LETS – origins, and what happened next: Michael Linton of LETSystems & Open Money

This is Part 1 of a conversation with Michael Linton – inventor of LETS, the moneyless exchange system. I want to talk about that, and he has a new idea called Open Money that we’ll talk about in Part 2.

Hello Michael

Hi Dave

I’ve just been reading a paper by Jem Bendell and Matthew Slater about complementary currencies, and they quote Bernard Lietaer: “Though numerous examples can be found in history, the modern complementary currency movement really began with the publication of the LETSsystem design manual and the popularisation of Local Exchange Trading Systems (LETS) in the West in the late 1980s.” So – you’re the father of the modern complementary currency movement, because you wrote that design manual didn’t you?

Angus Soutar and Chris Knight were also instrumental in writing it, and we had circulated by ‘85/86 the basic design of the LETSystem, which was largely my authorship. So yes. I regard the complementary word as questionable. It seems to suggest that legal tender is the standard. But I regard it as regressive – degenerate even. Money is bigger than legal tender, and the LETSystem was our first appreciation of the possibilities.

Tell us a bit about LETS at the beginning – having the idea, writing the manual. How did it come about?

By a series of accidents. I came across LETSystems by accident. We were out of money in my community on the west coast of Canada. A small town of around 40,000 people, around 1982, when bank rates suddenly went sky-high. Mortgages were at 18%. A group of us were looking at how to network. Nothing had changed – we still had our skills, our tools, our needs. So we created a little buy and sell (offers and needs) list, on the one little computer that existed in town, which could hold 64Kb on an 8-inch floppy disk! We had study groups looking at money, and we knew that banks created it from nothing. So we decided to do the same – but how much? The first figure was 1000 units each (of our own currency, that we issue ourselves). But that seemed a bit too much, so it was dropped to 100, which seemed too low. So in the end, we decided to start at zero. When there’s a transaction between 2 people, whether it’s labouring, childcare, dental work – whatever – there’s an acknowledgement that something’s happened, with a payment. A payment forward. If you get something from someone, you commit to provide something for someone else in the network. We called this mutual credit. LETSystem was one variant of that, with no service fees, no interest, and using legal tender as the measure of the value of a unit. Timebanks already existed, and they used hours. This was different. There were no credit limits either – it was a self-enabling network, of whatever size people chose to have.

You didn’t want to just use it yourself did you – you wanted it to spread around the world?

We saw that this could be picked up anywhere very quickly. People heard about it and wanted to play with it, so we started some conversations up and down Vancouver Island. We also heard that someone in New Zealand was talking about systems elsewhere, although it turned out he had visited Vancouver and got the idea here. Then we got picked up by the Permaculture movement. I’d met Bill Mollison at a LETS presentation in the US in 1984. Tom Greco was there too. Bill liked the concept and sent some people to come and stay with us to see how it worked. We had visiting academics too.

Tell us about the manual. How did that come about?

It’s very simple. It’s a set of agreement. What do participants in the network understand themselves to be participating in? The first thing was the user agreement. The idea was that a unit is measured in the national currency and we’re not obliged to trade. It was not a command system – it was a LET system – an enabler. That’s how we’ve always seen it, and advocated its administration and development – not very successfully, however.

I want to talk about what happened, but first I just want to slot something in here. The last interview I did was with Will Ruddick in Africa (building mutual credit schemes in Kenya). He’s saying something very different to what you just said. His position is that people are used to positive numbers, and negative numbers seem like debt, so he stays in the positive. What’s your response to that?

I don’t think your map should be an accurate representation of the territory, and condescending to misconception is a bad idea in design. If you try to accommodate what you project as a problem onto a group of independent agents, don’t be surprised if it doesn’t work as you expected. You’re turning something that’s a relationship into a habitual token, a thing. You’ve changed a verb of process into a noun of exclusion, identity, acquisition. If you think about the attitude of an individual in community – what’s in it for me, what’s the deal? That doesn’t have to be philosophised about – just about me in my environment. It confers onto the people doing it to be responsible for their own behaviour. That’s the main problem that most people run into.

I thought what he said was interesting, because it’s taken off rapidly in Africa. It is actually mutual credit. It’s not commodity money – he’s just moved the line forward a bit from zero.

