Strategic Crossroads - please read and contribute - we need input on this.

I don't see the rationale for arguing that "any work that supports the building of future federated structures is a distraction which is seen as damaging to the prospects of success." Success in what? I presume we're talking about recruitment, and that we're not having much success in that. Do we need a brainstorming session to hash this out?

My view has always been pretty constant, we need to enable federation from the outset. That means that a) there isn't a monolithic one-size-fits-all system pushed down from the 'top', like the (failed) NHS projects, for example b) gives the opportunity to some young genii to evolve better systems within the federated structure without breaking the whole thing c) pushes activity and responsibility nearer owners and users. d) scale, see the related: https://www.tkm.kit.edu/downloads/TKM1_2011_more_is_different_PWA.pdf

That, actually, doesn't prevent any current development work but it places a bigger emphasis on clear external apis, Oauth (ugh), monitoring etc. Also, I discussed this with ML about 15 years ago (Michael?) it almost certainly means that we (or someone(s)) need to think about exchangers or instances that have an exchanger role. One of the current (many!) defects of my development was 1:1 exchange where (supervised) many:many is needed. However this also poses some 'interesting' questions, for example, two currencies (ledger entries, really) called Leaf, one in London, one in Nottingham. Is that OK, are they the 'same' by default, since there's a naming authority etc. etc. Basically, here, we probably have to 'borrow' from existing concepts.

Ok, I'm done.

My position on this debate:

At the outset, it seems important to state that I am absolutely convinced by the argument of the 'Lean Startup' approach - that in building a project in a novel space, the most important attribute one can have is the ability to regard all activity as experiments, and to listen and learn from all feedback - to be prepared to change what you do, as long as you don't forget your aims. That to be rigid is to guarantee failure.

MISSION / SINGLE vs FEDERATED NETWORK

At the outset of this collaboration, Oli and Dave had agreed to build a 'UK network' - I joined that project, so accepted that as the purpose.

• In February, we spent a very successful afternoon building our purpose statement - from which the Mission statement on our website is derived:
  

  • "While we know that building a single network is not enough – for all sorts of reasons – we also know that building a great network that really works for all its members must be the start. So that’s step one. We’re going to work our socks off to make this network really hum along, so that each member feels it really works for them on as many levels as possible."
    

• I am fully committed to the latest version of the Purpose clause from our session in February:
  

  • "To build a trust-based, democratically governed UK mutual credit system as a model that can be replicated to catalyse the growth of a global collaborative economy that nourishes people and planet."
    

• From the outset, I have been of the opinion that a network of networks is the best way to achieve this aim. However, on the basis of forcefully put arguments and conviction early in the year, I compromised, and agreed to work toward a single network structure. It was clear that all sorts of work needed doing from the start that would apply to whichever approach was needed - this was the constructive approach. In agreeing to this, it was not necessary for me to change my mind, just to collaborate.
  

• From the outset, I have always been of the view that a carefully targeted 'niche' of businesses that had a good chance of finding Mutual Credit immediately useful should be selected. This dovetailed neatly with the idea of a single network as a 'starter for 10'.
  

• I have never ceased to be clear about my opinion about single vs federated networks, while working to build the single network approach.
  

• During the course of our work, I have had no evidence that building a UK wide network from a London base is a dynamic proposition - we have had small take-up, and almost zero trades. Our members are spread far apart, with very limited possibility for 'local' trade or trust development. NB as is clear from my contributions to other threads here, I do not define 'local' solely as place-based - there are other 'varieties of local'.
  

• Although we obviously must learn from Sardex, I cannot accept the Sardex model as a being a good analogue for the UK - Sardinia is a small (pop 1.6m, GDP €35bn), physically isolated region with a highly homogenous character (culture, ethnicity, religion, geography/climate, economy), while the UK has a population about about 40 times bigger, an economy 100 times bigger, and is significantly more diverse in every sense.
  

• I am completely committed to 'bottom-up' building.
  

