The Ingenesist Project

The Next Economic Paradigm

Tag: Business Method Page 8 of 9

Social Media and Flip-floponomics

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On August 28, 2009

In General Information

Flip-floponomics is a term that I just coined with this post which means:

1.    A traditional business method flipped on it’s back to reveal a new business method
2.    A mirror image of a previously accepted economic paradigm
3.    sing. n; flip-floponom; A phenomenon of flip-floponomics.

Let’s demonstrate how this works.

Flip-floponom A:

Twitter has announced that they will mine user generated data and process it into business intelligence which they will sell to corporations for a whole lot of money.  As such, corporations who were unable to figure out how to charge people a whole lot of money money to “watch” social media can now be charged a whole lot of money to “watch” social media

Flip-floponom B:

YouTube can’t make money on ads because viewers don’t care.  But with user generated content such as Jill and Kevin’s wedding (with 12 million views), Chris Brown landed a land slide of sales for the song “Forever”.  The audience is now the Brands positioning themselves to be “user-generated”.

The Mother of all Flip-flopona:

Before flip-floponomics: entrepreneurs assumed that they had the knowledge to execute a business plan and they went to the bank to borrow money.

After Flip-floponomics: entrepreneurs assumed they had the money to execute a business plan and they go to social media to borrow the knowledge.

Next economic paradigm:

With the continuing integration of social media, every single business transaction has the potential to be re-invented in the mirror image if itself using the principles of flip-floponomics.  The opportunities for future entrepreneurs who figure out this class of business activity can be described as nothing short of astonishing.

 

Image Credit Picasso

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What is Viral Marketing Immunity?

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On August 24, 2009

In General Information

The great promise of social media marketing is the free viral sales force.  Magically, if one person can be made to love your product, they will tell all their friends who go off and tell all their friends.  Some PR companies even go so far as to promise to deliver the “viral sales” force.  What actually happens is quite a bit more complex.

Social Media Immunity to viruses

I recently met a very tech savvy person at a social media convention who had recently returned from overseas with her Acer notebook computer.  She proceeded to give me a detailed analysis of important features such as size, weight, battery life, connectivity, durability, replacement parts, customer support etc.   I was about to buy an HP until I heard about this hot new Acer.  As I listened intently, I realized which features were important to me and which ones were not.  With all this new information, I bought a Dell.

So how did someone touting an Acer actually convert me from HP to Dell?  Frankly, that’s not relevant, what is relevant is that Toshiba was not part of the above conversations – they were attacked by the virus.

Developing a vaccine:

Dell, Acer, and HP could have each dropped 1,000 dollars into a pool of money.  Those 3,000 dollars could have been used to sponsor a community of bloggers to write about the systems, methods, techniques, and products used by their community, just like they would do anyway.

The Next Marketing Paradigm:

Brands will commit funds to people who share active conversations in the areas that truly interest them.  Bloggers will be rewarded for bringing together the communities around natural affinities such as boating, gardening, woodworking, sports, or music, etc.  The names of the sponsors and the funding amounts will be public information, of course, but the funding will be disassociated from an actual purchase.

Just a new twist on an old marketing principle:

McDonalds spends a great deal of money figuring out the best street corner to put a franchise.  At first the franchise turns out 500 meals a day.  Then comes Burger King and together the street corner now produces 1500 meals per day. Next, DQ moves in and the intersection now produces 3000 meals per day.  Without competition a franchise may serve 500 meals.  With competition, each “competitor” serves 1000 meals per day.  The street corner has become a “destination” of choice; literally and figuratively.

Knowledge Malls:

The difference is that the Mall concept is “arithmetic” scaling with upper limits, while the social media mall is multi-exponential.

1. When diverse groups of people get together, they share information, exchange knowledge and innovate, innovate, innovate.  Innovation creates wealth exponentially.  Wealth creates customers exponentially. Every conversation is an event and every event presents multiple opportunities to carry a message far and wide, exponentially.

2. Tangential innovation are the opportunities that are enabled by the primary innovation – often called “Apps”

•    Bloggers help define the community allowing for superior targeting App.
•    Even if a brand does not “win” the sale, they will gain valuable business intelligence App.
•    The brand wins a first mover advantage on the next product development cycle App.
•    Brands win trust because they are supporting a community App.
•    Brands win loyalty – like insurance – if something goes wrong, they are readily forgiven App.

3. The cost of absence App. The worst brand message is to find one’s brand locked out of the game, maybe Toshiba will find this post on Twitter.

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Listening For What People are Listening For

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On August 20, 2009

In General Information

Communities organize themselves:

Most people do not listen completely in conversations because they are too busy planning their response to what they think the other person is going to say.   Often what seems like astute response is a template that may fit a moment but can kill a conversation.  The successful conversation occurs when all participants speak to what the others are listening for. Not an easy trick.

I Heard the Ocean

When I first got into this social media stuff, I had a lot to say.  Then I figured out that nobody was listening; I learned a lot since then. As soon as I started to listen, people started listening back.   Today these people are my heroes, I hang on their every word, their generosity is roughly 70% of my social media world – where did they come from and where can I find more people like them?

Well, that’s all I have to say about that, so let’s listen to Janet Fouts. Part of her quote is a product pitch, but that illustrates an important point in Innovation Economics; conversation is currency and this currency has value:

“Before you dive into social media for any reason, listening should be your first step. What are people talking about and where are they doing it? Is there buzz out there about you or your product that you didn’t know about? Who should you be connecting to? Has there been a recent event you want to find out more about?

Setting up listening tools from free to paid versions can give you a tremendous amount of information and help you find even more things to talk about. I’ll give working examples of listening tools, outline a strategy for effective listening and give you some ideas to use this information in a real world setting.

This short 30 minute session will include links to both free and paid listening tools and creative scenarios for use.

You will learn how to:

  • Set up a set of listening tools to cover multiple platforms
  • Identify the right listening tools for your own needs
  • Identify the best networks for you to participate on
  • Evaluate what you find
  • Creative ways to engage and communicate your message
  • Find new topics to populate your blog and online discussions
  • Evaluate how effective your social media campaign is

Thanks Janet, Now here is a hint at the product pitch at Conversational Currency:

“In a few months, events such as Janet’s may need not  be funded by the participant.  Rather, our sponsors will support events for those most worthy of  participating.  Why would sponsors do such a thing?  Maybe they too are learning to listen, after all, roughly 70% of the US economy is consumer spending.  Will roughly 70% of ad budget be allocated on listening?”

What does all this mean?  keep listening!

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The Social Media Resolution; From Monet to Blue Ray

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On August 14, 2009

In General Information

The Convergence of Knowledge

The Ingenesist Project and related blogs such as Relationship Economy and now Conversational Currency have long predicted that the resolution of social media space will vastly increase from  “Monet” to “Blue Ray”.  The segmentation and convergence of social media space will happen on two fronts: Knowledge Inventory and Proximity.

From Strategis:

“As Facebook balloons to over 250 million users, many voice their appreciation for Facebook’s small social network feel.  Unlike its so-last-year counterpart, MySpace, Facebook has successfully maintained a very personal feel, finding hundreds of ways to link the most relevant people, in the most relevant ways.

Even so, because Facebook has so many interesting people, useful content, and relevant apps available, many users would appreciate a broader search option that would enable the to quickly search ALL of Facebook’s content. Thus, Face says: “your wish is my command”. And so it is. Facebook has now announced that it will soon make the change allowing users to search the entire site, not to mention, do new things like share status updates with everyone, rather than just confirmed friends. Expect to see these changes in full effect some time within the next two months”

What’s in store for the next 2 years?

