The Three Faces of Financial Innovation, and why we need a Finance Innovation Lab

The Finance Innovation Lab is an emergent force for systems change, informed by and feeding into the ever-growing alternative finance movement. In my new book, The Heretic’s Guide to Global Finance: Hacking the Future of Money, I use it as an example of an organisation bringing diverse people together and capturing the resultant outcomes, such that those outcomes can be used as the basis for further experimentation.

Indeed, it’s because of this open-ended ethos that I’ve always enjoyed the Lab so much. It lacks the bounded rigidness of the think-tank that has to produce definitive outputs saying particular things, or the company myopically pursuing singular short-term goals.

On the other hand, it still needs definition for people to stay attracted to it. So, what should a laboratory for financial innovation have to do?  To me, a laboratory should be able to fulfill three separate functions:

Laboratory definition 1: A place to do controlled experiments for a particular goal

We’ve probably all experienced labs as school children, being shown specific chemistry or biology experiments. Perhaps at high school you were given assignments and told to use a lab to finish them. In universities, labs get serious, and are used in the context of defined research projects, such as “what is the break point of this metal alloy”.

In the financial system, we need such labs to answer questions like ‘How exactly can we lower the cost of capital for this particular solar power project’ (AKA how do we create bespoke financing solutions for particular positive projects), or how can we ensure that this peer-to-peer technology is secure’.

Laboratory definition 2: A place to experiment in an open-ended fashion

Labs though, are also vital for creative self-expression around a more loosely-defined goal. Take, for example, my granddad’s old carpentry workshop where he’d tinker on weekends, or the London Hackerspace. Structured labs bring out the serious in people, but the open-ended lab brings out the oddball eccentrics: Take a look at the hilarious experiment Google’s Mr. Doob created here – there’s no practical point to it; rather, it’s a celebration of the creative process.

Indeed, unstructured labs are as much about fostering the ethos of creativity as they are about creating specific outcomes. If outcomes are not allowed to dominate over the creative process, then nothing is a pointless ‘waste of time’: For many deeper questions in finance – such as ‘how can we create a financial system that does not alienate the artistic and ecological aspects of people’, such an ethos is fundamental.

Laboratory definition 3: A set of facilities around which a community grows

To capture the essence of a lab though, we have to extend it to the social dimension. A lab should be as much a focal point for cultural experimentation as it is a place for individual endevour. Think of the Frankfurt School of Critical Theory, a group of individuals who didn’t always agree with each other, but who shared a common ethic and who informed each other’s work. Or consider the multidisciplinary Bloomsbury Group, or the MIT labs where the Tech Model Railroad Club and much of hacker culture emerged from. These labs were focal points for communities, playing a broadcast and feedback role: the people within them create the content, but the lab in the abstract comes to reflect the collectivity, collect that information and disseminate it into the public domain, from which further feedback comes.

This, I believe, is where the Lab’s strongest potential lies – in forming the focal point for a community. Indeed, my new book is partially created via the Finance Lab. I take ideas from people I have met within it, splice aspects of them together, and build my own philosophy around them. It’s a bit like the process of forking in Open Source culture, where people build on the models shared by others. This is what distinguishes an open lab from a closed one.

Please do check out the book if you’re interested, and yes, it’s available for purchase in several different alternative currencies.

Brett Scott is a campaigner and writer who works in alternative finance and financial activism. His new book – The Heretic’s Guide to Global Finance: Hacking the Future of Money – is published by Pluto Press and is available now. He tweets as @Suitpossum.