  • For me, this means local networks of trust, where businesses actually have some direct knowledge of each other - these networks federating together to form larger networks. In some discussions the Credit Commons has been characterised as a top-down global scheme. This is a misunderstanding which stems, perhaps, from a design approach which propagates from broader to tighter. These broader networks, though, operate mostly as 'telephone exchanges', connecting trading networks together.The software is designed so that the broader networks cannot 'see' downstream, while the local networks can see upstream - power is all at the local scale - including the power to move to a different exchange network, set economic policies, transaction and membership fees etc.
    

  • By contrast, the idea of a single, flat UK wide network looks very 'top down' - the sixth largest economy in the world having a single network doesn't seem bottom up to me.
    

• The learning I have done continually suggests that smaller networks of trust, federated together, offer a far more believable model for growth and viability of a Mutual Credit system. This learning comes in three types - each of which reinforces the other:
  

  • Evidence

    • Simbi has a very sophisticated interface, loads of cash, worldwide reach, strong backing. It has failed to have any impact (it's been sold/given to a non-profit). Analysis of failure: two issues - first, no 'local' feel - no basis for trust to develop, second, P2P model makes economic dynamism hard to develop. It tried quite hard, after realising this, to get members to connect themselves together into more local groups - but this strategy failed (I know someone who tried to get all members in London to come together, but got no take-up).

    • Parity (formerly Credex) - has decided to focus more tightly even than 'Birmingham' - choosing instead the very specific 'Jewellery Quarter' area adjacent the city centre.

    • Practical difficulty of recruiting businesses to OCN -  we have to rely on phone/email/website, as they are too widely distributed to visit. Most successful trade - Outlandish / Paul - people who are local to us. Conclusion: we need local contacts in many areas to be able to recruit well.

    • Existing viable LETS schemes - these tend to get smaller over time, not larger - and become resistant to new members - suggesting that the development of trust has strong relation to small scale, and that such trust networks resist becoming larger.

    • Network Conveners co-design circle sessions - these definitely do want to connect their members to a national scheme, but also have a variety of plans for strengthening local economies - which differ widely in both practical detail and ethos.

      • If we have one single network, it will be unable to mesh closely with widely varying local schemes.

      • On the other hand, it is clear that a local network that uses the same software as a wider network can allow local design decisions to operate locally (for instance, physical tokens might be used, or a local charities scheme credited with some portion of local transaction fees), while connecting local members across the wider network.

    • Circular Economy Wales - concentrating on Wales (much closer to Sardinia - at about twice the pop and GDP).

    • The experience of local currencies like the Bristol Pound is not one to take economic stories from, but the capacity of these currencies to mobilise high levels of interest and recognition suggests that networks at such a scale will have much stronger PR, uptake and loyalty than a national scheme - especially at a time when the UK itself is becoming a dubious brand, and the union is under strain.

    • Growth in trade volume. Sardex' experience shows that a major effort is needed to broker trade in order to achieve growth. It is the major expense for them, and accordingly we have made high estimates for this in our own forecast figures - to the extent that this is among the few 'make-or-break' parameters. A national scheme will have to provide such brokering in a centralised way to achieve efficiency. Local schemes are far more likely to attract volunteers and be able to implement local take-up drives. PR messaging will also be easier.

    • The IRTA has had little success in bringing member networks together 'after the fact', with their Universal Credit approach.
      

  • Learning from others

    • Firstly, both the Credit Commons whitepaper and Thom Greco's work recommend a federated system of smaller networks. Neither advocates starting with networks of the geographic spread of the UK.

    • Sardex has chosen, not to build an Italy wide scheme, but a series of regional ones.

    • Moxey likewise has region sized schemes, rather than one large network
      

  • Thinking /theory

    • Trust. We put 'trust' into the core purpose statement. Trust is intimately connected to knowledge - if I don't know someone, how can I trust them? It is self-evident that businesses hundreds of miles apart will find it harder to build trust than ones closer together. Since the viability of an MC scheme does not depend on a subset of the membership - but on all of them, it is obvious that local schemes will build stronger trust than broader ones. Stronger trust will result in more trade, which will build growth. Long piece on the operationalisation of trust here.