While the coolness of Social Media is still riffing through society as the late adopters drive huge growth, nothing “economical” happens until people actually get together and build something.  In order to build anything, there must be an inventory of parts.  All these parts need to be in physical or virtual proximity to each other. A financial system must support the initiatives of the entrepreneurs in any market.

The United States of Mind

We’re about 3% into this new paradigm today.  At 20% the corporate structure will become increasingly mushy as many corporate functions are now handled in Social media space. At 30%, cooperation will “compete” with competition as a business model.  At 40% a new currency emerges to hedge debt backed dollar with productivity backed “conversational currency”.  At 50% people convert general dollar backed holdings to ‘conversational currency’ holdings.  At 60% social priorities dominate corporate priorities. At 70% the Innovation Bond dominates financial markets. At 80% international borders become fuzzy as knowledge flows as easily as, say, avocados and T-shirts do today.  At 90% global currency backed by productivity, dollar, Euro, Yen all expire.  At 100%, the president is elected to a “State of mind”.

Hold on, not so fast….

OK, so that’s the problem with predictions, it’s hard to survive with one’s credibility intact.  Kudos to Strategis for showing us the future!!

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If it Quacks like a Buck…..

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On August 13, 2009

In General Information

If it looks like a buck, and talks like a buck, and quacks like a buck – it’s probably a buck.

So when your money gets “free will” and starts walking out the door door, that’s bad enough.  When flies out the window en mass enabled by the same social media that  brings money in the door – serious management issues arise.  Should organization choose fight, flight, or cooperation?

Battle lines are being drawn:

  • “Among large U.S. companies, 33% have employees on staff to monitor e-mail messages — up from 15% last year, one survey found. The Proofpoint study also found that 31% of companies had fired workers who breached confidentiality via e-mail, and 8% had fired someone over a social-networking leak. The survey found 41% of respondents are worried about potential leaks via Twitter. ZDNet (08/10)”
  • “Marines banned social networking sites from their computers Tuesday due to security concerns, and the Pentagon announced a policy review. But Pentagon’s top officer will still tweet (Christian Science Monitor 08/05)“
  • “A great way to keep up with the latest Navy news is through the MyNavyMyFuture Twitter handle: https://twitter.com/mynavymyfuture. Just FYI for anyone who’s on Twitter. The handle is based off the Navy Officer site www.mynavymyfuture.com. (NavyNima – recruiter)“
  • The New York Times reports, “The N.F.L. has identified the enemy and it is Twitter.”

There are literally thousands of articles on this subject but none of the few that I read came to any conclusion, so I will:

Money is becoming intangible (cannot be contained) and Social Media is becoming tangible (has become the container)

The very structure of organizations is changing.  Trying to control the temperature of the room when the windows have been blown out will only destroy existing controls faster.  A completely new economic structure is emerging complete with new factors of production, incentives, institutions, accounting, and currency.

Swap or swamp?

Easier said than done?  Not really; all we need to do is swap the same methods that we use to manage tangible assets with those same methods that we use to manage intangible assets.  There are in fact people and organizations trying to do this (specifically this author) but you won’t find then in corporations anymore.

Companies have no choice but to understand migration patterns, flock actualization needs, motivation, and environmental issues.  Going from an economy where the corporate charter is only “to deliver shareholder value” to one of safeguarding the health and welfare of people and their property” is a huge leap.

The discussion of Conversational Currency is required to understand the underlying economic forces that drive social media and the emerging institutional structure for corporations to create value in a computer enabled society.

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It Takes Currency to Make Currency

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On August 11, 2009

In General Information

If you’re a Flash game developer, you are concerned with how you can make a living from your creative and intellectual services. Fortunately there is a payment system so workable, that it may actually work.   Game developers can charge money both for their games, and for things within their games.

Here’s how it works:

1.    Player pays real money to buy fake money within the game.
2.    Player spends fake money on virtual stuff.
3.    Virtual stuff increases the value of the game.

The game developer can technically charge for whatever they like: level packs, hats, extended versions/director’s cuts, etc, etc. The sky’s the limit.

These types of transactions have been very popular in places like Korea for a long time, and it was amusing to see the initial resistance and resentment in North America to the idea. Meanwhile, North American Pioneers of such systems are drowning in money.

The Right [virtual] Stuff:

Now, suppose that Social Media could be modeled after a huge game where people act based on a set of incentives like, say, connecting with friends, accumulating followers for their blog, finding proverbial “gold rings” like employment opportunities, business opportunity, spiritual growth, professional advice, cheap airfare, fun things to do, product reviews, or political activism…just to name a few.

Suppose that in order to get from one level of the game to the next, they need to engage in conversation with another player.  Anyone who has been on Linkedin, Twitter, or Facebook long enough knows that the “right virtual stuff” is sometimes hard to acquire.  Twitter finally broke the mold with applications that now “sell” followers (I wonder if there were any Flash Developers behind this innovation).

A Mutually Inclusive Game:

Now, suppose the game was mutual such that some players need you a little bit more than you need them and they are willing to invest in your connection.  Similarly, suppose you need some players a little more than they need you and you too are willing to invest for their connection.  Finally, all players know that a mutual link between two appropriate players substantially increases the value of both players relative to the game.

It Takes Currency to Make Currency.

Immediately the engine of entrepreneurialism will ignite as people figure out new ways to play the game.  With a trillion dollar advertising industry, a trillion dollar Professional Placement industry, and a trillion dollar recreation/leisure/entertainment/family industry on the ropes, you can guarantee that innovation will be absolutely intense.  Welcome to the Innovation Economy.

(Editor’s note: This article was inspired by a piece authored by Ryan and can be found here)

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Humility R Us

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On July 28, 2009

In General Information

Many companies are flocking to Social Media as the great new tool for pitching products.  The results have been mixed; there are winners and there are losers.  At first, there was no clear path toward certain success but now the differences are becoming increasingly clear. Humility is rewarded and arrogance is punished.

If “Nice guys finish last,” is the mantra of the old world, then “The last will be first,” is the motto of the new.  To understand why humility works in social media, we need to understand what humility is.

Cashing the Reality Check

Humility does not mean looking down on oneself or thinking ill of oneself.  It really means not thinking of oneself very much at all.  The humble are free to forget themselves because they are secure.  So when they mess up, the humble don’t have to cover up.  They have nothing to hide.

All this is simply a way of saying that the humble are in touch with reality.  If the definition of insanity is being out of touch with reality, then in the old world, “nice guys finish last” illusion is clearly insane.

Strength in numbers

Since the humble are secure, they are strong.  And since they have nothing to prove, they don’t have to flaunt their strength or use it to dominate others.  Humility leads to meekness.  And meekness is not weakness.  Rather, it is strength under control, power used to build up rather than tear down.

You can’t buy happiness

Back in the early 90’s, I worked on an ad campaign in Hollywood.  The producer told everyone; “The objective of this commercial was to steal the thing that people love about their self, and sell it back to them for the price of the product”.

The marketing message has been for many years much along those lines.  Make people believe that they need something that they don’t.  Make people believe that they can buy happiness, love, and community.  Make people believe that reality is something that can be escaped.

Rising Tides float all ships

The great brand messages, the successful blogs, and the viral communications in social media all have one thing in common.  They provide true and real value to the most people.  They produce correct and practical insight for the most people. They empower the most people to help their selves.  They amplify the priorities of the most communities. They help the most people to be successful in their clear and present reality.

Soul Searching

Ironically, it will take great introspection in the hearts of many corporate brands that follow the old rules of marketing.  These corporations need to look backwards into their own corporate philosophy and business plan to re-identify what they represent and how they represent it.  This new identity must reach into R&D to define what innovations are developed and what features they provide.  This cannot and will not be easy for most.

