The Ingenesist Project

The Professional Engineering licensure is holding on by a thread – albeit a very strong thread – called State Government regulations supported by the Banks and Insurance companies.  However, that may change soon –  not because of something that the government or the engineers are doing, rather, there is a huge technological changes occurring in Financial Services sector.  This article describes how changes in the financial system may impact Professional Engineers.

How FinTech Impacts Engineers

The change is being driven by something called Bitcoin – well, not actually a coin, but the cryptographic process – called Blockchain protocol (BCP).  The Blockchain Protocol is being called by some one of the greatest achievements of the human intellect since Calculus.  Don’t take this lightly – anything that impacts finance, impact engineering, and vice versa.

While the mechanics of the blockchain protocol are extremely complex, an easy way to understand the impact begins with a short history on databases.

Early on, data was stored on tape machines and the computer told the machine to retrieve a bit of data, say, 11 meters down the tape and another bit of data 18 meters in the other direction so that some computation can be performed.

Today modern databases contain all sorts of data about every aspect of their business such as accounting, financial, HR, vendor, client, product, sales data, etc.  Modern data systems are incredibly efficient except when one database needs to talk to another database, then things start to get resource intensive.

But over time we have adapted to this problem with a burgeoning service sector that helps databases communicate.  These include mortgage brokers, insurance brokers, real estate brokers, multiple layers of management who bring the data to market.  Then we developed APIs that help convert the data so that Google, Amazon, or Facebook, can of sell certain parts of their database to partners.  Finally, platforms such as Uber and AirBnB are pure brokers of data.

In fact, Uber is the world’s largest Taxi but owns no cars, AirBnB is the worlds biggest hotel but owns no property, Facebook is the worlds biggest media company but writes no content.  These are the mega brokers because they can withhold information from a market and are worth Billions upon Billions of dollars.  Meanwhile it is impossible for me to email you 26 dollars because the fees to do so are 25 dollars.  Money can be withheld at will.  So if you can withhold information, you and create scarcity which drives price.

So what if you could eliminate the brokers?  Not because they are bad or wrong, just because they are inefficient and introduce a great deal of friction to a free market.  well, there are basically 2 ways to do this.

You can combine data bases of two or more organizations.  This happens with many mergers and acquisitions and nearly always result in surplus labor (i.e., brokers).

The other way is for many organizations to share a common database. This is the general idea of decentralization – it all happens outside the construct of what we now know of as a Corporation.

The Digital Engineering Stamp

The new problem that emerges with decentralization is how do you secure the data? Who is going to take responsibility for maintaining the database? What is to keep someone from giving themselves a raise, or double spending an account entry, or accessing private information, etc.?

This is precisely the problem that the Blockchain protocol solves. In fact, the blockchain protocol, is the digital analog to the professional engineer’s stamp, signature, assurance, or design.  So this is clearly not trivial.

The professional  Engineering licensure system has developed a qualification system that serves to define the engineer as an asset much in the same form as any financial instrument would format an asset.

Engineers need to understand how this design empowers them as a financial instrument otherwise, they can easily be sequestered in the domain of the “intangible”.   In the mind-eye of Wall Street, the engineer acts as a proxy for the physical asset that is being capitalized.

The Engineering Asset:

In general, engineering licensure is a function of three components where each is represented in the parameters of the licensure process.

1. An accredited education represents the quantity of the asset being described, be it mechanical, electrical, civil engineer, etc.

2. Documented experience represents the quality of the asset as verified by a comparable existing asset.

3. Finally, the examination minimizes the variance in the quality and quantity of the engineering asset.

Since there is some flexibility in the parameters.  For example, it is fairly easy to substitute a bit less experience for a bit more education. Similarly, it is possible to increase education and experience in lieu of an exam.

However, in each and every case, the asset is preserved as a function of quantity, quality, and variance. Otherwise, it ceases to be a stand-alone asset and requires a corporation to house it.

A great deal of engineering falls under the under the corporate exemption. This is neither right or wrong – it is simply another delivery mechanism for engineering services.  There are many different delivery systems that perform essentially the same function such as venture capitalists, university affiliation, grant writing, oppression, and quite predictably, bank loans and insurance contracts.

As such, there is no limit of possible delivery systems as long as they fulfill the governing equation for Quality, quantity, and variance.

The definition of Asset is broadly overlooked in discussions about finance and cash flow.  The definition of Asset must be upheld on the accounting sheet or else the “asset” ceases to exist, is classified as an “intangibles” or becomes a liability.

