Matthew Pirkowski

@matthewpirkowski

Crypto Beyond Capitalism: The Rise of Distributed Valerism

An evolutionary survey of human value representation and exchange

Welcome to the first installment of a long form essay — or short book — outlining my macro perspective on how the emerging crypto ecosystem fits within the greater context of biological, cultural, and economic evolution. I intend to publish each installment weekly, over the next 3–4 weeks. Afterward, I’ll release the content in its entirety, with additional notes and research materials, in e-book form.

As each section is published, they’ll be added here.

Enjoy, and I look forward to engaging with all comments shared in good faith.

The great source of both the misery and disorders of human life, seems to arise from over-rating the difference between one permanent situation and another. Avarice over-rates the difference between poverty and riches: ambition, that between a private and a public station: vain-glory, that between obscurity and extensive reputation. The person under the influence of any of those extravagant passions, is not only miserable in his actual situation, but is often disposed to disturb the peace of society, in order to arrive at that which he so foolishly admires.
— Adam Smith, The Theory of Moral Sentiments

Capitalism as Emergent Morality

As he looked out the window of his mother’s small Scottish townhome, Adam Smith struggled to comprehend the implications of the social and economic transformations taking place around him. With each weekly delivery of the Edinburgh Evening Courant, it seemed that news of some novel invention, business venture, or revolutionary scientific paradigm cast dim flickers of light upon the hazy shapes of futures yet unwritten. These impending shapes and forces — emerging at the intersection of past knowledge and present innovation — plagued him each night as he struggled to fall asleep. Yet the ideas crystallizing deep within Smith’s mind reflected the structure of the shifting economic patterns within which he was embedded. And how could one sleep with such visions struggling to escape the strictures of one’s physicality? He felt a deep need to ground, within axiomatic bedrock, the processes overhauling the world at a rate once considered unthinkable. So he began to articulate the moral contours of an emerging industrial world, amidst its gestation. In this manner, Capitalism was born.

Students of history know Adam Smith as the author of The Wealth of Nations, and the man responsible for the theory of Capitalism. But fewer know that before he set out to articulate his theory — which outlined humanity’s creation, representation, and transaction of wealth in an industrializing world — he was a moral philosopher. As such, he wrote extensively about the behavioral patterns shaping human interaction. His primary concerns orbited the manner in which we discern and perpetuate templates for proper action (morals), and how those templates influence our perception of what holds value. Though many contemporary economists have lost sight of the fundamental connection between the domain of perceived morality and that of economic value, the question stood paramount in his mind. To Smith, people used their economic actions as proxies to communicate the emergent moral sentiment of humanity itself.

But why does the link between morality and economic theory matter? And how does it relate to the emerging world of cryptocurrencies? In this essay I will argue that after millennia spent abstracting away the fundamental connection between our representations of value and the underlying moral sentiments they express, we stand at the verge of explicitly re-introducing these moral sentiments into the marketplace via a novel technological toolkit. I will then present the case that this emerging toolkit opens a gateway to exponentially increasing humanity’s ability to represent, store, and transact value.

Like Adam Smith 200 years ago, we stand at the event horizon of a new economic world. It’s impossible to predict exactly what the new world will bring, but I believe that — informed by the evolution and limitations of the current systems we use to represent and transact value — it’s possible to articulate useful outlines of the economic and technological transformations upon the horizon.

Distributed Valerism: The Economic Frontier of the 21st Century

Everyone sees Mt. Crypto, but what’s happening beneath the surface?
“I am not apt to follow blindly the lead of other men. I have steadily endeavored to keep my mind free so as to give up any hypothesis, however much beloved (and I cannot resist forming one on every subject), as soon as facts are shown to be opposed to it.”
― Charles Darwin, The Life and Letters of Charles Darwin

Re-imagining an economic system capable of harnessing the potential of the Industrial Revolution required the sacrifice of many agrarian and mercantilist assumptions which were, at the time, taken for granted. Similarly, it’s quite likely that we’ll need to cast aside many of our ideological, cultural, and mythological hangovers from the industrial era of Capitalism in order to fully embrace the economic potential of the Information Age. By introducing the concept of Distributed Valerism, from the Latin valere — loosely translated as of worth” — I seek to establish a conceptual handle that maps more closely to the technological, cultural, and economic transformations upon the present horizon.

Distributed Valerism shifts economic focus away from concerns regarding the centralized management of ownership and toward the long-tail dynamics of value representation, storage, and transaction within a behavioral landscape adapted to the novel physical and game theoretic constraints of an information economy. Where possible, I seek to leave behind the dichotomous frame of Capitalism vs Socialism, and believe Distributed Valerism provides a pragmatic evolutionary framework in which to nest discussions regarding a balanced path forward. By describing the nature of the tectonic shifts taking place deep beneath today’s monetary and economic landscape, presently detectable in the form of seismic ideological rumblings and an early eruption of cryptocurrencies upon the economic and political landscape, we may begin to see — and hopefully understand — the tectonic flows driving evolutionary change at the scale of the collective human organism.

In short, if Capitalism represents our moral values by proxy of ownership transfer, either of physical resources, machinery, land, or generic monetary tokens, Valerism represents Capitalism’s extension into — and balanced transformation at the hands of — the Information Age. It is the process of making fertile and economically incorporating vast swaths of untapped human potential, at present left fallow due to constraints both historical and technological. Specifically, two primary transformations will alter and extend the assumptions of our current financial toolkit:

  • The encapsulation of an increasingly diverse set of human values and knowledge within the monetary system itself, via the increased expressivity and decreased transactional friction of decentralized value representation systems.
  • The ability to play novel economic games, previously inaccessible due to problems of collective action, and dependent upon distributed approaches to managing the game theory of economic trust across expanded time horizons.

