• The Market Myth

    An investment banker's inside view of the market and the unveiling of the myths it is based on...

  • The Myth

    Where do all our strange ideas about the market come from? What is truth and what is myth about the market? What is the view of the market from the inside? From an investment bankers perspective?

     

    The book is based on my article in the World Academy of Art and Science journal - Cadmus.

  • About the book

    The Market Myth attempts to convey an understanding that the market is a human construct - a fiction - that could be different. Even a "free" market can be different. It tries to create an increased awareness of the fact that we jointly have control over our socially constructed reality.

    The market as a social construct

    The Market Myth is an empowering treatment of today’s economic system that frees the reader to define, and then develop, new kinds of markets more suited to the world we live in now.

     

    The central message of the Market Myth is that there are many possible free markets, and that we can decide what our free market should be like. “We have created the market and we can change it. It may not be possible to imagine a world without a market, but it is possible to think of one where the market helps to discourage greed, selfishness, cynicism and exploitation, rather than positively encourages them. Like all social constructs, the market could be different”.

     

    Just as Copernicus once saw through the myths that constrained society in his time, we can see through the economic myths of our time – and a new Copernican revolution can now free us from the constraints of markets that currently fail to serve the needs and goals of most people.

     

    Just as Adam Smith once described the invisible hand of the marketplace, the Market Myth illuminates the second invisible hand, one that distributes wealth. “It isn’t that there is one invisible hand, which manages everything – there are two of them”, says the Market Myth. “One invisible hand bakes the cake and one cuts the cake. Like people, the invisible hand has two hands, a right hand and a left hand”.

     

    Much as the rules of the market created in times past have established our current view of the market, now we can create new rules and markets that are more fair, more sustainable, and more ethical while still keeping the efficiency that characterizes today’s marketplace.


     

    The market as a tool

    The message of this book is that the market is a tool. “Like democracy or other social inventions, it can be adapted so that it can be used for what we want… The market isn’t a creature that lives its own life. It is we who created it and we re-create it every moment, whether we buy a newspaper or medical care… The market can deliver a kind of economic efficiency; but the difficulty is that it is unlikely to deliver justice, fairness or sustainability – unless we make it do so”.

     

    We are still participating in a marketplace developed for the needs of times long past. The Market Myth challenges the constitutive rules of today’s marketplace, and shows that we can create new fundamental rules and markets that take us more effectively toward our goals.

  • The Market Myth, Tomas Björkman

     

    You can order the book at Amazon or at Adlibris.

  • Tomas Björkman, Market Myth, Ekskäret

    Tomas Björkman

    Investment banker and author of

    The Market Myth

  • About Tomas Björkman

    Investment banker, Entrepreneur and Change maker

    Tomas Björkman has a long career behind him as entrepreneur in a variety of businesses within financial services, media, property and banking – working all over Europe. He founded Investment Banking Partners AB and served as chairman of EFG Investment Bank.

    In 2008 Tomas established Ekskäret Foundation in Stockholm. The foundation developed a conference facility on its island Ekskäret (eng: Oak Island) in the Stockholm archipelago, and the mission of the foundation is to facilitate personal development and social change. A special focus of the foundation is supporting the development of social entrepreneurs and the understanding of the complexities of social change.

    Tomas Björkman is co-founder of Perspectiva Institute and he is also a member of The Club of Rome, partner of the publishing company Fri Tanke Förlag, and co-founder and chair of the initiative Reinventing Learning and of the company Growing Minds. (More information about Tomas Björkman here.)

  • Highlights from The Market Myth

    "Humans, not the market, need to be at the centre of our world"

    It is all very strange. In modern society we deconstruct all traditional, religious mythologies. But somehow we still live by the myth of the market without noticing it. We find ourselves not really believing in anything – often viewing belief itself as a sign of weakness – but we keep clinging to this last semi-mystical belief. Since the rise of post-modern relativism in the 1980s, we have found that belief in the market offers a kind of crutch in a world that appeared to be without values.

     

     

    Humans (and perhaps other sentient animals), not the market, need to be at the centre of our world; this will be the Copernican revolution of economics. Just as Copernicus once changed our view of the earth’s position in the universe, we now have to change the position of the market in our human universe.

     

     

    The history of commerce and money shows that the current shape of the markets wasn’t inevitable. In fact, the various elements that make a market possible – money, corporations, ownership – actually have rather arbitrary histories, shaped by the places and times in which they originated and evolved. The truth, as we shall see in the next chapter, is that these ideas and rules are still being shaped from within even now.

