JW: Thank you, Chris, for meeting me to discuss your highly innovative work in the financial sector. Since 2008, our work with metadesign has led us to think beyond the usual notions of design as simply ‘form giving’ and into hybrid worlds in which verbal language is at least as important as images, shapes and colours. I therefore pricked up my ears when I heard you say you ‘write’ your solutions to problems. I think you also said that you ‘design’ systems. Did I hear you correctly?
Chris Cook: Yes, the terms ‘writing’ and ‘designing’ both seem applicable in my line of work. I started my career in the DTI official receiver’s office in 1977 and my work entailed discerning the causes of individual and corporate Insolvencies. Actually, we referred to the accounts of the causes of failure as ‘narratives’ which almost invariably plotted a sad trajectory from slow decline to sudden collapse. I then moved sideways at DTI into corporate fraud investigation and honed my skills in forensic accountancy. This led me into an exhaustive exploration of the myriad ways that people try to exploit Company Law to cheat one another, or beat the system. It taught me a lot. One of my most important lessons was to ‘follow the money’. I also learned that, if something seems too good to be true then it probably is. In my career, law and accountancy have frequently been intertwined.
JW: There is a slightly dismissive term ‘creative accounting’ which implies that proper accounting must always be uncreative.
Chris Cook: Maybe that’s because, at the macro level, fairness may be at least as important as creativity. In my experience, a fair market is good for business. In the mid 80s I was brought in as a market regulator in the City. At that time, unfairness and fraud permeated London markets and I subsequently became a director of the International Petroleum Exchange - which was the second largest global energy exchange and growing fast. After a while I began to look for creative ways to enhance the market by ensuring that the rules adapted to changing conditions and rapid growth in accordance with the fundamental principles of regulation. At that time the exchange was a network of members rather than a profit-seeking organisation, so we could exchange, share and develop knowledge and data. I was able to acquire a sense of the global system by speaking with other exchanges and to build a consensus that would lead to resilience across the whole system.
JW: Interesting that you present business in this way. I have tended to assume that the business world depends upon the granular nature of numbers and codes. In my terms, design operates in an altogether smoother, non-binary world of forms, shades and tones. Would you agree with this distinction?
Chris Cook: One of the areas I got into was what is now called ‘legal design’, perhaps because it can ‘shape’ behaviour within the business world. In this sense I would say that I was responsible for the ‘legal design’ of the UK natural gas futures market. In 1996, a decade before we had Blockchain, the internet was emerging and I set up a dot.com company combining law, accountancy and Information & Communications Technology ((ICT) into what is now called financial technology (’Fintech’). My innovation was the concept of a shared global market transaction registry (“NewClear”) initially in my home turf of the oil market. The legal design innovation was a mutual market user agreement which transcended jurisdiction to give bilateral contracts legal effect anywhere in the world.
NewClear was a global framework or platform by which mutual agreement enabled transactions to be validated and confirmed. In effect, I had identified a utility function of market data capture which everybody in the market wanted to own. So why am I not a billionaire, today? Well, if any market participant(s) owned it, the others would not use it. As this venture dissolved after a whistle-blowing episode brought my time and income in the City career to a traumatic end, I came to ask deeper questions about the financial system. What is money? Who creates and owns it? What do banks actually do?
Ironically, although I am a pragmatist with a pretty shrewd grasp of financial market systems the only exam I ever failed was economics. This was because - deep down - it made no sense to me. Of course, I buckled down, memorised the standard stuff you find in the textbooks and passed the exam. But what subsequently confirmed my suspicions about standard economic theory was reading Robert Pirsig’s book ‘Zen and The Art of Motorcycle Maintenance’. 1536 Pirsig blamed the ancient Greeks for turning everything into absolutes such as quantities. He realised that part of the Greeks’ legacy was a ‘subject-object’ metaphysics and grammar, and he proposed instead a metaphysics of quality which is indefinable or definable only in relative terms.. Looking upon quality and value as two aspects of a non-dual reality, then in economic terms, if value cannot be defined, or is definable only in relative terms, we require a metaphysics of value that is qualitative, rather than quantitative. We need a way beyond objective metrics, such as energy, of evaluating those things that seem priceless, such as care and creativity. This is my ongoing mission. 1607
JW: This question also sounds familiar to those of us who are looking beyond the traditional remit of design. But even if we don’t depend on numbers, don’t you still need hard-edged legal frameworks that harness austere, legalistic forms of writing?