    • Recruitment of member businesses. It is clear (from existing website experience) that recruitment through a website / PR is not going to give the sort of growth rates required to meet the targets needed to make the scheme financially viable - we get almost no traction this way.

      • At this stage, getting a business to join, and then trade, and then trade regularly, is going to require a significant amount of hands-on, personal contact. Recruiting businesses this way will be enormously costly.

      • If we can recruit a network at a time, this will be significantly more cost effective, and at the same time we recruit a 'secondary' business (the convener) - which needs its local network to be dynamic, and is thus more likely to work locally build trade volume and recruit.

    • Messaging: a national organisation can only really have one messaging campaign going at one time. This will have to be broad-brush. Local networks, by contrast, can tailor messaging to local conditions/needs/requirements.

    • Democracy/centralisation: it is well known that larger co-ops have lower democratic engagement. In a UK-wide network, where trust will be expected to be relatively low, due to most members being strangers, there will be increased pressure on the 'admin' team to be a strong centre - replacing missing trust with centralised power. This seems clearly against our purpose.
      

• MY CONCLUSION The more clearly we can make our offer one of local empowerment and inter-trade, the more effective we will be. Attempts to make a single, flat network appear to be 'local' will be costly and less effective. A single national network is far from a 'bottom up' approach.

INVESTMENT / FUNDING

(my work on this approach has been the proximate cause of this strategic disagreement coming to a head)

Conditions:

• We are committed to a mutual, non-profit distributing structure.

• Our purpose is to build the Mutual Credit economy at the expense of the fiat economy - not for self-interest, but because we are convinced that the fiat economy is a key driver of environmental and human degradation.

Investment:

• Our forecasts, however we massage them, do not predict break-even before five years or so, and it is easy to make believable models that push this to year 8 or more.

  • NB: these models do not include repayments on investment in either MC or fiat. They also make no allowance for 'defense' funding in respect of inevitable push-back from the banks if we do achieve targets.

• We need fiat investment to develop  - of the order of millions of £s.

• This scale of investment is far beyond what is believable as impact/crowdfunding/grant money (if we take Positive News as a benchmark, they raised £265k on the back of a well known, long established brand with huge goodwill and a low risk, easily understandable proposition).

• Therefore, we are required to develop an investment model which can attract fiat investment and pay the sort of returns required for risky startup investment - say minimum of 10x investment.

  • VC's in tech startups look for 100x returns, because they write off so many investments as failures)

  • Startup returns are often expected as rises in share prices, rather than dividends or interest.

  • We won't be issuing normal shares.

  • We won't be paying dividends.

  • We are unlikely to attract loans at affordable rates, as the idea is so risky.
    

• Long-term, we want to change the economy as a whole - this means moving on to buying assets into the Commons  and enabling the MC economy to make investments in building new capacities.
  

• Paying returns in fiat on fiat investments may be necessary. But it is not desirable. To be clear, paying such returns in fiat on the basis of the MC economy requires us to extract value from the MC economy and pump it back into the fiat economy. This is directly counter to our Purpose - which is to grow the MC economy.
  

• MY CONCLUSION :the most desirable investment model is one which makes it believable that we can attract fiat investment, while offering returns in MC currency units. This approach uses fiat to build the MC economy, and uses the returns on investments to further build the MC economy - because in order to get value from the returns, investors will need to spend the MC units into the MC economy - boosting it at the expense of the fiat economy -  in this way the MC economy gets double use of the fiat amount, and then more, for the returns (remember that we don't count MC currency as commodity units, but as flow units - each time they change hands new value is created).

Investment model development:

• In order to attract the seed funding required over the first year or so, early investors need to believe that the project can achieve viability. This means they need to believe it will be possible to raise £5 - 10 million (they will want a big safety buffer beyond whatever prospectus we show them, as they know it is a risky venture and that our figures will be largely imaginary).

• Because of the conditions we have set ourselves, early investors cannot rely on 'normal' later investment rounds (investors hate 'special' setups; standard advice to startups is to use the most 'vanilla' company structure possible, expressly to reduce the perceived risk to investors). It will be up to us to convince them that we have a route toward such funding.