Since the humble are secure, they are strong.  Likewise, when Brands are humble, they too are strong and they don’t have to flaunt their strength or use it to dominate others.  The power of social media is to build up rather than tear down.

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The 1.6 Trillion Dollar Waste of Time

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On July 15, 2009

In General Information

Countless blog articles and news reports complain about information overload in our society.  People are so occupied filtering information that they no longer have time to act on what is deemed important.  Every thought, idea, message, and picture that enters the human mind is stored somewhere by the magnificent human brain.  But the onslaught continues in spam, junk mail, billboards, pop-ups, aesthetic pollution, and road signs.

Endless War:

It’s a war that we cannot win so we just resign ourselves to the noise. Adult attention deficit syndrome is on the rise and I personally forget ideas quickly as they are replaced by new data appearing in my field of view.  I am increasingly aware of the huge time expenditure and the tremendous loss of productivity that is induced.

Money is time:

The underlying premise of Innovation Economics is that money represents human productivity and the only way to sustainably increase the quantity of money is to increase human productivity.  The only way to do this is to innovate.  This and other articles from the Ingenesist Project predict the value of innovation economics by the amount of productivity saved through the application of IE principles.

The Ad Spend and who really pays?

In the United States 2% of the Gross Domestic Product is spent on advertisements, not including the production cost of the ad. This is equal to 280 billion dollars per year.

Although direct response professionals usually project a response rate of less than 0.1% which means that 99.9% of the views are irrelevant noise. Time, energy, bandwidth and human productivity are consumed in seeing the ad, determining it is irrelevant and moving on (or sitting through the ad if you are captive such as TV commercials).

Pass Complete Ratio:

On super bowl Sunday, 90 million people will sit through a 30 second commercial that cost the advertiser 3 million dollars to air.  For an irrelevance rate of 99.9% , 375 man-years of productivity are lost.  For an average salary of 50,000 dollars per year; 18.8 Million dollars of productivity is burned by a single commercial.  For an 18.8M dollar productivity loss on a 3 M dollar ad spend, the ratio is about 6:1.

This means that for every ad dollar spent, 6 are lost in unrealized human productivity.  For a 272 Billion dollars spend at 6:1 irrelevance, then 1.6 Trillion dollars worth of human productivity are lost every year.

The most willing viewer is the most worthy viewer

The Ingenesist Project specifies a knowledge inventory system where a person’s knowledge inventory is represented by a packet of computer code.  Since the dissemination of this code is in the power of the owner, money spent on advertising can now be spent on compensating people for their time viewing and responding to an advertisement that they are actually interested in.

Economies of scale for advertisers can be produced by supporting groups that bring communities of people together in social media activity.

Spread the word:

So if media advertising disappears, what will the rest of us do with all of our spare time?  We’ll spend it with our families, friends, communities, and groups talking about what we know best – and the great products that empower us.

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Is a social contract legally binding…and who cares?

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On July 13, 2009

In General Information

Trillions of dollars in play:

Trillions upon trillions of dollars worth of value that once coursed through the veins of Market Capitalism is being transferred to social media from the legacy economy now stifled by insurmountable debt.  These numbers are indeed spectacular because they account for the invisible value “lost”, and most importantly, the calculations provides clues on how to “find” it again.

What is a Social Contract worth?

According to Legacy Economics, the term “social contract” describes a broad class of theories that try to explain the ways in which people maintain social order. The notion of the social contract implies that people give up some rights to a government or other authority in order to receive or maintain social order. Otherwise, we would each have unlimited natural freedoms, including the “right to all things” and thus the freedom to harm all who threaten our own self-preservation; there would be an endless “war of all against all”.

Take me to your leader

By contrast, Social Media begs the questions: who or what exactly is that authority?  Isn’t the greatness of the Internet the lack of an all powerful authority? So why aren’t we at a war of all against all?  What keeps social media at peace instead of an endless flame war?  Whatever this alien is, it is capturing and storing trillions upon trillions of dollars of value away from the legacy economy, but where?

Separating facts from fiction

According to the old economy, it is a “fact” that human knowledge is an “intangible asset” of which there are only two types defined:

1. Legal intangibles such as trade secrets, copyrights, patents, and goodwill (brands).

2. Competitive intangibles such as knowledge activities, collaboration activities, leverage activities, and structural activities.

However, when we consider social media;

1.    There is no law governing the phenomenon – so there are no legal intangibles.

2.    Collaboration, leveraging and structural activities are not being conducted in a competitive environment (the context of one “Company” against another).

So, the definition fails to account for knowledge assets in social media. The Ingenesist Project discovers the lost trillions simply by treating the social contract like a legal contract.

Tangible assets are managed by contracts

Technically, any oral agreement between two parties can constitute a binding legal contract. The legacy economy limitation, however, is that only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck.

But social media, email, and blog posts, etc., all constitute vast “written” agreements and material evidence as far as most people are concerned.   So what is missing?  Are we waiting for permission from government, Wall Street, corporations, attorneys, or the Federal Reserve to say it is OK for people to stop competing with each other or to renegotiate the terms of the social contract (and currency of exchange)?

The mystery is no mystery

Guess what, there is nothing there. Absolutely nothing except philosophical barriers carried over from legacy economics built upon political division. The mystery is that there is no mystery except using social media to unite people.  After all, the biggest Brand in the world is a Community Organizer.  Such calculation provides clues on how to “find” value again.

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The Value of Social Currency

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On July 9, 2009

In General Information

How big is this opportunity?

Roughly 10% of the US gross Domestic Product can be attributed directly to the process of evaluating or examining transactions.  This represents a 1.4 Trillion Dollar of value in a system that may be better organized, captured, and preserved through social networks and the conversations that they produce.

Social vetting on a scale that would allow social networks to monetize would require that communities organize their knowledge assets specifically for deployment to a market.  All that an entrepreneur needs to do is fill this need.

What happens if they don’t?

The true cost of vetting may be calculated by what happens in the absence of oversight, transparency, and disclosure. When the vetting process fails, so too does the industry.  The continuing financial crisis of 2008 was fueled by a failure to regulate mortgage backed securities.  The financial Crisis of 2002 arose from a failed accounting (CPA) profession.

The losses due to the absence of vetting mechanism exceeds by many times the cost of having a system in place.  The financial crises of 2002 and 2008 have together wiped out nearly 20 Trillion dollars of value and incurred high volatility to financial systems due to failed vetting mechanisms.   The people who held the knowledge about the impending doom had no effective medium to share.

Who vets KNOWLEDGE assets?

The flow of money lives and dies by the vetting mechanism.  CarFax, Experian, Ebay, Google owe their existence to the ability to vet information – However, they do not vet knowledge.  The ability to deliver the right knowledge asset to the right place, at the right time for the right price is tantamount to being able to “manufacturing innovation”, that is, to print money.  Inversely, the ability to foresee the result of specific knowledge assets deployed to specific business conditions is the Holy Grail of entrepreneurs.

Social networks can carry out this very important function of the Innovation economy; organize, locate, and develop knowledge assets in a form which can emulate a financial instrument.

How are things changing?

Emerging ideas such as conversational currency, relationship economics, innovation economics,. nd new ways to value intangibles are appearing in research blogs across the web.  Disruptions to Global finance, environmental policy, and the emergence of global currencies are setting the stage for a huge transformation in how society organizes itself.  Traditional industries such as print media, advertising, and banking are failing. Nothing is sacred except change.

Where are these communities, and what do they want?

