On Sunday night I did something that, when you stop and think about it for a moment, was weird.

Accompanied by SaulonSports, I drove to Ray’s Hell Burger to pick up dinner for ourselves and our fellow Pinks. We asked for five burgers. And the folks behind the counter gave them to us in exchange for — get this — three pieces of paper.

Three pieces of paper!

Yes, they were two 20-dollar bills and one Hamilton. But still, we obtained something of value (including a B.I.G. Poppa!) by handing over a few strips of fiber that have no inherent worth.

In his new book, The End of Money: Counterfeiters, Preachers, Techies, Dreamers — and the Coming Cashless SocietyDavid Wolman explores the conundrums and complexities of cash. (Buy the book at Amazon, BN.com, or IndieBound.)

He argues that bills and coins are inefficient and expensive — for example, a U.S. nickel costs 11.2 cents to make – and that we’d be better off without it. In fact, he tried to go a year without using any cash at all.

The book is fascinating — so much so that I asked David to answer some questions for Pink Blog readers.

You tried to avoid using physical money for an entire year. What changes in your daily habits or ways of thinking were you forced to make? And have you gone back to using coins and bills?

The biggest hangup for me–both during the cashless year and now–is tipping. While foregoing cash, I made sure, for example, never to get help from a curbside porter at an airport or bellhop at a hotels, no matter how heavy my suitcases. Now I’ve loosened up on that, especially during a recent family vacation, which included a duffle bag that I would swear was packed with silver bullion. I also steered clear of farmers markets; many of those vendors still only accept cash, although I think that’s changing. I tell ya, I can’t wait for the day when I can tip or buy some strawberries with an exchange as simple as a text message.

As some people know, I harbor a long-standing animus against pennies. You talk about this issue in your book – pennies are expensive to make, heavy to transport, and nearly useless as a medium of exchange. And still we can’t get rid of them! If we can’t even break our penny habit, how likely is it that we’ll be able to shed our reliance on cash more broadly?

Cash’s magic spell begins with the penny. You’re right: if we can’t even nuke the penny, doing away with cash sounds rather quixotic. And losing the penny is going to be especially hard during the term of a President from the Land of Lincoln. (You may have seen recently that the President wants the Treasury to look into making pennies out of cheaper materials, precisely because of this cost imbalance. Talk about an inability to see the forest through the trees.) All of that being said, I’m still hopeful that cash’s death by 1,000 cuts is still on course, thanks to emerging technologies and alternative currency innovators. It’s not so much that we will actively do away with pennies and cash in other denominations. It’s that cash will get pushed so far to the margins that people won’t want it anymore. Think of how little we use it already. Illicit transactions notwithstanding, when was the last time you or other PinkBlog readers used cash for any sizable purchase or payment?

What’s the most surprising thing you learned about money – past, present, or future — while researching your book?

I was taken aback by how vehemently so many people oppose the idea of doing away with cash. For crooks, tax evaders, or individuals who want to buy porn in secret — I get it. What I’m talking about are people representing a broad spectrum of viewpoints, yet all converging on a defense of cash that is sometimes rational, other times not at all. ACLU types worry about threats to privacy resulting from an entirely digital money system; right-wingers ascribing to the get-government-off-my-guns-and-cash dogma obviously loathe the idea; and even everyday folks who just feel this kind of vague ambivalence about giving up on money in its tactile form. They know the paper and metal representations of US dollars aren’t in and of themselves of worth. But they don’t care. They still like them.

After reading the book, I’m convinced. Cash costs too much in terms of time, materials, security, transportation, you name it. Tell us what a future without money will look like, and what’s one step a PinkBlog reader could take today to help make that future come true as quickly as possible?

The future holds a phantasmagoria of value options, with various currencies all exchangeable and trade-able in real time via your mobile phone. What can you do to nudge things along? Be like an airline! To avoid the high costs of cash, most major airlines have stopped accepting paper money for payment during flights. By doing so they have chipped away, ever so slightly, at the fungibility of cash. One of cash’s historical — and, to a large extent, persisting — advantages is that it can be used across almost all uses because nearly everyone accepts it. But that doesn’t have to be so. Look at how many restaurants and other businesses refuse to accept plastic because the proprietor doesn’t like the fees. If refusing to accept cash strikes you as too extreme, or possibly too hazardous to your bottom line, consider encouraging other forms of payment by offering a discount, for instance, to people who pay with electronic funds, thereby helping you reduce the need for using–and paying to use–cash.

21 Responses to “Would getting rid of cash make our lives easier and better?”

  1. Milla says:

    I’m hardly using any cash at all. I pay everything with my bank card. Even parking my car in the city center can be paid with either mobile phone or credit card. We don’t tip in Finland.

