $200B (which they could raise by increasing advertising opportunities and billing exposure). If it becomes possible to intentionally regulate the way that information is converted into capital, the company’s true size would be even more gigantic. Capitalism is a system in which capital controls business, but in the case of Google the situation is more akin to business controlling capital.

The two previous examples concern IT companies, but in my opinion the classification “IT industry” will disappear in the future when every type of device is connected to the internet and the technology permeates every industry (because everything will be part of the IT industry). This is likely to happen in the near future with Google and Apple having recently entered such fields as television, cars, glasses, satellite technology, robotics, and consumer electronics.

Through IT, it is possible that data will be recognized as a “value,” in addition to money. I think it will be an interesting phenomenon to see how these companies, whose main “value” cannot measured in money, develop.

I will tentatively call the new system that will develop as society transitions from capitalism (where money is central) to a social system in which “value” is difficult to convert into currency due to IT “the value principle model” (a simple name).

The boundary between the government and the economy becomes blurred

Looked at solely from an economic perspective, a change in the unit of value would not lead to a major transformation. However, when we expand the range of application to society as a whole, there most likely would be quite an impressive reshaping. For example, one comes to realize that there is no reason for a distinct separation between government and the economy when sees things from the perspective of value.Market economies stimulate the appetites of humans and can be considered an economic system designed to support people that “want to live a better life.” The methods of this system are money and markets. The economy’s role is to improve people’s lives.

On the other hand, democratic government is a structure designed to represent the entirety of dissatisfied voices and make decisions in a way in which everyone can agree. Its methods are parliaments and government administrations. The government is not designed to improve the lives of any one certain group of people but to help improve the lives of the entire population.

We can think of society today as a balance between the market economy and democratic government. Democratic governments are responsible for the areas in which market economies are bad at dealing with, while the market economy is entrusted with the spheres that are difficult for democratic governments to provide leadership for.

Examined from the perspective of value, however, the government and the economy simply have different approaches and their activities can be classified as the same.

This point is easy to understand by looking at social business. This proposal was made by Mr. Yunus of the Grameen Bank. Mr. Yunus wanted to eliminate poverty in Bangladesh and, by establishing a philanthropic organization that was sustainable, he was able to help millions of people escape poverty without relying on donations or government assistance. Poverty is normally a problem dealt with by the government. However, the bank discovered a solution for poverty through a business model, which is part of the economy (Yunus went on to win the Nobel Peace Prize).

Google and Facebook are currently investing in a variety of ways to provide free wifi to people in countries that still do not have the internet. Although expanding their businesses is one factor for these activities, what they are doing is of immeasurable value for the billions of people who live in regions without IT infrastructure.

Providing value and economic success are closely linked with the value principle model so that providing value to more people will inevitably be linked to the public interest. On the other hand, private organizations that want to help bring about such political goals as poverty reduction will be able to do so in a sustainable way as businesses without the need for donations or tax money.

If “public interest” comes to be desired in economic activity and “sustainability” comes to be sought in political activity then the boundary between the economy and politics will gradually become blurred. The value principle model is a way of thinking about what that boundary should look like. In this sense, maybe the term, “public interest value principle,” would be more correct.

The main characteristics of the value principle model

I think that a world transitioning from emphasizing capital to value will have the below characteristics

1) Recurring objectives

One can say that the goal of democratic government is representing the popular will, resolving the complaints of the population, and balancing advantages and disadvantages. The means for doing this are parliament and elections. However, at a certain point one gets the impression that elections and political factions, which are means, become more important than the original objectives they are supposed to work toward. This phenomenon closely resembles the previous discussion of how money goes from being a means to the purpose.

In a world where value is the primary focus there would be a variety of solutions for solving social problems without the need for elections. Crowdsourcing activities and business enterprise are perhaps two possibilities. The value principle model would raise the importance placed on providing value and would focus resources on the original objective.