Many communities exist today in a variety of forms and functions such as communities of practice, fellowships, service organizations, professional societies, trades groups, affinity groups, etc.  Increasingly they are moving to Social Media such as Facebook groups, Linkedin groups, Affinity groups, aggregation groups, and political action groups.  Communities are using social media technology to engage the knowledge domain contained within them.

As such, they will soon have ability to foresee the result of specific knowledge assets deployed to specific business conditions.  This is the Holy Grail of modern civilization.

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The Vicarious Search Engine

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On July 7, 2009

In General Information

The search engine wars continue as both Google and Bing develop more exotic ways of arriving at the wrong answer.  Both commit the same error as all declining industries in social media space; assuming that they can predict what people want without engaging them in a conversation.

The first development is the predictive search notably pioneered by Amazon.com for predicting future purchases based on past purchases.  While predictive search is an improvement, the next step is the “vicarious” search, that is, when the search engine sees the world through your eyes – or someone Else’s – for your benefit.

The Web is Flat

The Ingenesist Project specifies a standard knowledge inventory that may be represented as a packet of code.  If someone wanted to see the web through the eyes of another person, they could buy a packet of their knowledge inventory.  Likewise, a web article would be tagged with the representative knowledge inventory code of the author.  Each comment or re post to a blog article would contain the knowledge inventory of its aggregated vetters.

The search can be done in reverse as well.  If I find an idea on the web and want to know who can execute it locally, I can simulate the knowledge inventory in one or more local people.  This is not trivial.  It literally allows an entrepreneur to manage knowledge assets that they did not know exists and predict content that does not yet exist.

Been there, done that?

Obviously there are privacy, security, and ethics issues related to others seeing the world through your eyes.  But what if every American was told 20 years ago that their identifier number for an insolvent social security program would be attached to their personal, medical, financial, and civil records then spun through Wall Street algorithms, sold worldwide to advertisers, politicians, banks, insurance companies, demographers, and ultimately hacked?  The cities would have burned.

So why can’t social mediators monetize?

The difference today is that if packaged correctly, we can own and control our knowledge inventory.  We can allow or decline access and we can revoke access – it happens all day long on Face Book, Linkedin, Twitter, and My Space.   On-line communities represent collections of knowledge assets.  The 400 Billion dollar per year advertising budget is on the table – up for grabs.  The 100 Billion dollar “head hunting” budget is up for grabs. The multi-billion dollar election budgets are all up for grabs. What are we thinking?

The likelihood of Innovation

The innovation economy will depend on business intelligence related to society’s knowledge inventory to match most worthy knowledge surplus to the most worthy knowledge deficit.   Entrepreneurs must know supply and demand for knowledge assets as well as where to find them at what cost.  Entrepreneurs need to predict competition, disruption, risks, and volatility in knowledge assets.  They need to conduct scenario tests before expending money.  They need to predict the likelihood of innovation and all of the options that they have in the future related to those innovations.

The Securitization of Knowledge Assets

Entrepreneurs need to securitize knowledge assets in order to finance innovation on the scale that will be required to offset our massive debt. This is how the innovation economy must play out.  We cannot depend on corporations or governments to do this for us.  People must control, regulate, anonymize, and manage  their own knowledge inventory.   If only they could see their world through the entrepreneur’s eyes – perhaps they need a vicarious search engine more than anyone.

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Social Media Staffing: $3 Trillion Opportunity

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On July 1, 2009

In General Information

As the World Churns:

The cost of placing an employee approaches 30% of that employee’s salary.  In fact, most head hunters charge roughly 30% of the employee’s salary to find the right person to fill the job opening for a client company.  Sometimes the employee is recruited from a competitor causing a net productivity loss in a market due to disruption or “churning”.

The company also has a choice of hiring with the internal HR department.  In this case, they are paying HR personnel to place ads, review resumes, check references, and conduct interviews.  These costs can also run into a substantial percentage of the new employee’s salary.  From previous articles, The Ingenesist Project suggests that these methods may not even result in the best employee selection:

The Unnecessary Market Friction

Text only Résumé is no longer adequate in our complex business environment due to subjectivity, semantic inconsistency, and the time and resources required for fully interpreting the content. The cost of delivering a résumé has been decreased by computers and the Internet while the cost of reviewing the résumé has remained constant.  Keyword search programs often eliminate excellent and creative candidates based on criteria not related to the candidate.   Managers tend to hire what reminds them of themselves – from world that no longer exists.

Estimated wasted productivity:

Suppose that 50 Million professionals; doctors, lawyers, engineers, professors, administrators, managers, and directors are employed in the United States.  Suppose that the average salary is 70,000 per year.  Suppose that they change jobs 3 times in their career and that the cost of placement is 30% of salary, or $21,000 dollars per placement.

The total cost is $ 1 Trillion dollars multiplied by 3 placements in a career equals nearly 3 Trillion Dollars.  Now, divide this by 30 years in a career and we can see that 100 Billion dollars worth of human productivity are spent every year not necessarily matching the most worthy employee to the most worthy employer.  This does not include moving expenses, salary increases, disruption costs, or inflation.

The probabilistic electronic résumé system

The Ingenesist Project specifies a vetted knowledge inventory that resides in Social Media. The knowledge inventory, probabilistic electronic résumé system, and innovation bank together would make the paper and language Résumé obsolete.  The percentile search engine would scan the knowledge inventory of the corporation and scan the knowledge inventory of the labor market and seek matches with high probability of increasing net productivity – not unlike Amazon.com predicts what book you would like to read next.

Options, options, give the market its options

election criteria can be adapted to reflect social priority such as reduced traffic congestion or to reflect strategic objectives such as incremental or blue sky innovation requirements.  Trades across companies and industries can occur opportunistically not unlike interdepartmental transfers or even like trades in professional sports are conducted today.

Companies can manage peaks and valleys in employment by trading across diverse industries. avoiding layoffs all together.  Employees that can stay productive in diverse industries transfer new ideas and discover transferrable efficiencies.  Experience gained would be added to the knowledge inventory to enhance the probabilistic résumé inventory available for continuous improvement and tangential applications of innovation enterprise.

A virtuous circle? … A 3 Trillion Dollar opportunity nonetheless.

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1.3 Trillion Dollar Professional Contact Market

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On June 30, 2009

In General Information

“Hey, I know a guy who owes me a favor …”

It is only a matter of time until professional contacts will be for sale.  The problem is that the ROI (return on investment model) is such a poor valuation tool for social media. Another valuation tool used in finance is called Real Options.  An option is the right, without the obligation, to act on an opportunity at some time in the future.  Social Networks, friends, family, and professional contacts behave much more along these lines.

Five Easy Pieces:

While the calculation for the value of an option is complex, the things we need to plug in are fairly simple in the context of social media:

1.    There must be an inventory of the assets
2.    The future date when the asset can be acquired must be known
3.    The cost of acquiring the asset must be known
4.    The value effects on the enterprise must be estimated
5.    The uncertainty related to the asset must be estimated

The term “asset” in social media space may include: Knowledge, skill, an undertaking of a new project, or the generation of a new idea, etc.

The Social Networking Manifesto:

The objective of the building a social network is to know where the knowledge assets are, how much they can help you, how much they cost to exercise, and the certainty that they will be applicable, available and useful when you need them.   Conversely, the best way to increase the value of a social network is to be visible to others, tell people what you can do for them, tell people what you need from them, and establish a reputation for reliability.

