English: 'I'm Lovin It' — HM1(FMF) Fred Turner...

Innovation with how we represent the results of our hard earned labor — money — and how we transact business with it has been going on for thousands of years.

Metal coins for commerce go back to the third century B.C. and paper money was introduced by Kublai Kahn in the 1200s. The disruptive idea of using paper money rather than intrinsically valuable gold coins seemed magical when it was observed by visitors to China from the West. It was an abstraction to use something for trade that merely represented value, and it was radical.

Today, that abstraction continues.

Unless you are hiding your savings in your mattress or buying lots of gold coins, virtually all of your monetary wealth is, well, virtual. Your savings really aren’t anything even as physical as currency. The results of our labor and our spending habits exist as numerical bits of data stored on magnetic disks somewhere in far-away networked computer servers.

It all works, but only because of systems that governments, institutions and consumers have all agreed to abide by, and moreover because of the faith people have in those systems.

In everyday life, as computer technology advances, we are using less and less cash for our transactions. We have been using checks for many years. More recently we have become comfortable with using credit cards or debit cards that either add to our debts or subtract from our surplus.

With the ubiquity of mobile smartphones, it is natural to think that the evolution of currency will soon include using your phone for transacting business. This is actually happening now. At Starbucks you can pay using your Starbucks App, where your phone basically stands in for a prepaid debit card. Perhaps it won’t be long before you can hold your phone next to someone else’s and exchange money effortlessly over a Bluetooth connection.

The abstraction of money continues along an unconventional path with the development of currencies that aren’t even backed by any national government. There is an internet currency called Bitcoin that is being introduced gradually, and is created basically out of thin air. Google is toying with the idea of developing their own currency. And there are others.

The key to success for any of these currencies is that it be accepted and used enough so that a faith develops that it has value. It also must be difficult to counterfeit. Attempts at fraud will always be there, but the level must be kept low enough that the faith in the value isn’t lost.

Even with all these changes, the demise of cash might still be a ways off in the future. First of all who wants to use a credit card for small dollar or two transactions? However maybe that’s just my generation talking — I know my young college son certainly has his share of under $10 credit card transactions. Also, for whatever reasons, there are a certain percentage of people that would like their transactions to be anonymous. That will probably never change.

We don’t know where all these innovations will lead, but the trend is toward even more abstraction with money. Perhaps one day coins and paper money will go by the wayside like the old typewritten memorandum has in today’s email and text message society.

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