In the prior post, I make the claim that engineers are money. On certain types of projects, such as construction or product development, there is a period of time between expenses and revenue.  During that period of time, the asset does not actually exist.  Instead it is being supported by the engineering that is actualizing the future asset.

All assets are described by two components; quality and quantity. For example; it is insufficient to say that “water” is an asset without also specifying the quantity and the quality of the water – is it 6 oz of drinking water or is it 6 liters of cooling water in your car.  A value cannot be ascribed to an asset without these two pieces of information – and each has a hugely different value proposition.  Likewise, if either of these two bits of information are missing from the definition of the Asset, it ceases to exist on the accounting statement. During construction, maintenance, renovation, or replacement, either of these two information points may be temporarily compromised.  The term for this is Accountability.

In this case we say that the value of the asset is a function of Quantity and Quality:

In order for that to occur, the asset value needs to be projected upon the engineer as a proxy for the asset.  As such, the engineering assurance must also be described in terms of quality and quantity.

Our next lesson comes from insurance 101: in order to manage risk, you first need to know pieces of information:

1. Can you identify the risk exposure

2. If so, what is the probability that risk exposure will manifest

3. If so, what are the consequences of that manifestation

These are the governing equation for the Accountability of engineering assets; definition, transmission, accounting, and resolution of an asset.

Likewise, the best way to an intangible asset or even a liability, is to impact Quality, quantity, and variance.  This is the domain of engineering

Engineers are the critical component in Global finance.  They are needed to keep the electricity on, the Internet running, to fight wars,  to provide food, shelter, warmth, and transportation to all mankind.

However, economies are segmented by political boundaries, not necessarily engineering boundaries.  The political laws vary, but the physical laws do not.  It is precisely the ability to sequester engineering behind political, corporate boundaries, and ontological boundaries that gives unfettered prioritization and control of our Planet’s resources to non-engineers and non-scientists. To control engineering is to control the world.

As we saw earlier, V=F(Q,q) relation did not hold for NAFTA engineers but it flew right through for financial services.  Pretty much every trade agreement after NAFTA copied NAFTA and passed along this flaw.  Today, there is no such thing as a Global Engineering system anywhere near comparable to the Global Financial System.

Money Must Represent human productivity otherwise nobody would work in exchange for it. Productivity can include factory production, but also social production like kindness, empathy, parenthood – the things that people normally are by definition part of an economy.

Unfortunately, Money has been largely divorced human productivity through the intricacies of financial exotica and the great speed at which money can travel which productivity cannot. There is a precarious situation where money no longer represent the underlying human productivity asset that underwrites it.  This is dangerous because people will refuse to work in exchange for it, unless forced. Forced liquidity has been known by many names over the course of history.

Money is a social agreement, As soon as a viable alternative currency arises which truly represents the essence of their productivity, they will switch over to use it.

Until then, we must endure non-engineers/scientists making decisions on what is best for our planet.  Non-engineers decide if and when electric cars will replace fossil fuels.  Non-engineers decide what neighborhood gets the best schools or how much desert property is worth 100 yards across the US border.  Non-engineers set technical priorities and allocate engineering – in doing so, they are in fact performing engineering for which they are unqualified.  This is simply another form of forced liquidity.

The laws of physics tell us that the greatest electrical “potential” is defined as the difference between two nodes.  The greater the distance, the greater the potential and the brighter the spark that can jump the node.  By analogy, less developed countries would therefore have the greatest economic “Potential” precisely because the gap is so wide. Poverty ridden cities would have a greater economic potential than exclusive gated neighborhoods. Impoverished peoples would have the greatest potential due to the distance between the rich and the poor.  All of this potential is lost due to a tiny flaw that can be easily corrected.

Technological change must precede economic growth.  We are going about the process of Globalization as if economic growth can precede technological change.

In short – we got it backwards.  The tragedy is that we got is backwards.  The opportunity is that it can be so easily corrected.

The North American Free Trade Act was unique in that it provided for the free trade of professional services such as financial services and engineering services.  Unfortunately, international trade in financial services was accomplished without also achieving international trade in engineering.  This created a vacuum on productivity (The actual giant sucking sound). Most trade agreements that followed NAFTA were modeled after NAFTA.  As such, this flaw was inherited by modern globalization worldwide.  To correct the flaw could reverse much of the misalignment between money and the fact of productivity.

Here is how NAFTA Failed. This diagram comes from an obscure paper that I published in 1996.

