The Florin, Bitcoin, and Parallel Lessons for Beautiful Innovation in our Moment August 10, 2020 | Matthew J. Milliner & Jon Ungerland
“If the business world loses its contact with culture and the intellectuals resentfully keep their distance from economic matters, then the two spheres become irretrievably alienated from each other.” - Wilhelm Röpke
Finance and culture, when bound together, can generate beautiful innovation and freedom towards human flourishing. When ignorant to their inseparability, all manner of scourge and plague are possible (economically and socially). Yet, the current rise of digital assets and cryptocurrencies could herald hopes for humanity, industry, and communities, even amidst current medical, economic and industrial illness introduced by COVID-19. Obviously, it is a lot to ask businesses to care about subjects like art history in normal economic circumstances, let alone in the abnormal ones we face today. But there are costs to the business and academic worlds continuing to disdain one another as well. Divorced from the complexity of how businesses run, scholars retreat to their endowment-funded hideouts while producing graduates ill-prepared to function in complex economies. Investors, on the other hand, splash in the red ocean shallows of business literature without drinking deeply form the blue ocean of the world’s great wisdom traditions. A bit of accounting is in order: Ours is a moment where twin disasters have converged: Aging economic policies have been compounded by a public health calamity. The fiscal authorities “condemn unjust gains” while lining their pockets, just as “the shops scarce opens their doors” for fear of the pandemic. Political volatility and even open street revolt intensify our distress. But as the body count rises, a new currency is coming into its own. Brazenly untethered to formal government authority, it is being harnessed to foster new networks of trust, bursting feeble attempts at regulation (which primarily befnefit the regulators). The net result is that as the industrial and economic plague subsides, new actors will be emerging into unrecognized networks of exchange. Aware that many titans of finance as well as classical academic and intellectual economists may consider the above narrative fabricated, concocted, creative, impossible, utopian, or ridiculous (perhaps all of the above!), it’s important to remember History is a stern schoolmaster. The fact is, the moment we just described is not only an accurate accounting of our own epoch, but of the early Italian Renaissance as well. The chronicler cited above is Boccaccio (1313-1375), the challenged regulations are ecclesial (Church) bans on usury (i.e. loaning at abusive rates of interest), and the new currency is the golden florin (bearing no ruler’s image) as cleverly deployed by the new Medici banks. That the exact same description, compressed to apply to the last fifteen years, parallels our moment of aging banks, pandemics, and cryptocurrency should be of considerable interest (and yet, the instruction from history is ours free of charge!). Learning the lessons of the Renaissance, today’s businesses might be poised to avoid pitfalls and grasp opportunities for human and community financial and cultural flourishing. And so permit us to describe the Renaissance moment in more detail. A quick glace through historical ledgers might help us balance the books and budget of our moment. The Medici were the family of bankers that presided, from their home perch of Florence, over a new era not only in culture but in finance as well. As Florence rebounded from the mid-fourteenth century Black Plague that annihilated a third of Europe, they harnessed the power of the florin (a new currency) to avoid constraining and economically damaging ecclesial (Church) regulations. The Church ban on usury was intended to prevent unjust gain, but as Tom Parks makes clear in Medici Money, the ban clearly benefitted ecclesial authorities as well. However, by gambling with currency exchange rates across their bank branches in Florence, London, Rome, Milan, Venice and Bruges, the Medici grew wealthy while technically avoiding issuing loans at interest. Church authorities determined that if considerable risk was involved, the fortunes generated through these trading avenues did not violate Church law. So it was that the new currency generated new networks of trust, networks that we know today as banks. The growth of the Medici banks, however, led to inevitable Medici involvement in politics. And, not surprisingly, the regulatory power that they had previously skirted ultimately allied with the unleashed power of the florin, the new currency, as well. By 1466, Pope Paul II joined forces with the Medici banks to declare a monopoly on the sale of