     

     

    Adam Smith wasn’t entirely accurate when he described the invisible hand. It isn’t that there is one invisible hand, which manages everything – there are two of them. One invisible hand bakes the cake and one cuts the cake. Like people, the invisible hand has two hands, a right hand and a left hand. The first had takes care of the non-zero-sum game of creating wealth, trying to get as big and nice cake as possible. With respect to this invisible hand we are all more or less on the same side, all wanting a nice cake out on the market. But when it comes to the operation of the second hand, we all tend to want a bigger piece of the cake for ourselves. It is important to always keep in mind that the market constantly performs both of these self-organising processes, and that the outcome of each is dependent on the constitutive rules of the market. That means that, when we design the constitutive rules of the market, we need to take into account how the rules influence the functions of both these invisible hands, these processes of production and distribution.

     

     

    It is time for you to come with me for a cup of coffee. I’m in a Starbucks shop in the City of London, the financial centre of Europe. I have just finished a meeting with one of the leading banks and I’m now on my way back to Notting Hill where I live. I have money in my hand: two one-pound coins. The coins are heavy. Gravity gives them a significant weight in my hand. As an investment banker, I find myself thinking about what these coins really are. What is it that makes these pieces of metal into money? What is it that allows me to use them to pay for coffee? Is there something beyond our common faith in money that makes the coins into money? The issue becomes even more apparent when I realise that no coffee shop in Sweden would accept these one-pound coins as payment for anything.

    I give the coins to the barista, who suggests that I get a Starbucks card. I realise how much money I will save with such a card and immediately charge it with £50. Starbucks takes my £50 and uses it to pay wages, buy raw materials or pay rent for their premises. The money is now spent. But I still have £50 pounds on my card to buy coffee.

    It may seem strange, but Starbucks has just created new money. It wasn’t there before; after all, they spent the money I gave them. How did that happen? Starbucks is hardly a central bank. It isn’t even an ordinary bank, but somehow they have the power to create money. The coins in my hand felt tangible and real, but Starbucks credits are money because I believe they are. The value isn’t even attached to the card. The barista explains that, if I register the card on the Internet, I can just pick up a new card if I lose it. The money remains. Money is not even a thing with physical characteristics – it is an idea whose existence depends on our collective faith in it.

    But how can something that is just a social idea, an agreement between us, feel so tangible and real? If I don’t like money as an idea, I should be able to ignore it – but money and our need for it is as real as our biological needs for water and air. How can a belief in an idea be turned into such an objective fact of reality?

    The mass of the coins in my hand does not depend on how I perceive it. Mass itself existed and played a crucial role already in the Big Bang, billions of years before anyone could even feel it, and billions of years before the physicists got the idea to call it ‘mass’. But money, property and the market are not independent of human consciousness or of the world of ideas. No people means no money and no market. Worse, what seems like objective reality can change along with our collective faith in these changes. In a few years, we may no longer ‘believe’ in the pound in London. Maybe we will ‘believe’ in the euro or something else instead (an improbable example, admittedly.)

    Money is a new kind of phenomenon, a socially constructed one, like marriage, nations, science and religion. These socially constructed phenomena exist only by virtue of human activity. The land on which we live is independent of us humans, but the country Sweden only exists because we believe that Sweden exists. We agree about it. It is a socially constructed reality. Like money.

     

     

    If money is just a social construct and it is so easy to create, why is there so much poverty in the world? If human beings created the phenomenon of money and the market, can’t we change the way that money works? Can we change society’s basic functioning? To answer this we need to go back to the question of where money came from, and precisely how the ideas behind money emerged.

     

     

    Imagine… that a few children are playing together. They start to get bored with the current game and decide to invent a new one. One child suggests that there are two different groups divided by a large canyon, represented by the carpet in the room. Someone else says that there is a bridge, which can only be crossed if the queen (the child points to herself) says you are allowed to cross it. “Maybe,” says another child, “you give the queen a lot of gold and she lets you cross.” She points to some pieces of Lego. “That’s the gold,” she says.

    The game evolves, but suddenly one of the participants abruptly runs out of the room, saying that he does not want to play this stupid game anymore.

    This story has interesting similarities with our world. The children invent a new game and this involves making up rules, assigning roles and responsibilities, and assigning a function to certain objects – the Lego piece stands for gold and is now a valuable means of transaction. What’s more, the children create the rules and play according to them, as a group. As long as the children imagine that one of them is queen then, in the context of the game, she is in fact a queen.