From prior posts on this topic, The US PE is a function of education which defines Quantity of the asset, Experience which defines quality of the asset, and Examination which reduces variance of the asset.  Education is defined and standardized by ABET, the examination is defined by NCEES, and the experience is defined by an adjustable peer review standard. There is some flexibility such that little more or a little less of one factor can be absorbed by a little more or less of the other factors. This is rational.

Each of the NAFTA countries has their own rendition of this. In the case of Canada – the education is equivalent to the US due to an accord between accreditation agencies.  The Canadian exam is different, however, the experience component is mutually recognized across jurisdictions.  Since 2 out of 3 factors are reciprocated, then the difference can be made up with minor adjustments.

However when you get to Mexico, both the exam and the education were substantially different with no accords with either of the other countries.  Since only 1 of the 3 factors (experience) were reciprocated, an extreme adjustment to the experience standard needed to carry all the weight.  In fact 15-19 years of experience was the only way that an engineer from Mexico could participate in NAFTA

So when you try to get a combined standard, we see that there is no way to assess the Quantity and Quality of the NAFTA Engineer. This is where the negotiations where breaking down when someone said, hey there are hundreds of Mexican Engineers passing the EIT. This is how I got dragged into NAFTA.

Our proposal was that all three countries accept each other’s experience requirement – they were already willing to do this.  Then we suggested that everyone take the same examination – assuming it could be published in Spanish.  Then, the feedback of the exam can be fed back into the education system so that they can be reconciled over time.

The purpose of this solution was not to toss a political hot-potato.  It was to preserve the formulation of the asset. In doing so, insurance companies would be willing to insure the asset and banks would be willing capitalize the asset.  As such, the flow of financial instruments could be applied to infrastructure and the process of economic development could begin for all participants.

Unfortunately, this proposal was rejected for reasons far too trivial and irrational to dwell upon here.  The bottom line is that on a planet where the laws of physics are nearly identical at single every point, there is no Global engineering profession.

This is, and continues to be, an utterly tragic outcome.

To describe how Cryptocurrencies would be applied by Professional Engineers, we need to start with a brief discussion on cryptocurrencies and blockchains.

Cryptocurrencies 101

It all starts with something called a hash. Basically, a computer program generates a large random number.  Then a key generation program fashions the random number into keys that are mathematically related to each other – so the keys recognize each other.

One key becomes the public key, and the other becomes the private key.  As the names suggest, the Public Key is made available to everyone via a publicly accessible repository or directory while the private key remains in the possession of the owner.

For example, if Bob wants to send sensitive data to Alice, and wants to be sure that only Alice may be able to read it, he will encrypt the data with Alice’s Public Key. Only Alice has access to her corresponding Private Key and therefore is the only person who can decrypt the encrypted data back into its original form. Even if someone else gains access to the encrypted data, it will remain confidential as they should not have access to Alice’s Private Key.

There are many ways to arrange cryptographic keys in a relationship, or even among additional operations with Boolean logic such that: If A and Not B, then C.  Such logic statement are the basis of a new form of production delivery called “Smart Contracts”.

Blockchain 101

However, cryptographic key sets are only part of the solution.  In order for a contract to be valid it needs to be recorded or institutionalized to some type of ledger or accounting statement which is equally secure, protected, maintained, and most importantly, it must be consensus from the users that the ledger is valid.

A Blockchain is sort of like a metronome that marks time.  Once a block of time passes, a new block starts.  The motion is caused by what are called “miners”. Miners are computers tasked with solving a difficult puzzle.  When the puzzle is solved, a new block is formed and the solver gets a prize – often called a coin.  Once a block is closed, it can never be reopened – the contents can be viewed by the users (to maintain consensus), but they cannot be changed.  They are cryptographically Sealed for all eternity.

These coins are often mistaken for money because they have some of the characteristics of money such as like creating an incentive to perform work.  Unfortunately, they do not have all of the characteristics of money such as possessing an intrinsic “earthbound” value.  Neither is the value trivial – the etherial value of the coin is proportional to all the things you can do with cryptocurrency that you cannot do without cryptocurrency.

The Blockchain protocol moves along opening and closing blocks that form a long chain that records every transaction that ever occurred since the so-called “Genesis” block.  Users interface now being developed for various blockchains incorporate features such as personal wallets and exchanges.  The current problem with most cryptocurrencies, despite their utility, is the limited number of people who are willing to part with their dollars in preference for the coin.  This is called the “liquidity crisis” and remains a problem yet to be solved.

In short, the blockchain protocol solves the broker/handshake dilemma with cryptography and incentives.  Social behaviors are still adjusting.