valuable minerals. Meanwhile, however, much of the fortune generated by the Medici banks was invested into culture, enhancing the churches and private palazzos of Florence and Rome. So it was that the florin generated the flowering of scholarship and culture that remains famous today. Art and scholarship – some have argued – was itself a form of Medici currency. The Medici banks themselves may have ultimately failed, but the culture they created, and the innovation of a borderless and government independent currency and exchange network they invented, were here to stay. Indeed, according to Vigna and Casey’s The Age of Cryptocurrency, the Medici are the origin of the modern banking system of profiteering middlemen, and that model – most people alive in 2008 need no reminding – is failing. “Our high-charged global economic system would collapse if these middlemen stopped doing what they do… a system that first empowered people has fostered a dangerous dependence….” If banks originally liberated wealth from stifling ecclesial regulation only to become themselves the stifling regulators, could cryptocurrency be generating the same liberating dynamic today? There is reason to think so. Vigna and Casey explain: "At its core, cryptocurrency is not about the ups and downs of the digital currency market; it’s not even about a new unit of exchange to replace the dollar or the euro or the yen. It’s about freeing people from the tyranny of centralized trust. It speaks to the tantalizing prospect that we can take power away from the center – away from banks, governments, lawyers, and the tribal leaders of Afghanistan – and transfer it to the periphery, to We, the People." Which is to say, the energy unleashed by cryptocurrency could have the same impact as trade networks of the florin, and the same risks. Just as ecclesial authorities quickly harnessed the banks, so might banks, government and social media empires harness Bitcoin and Ethereum. But if the history of Florence tells us anything, it is that before such harnessing is successful, we can expect more and more new actors to emerge into the market on the roads that cryptocurrency paves. But every analogy limps, and we’re afraid that here is where the parallels between the Renaissance era and our own conclude. What our cryptocurrency conversations miss is anything approximating the intellectual and spiritual ferment of the Renaissance that accompanied their new economic possibilities. It might be unfair to expect an expert on Ethereum to tackle the nuances of Neo-Platonic thought as did many of the Medici bankers themselves. From engineering to economics, cryptocurrency already demands much. Still, it is precisely because the cryptocurrency enthusiasts attempts to navigate these deeper waters that its poverty, in comparison the Renaissance at least, is exposed. At best cryptocurrency chatter is characterized by easily debunkable fantasies. At worse one gets refried soundbites from a Yuval Noah Harari Youtube lecture. But Harari, even with a condiment of Vipassana mediation, just won’t do. We are humans who are drawn not to just any story (Lehman Brothers spun one hell of a yarn), but to true stories, and what makes the story of cryptocurrency of special interest is that it is not allied to a false utopian fable. Cryptocurrency is noteworthy not because it is tethered to facile progressive notions of human self-improvement, but because it challenges such notions, taking humanity’s inherent drive to self-interest and hoarding and corruption, squarely into account. And yet, just when one would expect cryptocurrency conversationalists to linger on these illuminating details and promising prospects for humanity, they demur. Fabricators of our potential digital florin dive back into dialogues which appear dangerous to our culture and seem to portend anarchy, a sovereign digital deity, or elimination of trusted institutions. The potential for beauty becomes lost in the digital and technological dissonance from current culture. For the masters of the florin, however, it was not so. Fortunately enough for the Medici, their innovations were paired with profound spiritual and intellectual emergence as well, such that even a skeptic like Park can claim that the intellectual and spiritual space the Medici made possible remains (in part) the “space we live in today.” Which is to say, unless there is some outstanding pocket of Bitcoin humanists to which someone can direct us, the Renaissance parallel does not flatter us, but puts us to shame. Renaissance innovations in banking were not isolated developments, but were waves in a sea of culture to which the Medici, disingenuously or not, still swam. The accumulation of capital was fueled by, and fueled, a dawning Christian humanism, one that pushed every imaginable