• Since the sums involved are so large, the models often suggested for platform co-ops look weak (it should be noted that most of these models have very limited track records, in any case).

• If we're going to have to work hard at developing a credible investment model, it seems sensible to spend this time on the one that will be most beneficial for our purpose - which is one that pays returns in MC.

Investment Model co-design sessions:

• I developed these ideas and shared them with the group all along - big debate when Tom Greco was here etc.

• I worked hard to get the sessions together, to get people to participate. They were unconvinced by OCN alone, then confused by OCN + global credit commons. Credit Commons is the vehicle for the conversation that worked best.

• The specific model design focus of the sessions, if it produces an outcome, will apply equally to OCN as to Credit Commons, so there is no loss to OCN.

• The people gathered for the sessions are not people who would be useful to discuss seed funding strategies with - they mostly don't work at that level.

• MY CONCLUSION: Take the co-creation sessions forward using the Global Credit Commons as the example project on which to base this model, in the knowledge that, as a model, it can be applied to any Mutual Credit scheme.

Quick comment on one point: "Existing viable LETS schemes - these tend to get smaller over time, not larger - and become resistant to new members - suggesting that the development of trust has strong relation to small scale, and that such trust networks resist becoming larger."

To what extent can any "LETS schemes" of the type most commonly found in the UK be considered viable? Few seem to have been able to preserve their identity through time within the changing evironment in which they operate. Some may continue to exist in name, but few serve the "purpose" intended by their founders (a zero-sum, interest-free, mutual credit network). The purpose of a system is (of course) what it does (POSIWID), but to what extent can their identity be said to have been preserved? (In contrast to credit unions - which include a well-defined if differently-named set of metasystemic components - how may "LETS schemes" incorporate an identifiable S5, S4 or S3*, even if they have a reasonably clear S2 and S3?).

For me it is a practical question. Lots of different groups may more closely mirror our long term goal, but it will also give users a fragmented experience, and mean much more software management overheads. I think if we are here to serve, users would prefer to be part of a larger network with a seamless user experience, and
- only if/when the local chapters reach a certain size, and
- only when we have federated software available
should groups take on technical independence and self governance. I think each group choosing and managing its own software would be highly inefficient and most wouldn't want to. By providing software we make those groups much more viable.
There is a need for both building the network and doing the storytelling/propaganda around the new economy - each activity is valuable in itself, but they also two sides of the same coin. The preaching is given power by the network. The network is given purpose by the preaching.

Variety management issue: how much capacity is there available and how is it distributed?

What are the characteristics of a "sub-network" assumed to be? How much variabilty is acceptable?

What incentives are there for a "sub-network" either to join a federation or to collaborate in the formation of a federation?

What co-ordination is actually required? How can it be characterized? How can it be quantified?

If the "sub-networks" are to be holonically-nested, what would be the structure of these holons? Chaordic? VS (Viable Systems)? Something else? (Holons identifiable within a chardic structure are not necessarily viable.)

If as VS, what are the constraints on the autonomy of each?

What is/are the primary objective(s) of the federation? Is this simply to create an elastic mutual credit pool of a single currency type (one isomorphic to bank-issued money), or is there flexibility/extensibility at the sub-network/holon level?

These are just a few questions that occur to me immediately. There will be numerous others. I think this calls for construction of a decision tree, but I wouldn't like to make any assumptions about how this would ramify or how the cost-benefit weighting of each branch might/should be evaluated.

However, I think it would be very dangerous to make too many assumptions at the start. The ability of the overall structure to co-evolve with the environment in which it's embedded is crucial.

is there interest in a voice conversation about this? The thread is already heavily loaded with text and seems likely to get stuck there. I can "zoom" anytime after 6 pm (UK) today.

Dil, let’s leave the investment issue aside for the moment and focus this discussion on the recruitment strategy.

Dil: “The more clearly we can make our offer one of local empowerment and inter-trade, the more effective we will be.”
I totally agree.