    My husband likes to withdraw money and pay with cash. I guess that way he has better control over how much he spends.

  2. Seth Godin says:

    Dan,

    17 (!) years ago, I wrote this book: http://www.abebooks.com/products/isbn/9781575210629

    I talked breathlessly about digital cash in all its forms.

    I don’t think we’ve moved forward at nearly the pace I expected, and it all goes to your take about how the brain works, storytelling and fear of change.

    Money = food = life = not dying.

    Messing with the penny? That’s like running with scissors, bud.

    • I am going to change that, change the world because I am the future and I will not let this world continue to live on greed, false reality, etc. because unlike all of you old, influenced, soul less people, I see a better future and I have plans to fix every problem there is that money has caused and I will make this world a better place in every aspect. One day you will see if you haven’t passed by then. I am already taking a path to get to the top and once I am there and have the knowledge, I will change this world as you know it and once I fixed this messed up world, I am just going to blend in with the people because I have no need to feel power, fame, or to satisfy that animal instinct within a person because all I need is to see what I have done to make this world function as it should of and should be, and with that it is all I will ever need. Think say what you want people but I know I will get there, I believe in my ideas and I have enough passion and balls to get there.

  3. Dan Pink Dan Pink says:

    @Milla – No-tip cultures have other advantages, too.

    @Seth — As usual, you were ahead of the game. Cash in general is OK. It does provide some measure of convenience and privacy. But pennies and nickels are a joke. They’re the cultural equivalent of the human appendix: Still around, but completely unnecessary.

  4. While I could see this becoming a reality, I am against it. For those who live a debt-free lifestyle cash is extremely important. My wife and I use cash to buy our groceries, gas, clothes, entertainment etc. It limits our spending as Milla stated about her husbands use of cash. We paid for a TV with cash and we were able to get a discount because of it. We use checks or our debit card to pay for housing etc. As far as pennies and nickels are concerned, the only thing I use those for is to turn them into bills. Thanks for your post!

  5. Mara says:

    The shift in our culture is very evident and I do see the advantages Wolman raises in his book…but, I argue that there really is no overall reduced cost to electronic funds. The security, infrastructure, gadgets etc that are required for safe and secure money transfers are still required but they are hidden to the average consumer; passed on to consumers through user/bank fees and we accept them as the ‘cost of convenience’. The criminal element will never be removed, counterfeiting will evolve along with the technological advances.

    And I haven’t even touched on the psychological impact of hard currency vs intangibility of electronic funds on the behaviours of consumers…would love to see the research from behavioural economists on this one.

  6. Stuart Buck says:

    I was taken aback by how vehemently so many people oppose the idea of doing away with cash.

    Well, if you’ve ever been on a road trip and your credit card suddenly stopped working (because it was scratched or because the credit card company’s computers thought your card was stolen), you’d never want to be without some cash on hand.

  7. Maybe this is discussed in the book, but what about the fact that people spend, on average, 30% more when using non-tangible currency (the assumption being that this is because the purchaser doesn’t actually see the money leaving their hands, thereby reducing the effects of loss aversion)?

  8. There are so many reasons why a strictly digital currency is a horrible idea (see comments above).

    In this day and age of hackers taking all kinds of systems down with a key stroke what happens when they take the digital monetary system down and thousands, MILLIONS of people are left with nothing?

    Furthermore, as mentioned above, there is a huge psychological impact. When you have something tangible to trade you can actually see your loss or gain. “Whoa, maybe I’m spending too much!” The problem with digital currency is evidenced by the mountains of credit card debt that many Americans are swimming in.

    Cash provides flexibility and freedom. I’m not buying guns or porn but I don’t want my every move tracked. I don’t want all of my money under someone else’s control.

  9. Jim says:

    There is no mention of the cost of using digital transactions. The additional cost of that transaction either gets absorbed by the business owner or is passed on to the consumer. Additionally, I can see the point of view where some don’t want all of there transactions know to others and this can be for legit reasons. Just look at the move in privacy policies at Google and others to see where this can go. Most of my transactions are cashless but I don’t think we are ready to go away from it.

  10. Dan, I have a 10 and a 5 in my wallet that have been there for 2 months now. Haven’t touched them. I see the points made in your post, clearly. What I am concerned about is the alarming number of people (I believe the number is growing) that do not have a bank account, do not have any plastic, and pay everything in cash. I live in a really heterogeneous, international city with a large population of immigrants, and the number of Check Cashing Stores has exploded in the last 5 years. What to do about this?

    Enrique Fiallo

  11. Steve Jones says:

    A couple years ago I was traveling to the UK. I arrived at the airport with change in my pocket and a credit card. I debated getting some cash at the currency exchange, but decided not to bother since I was in a hurry. I was surprised that I was in the UK for a week for business, and didn’t have any issues with using my credit card, although the lack of the smartcard capability did cause a little inconvenience at a few places.