Chris Cook: Perhaps a more pragmatic question is to ask how can we get things done using legal tools? In the early 1990s, the usual legal frameworks did not encourage cooperation. At that time, even large professional partnerships such as Arthur Andersen were concerned that an individual partner’s legal liability for their firm's actions could easily bankrupt them. So I did a lot of work on devising agreements that would make partnerships work better. By 2001 the government had approved the Limited Liability Partnership Act which limited each partner’s liability to the investment they made. Although this encourages commitment by smaller players, it also retains the co-operative spirit and benefits of a partnership. LLPs are easy to set up. You just need two designated members to pay £95 and complete an application form from Companies House website. So now there are over 7,000 LLPs in the UK. But you are right in saying that writing is normally used to set up hard legal boundaries. In this case, however, there is nothing to stop you from setting up a LLP without any written agreement at all since a couple of pages of default provisions apply, such as equal shares. Of course, these skeleton default provisions may require to be fleshed out unless all parties are convinced that mutual trust would survive in all weathers.
JW: Most of these concerns have tended to seem subordinate to what designers are paid to do. However, one of the aspirations of metadesign is to reclaim more of the conditions of design that shape how we work as designers. This is because the design process often gets re-shaped by the conditions that frame it. For example, if you design a home you usually become embroiled in the business models, regulations, mortgage arrangements, freehold conditions, planning and building regs, etc. These are not just secondary issues. Mortgages, for example, play a huge role in how money circulates around the economy, so how might designers get their heads around the legal complexities of, say, ownership?
Chris Cook: Yes, around 2008 it occurred to me that partnerships are better for work situations than for owning things. You do need things to work at the local level but, as you say, this may have big implications for the economy as a whole. After the financial crash I was asked to give evidence to the Treasury Select Committee when oil prices went sky high. Following this I was invited to become a senior research fellow at the Institute of Strategy, Resilience and Security at University College, London. My role was to envision a resilient financial system that is fit for today’s networked economy. Exploring at the micro scale my aim is to identify legal tools that can mobilise individuals and assist them in sharing risk, costs, surplus and asset use equitably. While the conventional legal form is the ‘joint stock company’ this fails to mobilise people and resources to a common purpose. It isn’t working. How can you have a sharing society if the lenders, shareholders and landlords won’t share? We need different agreements.
JW: You make your work sound very down to earth when you say ‘legal tools’, but isn’t it rather more theoretical and abstruse?
Chris Cook: Actually, I like action research methods which I see as ‘learning by doing’. When I started at UCL, one of my first projects was to draw up a simple two page “club” constitution enabling my local community to club together to save a historic and important pub from demolition after it had been burned down to a shell and then repossessed by a bank after insurers denied a claim. The pub had always been a popular social hub and listed building which was potentially hugely profitable but it had got stuck in limbo. Everybody said that something must be done but nobody did anything. So I convened a core team of founder subscribers to the founding “club”constitution which enabled the community to unite around a common purpose. Within 18 months it was a working pub again. Robert Pirsig talked about ‘stuckness’ and I have always enjoyed addressing what, today, we call ‘wicked problems’. Effectively, a small group of supporters had worked together and acted as a catalyst.
Over the years I have developed an armoury of tools and methods in particular the Linlithgow Natural Grid which was active over a period of five years. The single, commonly understandable aim of LNG was simply to achieve energy independence for my home town of Linlithgow in Scotland. LNG’s objectives were to bring together the people, assets and resources necessary to achieve this goal. I soon realised that within the right mutual legal structure money was not essential. Once you have the people, land and resources with the will to make things work you just need accountancy and an appropriate agreement.
JW: So if there is nothing to stop us from ‘writing’, or ‘designing’ fairness and resilience into our financial markets, why are contracts currently failing us so badly?
Chris Cook: One of the main sticking points is the legal concept of the ‘corporate’ or collective ‘legal person’. Whether applied at a public level such as a State or municipality, or as a private entity, such as a Plc or an NGO - it perpetuates a legal fiction within which our actual personal identities are nullified or ignored. For individual citizens this reduces our feelings of involvement in the system. Marx and others have called this ‘alienation’. Another problem is that democratic systems favour certain groups rather than others. For example, ’shareholder democracy’ often excludes many individuals who actually have more ‘skin in the game’. When there is a large number of people involved we may adopt a form of ‘representative democracy’ but this can easily work as a ‘tyranny of the majority’. The final problem with virtual entities that function as a collective legal person is that you still need individual human beings to act on behalf of the collective. These managers as agents or trusted third parties are known – as are Trustees acting on behalf of Beneficiaries - as fiduciaries. Unfortunately, managers’ interests diverge from those of owners and this intractable conflict of interest is known as the ‘principal agent’ problem.
JW: Creating change at this level sounds like a tough challenge, given that the world’s richest and most powerful people presumably like things the way they are…?