    We grownups also make rules and these rules define what counts as national borders, who counts as an illegal alien, and who gets to decide on who is allowed to cross the border. The rules also define roles within a system, and each role comes with certain rights and obligations, just like the queen having the right to decide who can cross the bridge. We also assign a value to certain objects, pieces of paper instead of Lego, or blips on a computer screen, and start counting them as something else. These pieces of paper – money – can be used for transactions. And once we change some of these defining rules, just like the children did, we replace an old institution with a new institution, or one game with another game.

    Our social world is just like children’s games. It is a world of imagination and make-believe. It is a product of our collective imaginations and it can only exist as long as enough people believe in it and are playing the same game, and with the same rules. Our shared social world is pretty fragile: it only exists because people think it exists.

    On the other hand, there are some important differences between the children´s games and the social world. In the game described above, the children count the carpet as a canyon and Lego pieces as money. In our social world, we can’t just create a canyon by deciding on it – we rely on geological forces for that – but we can decide to count some things as a means of transaction and create money. Here, then, is a central distinction between natural phenomena (canyons that exist independent of us) and social phenomena (money depends on us for its existence).

    Another interesting thing is when one of the children suddenly leaves, he can just do so. He has the individual freedom to exit the game. For us, as members of a society, we can’t just leave. We can of course imagine tragic cases like suicide, or being forced to become a refugee. But, in the latter case, we would still participate in a game in another part of the world with similar collective creations such as rights and obligations. But normally, we can’t just leave the social world. If we were to say that the queen is no longer the queen or that the pieces of paper are no longer money, we would be regarded as peculiar and perhaps crazy. Perhaps that is why so many of us take this social world for granted and regard its limits as similar to the limits in the natural world. But, collectively, we could decide to stop counting pieces of paper as money and – presto! – the paper would stop being money.

    In other words, we have collective freedom to exit the social world we have created and form another social world. Or exit some parts of the social world such as the existing rules of the market, and create different rules and hence a different market. In short, from the individual´s perspective, the social world is given, fixed and taken for granted, but collectively it is fragile and always possible to change. This fragility of social constructs has historically always been protected by myth.

     

     

    The truth is that we are making and remaking the rules of the market all the time. We sometimes get blinded by all the rhetoric about free markets and forget that what makes it “free” is paradoxically a set of agreed boundaries, goals and legal frameworks.

     

     

    The central message of this book is that there are many possible free markets, and that we can decide what our free market should be like.

    Like all social constructs, the market could be different. We have created the market and we can change it. It may not be possible to imagine a world without a market, but it is possible to think of one where the market helps to discourage greed, selfishness, cynicism and exploitation, rather than positively encourages them.

     

     

    The whole message of this book is that the market is just a tool. Like democracy or other social inventions, it can be adapted so that it can be used for what we want. After all, a democratic system says nothing about what decisions should be taken, just how they should be reached and decided upon. Likewise with the market: we can shape it to serve our demands. The market isn’t a creature that lives its own life. On the contrary. Without people there would be no market. It is we who created it and we re-create it every moment, whether we buy a newspaper or medical care.

     

     

    It isn’t just that other kinds of free market are theoretically possible – they are possible in practice too. Free and open markets can exist in other forms than we know them today. The market can deliver a kind of economic efficiency; but the difficulty is that it is unlikely to deliver justice, fairness or sustainability – unless we make it do so.

     

     

    My fear for our society is not so much the various external threats we face, but rather the kind of emptiness and meaninglessness that can destroy society from the inside.

     

     

    The market system needs no sense of meaning to work, but both society and individuals do need a system to create meaning. We need a cohesive force, common ideals and goals in order to survive and flourish. We need to operate within a context to know that we are part of something meaningful. Without a cohesive force, society unravels into a collection of individuals who are mere economic entities in the market. A society cannot consist of consumers and producers only, yet this is the vision of our world promoted under the current market-liberal worldview.

     

     

    The market has evolved as the un-reflected answer to our need for collective co-ordination in today’s world, our need for an ultimate authority. As an ultimate authority the Market myth is very thin. As efficient as the market is for allocating private goods, it is that poor at providing a satisfying shield against our collective existential void. And we can all feel the cracks in this shield. It must address the important common question of efficiency, but also must address questions about other common human values like justice, equity and meaning. Collective questions like ‘How do we balance our needs today with the needs of future generations?’ require a bigger frame to be answered: A new meta-narrative.

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