There's good reason to expect big disappointments when the hot funds transactor Square goes IPO.



NEW YORK (MainStreet) -- Before investors go all ga-ga thinking San Francisco-based funds transaction powerhouse Square really is worth $3.3 billion, they might want to consider the notion of "funds" themselves, since in this never-more-bizarre information age not everyone is going to need funds like they used to.

Believe it: Money itself is coming under the same commoditization pressures faced by all forms of information flowing on a digital network.

The new reality that dollars don't mean what they used to already has a hip, new-age brand. It's called "collaborative consumption." That means that when it comes to acquiring stuff, who needs money after all?  

Taking its place is "the rapid explosion in traditional sharing, bartering, lending, trading, renting, gifting and swapping, reinvented through network technologies on a scale and in ways never possible before," says collaborativeconsumption.com, the Web hub on all things collaboratively consumptive.

The trend even has its Steve Jobs -- her name is Rachel Botsman, an author and trend analyst who has a written the treatise of the space with Roo Rogers called What's Mine is Yours. In it, and in speeches around the world, Botsman makes a heck of a case that the modern age is moving away from money as the be-all, end-all transaction tool.

"Technology is enabling trust between strangers" is my favorite quote from a recent lecture she gave at the TED Sydney conference. "Social bartering, swapping and sharing are being reinvented in dynamic and appealing forms. Networks and real-time technologies are taking us back."

Back to the fiscal future
Collaborative consumption is already beyond the fly-by-night trend stage. It is a massive,entrenched fast-growing sector in the self-destructive digital economy. Most anything now can be bartered. Belgium-based Zilok lets anyone rent essentially anything from anybody around the world. San Francisco-based Airbnb lets any user share spare rooms they might have. RelayRides, also in San Francisco, does the same for rental cars. There is Tripping.com for organizing rentals, Eventup for throwing a party, Gidsy for sharing or learning skills, Spinlister to help you borrow a bike.

And if you ponder these services, strange economic beasts begin to lurk under the bed.

Take this item for rent as an example: the Yorkville NX750P powered speaker that can be leased on Zilok in San Jose, Calif., for $40 a day. Now you put your amateur behavioral economist hat on for sec and exactly does that $40 price signal? Without doubt, it is not the firm, as-found-in-Wal-Mart (:WMT), shaved-to-the-lowest-penny, take-it-or-leave-it price. This is a person with a decent speaker probably at home who wants to pick up some spare cash. That makes the $40 not the selling price, but the asking price, which every trader will tell you triggers a complex negotiation that might include who is being rented from, how far away the parties are -- and most importantly, what might be had in trade?

And there goes money. Considering that financial operations such as Square hope to collect 2.75% of every deal they touch and that we as an economy get poorer every day, the clear incentive will not be to use cash, but to go as deep into in-kind trading as possible -- which is exactly what these collaborative consumption markets make devilishly easy to do.

The startling fact is, the United States has a long history of consuming collaboratively. Not long ago, during the Great Depression -- not this one, the one in the 1930s -- cities, states and towns had no problem issuing their own money, called scrip, to enable just such a live market in fractional trading in everyday items when banks stopped lending. Or taking deposits.

Want a sobering trip back to the fiscal future? Go to Depressionscrip.com and see bartering bills issued by the likes of Dallas; Bristow, Okla.; even Asbury Park, N.J.

Strictly speaking, Zilok, Airbnb and Spinlister are merely virtual scrip houses creating their own mini-barter economies.

The no-money economy
If you want to get in direct touch with just how vulnerable funds transaction plays such as Square will be to collaborative consumption, watch one of Botsman's videos. If this articulate visionary is even half correct, the big, beautiful transaction business that backers of Square -- including Citi Ventures (:C), Rizvi Traverse Management and Starbucks (:SBUX) -- grotesquely overpaid to invest in will almost certainly not materialize.

To these tired eyes, that makes Square sadly familiar: a hot private company with a nutty digital economy valuation that will open big on its IPO payday, enriches insiders and leaves the wider investor holding the bag.

You heard it here first: Square is shaping up to be Facebook (:FB) 2.0.