Making Money Work for Change

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Consider this: the cumulative stock of frequent flier miles issued by major airlines has a value in excess of $700B dollars (subscription required), as much as or more than the value of circulating US currency. Now add to the value of those frequent flier miles the value of points that are doled out by hotels, rental car agencies, grocery stores, pharmacies, retailers, coffee shops, automobile manufacturers, and… well, you get the idea: there is a lot of "money" just sitting around.

What if we used that enormous stockpile of currency to reward community volunteerism, promote sustainable buying decisions, reinforce healthy lifestyle choices and fund seniors’ retirement? That is exactly what a Twin Cities-based start-up called DualCurrency Systems (DCS) has not only imagined, but is already beta testing right here in the Twin Cities.

This is how one of the beta tests works: For every hour that a person volunteers in a community project (Third Way Network affordable housing projects), DCS adds 10 electronic volunteer credits to an account. (Third Way Network affordable housing projects). The volunteer credits can be used with dollars to purchase goods from participating merchants, in a ratio determined by the merchant.

Say you want to buy a pizza that costs $10 from a local pizza joint - you buy the pizza with a debit or credit card, spending $8 and 2 volunteer credits. The transactional details to allocate the proper amount of volunteer credits and dollars is taken care of electronically by DCS' system. Users get a periodic statement showing their balance of volunteer credits and their normal cash.

Also being piloted are "EcoBucks" - exchanged for volunteering at last year's local Bioneers conference to prove the concept, but eventually intended to reward green behaviors like car-pooling or eco-education.

The beta tests are to demonstrate the viability of the system and prove that DCS' technology can be feasibly used. Worldchanging has touched on complementary currencies before, and this has similarities. It is differentiated from community-based systems in that it is commercial endeavor, being profit driven and market based. The potential impact of DCS' ideas could have global impact.

I saw Joel Hodroff, the CEO and founder of DCS, speak about his business to the Carlson School of Management chapter of Net Impact members a couple of weeks ago. He is enthusiastic and articulate, and his ideas are compelling. I encourage readers to peruse his white paper that describes DCS' systems and philosophies in detail. I'll attempt to give you the paraphrased/condensed version of Joel's views here:

Our economy is producing more goods and services at higher quality with fewer materials, less energy, less labor and less capital, yet paradoxically these changes are not driving improvements in living standards, environmental conditions, and overall quality of life. Meanwhile, there is evidence of wasted business capacity throughout the economy, in the form of unsold inventories (both physical - like unsold cars, and service - like empty restaurant tables). This capacity represents an inefficiency in the market (similar to the wasted capacity in our transportation system).

If consumers had the purchasing power (money), they would be using these resources which are now wasted - there are abundant unmet wants and needs for business' products and services, but businesses routinely downsize and fail despite their ability to produce and distribute more. Downsizing creates a negative feedback loop: labor cuts in one area of the economy result in reduced consumer purchasing power, which depress sales and profits elsewhere in the economy, driving further downward pressure on labor costs, resulting in more cuts...

Many of these cuts are driven by too much competition, and not enough cooperation. Industry has cooperated in the past to provide a level playing field and encourage growth - in the financial world, an example of this is the creation of the VISA processing system, where banks compete for individual customers while following the same systems to manage transactions. DCS' system would be a similar cooperative system - companies would pool their "spare capacity" into a pool, which becomes the backing for a new, electronic, currency - business dollars (a form of business scrip). Since money, at its core, is a purely symbolic tool used to facilitate trade, business dollars can thus become a useful tool to facilitate the trade and distribution of goods and services that are relatively abundant. Meanwhile, regular dollars remain useful in the trade and distribution of relatively scarce goods and services. Business dollar networks, once established, would be chaordic, voluntary and self-governing networks, much in the way that the internet and the VISA system currently work. (they also follow a few additional rules to allow accounting and systems compatibility, which are described in the white paper)

Business dollars can still be used to reward customer loyalty - like they currently are, but DCS envisions using them to increase consumer purchasing power through other channels - like community volunteerism (as in the pilot described above), social security enhancements, or as employee rewards through a benefit program. There are as many uses for business dollars as there are for regular dollars.

If this all seems mind-boggling, think about historical transitions from barter to metal coins to paper money to our current age of plastic cards and Paypal. Each of these has represented a fundamental change in our view of what money is and how it works. DCS' ideas clearly have broad-reaching implications. Time will tell if we start spending EcoBucks at our local farmers' markets.