2) Widening alternatives

The Evaluation Economy and Sharing Economy, which have attracted recent attention, operate by rules that are different than those of capitalism. If they continue to spread, we will be able to choose the form in which we want to hold value and the rules we want to use to exchange it. There may be people that wish to continue exchanging value according to the current rules capitalism while others, I believe will want to live under an economy that operates by different rules.

What is important is not which set of rules is superior, but which is a better fit for each individual. It will be analogous to the way we choose our occupations (e.g. should one become an engineer, a writer, etc?). When you consider that our range of choices has expanded throughout time, a world under the value principle model would further expand the extent of individual choice.

Ideologies have an “expiration date”

In this discussion, I think that for 20 to 30 percent of the population in the countries that can be deemed “capitalist” the transition has not been welcome, while the system can be said to work for the other 70 to 80 percent. In the period when social status was paramount 300 hundred years ago, the social system was highly advantageous if you were born into a noble family or were a samurai, but was a cruel one if you were born a slave or worked the land.

It is frequently the case that periods when social systems change dramatically overlap with the emergence of new technologies.It became possible to supersede time and share knowledge with the creation of printing technology, which led major social changes. The invention of steam power and electricity enabled humans to harness energy beyond the capabilities of the human body. The result was the Industrial Revolution, which led to capitalism.

There is no doubt that society under capitalism/democracy has been wonderful compared to feudalism, during which the king decided everything; nevertheless, a variety of problems have appeared over the many years since its emergence. I think the decay of institutions visible in recent years demonstrates how societies outgrow their institutions with the passage of time. In this way Ideologies have an “expiration date,” and one can assume that the arrival of new technologies hastens their obsolescence.

With the arrival of a society with a large number of choices, I believe the next “expiration date” will be at the most 30 years. Pastoral farming lasted several tens-of-thousands of years, feudalism lasted several thousand years, and the current social system has been going on for over 200 years. The next paradigm shift will occur due to the emergence of IT–although I think its duration will be much shorter than previous epochs.

The value of money and information will change places in the “Information Economy”

Let us expand the scope of our inquiry and consider how society will change due to the further development of the value principle model. In the early period diversification will advance due to increased choice, but as technology develops further, “information” will become the form of value people concentrate on the most.In several decades the value of “information” will completely surpass that of “money,” and it is likely that the economy will centered on information itself. At the present it is impossible to do much without money even if one has information, but in the future it will likely be the case that you cannot do anything without information even if you have money.

Naturally, entities that control lots of information will have tremendous influence.

Facebook has been criticized for performing an experiment in which timeline information was manipulated in order to affect users’ emotions. This was only discovered accidentally through the release of a research paper. Normally we would not even be aware if someone was affecting what we view through our browser or applications.

Once technology greatly surpasses current human ability most processes will be able to be performed without human interference. At that time, few people will doubt the “answers” arrived at by computers with processing power exponentially greater than humans. The entities that will be in a position to overwrite these answers will essentially be those that can control value itself.

Ultimately, I think that entities that are able to manipulate the core of both money and information will grow stronger. The question for society as a whole is how will these entities control them.

Progress advances incrementally like a pendulum

When I spoke to Mr. Ogasawara in Awaba, he used the word, “pendulum,” to describe the world. I thought of the expression “action and counteraction,” but I think pendulum is easier to understand.

Like a pendulum, society moves smoothly as it moves in one direction but at a certain point it stops and starts to move in the opposite direction. It stops again when it reaches the end of its path and begins to swing back in the opposite way.In a society where those with absolute power make all the decisions, people that are unsatisfied with the situation create a revolution and democracy and capitalism are instituted. For a while things go well but then problems with the new system arise and people come forth with a different approach for solving the new set of problems.

We are now in a phase in which information technology is profoundly improving society but in several decades it is foreseeable that we will switch to a phase where we will need to resolve the problems that have arisen in a society where information technology is dominant.

I suddenly realized how human society slowly progresses in pendulum like movements that repeat in thousand year, hundred year, and decade-long spans.

 

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