Here is a picture of one class of over 100 Mexican educated engineers sitting for the California EIT exams. During the 2 years that we conducted this program, we sent over 250 Mexican educated engineers to these US Board Exams. I must say that the whole process of making this happen was the most profound experience of my career. believe it or not, Engineers create money.

(Note: while professional engineering licensure reflects on a specific regulatory process discussed here, the use of the term engineer may be generalized to include all sciences and technical workers)  

But listening to the talk and banter of NAFTA, they were throwing around these words like money, value, risk, in ways that were simply did not match what I was seeing:

How could so many brilliant engineers be found in such a technologically underdeveloped country? The simple answer lies in the fact that for the developed world, modern finance allows for the capitalization of infrastructure projects. Engineering is, in fact, an extremely important financial instrument.

The Miracle of Capitalism

There is a large time gap between the moment that money flows to a project and the time that the project generates revenue. During this time gap, the profession of engineering serves to maintain the asset on the balance sheet. Engineering provides something called “assurance”. A bank and the insurance industry hedge each other’s risk, but without assurance the project cannot be capitalized. Again, capitalization and securitization FAILS without engineering assurance.

The 3-legged stool

In the preceding article, I said that the failure of NAFTA was that the financial service were successful in becoming a service of free trade while the engineering profession largely failed.  It is precisely the failure of the engineering profession to negotiate a meaningful Mutual Recognition Document which led the NAFTA to under perform. In essence, we kicked out one leg of the 3-legged stool.

Without the assurance of a viable professional engineering community, foreign direct investment in Mexico was limited to very high ROI investments, Government guaranteed construction, or partnerships with the Mexican oligarchy – in order to supplant an absent independent engineering sector.

Very large contracts for the sale of otherwise worthless desert land were being written contingent on 500 engineers being available to work in the foreign factory that would be built and guaranteed by the government.  Tacit or implicit, there certainly would be an incentive on all sides to not give engineers “wings” so that they could fly away, let alone enjoy free will.

I ran into trouble when the Federal Government found out that my program was doing precisely that – Mexican Engineers who passed the US Board exams were being scooped up by US Companies outside the jurisdiction of Mexico.  There was deep fear of a brain drain if the World learned that Mexican Engineers were as strong as we were measuring.

At one point a representative of the Mexican Federal Government negotiating NAFTA asked me to leave the country.  When the State of Baja California (governed by the opposition political party) heard about this, I was asked to stay and I lived in a private home under armed guard until the program could be completed.

The Big Flip

There is a great deal more to this story than I can not reveal in a short blog post, but the idea is clear.  Engineering productivity is an extremely important resource for the flow of money. Engineering assets play an important part in contractual agreements for tangible assets such as land and factories (factors of production).  They are central to the design and execution of international trade agreements.  Everyone wants to control engineering because to do so controls productivity.  In essence engineers CREATE money – money does NOT create engineers.

(The Internet of Productivity challenges the Internet of Money and the Internet of Things the prevailing objective of the Internet / Crypto Currency ecosystem)

The simple idea that Crypto currencies represent “The Internet of Money” could be an extremely dangerous idea unless properly and fully considered. The problem may lie in the perception of money rather than the perception of the Internet’s ability to articulate money.

There are billions of words written about what money is and what money is not.   One of my guiding principles, however, is as follows: whenever I hear the word “money”, I replace it in my mind with the term “productivity”.  If the idea still makes sense, I’ll read on. If not, I’ll move on. The reality is that money must represent human productivity or else nobody would be willing to work in exchange for it; hence, there is a liquidity crisis.

True willingness is true freedom.

The operative, of course, is the term ‘willingness’. Shackles made slaves willing to work in exchange for sleep. Debt entraps people into the willingness to give up their future to survive the present. Free trade agreements are little more than sequestered productivity. Austerity measures are controls on money where there is no associated shortage of productivity.

Banksters on Steroids

Crypto-currencies are about to accelerate financial transactions to an astonishing rate. The organizations investing most heavily in crypto currencies today are the banks and insurance companies. Blockchain technology will allow them to eliminate their own brokers and the regulatory environment that constrains them while executing trades far faster than actual productivity can keep up. Thousands of hot-new BCT start-ups are looking for their day in the Wall Street sun. Governments are curiously absent, except for inserting their back-door taxation clause.   Meanwhile, start-ups demonstrating true benefits to mankind often fail for lack of money – not a lack of productivity.

The Big Play is on Productivity.

