Translator: Robin Noel
Reviewer: Denise RQ
Hello, as Alexis just said,
I’m here today to talk to you about money.
I can see some of you are already saying,
what a stereotype, another Indian
who’s going to talk to us about money.
But the truth is
that my interest in the subject
only started when I arrived in France.
In 2006, to get over my boredom,
I joined the French Foreign Legion.
As a result, in 2010,
I found myself in Afghanistan
with my comrades in arms.
During my seven months deployment,
I was struck by several things:
the courage of the Afghan people,
and the beauty of their country.
But what shocked me most
was the gigantic amount of money
we were spending on the war.
Did you know that to date
the coalition has spent over
seven trillion dollars on the war?
I wanted to put that sum on a slide but
there were too many zeros to fit on it.
So I asked myself where
does this money come from?
How is it created?
The war can’t just be paid
for out of our taxes.
I know French taxes are high but come on!
So to answer this question,
on leaving the Legion,
I took up my studies again and did an MBA.
In the business school I realised
that out of the 13,000 pages
of textbooks I had to read
to learn how to manage and invest money,
there weren’t even five pages
to explain how money is created.
So I started to do my own research.
What I discovered was fascinating.
I realised that the history of money,
like the history of humanity,
is constantly evolving.
Around 4,000 years ago,
in ancient Mesopotamia,
clay tablets were used as currency.
2,000 years ago, in Australia,
they used sea shells.
In China at the same period,
they used salt.
In England, in the Middle Ages, they used
polished wooden sticks called tallysticks.
And at the same time,
in Russia, they used squirrels.
Well, they are Russians.
So in fact, what I discovered is
that whatever form it took,
money had three functions:
it was a reserve of value, a means
of exchange, and a unit of account.
It was, and still remains, a social tool
to communicate and exchange between
us and to develop our economy.
But about 400 years ago, things changed.
in the sciences and technology,
began to trade with merchants
in more exotic countries
richer in resources, like India.
And to facilitate trade,
they were obliged to use a currency
which was accepted
everywhere and by everyone.
That currency was gold.
The merchants returned
from abroad with their sacks of gold,
and to safeguard their gold,
they deposited it with goldsmiths.
So it is not surprising
the first bankers were the goldsmiths.
For his services, the goldsmith
was paid a small commission
while the merchant, in exchange for
his deposit, got a receipt in his name.
Gradually, the goldsmiths realised
only a small minority of their customers
turned up again to collect their gold.
So what did they do?
They started to deliver
more and more receipts
which this time were nameless.
These anonymous bills
were a promise of payment guaranteed
by the gold they held in their vaults.
In doing so, the goldsmiths
created two things:
the first was paper money,
and the second was the concept
of payment with interest.
That is the basis
of our monetary system today.
Today, the governments
of almost all countries use
a private enterprise
to manage their economies.
Do you know what that enterprise is?
It’s the Central Bank.
Just because the bank
is called the Bank of France,
the Reserve Bank of India,
or the Federal Reserve,
doesn’t change the fact
that it remains a private enterprise.
How does this work?
The government exchanges treasury bills
for currency with the Central Bank.
The exchange is made with the promise
that the government will repay
the debt with interest.
The government then uses the money
for social or infrastructure projects
or for wars, and this way
the money becomes available to us.
And what do we do with this money?
We deposit it in a bank.
Here’s where it gets interesting.
Today’s banking rules stipulate
that each bank must hold
in its vaults only 10% of deposits.
The remaining 90% can be lent out.
But bankers are cunning.
Obviously, they are heirs
to the goldsmiths.
So what did they start doing?
They started applying the “fractional
reserve” rule to the remaining 90%.
So in fact, you deposit
your money with your bank,
and the bank keeps 10% and lends 90%.
Of the 90%, it keeps 10%
and further lends 90%.
Of that 90%…
OK, you get it.
In this way a bank can can create
9 times the original sum from nothing.
So that’s amazing, we’ve found
the philosopher’s stone.
We can have all the money we want.
But I think we’ve forgotten something.
When we take out a loan from a bank,
the money has to be repaid with interest.
We saw how money was created,
but what about the interest?
Where does that money come from?
The answer is from nowhere.
It doesn’t exist.
So, to pay the interest,
we need more money.
But if there’s more money,
we have inflation.
Also, the money comes
from the Central Bank.
So the more money we have,
the more debt we must repay to the banks.
That’s why the amount
of money in the economy
will never be greater
than the interest owing to the banks.
The best way to illustrate this
schizophrenic relationship is this image.
Don’t laugh, that’s us.
We run after it, but never catch up.
So after the economic crisis in 2008,
many people began to wonder
why we should have to depend on
such a centralized system
managed by just a few bankers?
We need something
better suited to our needs.
And once again,
technology provided the answer.
This time it wasn’t sticks,
but the Internet.
Maybe some of you already know
what I’m going to talk about:
digital or crypto currency, or Bitcoin.
I’m not here to publicize Bitcoin,
but I’ll use Bitcoin as an example
because it’s widely known.
If you’re not familiar with it,
Bitcoin is very simple.
The official definition is
a distributed database
where the order of each transaction
is verified and validated
by all network users.
If you don’t get it,
don’t worry. I don’t either.
But if you want to sound like an expert,
or get intimate with a geek,
then use that definition.
I can assure you, it works every time.
But more simply,
crypto currencies like Bitcoin
are the money of the internet.
Obtaining the currency is very simple.
You can either exchange Euros
– I think the current exchange rate
is about 435 Euros to the Bitcoin,
or you can earn them
by a process called mining.
Becoming a miner is very easy:
you have to subscribe to a network
on which Bitcoin is accepted
as a means of payment.