Most importantly, everyone must have the right, without the obligation, to accept or decline the opportunity.  This is what jump starts ‘supply and demand’ and makes a market a market

Let’s consider all options:

To estimate the value of an option to call on anyone in your network use a financial option calculator tool on the web and plugged in social media numbers.  Let’s use Linkedin as the knowledge inventory; 40 million knowledge assets also hold options with their contacts. Say that the expiration date is 1 year (for tax reasons).  Assume the market value of their skill is 100 dollars and that at some point in the next year, the value of their skill relative to yourself becomes 200 dollars. The right to buy the asset at the earlier price is worth a premium.  Suppose that the volatility of the asset is 50% and the interest rate is 7%.

The value of the “call” is worth about $3.47 dollars.  The Call is an option contract that gives the holder the right to buy a certain quantity of an underlying security from the writer of the option, at a specified price up to the specified expiration date.

The value of options in a network:

For the above scenario assuming all assets are equal in price of 100 dollars; if someone has 10,000 1st and 2nd level contacts on Linkedin, the value of their implied call option is about 34,700 dollars.  If Linkedin were a stock market, the value of the social contracts that people have with each other is 34K x 40M = 1.3 Trillion Dollars market value for the contracts that people hold and trade.

This is not even the value of the transaction – only the right to have a transaction. The value of the social contract is in the conversations that they hold.  Contracts are a financial instrument that can be traded, combined, diversified, and aggregated for real money.  It’s only a matter of time.

The Ingenesist Project specifies the structure of an innovation economy where a knowledge inventory, a percentile search engine, and an innovation bank will facilitate and aggregate the 5 components of Option Valuation.  Social media applications form the operating system for the market in options.

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The 2.3 Trillion Dollar Mentor Market

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On June 29, 2009

In General Information

Mentors provide expertise to less experienced individuals to help them advance their careers, enhance their education, and build their networks. In many different arenas people have benefited from being part of a mentoring relationship: Freddie Laker mentored Richard Branson, Bach mentored Mozart, Dr. Dre mentored Eminem, Aristotle mentored Alexander the Great, and Obi-wan Kenobi mentored Anakin Skywalker.

Mentorship: a Valuable 2-way Conversation

Suppose that mentorship could be monetized like financial instruments.  Within the structure of an innovation economy specified by The Ingenesist Project; a knowledge inventory, a percentile search engine, and an innovation bank will match the most worthy student to the most worthy mentor in the respective market structure.  The mentor would take an equity position in the protégé, not unlike taking a stock in a corporation.

For example:  A single mid-career mentor could take on 10 protégés with an option to exercise, say, 1% of the students future salary for every year mentoring upon predetermined retirement date. Say that the average mentorship lasts 10 years.  Likewise, each of the protégés also becomes a mentor taking on 10 protégés of their own.  The Master mentor will collect 1% of the revenue that each of the 100 sub-protégés provide to their middle mentors per year.

The Educational Pyramid Scheme

If each protégé becomes at least as successful on average as the mentor, the master mentor can collect the equivalent of their average salary for the duration of their retirement.  If each of the protégés become equally effective mentors, then the master mentor can double their average salary for the duration of their retirement.   A third tier adds another salary to the master mentor.

This is what actually happens in an informal way within companies, government, and Jedi Knighthood; the exception is that social media will enable this to occur outside the construct of a corporation – and such.

Game Theory for the Rest of Us

An interesting social game emerges:  It becomes the best interest of the mentor that each of their protégés is successful in their field and practice high integrity.  It is in the best interest of the mentee to learn as much as they can and become as proficient as they can. It is the best interest for mentees to pick appropriate mentors and it is in the best interest for mentors to take on appropriate mentees.  It is efficient for mentees to form a social network among themselves and for Master Mentors to form a network among themselves. A multiplier effect surges with cross-mentoring.

In aggregate, it is in the best interest for the membership in the social network to cooperate rather than compete because their income would ultimately benefit less from competition than from cooperation.

2.3 Trillion Dollars Market

The American Public education system is in disarray.  Standardized education defies the diversity of the country.  Teacher’s pay has been stagnant. Curriculum takes years to respond to new knowledge. Recent McKinsey research finds that a persistent gap in academic achievement between children in the United States and their counterparts in other countries deprived the US economy of as much as $2.3 trillion in economic output in 2008

None of this has anything to do with the dreams of our children.  None of this has anything to do with the intellect, motivation, and perseverance of our kids.  It has everything to do with Political stalemate and failure of the economic system.  All children can achieve their dreams, and ours, if there were a market for mentors.

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The New Economic Paradigm; Part 5: The Entrepreneurs

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On April 9, 2009

In General Information

There is no shortage of entrepreneurs in this world.

6 Billion of them wander the Earth looking for assets that exists at a low state of productivity waiting to be elevated to a higher state of productivity.

The entrepreneur must first be able to identify an asset as an asset.  Next they need to identify the lower level of productivity and they need to be able to imagine the higher potential level of productivity.  The entrepreneur must identify and manage some risk, perform leadership tasks; and as a result, elevate the asset to the higher state of productivity.  Profit is the difference between the lower and the higher state – minus expenses.

Unfortunately, today this process starts at the forest and ends at the junkyard.

This is how our economic system is organized.  The next economic paradigm flips that idea over.  Instead of accounting for natural resources as the tangible element and human knowledge as the intangibles element; the next economic paradigm must account for the natural resource as the intangible element and the human knowledge as the tangible element.

The current problem is not that knowledge is intangible; rather, knowledge is simply invisible.

The Ingenesist Project will make knowledge assets visible by provisioning all of the information that an entrepreneur now needs to identify the knowledge asset and the associated states of productivity.  Entrepreneurs can then increase human productivity using knowledge assets applied to natural resources, instead of natural resources applied to consumption.  The implications are vast.

Returning to the financial analogy:

With a financial bank, the entrepreneur assumes that they have the knowledge required to execute a business plan and the go to the Financial Institution to borrow the money.

With an “Innovation Bank” the entrepreneur assumes that they have the money to execute the business plan, and they go to the innovation institution to borrow the knowledge.

While this may sound trivial, the implications are vast:

1. A virtuous circle now exists between society and the financial system
2. Profit is derived from increasing human productivity not natural resource exploitation.

Economics is the science of incentives:

A financial Bank seeks to match a surplus of money with a deficit of money.  It is in the best interest of the bank to find rich people who will not need their money for a while, and poor people have the best likelihood of paying the money back in time.  The process assumes that the borrower has the knowledge required to execute a business plan when they seek to borrow money.  However, that FICO score does not measure knowledge explicitly, so little incentive exists to make it tangible.  All of the top ten reasons why businesses fail are due to failures of knowledge.  The financial system is collapsing under the weight of failed knowledge.

By contrast, the Innovation Bank seeks to find people who have a surplus of knowledge and people who have a deficit of knowledge about what they intend to produce. The innovation bank then uses a series of statistical calculus (the same calculus as the credit/insurance/risk management professions) to match most worthy surplus of knowledge assets to most worthy deficit of knowledge assets.  Here, the opposite assumption is made; everyone assumes that the borrower has the money required to execute the business plan and they go to the innovation bank to borrow the knowledge.  People have an incentive to accumulate knowledge.

Simplicity that defies comprehension:

The business plan for the new entrepreneur is deceptively simple to do and nearly impossible to monopolize; anyone can do it not just the wealthy and their chosen few.  The next 3 modules will outline how new enterprises will be constructed from the virtuous circle created between the financial bank and the innovation bank.  This changes everything …. and did I mention that the implications are vast?

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What Comes After the Knowledge Economy?

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On March 25, 2009

In General Information

The Ingenesist Project was featured in this video for Social Media Connection Broadcast Network produced by Jay Deragon. This is the first of many videos that we will be producing in order to explain what the Ingenesist Project is and why it is so important.

The Innovation Economy is the next level of economic development following the knowledge economy.  It will not be induced by corporations, Wall Street, or even the Federal Government.  This is something that we must create for ourselves as a social movement.  Social Media will play a pivotal role in this next economic paradigm.