Everyone learned in high school economics that the factors of production for the Capitalist System are Land, Labor, and Capital (money). We learned that the benevolent merchant class allocates these factors in various combinations to produce everything that society needs. Today we learn that the BTC will accelerate the flow of capital and smart contracts will accelerate the allocation of land (title to property).  Decentralized exchanges will trade securities in an unregulated decentralized environment.  This is good because we can eliminate the labor of brokers.

What about labor? What about physical component of labor – the dreams and aspirations of 7 billion people? What about the physical component of land, our little spaceship Earth? Where does Blockchain technology explicitly accelerate human rights, where does blockchain specifically reallocate Earths precious resources for mankind through the miracle of decentralized consensus?  We need to keep our eye on the ball – it’s all about stealing the productivity of others.

The entire game is still contingent upon everyone in the World showing up to work everyday until they are no longer able to do so. It really has little to do with money, it has everything to do with productivity. Money is not where the focus needs to be.

Why Curiosumé?

My fear is that crypto currencies will fail to find decentralized liquidity without accounting for the fact of productivity in the consensus ledger. Curiosumé is the missing link that converts your “productivity” to cryptography.   A person’s past, present, and future productivity can be owned, controlled, and stored by that individual.  We all become capitalists of our own factors of production. It is available only to ourselves for exchange in whatever they feel is the highest allocation of our talents. That is true decentralization and something people are willing to work for.

Curiosumé is an analog to digital converter of knowledge assets that allows people to bypass the barter system and enjoy the same scale, liquidity, and capitalization of productivity as banks, governments, and corporations do with your money and title assets.

Things get really interesting when Curiosumé is combined with Blockchain Technology.   Anonymous until the point of transaction, Curiosumé creates a cryptographic tollbooth on personal data. If anyone wants to access the productivity of another person, they need to pay for it with their own.

The Internet of Money and the Internet of Productivity should be synonymous in the next global accounting system.  Wherever BTC proponents use the word money, insert the word “productivity” then imagine things like: Decentralized Integrated global productivity system, Decentralized and integrated global flow of productivity, decentralized smart keys to unlock decentralized smart contracts, decentralized exchange of productivity, Micro productivity.  But most importantly, consider a liquidity crisis on non-productive activity such as warfare, hatred, corruption, prejudice, endless consumption, etc.

The Complete Picture

Blockchain technology, not unlike the Internet itself, may someday be regarded as one of the greatest achievements of the human intellect. But like many great technological achievements before it, there are both positive and negative outcomes. We have a unique opportunity to alter the course of humanity in profound ways, but it is essential that we address the fundamental flaw of market capitalism: there is no accounting system for intangible assets – that is why they are called intangible.  We need to give people ownership of their own user-generated assets, that is, their productivity.  We need to build Curiosumé.

Suppose two cities are separated by a river. Every day 100 people pile into a boat for the 1 hour journey to the other side two times per day. Crossing the river costs 200 person-hours per day. Then civil society decides to spend 1 million dollars to build a bridge to carry 10,000 people across the river every day in negligible travel time = 10,000 person-hours of productivity are added and redistributed to the communities every single day.

These people go on their merry way expressing themselves as intangible assets to create art, raise families, and transfer new ideas to enterprise according to classical Schumpeterian design.  They are doctors, nurses, and engineers.  They are teachers and students, collaborators and Capitalists.

If the bridge has a service life of 50 years, it will conjure into existence 178 million hours of human productivity. If the average income is 25 dollars per hour, a simple $1M bridge is amplified to a stunning 4.5 Billion “dollars” worth of productive community value. This value never appears on any accounting statement because market capitalism measures value into existence at the tail end, not at the palette. The economy is measured as the stuff that intangible entities (people) are told to produce, not what they actually want to produce.

This 4.5 Billion dollars is uncounted value that is expressed in fiat currency which, through the miracles of the fractional reserve, corporations, and a litany of exotic financial instruments also amplifies 1 million dollars of Real Value into billions of dollars of paper value.  In fact, the ONLY reason that the tangible financial system does not yet collapse is that it is being propped up by this “invisible” intangible asset value that never appears on any accounting statement.

Many new money theorists claim that 70 Trillion dollars in debt can never be paid back because the “interest” on that debt does not exist.  I believe it does exist, it must exist otherwise the system would collapse.  The real problem is that the debt exists in a form of uncounted currency.  All we need to do is measure intangible value into existence and trade it directly as a financial instrument – nothing will change and everything will change.

From Charles Dickens’ A Tale of Two Cities :

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”