You then have to download
a Bitcoin software onto your computer.
And as such you validate every transaction
taking place on the shared network.
What the miner says is this:
“I certify that each transaction
on this network
started at such a point
and ended at such a point,
and that nobody has attempted
to falsify the transaction.”
And for his services,
the miner is paid in Bitcoin.
Today, when you do that with a bank,
you get charged 3% of the transaction.
So what’s the advantage?
Because the network is shared,
your work can be checked
by every network user.
So it’s a self-protecting system.
Secondly, and here’s the real difference
of crypto currencies such as Bitcoin,
the total quantity is
limited to 21 million.
Contrary to central banks,
which print limitless paper money,
there can never be more
than 21 million Bitcoin in circulation.
Why 21 million?
I don’t know, but it’s 21 million.
So as there’s a predefined limit,
Over time, the value
of Bitcoin will go up.
Today, I think there are already
13 million Bitcoin in circulation
and we will attain 21 million
around the year 2140.
So we’ve still got a bit of time left.
What are its advantages?
Obviously, we can already say
it’s democratic, to a certain extent.
But at the same time,
let’s not forget it’s a currency
that circulates on the Internet.
Today, if you sell a product
or service on the Internet,
your customer base is worldwide.
But did you know that only 25% of visitors
to your website can trade with you?
Why is that?
It’s because the payment systems we use
today were developed 50 years ago.
So that’s why companies
like Virgin and Expedia
are starting to accept Bitcoin
as a means of payment.
Because they’ve understood by doing so
they increase their customer base by 400%.
But profit isn’t the only issue.
We have to understand
that for the first time in human history,
we have a monetary system
which is decentralized, democratic,
and which isn’t based on debt.
This technological shift
isn’t just limited to crypto currency.
Look at the society.
Our society is becoming very, very social,
and we are working more and more
collaboratively in spite of our diversity.
An Indian who fought in the Foreign Legion
and who’s talking to you about economics.
Sometimes I don’t believe it myself.
I know I represent this change in
our society, but I’m still very doubtful.
I wonder whether technology
is really improving society.
If you have a Facebook account,
raise your hands please.
Most people in the hall.
What is Facebook’s business model?
It uses our personal data
to conduct online marketing.
That’s it in short.
Are you or I paid
for our contribution? No.
And yet Facebook makes a nice fat profit.
Maybe you say to yourselves,
“OK, but it’s a free service
why should we be paid for that?
I have a reputation thanks
to Facebook. I’ve got likes on my page.”
Fair enough, but ‘likes’
don’t pay the rent.
And that’s important.
Look at society today.
We are a society where it’s harder
and harder to find a job.
Unemployment is soaring and there
are more inequalities in society.
And this trend will continue.
If you don’t believe me,
let me outline a scenario.
It’s futuristic but plausible:
it’s 2030, and I find myself in India.
I don’t know why, but I’m in India.
And having spent some years in France,
I’m familiar with French cuisine.
So I say to myself, I’m going
to launch my own business
making French cheese in India.
Plus, cows are sacred back home,
so I think I have an advantage.
To start my business,
I obviously need capital.
But instead of going to the bank, I go
straight to a crowdfunding platform
because interest rates are lower,
and it’s easier to find money.
Once I have the money,
I still have to learn to make cheese.
No sweat, I can do that online too.
Then I can start to prepare my product.
I need attractive packaging
to contain the cheese.
I’ve bought a 3D printer, and I’ll use
recyclable plastic as raw material.
To market my product,
I can go online onto social media
or specialized websites for entrepreneurs
to launch their products.
My customers start to show interest
in my Indian Saint-Nectaire.
They want to buy it,
and they start placing orders.
To deliver the orders,
I don’t even need to hire a driver.
There are robotic vehicles
on a common logistics platform
which operates more or less
like a car share and which already exists.
All this happens very quickly.
Within the week, I have
the money and my product.
I load my robotic vehicle
and off it goes to the customer.
The customer is delivered
and sends me off his payment.
And then I have to wait 45 days
to receive my payment.
Because the banking system
hasn’t changed in 50 years.
And I don’t think it’s going to change
over the next 15 years.
But that’s not all
that’s wrong with this scenario.
From start to finish, you saw
I was able to do nearly everything myself.
A real legionnaire.
And that’s what worries me.
Because I ask myself,
if I can do all that by myself,
what’ll happen to all those people
who work today in marketing,
finance, logistics or manufacturing?
What are they going to do?
In 2030, 50% of jobs
will have been destroyed
in the services and manufacturing sectors,
because of the 3D printer,
robotic vehicles, and ‘big data’ models.
And don’t forget that in 2030,
there will be 2 billion
more people on this planet.
That’s why I asked you, why
shouldn’t we be paid to use Facebook?
We should at least try.
If it doesn’t work, it’s no big deal.
I’ll be treated as an idiot,
but I’m used to that.
But let’s try.
The base of innovation is experimentation.
We also need to ask some questions
about our current financial system.
We need a financial system
that will help us become
a more collaborative and innovative
society, which isn’t the case today.
I know I’m asking you lots of questions.
But I don’t really have any answers
to give you, or a solution to propose.
But the advantage of being
in a collaborative society
is that we will find the answer together.
What’s essential is to ask questions,
develop ideas, and share them.
Money will always remain a social tool,
and will keep its 3 traditional functions:
it should be a reserve of value,
a means of exchange and a unit of account.
But the form it will take
and the world in which it will be used
must reflect our democratic,
collaborative, and innovative society.
It’s up to us to create that,
not just for ourselves
but for the 2 billion individuals
who’ll be joining us very soon.
So come along with me; together,
let’s create that new economy.