“Attempts to make a single, flat network appear to be 'local' will be costly and less effective.”

But I don’t think that was anyone’s intention.
A network is by nature hierarchical. We are envisioning a network of networks.

As I recall it, the choice of building a national network was based on the original idea of recruiting cooperative businesses into a trading network. Cooperative businesses, although scattered around the UK, constitute a “local” community or “affinity group.” If we consider the meaning of “local” to be defined as some such shared interest or pattern of existing relationships, then geographic scope becomes less relevant.
We seem to have strayed from that original idea.

Suppose we shift our focus back from trying to recruit individual businesses to trying to recruit clusters or existing communities or affinity groups, say those that are connected by common religion, ethnicity, culture, values, etc. We can offer them a way of strengthening their existing bonds of trust and mutual support.
We don’t need to sell them on our ultimate destination, but merely get them to take a step in the right direction. I am still digesting the rich “meal” of ideas and principles I’ve found in the Heath brothers’ book, Switch: How to Change Things When Change Is Hard, but one fundamental approach to change boils down to this: Motivate the “elephant” (the emotional body), Direct the “rider” (the rational body), and Shape the path. I may eventually prepare my own summary, but this one is pretty good: https://alexvermeer.com/switch-by-chip-and-dan-heath-2010/ . I suggest everyone read it.

The Heaths give many examples of successful change efforts based on this approach. Let’s look for the moment at shaping the path. We’ve been trying to sell prospects on the ultimate destination by, I presume, appealing to their rider, and maybe we’ve also been trying to motivate their elephant by waving our values at them. How can we shape the path to get them moving in the direction we want them to go? It may be hard to get them to commit to a long journey, but we might get them to take a small step. Maybe we offer affinity groups some small element of our service, like organizing a “social network” for them? The object would be to increase communications among members, strengthen existing bonds, and deepen trust. The marketplace and trading can be offered later.

That aside, I think we need to look at what is already working--Sardex, BBX, UC, Moxey, etc. Yes, the circumstances/environment and values may be different but maybe there is enough commonality to suggest that adaptations might be useful to us. It IS possible to “tweak the environment” and change cultures, and “rally the herd.”

Let’s do some deep thinking and brainstorming about this.

Having read Dil’s long spiel above, it’s very persuasive. I’d like to know if anyone thinks he’s gone wrong somewhere, and if so, where.

I don’t know yet about a) building the OCN on sub-networks or via one national network only; b) the credit commons investment strategy; or c) the work that Dil and Matthew have been doing to build a credit commons ‘template’ for national and other groups to slot into - I’d like to hear more opinions, either here or via zoom brainstorms.

Tom and Hugh seem to be pro sub-networks. Matthew – I think you’re saying that we should build a credit commons template plus standard software for sub-networks to adopt, to avoid complications and confusion that might be caused by lots of different (and maybe not very compatible) systems.

The core group put together a purpose / mission / strategy document in the early days of the project. I don’t see that this document rules out sub-networks, and doesn’t relate to credit commons template or investment strategy. And even if it did, I don’t see a problem with revisiting it and changing it if deemed necessary or beneficial.
But I don’t know if it is necessary or beneficial yet – which is why I’d like to hear more discussion.

I’d like to help build a new economy, in the best ways that I can. I think that the credit commons is essential for that. The OCN is important for building the credit commons, but not essential. So for me, the crucial thing to keep in mind is the credit commons, and to make sure that everything we build is compatible with it.

I'm actually 'worse' than subnetworks, in that the 'sub' might suggest that the local networks are incomplete in some way. So I believe that the locals should be autonomous with a well documented connection architecture and (maybe as a result) 'clearers' or 'exchangers' (an immediate worry since those components have quite a lot of power).

But, I'm also thinking about failure modes, if this is (for example) something UK wide and monolithic, then I believe it's less resilient in many ways. And, yes, I agree that the locals can be built with something standard, but I also think that something 'new' that passes connection testing (as SWIFT, for example) should be acceptable. That gives evolutionary paths. There are lots of different webservers and IRC servers, for example, but protocol is common.