Please watch this video and send any comments, questions, or ideas for future broadcasts about the Ingenesist Project.

I would like to thank all of our contributors for their endless support.

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Innovation Bonds: 3 Million Jobs

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On February 26, 2009

In General Information

Another approach for spending a Trillion dollars (backed by debt) would be for the government to issue innovation bonds (backed by innovation) to fund new enterprise.  Surely the World still greatly admires and respects American Ingenuity (social capital, intellectual capital, and creative capital) and would likely buy such a financial instrument instead of more of our debt.

The final frontier; your backyard

The Last Mile of social media is a vastly unexploited resource with an astonishing wealth creation potential.  The Ingenesist Project (TIP) specifies a structure for an innovation economy through the application of 3 simple web applications deployed to social media that will ignite “The Last Mile”.

Already, people use social media to harvest great ideas from around the world.  The Ingenesist Project will enable global ideas to be applied in local economies throughout our communities.

Running Numbers:

The sweet spot for Last Mile social media is (2-6) people living within a (1-6) square mile area. Assume an average innovator density is about (1) person per square mile.  The United States is a little more than (3) million square miles.  If only (1) of the thousands upon thousands of potential applications of Last Mile social media were implemented across the country, then (3) million jobs would be created.

Dan’s List; Leave a Tip

Here is a list of (10) hypothetical business ideas that a buddy and I dreamed up over lunch using TIP methodology for inducing an Innovation Economy.  Each of these ideas has a working revenue model.

1.    Zertify: This company is a last mile/vetting social media application where neighbors “Zertify their Zillow Zestimates”.
2.    Start Up Neighborhood (SUN): is a last mile social media application where neighbors get together to innovate and create new businesses.
3.    ScatterWatt: is a last mile social media application for decentralizing power generation aggregating local clean power generation systems (rooftop wind, solar, greenery).
4.    ComPrac: is a last mile/vetting application of social media that forms and organizes communities of practice for the purpose of mentorship and cooperation in innovation.
5.    CombinePac: is a last mile/vetting application of social media that combines communities of practice strategically for the purpose of tangential innovation
6.    TopUse: is a last mile social media/vetting application that makes best use of already disturbed lands saving undisturbed lands from exploitation.
7.    CodeVitae: is last mile/vetting service that translates CVs and job descriptions into universal decimal classification system for computerized analysis, normalization, and improved allocation.
8.    Proximizer: A last mile social media application that reallocates knowledge assets for best proximity to home space for carbon credits.
9.    CarbonCops: is last mile social media application to register, certify, and implement carbon savings ideas.
10.    VetBucks: is a last mile/vetting site for the verifying expenditure of public funds.

Improving Information for Fun and Profit:

The degree to which information is improved in a market is the degree to which the innovation adds value.  As such, monetization becomes a relatively simple matter.  Furthermore, the options that are created will have a multiplier effect in the communities as neighbors learn what knowledge assets are available with which to cooperate in their communities and where their knowledge assets can be deployed productively. New ideas generate more new ideas as the markets will seek to fill in the blank spots and support more structure for innovation economy.

An Endowment for their Grandchildren:

While the leadership elders are to be respected for their wisdom and accomplishments, they have very little comprehension of the economic growth potential of social media. It is understandable that they may overlook this opportunity.  The capitalization of social media lays in the hands of the young people who know exactly what to do if given the opportunity.  Why not give them a shot at getting the books in order?  Call it their inheritance.

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Social Media; The Engine of New Economic Growth

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On February 19, 2009

In General Information

Click image to activate

Business Models of the Future:

The great new social media business models of the future will be in the areas of “The Last Mile of social media” and “Social Vetting mechanisms”.   I have written about these two elements in the past.  However, this article will attempt to focus on how the future engine of economic growth can use social media platforms to power social capitalism.

The Last Mile:

The Last Mile of social media is where the rubber meets the road.  I can chat with people all over the world on Twitter and Facebook, but nothing happens until I walk out of the house and meet real people in real time to create a real business that really increases real human productivity.  If I can accomplish that, monetization is simple matter.

If everyone is harvesting ideas from all over the world, Last Mile technology is the key to bringing these ideas to the ground.  The new social enterprises will develop, support, enable, and service the structure for innovation in neighborhoods and communities.

Feel the Burn:

To understand the power of this paradigm; there is little doubt that the leader of the free world was elected by the Last Mile.  That is huge.  Now, when the Last Mile is in trouble with mounting layoffs, foreclosures, and wealth destruction, eyebrows are raised, headlines make the first page, and everyone is wondering what will happen in to the Last Mile.  In 1992, this author saw Los Angeles burn over a whole lot less than what’s coming down the pipes today.  This is not a game, this is very serious stuff.

Social Vetting:

Social Vetting, on the other hand, is less understood, but like a tornado there is nothing subtle about the forces that it can impart against the darkness of secrecy.  All markets become more efficient in the presence of an effective vetting mechanism, as such, monetization is a simple matter.  Conversely, the absence of vetting is the root of all corruption – as we are now painfully aware.

Begging for Mercy:

To understand the power of this paradigm; Facebook was recently brought to its knees by Social Vetting.  First, a social watchdog group noticed the change in the terms of service and set the dials on “viral”.  Facebook users organized immediately and lay siege to the core validity of a 3.5 billion dollar new media titan.  Within hours, Facebook was backpedaling. The 300 billion dollar marketing industry, ravenous for viewer impressions, was sent back to the drawing boardroom.  Meanwhile, legacy media spin took pot shots at Facebook’s inability to monetize the value it claims to create.  Again, this is not a game, this is serious business.

Role play

In each of these examples social media responded effectively to an existing injustice.  This presents the dire question:  If the Last Mile and Social Vetting can have such a profound effect in the REACTIVE role, what would be the underlying dynamic if applied in the PROACTIVE role ?

The Engine of Economic Growth:

Consider this: Social media has no problem scaling up, rather, it has a problem scaling down.  The Last Mile and Social Vetting represents the compression cycle of the new economic engine.  The spark of innovation ignites the secret sauce to scale upward.  With a repeatable cycle, we can literally create an engine of economic growth cycling from down-scaling to up-scaling, and back to down-scaling, and so forth, forever.  Each combustion cycle literally pumps value into an economic system.

Master of Puppets:

I’ll let the reader now ponder the cause and effect sequences of this proposition.  But I will leave one hint: Wall Street becomes the servant, not the master.  As such, monetization becomes a simple matter.

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The US Financial System – Tail Wagging Dog

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On February 10, 2009

In General Information

The financial system is not the problem.  The Innovation System is the problem – or did you notice that we do not have an “innovation system”?  Finance and Innovation in the US has engaged in the dangerous dance of tail wagging dog.  Innovation is as Wall Street does; not the other way around.  This is wrong, this is very wrong.

Doers, not shakers

[Our economic strength is derived from the doers, the makers of things, the innovators who create and expand enterprises, the workers who provide life to companies and, with their earnings, support families and invest in their future… This is what drives economic growth.] – Barack Obama

These are sobering words.  It make one wonder how everyone else makes a living; the brokers, the agents, the middlemen, the gatekeepers, the spinners, the flippers, the money managers, and everyone else in the game with their hands “in the flow of money” dragging the system into a tailspin.  Many of these people publicly criticize the working class, who have finally run out of steam, for gumming up their game.

It is also amazing that the engineers, educators, technologists, medical professionals, and public servants could produce so much for so long; enough to feed everyone else – except, as of recently, themselves.