Maybe that’s a problem with the term mutual credit – that it’s become so ‘complementary’ to everything, which has been the biggest issue. I’m an engineer – I trained in physics and engineering. I look at systemic definitions as relevant. If you’re building something, it’s built in a way that works – it’s tested etc. Don’t break the process; read the manual. That’s how things work. I see so much untested wilfulness offered – that it should be this way etc. The co-operative movement, for example, will do anything but co-operate. The aversion to change in experience is horrendous. People want things to be the way it already is. They don’t like anything that rocks the boat. If you come in with something new, people say that they’re too busy keeping their heads above water.

Back to the manual then. What is your perspective on what happened with LETS, and why, and how you feel about that?

The first thing is that it happened with LETS not with LETSystem. We documented and specified, published and placed in trust the intellectual property of the LETSystem. The LETSystem Trust is the holder of those deeds in kind. That was because we felt that we needed a precise definition. We could see all sorts of things out there without definition. We saw this LETS process happening everywhere, with no feedback. We heard that they’d created committees, credit limits, and lots of added features – none of which made it work better, and some blocked it from working.

What kind of things blocked it, and what kind of ambition did you have for LETSystem?

My background was physics and engineering, but I worked in computers in the 60s. I was much more interested in business, and I worked in inner city development in London. I looked at the changing processes, and I couldn’t see an intelligible response to the crisis that I saw emerging – poverty, social distress, environmental problems. So I became an emigrant to the west coast of Canada, to be out on the edge. Then the economic crash happened after Reaganomics / Thatcherism started a whole new game of austerity. When we saw the LETSystem, I saw that it was a universal relationship for civilised interaction between agents in community. I thought this is a good idea, and it has legs.

Did you know about the history of complementary currencies and mutual credit-like systems?

We studied what we could, and we’d come across the Skills Exchange in Virginia. We didn’t have the internet in 1982. We’d also heard about commercial barter networks, very common in North America at the time, and turning over about $2 billion per year. They were all centralised hubs with commissions on transactions between the users. We reasoned that what they were doing for about 15% paid in cash for every transaction, could be done for about $1, paid in an internal currency. So our angle was why use a commercial barter service when you can build one yourself? It was because I was computer literate, and there was a computer in town, and the woman, Barbara McKenzie who was running the hub office with the computer, was 40 years ahead of her time. She partnered with us. We could be a ‘credit union with no bricks’ (only better than a credit union).

What’s your perspective on why LETSystems didn’t take off and change the world?

Bad replication. If people had read the manual and followed the instructions rather than adding things like credit limits, democratic control, user fees etc. it would have worked.

So you see credit limits and democratic control as unnecessary or even negative?

Both. Democratic control is a fantasy. The process of a LETSystem is the interaction of the people doing it. It doesn’t need managing. Don’t tell people what they should be doing, including credit limits.

So if you don’t do that, what would stop people racking up a huge negative balance?

Nothing – the question is what’s the damage anyway? There are no monsters under the bed. Relax. Committees have collective unintelligence. If you put a bunch of people together, they’ll add stuff on that isn’t necessary. But the committee function was added everywhere, along with credit limits. And also fees for a central budget. Funding, control and fear – those were the problems.

How would those things have caused failure?

They all stifled. Dead weight. If you go down any of those routes, you’ve missed the point.

Tell me more about why you feel those things cause failure.

I can give you a metaphor. If you take a child on a bicycle for the first time, they’re going to want to go slowly, and freeze. But that’s a recipe for falling over. I took the pedals and saddle off my kids’ bikes and got them running with the bike, until they were begging for a saddle and pedals. It’s training wheels that stop kids being able to ride bikes. The first LETSystems were stuck with training wheels, like credit limits. The committees felt they were responsible for everybody else’s behaviour.

What would stop people going too far into the negative, or even the positive?

In any community, you know who’s up and who’s down. It’s a social process. Also, what’s the damage if someone defaults in some way? There’s a catastrophic expectation that it will bring the system down, but it won’t.

So from the beginning, did you see communities as separate, or did you see them being linked so that they could trade with each other?

We imagined scaling. Let’s not get stuck with the concept of how. The point is, does it scale? Yes. From the beginning, I put a lot of effort into thinking about how it could crash or who could stop or block it. Was it contrary to any regulations. Could it be stopped by a cabal of the usual suspects?

How did you see it scaling?