By incorporating these characteristics into the engine of Capitalism, humanity will unlock new and powerful tools in its quest to increase overall wealth creation, improve its fair distribution, and decrease not only financial, but also political volatility over time. The initial shape of the cryptocurrency explosion already exhibits early contours that map well to this framework. But before discussing the specifics of present and future dynamics, I’d like to place the importance of Distributed Valerism’s primary characteristics in their proper context. Given this aim, I will first present an interdisciplinary review of the relationship between our species and the technology of money, then describe why the creation and incorporation of these novel monetary technologies is just as revolutionary as any technological innovation to date — perhaps more.

Ambiguity and the Meaning of Money

An image of a pipe is not a pipe, and a representation of value is not itself that value.
Everything we see hides another thing, we always want to see what is hidden by what we see. There is an interest in that which is hidden and which the visible does not show us. This interest can take the form of a quite intense feeling, a sort of conflict, one might say, between the visible that is hidden and the visible that is present.
― René Magritte

If we seek to investigate how our monetary representations evolve with respect to their underlying meaning, it helps to meditate briefly upon the present meaning of money. So, then, what does a dollar mean? We tend to get caught up in its functional uses, and therefore our folk conception of the meaning of money often stops at the transactional level of analysis. One may buy groceries, gas, and entertainment with some number of dollars. And in a sense, so long as this holds true, it doesn’t really matter what a dollar means to the majority of market participants. In fact, most people will probably look at you like you’re a bit touched in the head if you pose the question to them seriously; I’d know, I’ve been asking…

But I keep asking, because when one ponders the question for any substantial amount of time, the concept of money begins to seem rather absurd. These little pieces of paper we use as money — each covered in symbolic flourishes — have somehow come to represent the collective set of values otherwise trapped inside the skulls of 7 billion apes. Quite strange, indeed. Yet the US Dollar, and for that matter all other currencies, have much in common with the Magritte painting above: when you pause to think about it, they’re just symbols of the underlying thing most assume them to actually be. For example, if I were to ask you what the image above is, you’d probably respond with something along the lines of: “oh, that’s a pipe”. But of course there’s no smokeable pipe in front of you. It’s an image of a pipe that once existed in an artist’s mind, portrayed upon paper for others to see, and presently viewed upon your screen. In other words, the mental mapping between the image representing the pipe and a pipe itself is so strong that it practically disappears. This metaphor approximates the manner in which we consider the money we hold in our hands to actually be valuable, rather than to merely stand in as placeholders for value.

As humans, we keep many such invisible mappings — symbols — in our minds. Often, the mapping between the symbol and that which is symbolized remains consistent across individuals, but not always. The degree of consistency depends upon where the item symbolized sits upon the spectrum between the concrete and the abstract. The more concrete the item symbolized, the more probable that the symbol will retain its integrity when communicated between minds. A pipe, for example, is rather concrete, and therefore the essential qualities associated with “pipe” in people’s minds possess a high degree of interpersonal overlap, and a low degree of functional ambiguity. On the other side of the spectrum, we often use words like “love”, “hope”, “faith”, and “evil”. These words — due to their extremely high degree of abstraction and subjectivity — are less likely to map to the same conceptual representations across two individuals. Furthermore, it’s quite difficult to pin down their essential characteristics. These abstract word-symbols are therefore less amenable to encapsulation within a simple image or representative context. For example, we allow our artists to portray the concept of “love” more subjectively than we do the concept of a “chair”. We innately comprehend the subjective nature of love, yet reflexively recoil from ascribing the word “chair” to that which is not recognizable as a “constructed sitting place”.

With this in mind, it’s helpful to introspect one’s own conceptualization of money, and to identify where its symbols lie upon this spectrum between the concrete and the abstract. What’s being symbolized by the US Dollar? Is it concrete, or abstract? Is it a symbol of the United States’ military power, of the discounted present value of US economic potential, of the ability of an individual to exert power over others, of the value of a widget, of the worth of one’s actions, of the trust between strangers, of love itself? Of course, it represents some portion of all these disparate realities at once, and is therefore by definition more abstract than any given exemplar.

This implies that despite our unthinking daily transactions and the staggering amount of human energy spent creating, storing, and transmitting monetary symbols within present systems, the underlying thing that the symbol of money represents remains almost comically abstract. The underlying “value” money represents — as a symbol — more closely resembles the blurry underlying realities associated with concepts like “love” and “hope” than it does the concrete entities symbolized by words like “pipe” or “chair”. And yet, as blurry as the underlying landscape of value remains, its concrete representation via monetary symbols allows the collective human organism to self-organize into immensely creative assemblages capable of near-constant growth. Such a task is no triviality, and relies upon constantly re-balancing the needs of the individual with those of the greater society in which individuals live out their lives. And so money itself has grown, pervading nearly every experiential niche within our lives. We represent this explosive growth as a quantity of underlying value amounting to trillions of units of today’s abstract monetary symbols ($, ¥, £, €). Again, weird.

Given the power of monetary symbols to abstract behavioral value, why does specifying the relationship between symbol and value remain elusive? Why do our monetary symbols remain so detached from the more concrete notions of value in the everyday world of human actions? Why are their symbolic mappings more like those of “love” than those of a chair? It’s to these questions we’ll turn next week…

Thanks for reading! If you’ve found this content valuable, give me a follow so you don’t miss out on the next installment. There, we’ll dig further into the evolutionary substructure of value, in light of:
- Money and Utility: The Margins of Value
-
Evolution, Trade, and the Emergent Abstraction of Value

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