[The financial system is central to this process, transforming the earnings and savings of American workers into the loans that finance a first home, a new car or a college education, the credit necessary to build a company around a new idea.] – Tim Geithner

Meet the Master:

The financial system is supposed to be the servant, not the master.  Innovation takes time, effort and resources before the payback can be realized.  For this reason only, the financial system bridges that time gap to allow for increased future productivity to generate new wealth for use by all.  That is the only reason why the financial system should exists.  But somehow we have gotten it backwards.

We got it backwards:

Technological change must precede economic growth.  We are going about the process of globalization as if economic growth can precede technological change.  The invention of the wheel, wedge and the pulley came before the invention of the Collateralized Debt Obligation (CDO) – there is no excuse for this oversight. This is clearly unsustainable and the process must be reversed.

An easy fix, almost:

The Ingenesist project specifies 3 web applications that will allow social capital, creative capital, and intellectual capital to become tangible outside of the bloated and failing financial system.  These applications will make innovation success predictable.  If success is predictable, then cash flows are predictable.  Using the same calculus as Wall Street, the cash flows can be combined, diversified, and split up into innovation bonds with superior returns that can be issued to fund new and sustainable innovation enterprise. Problem solved.

3 steps away from a quantum leap:

This can be done today playing by the rules and using existing technology – 3 simple applications.  That is how close we are to achieving the most important evolutionary step in human history.  The Government needs to empower the people to release themselves from the shackles of debt created by those who create little else.  For this reason, Obama is on the only correct path – buying time so that this important social media technology can mature.

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The First Mile in Social Media

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On February 6, 2009

In General Information

The Last Mile….

Back in the early days of Broadband, the cost of sending a signal across the Pacific Ocean was negligible compared to the cost of delivering that signal to everyone in town – the problem was called the called “The Last Mile”.

Predictably, companies battled it out in the Dot-Com Wars with a flurry of IPOs and hostile takeovers clambering to fill “The Last Mile” void.  Then the issue largely disappeared.  I guess the cable TV folks figured it out because that is who I send my money to for the speedy bits.  Last week I was chatting with the FiOS folks burying fiber optic cable near my mailbox.  They said it’s going to get faster.

…of Social Media….

Social media currently suffers from “The Last Mile” syndrome.  Social Media applications have enabled me to make friends in India, Israel, Colombia, Mexico, Japan, and everywhere in between. I can shout out to 3 million people with the click of a mouse, but not the wonderful family living a few houses down the street.   I met them while chatting with the FiOS folks who were burying fiber optic cable near our mailboxes.

…is where the rubber meets the road

I really enjoy my online friends and the sharing of information makes me smarter and introduces me to new ideas.  But these ideas are not very productive until I apply them to something that actually touches the ground, like the FiOS cables.  The secret to finding a business case for social media can be found in “The Last Mile”.  It would seem that innovators and entrepreneurs would be strafing each other to fill this vastly under served market and lucrative market segment. This is where the money is. Hello, is this thing on?

But the scalability is lost.

I have found a few applications like Meet-up, Biznik, Ning, Neighborex, Start-up Weekend, etc., but they are just not catching fire like the calculus suggests that they should.  The problem is that the scaling is lost.  The advertising revenue model carried over from radio and TV requires millions of impressions to be viable.  The demographic of “The Last Mile” are groups of 2-8 people living within a few miles of each other – a corporate business model just does not exist to serve “The Last Mile”.

The First Mile…

Meanwhile, the old one-way advertising model is dying off quickly and the two-way advertising paradigm is sending all the major corporations and media outlets to the drawing board looking for the social media strategy.  Corporation are now expected to provide real value to a community, but they can’t figure out how to scale that value. The Irony is that most of those same corporations were started by 2-8 people living within a few miles of each other.  Maybe we should call it “The First Mile” and then re investigate the role of Social Media.

…holds the the secret sauce…

In the future of innovation economics, patents will not be the most valuable object, rather, the secret sauce that comes up with the innovations that will be the most valuable.  Corporation can employ social media to provide a practical and repeatable program that empowers a community.  Corporations can strategically assemble local entrepreneurs into spin-off entities. Corporations could license their IP, open-source their technologies, share internal strategy, and provide executive coaching that helps community teams to form new corporations discovering tangential and future markets.  Corporations should teach people what they do best – making money.

…where the scalability is found.

So where is the scalability?  Hey, let me hop on my new FiOS line with my 8 friends from down the street and we’ll just shout out to our 24 million global neighbors – and we’ll get back to you.

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Oh, What a Semantic Web We Weave

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On February 5, 2009

In General Information

Innovation Economics:

is the conscious practice of investing in innovation as a method for driving economic prosperity.  Innovation is the science of change and economics is the science of incentives.

Money is fictitious:

Money does not represent gold or silver, it represents your productivity.  The value is held in the productivity, not coins or bank notes.  Debt represents future productivity and savings represents past productivity. It’s very simple.

So if the word “money” and the word “productivity” mean the same thing, they should be interchangeable. Right?

As a test, try the following:

Every time you hear someone use the word “money”, simply insert the word “productivity”.  Try it with the kids, your boss, the news broadcast, or your favorite politicians.  If their statement still makes sense, then it is likely a logical statement.  If the statement is confused, reversed, or makes no sense whatsoever, then this is where we need Innovation Economics.

The Reversal:

  • “Mom, can I have some [productivity] to buy an ice cream cone?”
  • “We don’t have enough [productivity] to invest in R&D”
  • “There isn’t enough [productivity] in the budget so we must cut education programs”.

The Confusion:

  • “It concerns me that Facebook has yet to find a [productivity] model that seems likely to secure its future.”
  • “Icelandic [productivity] collapse is heard around the world”
  • “Global Warming costs too much [productivity] to solve”

The Ridiculous:

  • “Wall Street Executives earned excessive [productivity] in 2008”
  • “State of Washington opens more liquor stores to raise much needed [productivity]
  • “Lawmakers from both political parties have criticized banks for failing to use the taxpayer [productivity] for lending to help stabilize the hard-hit U.S. economy”.

It’s really fun to play this game when you start getting bored with the endless dribble of spin.  You can even go backwards; hear “productivity” and insert “money”. Pour yourself a glass of wine, sit back to the nightly news and you may start noticing some interesting trends.

Discussions related to engineers, infrastructure, airplanes, teachers, doctors, police and firefighters, etc., tend to get The Reversal. Discussions related to innovation industries such as social media, environment, and social causes tend to get The Confusion.  Discussions related to gambling, marketing and advertising, money shuffling, law suits, Wall Street, and various forms of speculation, are simply The Ridiculous.

It will make you wonder why we would need a Web 3.0 Semantic Web.  We really need a Web 3.0 de-Semantic Web.

(Picture from Charlotte’s Web; a story about a dinner pig who makes friends with a spider who comes up with a plan to save the pig by writing words in her web.  All the town’s people thought that the pig was special and his life was spared. The farm animals knew that it was really the spider who was special – she was an innovation economist)
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The Shift to Social Capitalism

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On January 8, 2009

In General Information

As computer enabled society marches toward social capitalism as a result of overburdened financial institutions, a new generation of social media applications will form to emulate those institutions.  Social capital, creative capital, and intellectual capital will increasingly behave like tangible assets.

Economic and Privacy

Our credit score is a statistical sampling system in which we compete with ourselves for the cost of money.  We lose some privacy with the credit score, but we accept these terms to the degree that we enjoy the benefit.  After all, we can literally print money today to build a businesses backed by future productivity (financial capitalism).  If this benefit disappears, so too will the paradigm and something else will take its place.

