1. Ethical is Optimal
Simply does it
Chris Cook
Just Banking Conference 20th April 2012

2. “21st Century problems cannot be
solved with 20th Century solutions”

3. Money 3.0
Market 1.0 – decentralised but disconnected; physical
market presence; Money 1.0 was a physical object
Market 2.0 – centralised but connected; market
presence by middlemen; Money 2.0 is a credit object
Market 3.0 - decentralised but connected; network
market presence; Money 3.0 will be a relationship

4. “The Internet interprets censorship as
damage and routes around it” - John Gilmore
Direct connection - 'Peer to Peer' and 'Peer to Asset'
New instruments are needed for people-based (P2P)
credit and asset-based (P2A) credit
New generation of consensual agreements are needed
as a trust framework for such direct credit creation
“Law is Code” - Lessig

5. Getting to Zero
Maths - Plus One; Minus One; Zero
Physics - Positive; Negative; Neutral
Economics? Conflicting Absolutes. No Zero
Scotland shows the way: Guilty; Not Guilty; Not Proven
21st century agreements will be neutral; interactive and
consensual
East of Suez - consensus is normal and trust is
assumed eg Sharia'h
“US has as many sumo wrestlers as Japan has
attorneys”

6. Financing and Funding
Financing – people-based credit; short term; high risk
Neutral framework agreement – Guarantee Society
Funding – asset-based credit; long term; low risk
Neutral framework agreement - Nondominium

7. Guarantee Society
Mutual guarantee of Peer to Peer credit between
buyer and seller
Buyers and sellers cover system costs and make
provisions into a pool in common ownership
Credit allocation and management by a service-
provider-formerly-known-as-a-bank

8. Outcomes
Community owned VISA credit clearing system
'Not for Loss' operation with no payments to rent-
seeking shareholders or fat-cat managers
Value stays within the community

9. Nondominium
A smart US lawyer wrote a new co-ownership
agreement and called it a 'Condominium'
The 'Condo' went viral in the US
Debt funded Condo's are now a US standard,
codified with state by state quality control
Classic reality-based, bottom up policy – 'what
works' (except for the debt funding!)
A Nondominium agreement is a Condo with
financing and financing credit on the inside

10. Nondominium
Nondominium simply integrates two complementary
associative agreements
A 'Joint' agreement between the stakeholders
collectively
A 'Several' agreement between the stakeholders
individually

11. User
Rental
Custodian
Stock %
Investor Manager

12. Nondominium - Outcomes
Neutral – removes ego and politics
Collaborative - stakeholder interests aligned – no
principal/agent problem
Social – shared surplus/ 'not for loss' - relationship-
based not transaction-based
Sustainable - everyone has an interest in minimising
cost of use over time

13. Stock 1.0

14. Stock 1.0 – Sovereign Credit
Stock – part of a tally stick, used either as a receipt
(memorandum tally) or as an IOU/ credit token
Issued by the Exchequer to creditors at an agreed price in
exchange for value received by the sovereign
Returnable in payment of taxes
By 1694 some £17m of tally stock was in issue when cost
of government was £2m to £3m a year
In 1694 the (private) Bank of England started to create
credit – partly backed by gold - and buy stock
The rest is history: the public credit has been privatised.

15. Stock 2.0 – Asset-based Credit
Stock - undated credit returnable in payment for use
value of productive asset
Sold at a discount – eg £1.00 of Rental Stock sold for
80p gives an absolute return of 25%
Rate of Return is literally the rate at which Stock may
be returned to the issuer
Rate is not fixed, but depends on the quality and
quantity of the flow of value

16. Outcomes
Collaborative – all stakeholder interests aligned
Co-operative Advantage – absence of economic rent &
compound interest out-competes conventional model
Reality-based – may be introduced by consensual
agreement with no change in any law
Complementary – not new organisations but
agreements between existing organisations
Neutral – agnostic as to legal forms

17. Applications - Land
Financing
– Sustainable Development – energy efficiency
and good quality are in everyone's interests
Funding
– Resolution of unsustainable housing debt
– Release of a pool of development credit
– Affordable Housing – absence of debt

18. Applications - Energy
Renewables - MegaWatts
– Energy loans – funding through selling future
energy production
Energy Savings – NegaWatts and NegaBarrels
– Energy loans repaid from energy savings
– A Green Deal that will actually work !

19. Ethical is Optimal
Guarantee Society and Nondominium share risk and
reward equitably
Both are immediately recognised by Muslims as
Sharia'h compliant
Perhaps Ethical is in fact Optimal?