    I rarely use cash, but I always have some. There are always cases where a place might not take credit (rarer and rarer), or they lose connectivity/power/register functions, and they can only take cash. There are also issues were credit cards stop working (demagnetization).

    There’s also an anonymous capability with cash, which I think is important. Data and records are forever abused, and not allowing people to function in an anonymous matter can be a problem. It causes other problems for sure, but the tradeoff, IMHO, is worth it.

    I prefer to have the choice between anonymous cash and credit when I want it.

  12. Tim Canny says:

    I just don’t see people getting rid of a technology (hard currency) that has served mankind for centuries. While over time it may be used less and even change its form (local currency/barter currency) ditching it in the name of progress assumes that we know what all the unintended and unforseen consequences will be.

    Also, the argument about a specific coin costing more to make than it is worth would only be valid if you only used that coin once. Coins are used over and over again so their cost should be compared with their value as a tool over time not by their face value.

  13. Will says:

    A cash-less future would certainly be much more efficient. However, I think the most credible counter argument would be the concern for the security of one’s money and identity when it is all in trusted in a digital system. That being said, once such technology has been proven as secure there is no reason not to move toward a cash-less system.

  14. Hi Daniel – In some areas of the world they already are going cashless – as reported on What The Future. There, the host shares how he made purchases through his mobile phone and Near Field Communications (NFC) as carrying cash – as some here have already implied – is not just a nuscance, it’s down right unsafe in some situations.

    I tried to find a good explanation of what I have seen – here’s an example – but I’m sure there are better articles out there. http://www.wired.com/epicenter/2011/05/wired-nfc-faq/

    In essence, the money payment at a fruit stand or little mom and pop shop was made through a cell phone payment transfer (I remembered it being like texting, but the Wired.com explanation says “waving the phone.”) In moments, just like Paypal, the payment is made to the merchant, debited from your bank account, and you are on your way.

    Maybe it would catch on here in the US like Paypal has for online banking and payment systems.

  15. Brad says:

    I just read “How Target Figured Out A Teen Girl Was Pregnant Before Her Father Did” based on using a credit card and purchase history. It really made me think about he potential for data mining and tracking of individual.

    The article is here: http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/

  16. Jeff Moore says:

    Dan,

    Our cash as a form of anything but convenience is a joke. Fiat Currency with diminishing value every time our government jumps into another “Quantitative Easing” solution.

    However, we Americans will do anything… even die for our convenience. Whether it be “grab and go” processed food to 999 television stations, convenience = liberty.

    “Life, liberty and the pursuit of happiness…” Seth hit is on the head (no pun intended). Money = Food = Life = Not Dying.

  17. Joy says:

    I live in New Zealand, where in 2006 some of the smaller denomination coins were removed from circulation and other denominations got a facelift making them smaller and lighter. Some of them changed colour, too.

    Six years later I still can’t tell the new coins apart from each other because I’ve never actually used them. I do a lot of my shopping online, but if I’m buying in a physical store I always use my credit card (just for the rewards scheme, I pay it off in full every month) or if it’s a small local business I’ll use my bank card (EFTPOS) instead. I always carry a $20 note for emergencies but I very rarely use it.

    I’m saying this not because I necessarily think it’s better but because it hadn’t occurred to me until now that people in the US still have to carry cash in order to tip. Given how easy it is to be entirely cashless here I think I’d find that very frustrating!

  18. Fadi El-Eter says:

    Ever since I stopped using cash for 99% of my transactions, my expenses have nearly doubled, and I started to buy stuff that I didn’t really need.

  19. John Zimmer says:

    The merits of cash (and there are some) aside, I fully agree with the point in the post that, at the very least, the penny should go. In Switzerland, where I now live, they did away with the equivalent (one centime) coin years ago.

    When you purchase something (gas, clothes, whatever), the price still comes out to the nearest penny. But then, it is automatically rounded up or down. If the amount ends in a 1 or 2, it rounds down to 0; a 3 or 4 rounds up to 5; a 6 or 7 rounds down to 5; and an 8 or 9 rounds up to the next 0.

    Thus filling your car with CHF 34.72 of gas will only cost you CHF 34.70. Groceries totaling CHF 122.69 will cost CHF 122.70.

  20. In the future, the poor and lower middle class will use credit. The rich will use cash or non-trackable cash equivalents. In the near future, cash will experience a resurgence as more and more people realize what is happening to privacy in this country and as they get educated about the dangers of credit.

    And yes, Pennies are a national pasttime at this point, like baseball. We love ‘em. Nickels? Meh.

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