Effortlessly. Not by communities trading with each other. It would scale because it just worked. If your independent community network isn’t thriving, it’s not going to persist, even if they’re tied together with other communities. Each community must be viable. Doesn’t matter what it its – a babysitting network, a tool exchange – anything. If it doesn’t serve its function, it’s not going to work. It can work for a huge range of different networks. I was a businessman. I have an MBA and I understand systems theory. I was primed to get this. It said to me that this was an orthogonal relationship to the status quo. The status quo is ‘you’re fucked’. Money is ‘theirs’ and you get it if you’re lucky and you do what you’re told. That’s it. Now here we have something that isn’t that. LETSystems allow people to exchange businesses, networks, municipal governments – it enables any networking you want.

Within one community?

Every community is a community. Greater London is a community. What are the possible connections that would serve any subset of that community? How many networks are possible in Greater London. It’s intangibly huge. It’s not about how many could we have – it’s about is there an edge to this? It’s a propagating, high-variety, matching package. It asks what’s there – it doesn’t put something there to try to have things attracted to it.

Let’s break it down for someone who hasn’t come across this before. Say I’m part of a LETSystem in London. I go to Manchester. Can I buy something in Manchester?

In which LETSystem? The London LETSystem or the Manchester LETSystem?

That’s what I’m asking. How do I buy something in Manchester?

You can spend in any system you’re in. People think ‘I’ve put my time in in London, can I spend my money in Brighton or Manchester?’ That’s old thinking. I earned it, it’s mine, so I’m going to go somewhere and spend it. That’s not what this is about. But it’s commonly seen as that would be a good thing. So the question I’d ask is ‘why aren’t you in the Manchester system?’

So people would be in lots of different systems?

Talking about you. You’re in the London system. Why not also the Manchester system?

You mean if I had family in Manchester, or if I went to Manchester regularly – then I’d want to be in the Manchester system wouldn’t I?

Yes. What’s your give and get in Manchester? Be where you are, do what you do, be a contributor. I keep hearing ‘we have to keep the exchange rate solid’ etc.

So again, really simply, for a beginner – I go to Manchester. I’m not doing any work in Manchester. I’m not producing anything for anybody in Manchester.

So you could buy the local money from one of the trade shops. You could put some money into a Manchester project – feeding the homeless, painting walls etc. and get LETSystem units. Same for people from Manchester going to London. There will be plenty of people offering exchange services – a ‘fiddle in the middle’. You know what I mean.

So people will work out some way to do it.

Yes, and cheaply.

OK, so things will spring up.

Nothing is impermeable. There’s leakage out of any network. Do we encourage it, create it? I’ve never seen a way of keeping this kind of stuff in if it wants to get out.

LETS didn’t go that way at all did it? It didn’t follow what you suggested. It had credit limits, democratic control. They tried to set up intertrading between different systems. All sorts of things like that.

Everything was related to a conventional expectation of organisation. Propriety. People wanted to do it right. There were no opportunities for fraud. It was generally church halls, working-men’s associations, knitting circles etc. They wanted to do it right, which meant being careful. And that was wrong.

You couldn’t have forced people to follow the manual to the letter though, could you?

We couldn’t excite them to. There was a proposition that if there were a lot of groups that were doing the same thing, that would be good. There was a potential for people to send a $100 registration fee. That didn’t work. So there wasn’t a network, a way to get the idea out. Tom Greco and I tried to start a network, when emails arrived, but that didn’t happen either.

In Part 2 we’ll discuss a new idea called Open Money. I want to ask about the connections between that and Michael’s original LETSystem ideas.

Highlights

1. When there’s a transaction between 2 people, whether it’s labouring, childcare, dental work – whatever – there’s an acknowledgement that something’s happened, with a payment. A payment forward. If you get something from someone, you commit to provide something for someone else in the network. We called this mutual credit. LETSystem was one variant of that, with no service fees, no interest, and using legal tender as the measure of the value of a unit.
2. We documented and specified, published and placed in trust the intellectual property of the LETSystem. The LETSystem Trust is the holder of those deeds in kind. That was because we felt that we needed a precise definition. We could see all sorts of things out there without definition. We saw this LETS process happening everywhere, with no feedback. We heard that they’d created committees, credit limits, and lots of added features – none of which made it work better, and some blocked it from working.
3. If people had read the manual and followed the instructions rather than adding things like credit limits, democratic control, user fees etc. it would have worked.