Chris Cook: I think it was H.G. Wells who said that the only thing stronger than the Will to Power is the Will to Freedom. Of course, nobody likes to be told what to do. About eight years ago I came up with an innovative legal design for a mutual multi-stakeholder agreement which I termed ‘nondominium’ and this has since become the basis for almost everything I do, nowadays. I’ll just give a brief background to the need for it. It is usual to see ‘property’, or ‘money’ as ‘things’ and so everything gets commodified into objects. Instead, I reframe them as relationships rather than things. It is a systems approach in which everything is legally codified as mutual prose agreements. By specifying certain rights and obligations we redefine the way we see ownership. We might specify, for example, ‘rights of use’ the ‘fruits of use’ or the ‘right to exclude’ or ‘oversee’. These can be clearly written, designed, or defined and bundled together in a mutual or associative agreement. As a result, instead of needing an intermediary or trusted third party (i.e. the fiduciary) it merely authenticates certain kinds of relationship among the interested parties. I have deconstructed the role of the agent into two separate and distinct roles, a custodian and a steward. The custodian has passive foundational rights of veto (like a covenant, or golden share) in accord with the founding purpose of the venture. Although s/he has the ability to say what you cannot do, s/he cannot tell you what to do. The steward may be the active developer, operator or maintainer of the venture’s key asset/s. Usually, it is the investors who tell the steward what to do. However, in my nondominium model the consent of both the two parties involved in exchanges or swaps of value is required. By way of example these may be the land user and the land investor. In systems thinking terms the result of this four party agreement is a ‘viable system’ which is recursive and non-hierarchical. In other words these agreements may be nested one within another from the most local micro-level via the mezzo national level to the macro global level without hierarchy.
JW: In our Metadesign research we have experimented with ways to support non-hierarchical teams so I am particularly interested in finding genres of writing that can be used to diagnose or catalyse effective relationships between people. Some languages depend more on a currently situated context than others. I am told that the meanings in conversational Japanese are heavily dependent on informational cues from the immediate context of the discussion. By contrast, I would imagine that Swiss German would be much more applicable to contract writing as it is more explicit and self-explanatory. However, this also implies that it is less relational. Current developments in cryptocurrencies seem to copy token money and the way that it is a form of ‘bean counting’. If, as you say, we need more quality-based and relational genre of agreements, should we be mapping local values, rather than registering units of account (c.f. Wood, 2019)?
Chris Cook: Designing better monetary systems is an important idea, but my work offers a more bespoke system that may not need to involve money at all. An Edinburgh lawyer once told me, when you peel away all of the layers of the onion there are only two things at issue - rights and obligations. In my ‘nondominium’ approach, as long as we generalise the situation imaginatively and consensually, this somewhat reductionist approach will not compromise the parties involved.
But here, we need to be very clear about our terms of reference. For example, there are two types of right. A right ‘in rem’ (i.e. literally ‘in the thing’) is a property right that has no name attached to it. So it acts as an independent object until we create an instrument that links it with a subject through a relationship. In technological systems terms this is called a semantic triple.
This leads to the other type of property right known as ’in personam’, with a particular individual’s name linked by a relationship to an object. This is similar to the difference between electronic cash and electronic money. Whereas electronic cash transactions (e.g. cash debit cards) offer anonymous (‘in rem’) rights the banking network always knows who (‘in personam’) owns the money that moves via regular bank transactions. Another ‘in rem’ example is freehold ownership, which you can buy and sell. In a leasehold, however, you only have the right to assign the lease, rather than exchanging it. The same applies to cheques and invoices. Although you cannot spend them directly you can still assign them to someone else. Today, of course, we are living in an increasingly electronic banking system that perpetuates an inorganic legal fiction that is populated by inorganic objects that exist ‘in rem’. The problem is that these financial objects get between you and me. My feeling is that building and sustaining trust is less expensive and painful than building contractual systems designed to resist every attempt to undermine them. These seem more common in less westernised cultures. Sharia Law is about consensus. I am not sure whether your ‘situated language’ theory supports my findings, but the joke is that there are about the same number of Sumo wrestlers in the USA as there are lawyers in Japan. My approach is to design mutual agreements that encourage people to nurture relationships of trust, whether these are for risk-sharing, cost-sharing or surplus-sharing purposes.
JW: That has been really illuminating and helpful, Chris. Thank you very much.
Pirsig, R.M., 1999. Zen and the art of motorcycle maintenance: An inquiry into values. Random House.
Wood, J., (2019). ‘Re-Designing Money’, Mint Magazine, 2nd April 2019 https://metadesigners.org/Mint-Article-2019
The Institute of Strategy, Resilience & Security: https://www.isrs.org.uk/