This blog is inspired by Jack Weatherford's The History of Money, and I'll open with a quote from the book's introduction, attributed to Gertrude Stein: "The thing that differentiates man from animals is money." Now I'm guessing most of us can think of a few more distinctions than that, but I will wager her item would make just about any top ten list.

In his book, Mr. Weatherford discusses three generations of money, noting that today's free market systems saw their genesis in Lydia several millennia ago with the advent of coins. He credits the invention not only with leading to our free market systems but also with destroying "the great tributary empires of history." In other words, money can build new, mighty things and fell that which was once mighty.

Mr. Weatherford describes the second generation of money as beginning in Italy with the Renaissance and moving through the Industrial Revolution. What emerged in this turning was paper money and banking and what fell was feudalism, "changing the basis of organization from heredity to money," with ownership of land supplanted by ownership of stocks, bonds, and the like. In other words, modern capitalism took hold and society evolved into something very different from what it had been.

He describes stage three as electronic money and the virtual economy. Instantly, we recognize the current age. In the way he presents the history, he makes a compelling case that noteworthy evolution and reinvention of money changes the world.

"Fascinating," you might say, "but so what?" Before suggesting an answer, I point out that Mr. Weatherford published this work in 1997. Nevertheless, presciently, he said, "A new struggle is beginning for the control of [money]... We are likely to see a prolonged era of competition during which many kinds of money will appear, proliferate, and disappear in rapidly crashing waves. In the quest to control the new money [emphasis mine], many contenders are struggling to become the primary money institution of the new era."

Indeed. So, I get to my answer. At the moment, one of the focal points for many payment wonks is making platforms "faster." A lot has gone into that already, and much more seems yet to come. A key risk if not the chief risk in this endeavor is ending up with an industry focus that is too narrow (platforms only). It could cause key payment participants to end up missing an important change—in money—not the mechanisms for moving it.

As work progresses to reach consensus on what and how to improve the extant payment mechanism, it seems good to pause and make sure the focus. Pursuit of a purely faster mechanism that envisions world monetary systems continuing to be based on the things they've been based on for centuries now could cause us to overlook or miss the next evolution of money. It would have been of little use to invest in improving the systems for speeding the exchange of cowrie shells as the turn was made toward paper money and banking. I think that to get this right, it is important to worry less about improving the system(s) for facilitating exchange, and more about what's going to be exchanged.

Photo of Julius Weyman By Julius Weyman, vice president, Retail Payments Risk Forum at the Atlanta Fed