sector of human learning to the known limit. In other words, we don’t talk about the Medici because of their ability to invest, but because of what they invested in. Nothing about the advance of cryptocurrency alleviates us from these wider questions, and the time to be asking them is as the currency develops, not afterwards. A currency revolution of this magnitude needs cultural analogues to sustain it. Can the brilliant minds swarming around this economic breakthroughs partner with the world’s great religious and aesthetic traditions, those deep ‘blockchains’ of wisdom immutably recorded in the ledgers of the ages?. As finance leaders, community bankers, academics, intellectuals, legislators, and regulators of our moment, are we actively surveying our systems and looking for opportunities to catalyze community flourishing and financial health (through complimentary advancements in thought and business)? Are we investing in our own micro art worlds as well (local merchants, artists, scientists, philosophers, engineers, architects, etc.), who in turn could enrich public religion, life, human thought, and social discourse? Have we even bothered to see if such pockets of local culture exist and desire economic innovation to animate a new era of creation and beauty? Or, are we simply preoccupied with death – the inescapable reality of human death plaguing our world and the apparent demise of legacy financial norms and institutions? Arguably, our answers and actions as local cultural and financial institutions are the only investments that can create the kind of humanist spaces for individual and community flourishing that purely political, or purely religious agendas cannot abide. Some might object that to summon cryptocurrency enthusiasts to cultural and spiritual depth would be a disaster: Such a distraction could wreck the enterprise. For Parks, “the chief drawback of these exciting ideas [is that] they had little to say about moneymaking and the price of things.” Cosimo de’ Medici (1389-1464), who built the bank, genuinely loved numbers, while Piero di Cosimo de’ Medici (1416-1469) presided over the bank’s decline because he was more of a humanist than a banker. Facts like this seem to end the discussion, suggesting deep ideas and cultural investment are an extraneous distraction to the business of shepherding new currencies into permanence.
But the point is missed. By the 1460s, plummeting trade, ostentatious princes, mismanagement and external invasion combined to bring cause the Medici banks to fail. Meanwhile, the permanent things endured, as the name of a banker named Portinari makes perfectly clear. Some pin the blame for failure on Tomasso Portinari (c. 1425-1501), head of the Medici bank in Bruges, who shunned Medici counsel “not to seek to get richer at great danger.” But only those familiar with the history of banking know Portinari for this reason. The rest of the world knows him, and will always know him, because of the perfect fusion of northern and southern artistry that he commissioned, and which still radiates its wisdom at the Uffizi today: The Portinari altarpiece. There Tomasso is on the left panel with his sons, presided over by saints Anthony and Thomas, adoring the Word made flesh whose numinosity penetrates the world of earthen affairs that Tomasso so inexpertly managed. In the last analysis, the florin and the Medici banking system, liberated from previous corruptions, loosened restrictive and unnecessary laws, and inaugurated the financial modern age. That a similar revolution may be upon us is an exciting feature of our moment. Barring unforeseen pitfalls, it has potential to be no less liberating. The question that vexes most Bitcoin enthusiasts, rightly, is whether or not cryptocurrency momentum will continue to build. But the bigger question, which forums like this can at least pose, is: What if it does? Will those who forget their Bitcoin passwords, thereby surrendering a fortune as did Tomasso Portinari, offer history anything akin to the Portinari altarpiece? If so, the time to be cultivating deeper cultural investments, without neglecting the numbers, is now. As the twentieth-century economist Wilhelm Röpke argued in A Humane Economy, finance and culture “should merge into a new humanism in which the market and the spirit are reconciled in common service to the highest values.” The Medici, for all their considerable faults, knew this, and so should we. If the merger not just of corporate entities, but of culture and finance, was on the mind of more business professionals, we could offer future generations not just worth, but more critically, something worth remembering. Matthew J. Milliner is associate professor of art history at Wheaton College and Jon Ungerland is COO and co-founder of DaLand LLC