Social Media and Privacy

Similarly, we lose privacy with social media; we drop our resume on Monster, we post our profile to Facebook, we express opinion on a Blog, and search engines display this activity.  But we accept these terms to the degree that we enjoy some benefit from our social network.  Whatever that benefit is, we know that it is real, it is tangible, and it has value – otherwise, people would not do it.  This is the nascent domain of Social Capitalism.

Cover your Assets

Like financial capitalism, social capitalism will be the ability to borrow knowledge assets today to build a business backed by future productivity of those assets.  In order to anticipate how social capitalism may be structured, we continue with the analogy:

The FICO equation churns about 22 variables related to your financial behavior. These variables include debt load, asset value, income, payment history, etc. Input data comes from past lenders for the benefit of future lenders, as well as insurance companies, employers, public disclosure, etc. The credit score predicts the likelihood that your future productivity is worthy thereby allowing the lender to hedge risk accordingly.

Computer Enabled Society

If we reconstruct computer enabled society in the same form, we notice some interesting similarities as well as differences.  Instead of 22 financial variables, social variables appear as events demonstrating social, creative, and intellectual capital. Input data comes from Social networking applications such as profiles, blogs, referrals, etc.  Finally, search engine placement registers your social credit score.  Have you Googled your name lately?

As imperfect as this may sound, remember that computer enabled society has not fully developed on the ground. Social Capitalism is in the beginning stages and there is great opportunity in improving this system if we know how it should work because the value of the paradigm, by default, could be in the trillions of dollars.

Next Generation Business Methods

The next great business opportunities will be in the area localizing, mobilizing, organizing, vetting, classification, and normalization social capital, creative capital, and intellectual capital.  These elements will contribute to one’s social credit score which buys access to share information and knowledge. Geographic location will become an essential SEO component as diverse communities cluster around technologies and tangential innovations.  Many of the functions that drive a traditional corporation will exist in communities governed by social economic incentives.  As a consequence, not as a cause, social capitalism will reflect social priorities as the term currently implies.

Social Capitalism and The innovation Economy

Social Capitalism fueling an innovation economy may become the most powerful engine of economic growth in human history if structured correctly, and a dud if not.  We are much closer than anyone realizes and the path is becoming increasingly clear. There is great cause for optimism in the next few years of social media development and social capitalism.

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Out of Cache; Will Work For Bandwidth

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On December 31, 2008

In General Information

We can measure the time in minutes, we can measure distance in miles, and we can measure mass in grams – so how do we measure Innovation?  Am I missing something or is this possibly the most stunning omission in the history of civilization?  Who is keeping score? Where’s the referee? This is serious business, folks – the fact, factors, and factories of innovation should be in laser sharp focus to everyone right now, here is why:

The total US liability is estimated at 53 trillion dollars. Every US citizen must become more productive by $175,000 each to cover the invisible mortgage.   Government and corporations are not going to fix this problem – they will leave it to the kids to figure out how to make, mix, and measure innovation.

Natural Resources of Bandwidth

It is official; the United States has run out of bandwidth and we need to create more. The only way to accomplish this is an extraordinary expansion in the breadth, depth, and scale of innovation. This is a situation that cannot be rationalized by any conventional school of thought – starting with our definition for innovation.

The accepted definition for innovation is “something novel and useful”. I hope that I am not insulting any B-school professors or innovation guru’s but “something novel and useful” is already bankrupt as a definition for the only thing that can pull us out of this flaming tailspin of debt economics.

So let’s try something that the kids can do well (because they get to pick up the tab):

Innovation = Bandwidth Created / Bandwidth Expended

So there it is: a simple, clean, and effective:  If the number is greater than 1 we have a creation of wealth. If the number is equal to 1 we have a transfer of wealth, if the number is less than 1 we have the creation of more debt.

It should not matter how one defines bandwidth as long as the top number and the bottom number are measured the same way. If the kids can increase the top number, or lower the bottom number for anything anywhere by using their social, creative, or intellectual ability, alone or in groups, then they can become successful innovators.

Business case

There is a clear and rational business case for bandwidth – people will pay for it at a price relative to their own available bandwidth. Let’s give the kids a game they can win.  Let’s give them a score that they can keep. Let’s show them how entrepreneurs work, think, and play.

For the same amount of bandwidth expended, they can create more bandwidth for 10 rich people or more bandwidth for 1000 poor people. Let the kids decide. If they give some people more bandwidth at the expense of the bandwidth of others, they lose.  If they find synergies that act as a bandwidth multiplier, they win. Let the kids figure it out.

All we need to do is help develop standards to measure bandwidth.

It’s the least that our old people can do and a much simpler problem for our feeble minds to solve.  The Ingenesist Project specifies 3 web applications which if deployed to social media will allow social capital, creative capital, and intellectual capital to become tangible outside the construct of the traditional corporation – we believe that this may do the trick.  There may be others working on the problem too, we don’t care – at the end of the day, we all work for bandwidth.

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Advertising in the Age of Social Capitalism

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On December 31, 2008

In General Information

The recipe for selling great products to great customers in the age of Social Media resides first in helping people find their highest talent and passion.

The great innovations of our time were created by people doing what they enjoyed most by using their talents to the highest potential.  Disney, Boeing, Apple, Mattel, and nearly every other ground breaking venture had the secret sauce of people doing what they were best at and most passionate about.

Advertising in the Age of Social Capitalism

Computer Enabled Society is in the midst of a struggle to reorganize itself outside of the construct of the traditional corporation. People seek to develop methods and systems that allow for the reallocation of social capital, creative capital, and intellectual capital to match a person’s natural talents and passions with those complementary to other people.

If marketers have the foresight and methods to “get ‘em while they’re young”, they certainly also have the foresight and methods to develop ‘em to their highest purchasing potential.  All they need to do is listen and support to the future trends in Social Capitalism.

Instead, mass marketing pays mass money for mass audience from which to draw mass revenues.  As a result, actual products are designed to be marketed and thrown away; not to be particularly useful, productive, or even healthy.  Such unnecessary innovation wastes human effort and natural resources while mass marketing of unnecessary innovation wastes the time and bandwidth of those for whom the product is irrelevant (yes, Spam).  Economies of scale will become liabilities of scale in an Social Capital driven Innovation Economy.

Few realize that advertising can become a highly useful component of the Innovation Economy.  In many professional societies, practitioners look forward to hearing from vendors, educators, and fellow practitioners for trends, news, and developments that can strengthen their community.  Bad products are rejected quickly and good ones are elevated quickly. This is how the great innovations are found. This is where the early adopters congregate. This is where brand loyalty is unyielding. This is where wealth is created.  This is efficiency that society wants and needs.

The Ingenesist Project starts the discussion by specifying the creation of a knowledge inventory in society.  This simple exercise enables communities of practice to form around a set of knowledge attributes.  Advertisers can quickly identify target markets and support the operating costs of these communities in exchange for the bandwidth of the members.   The community will look forward to learning about the advances in the field of their interest and ad copy will become far more useful and efficient to deliver in greater detail.

When communities of practice merge with other communities in the innovation process, the message of the advertiser can be carried far and clear as people share ideas and coordinate activity.  Feedback to the vender is highly qualified thereby creating a virtuous circle of innovation.  In the age of social media, highly targeted advertising is simply more efficient than “bending the herd” in a TV era mass market model.

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Social Media Frequent Flyer Miles

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On December 22, 2008

In General Information

The Internet is a lot like a commercial airplane – it is very useful in transporting us to distant lands but the real work must happen on the ground.  The organization of society at both ends of an Internet destination must be developed if real wealth is to be created. Social Media needs to develop this component at this critical juncture of human history when vast amounts of social capital, creative capital, and intellectual capital are being sent to the shores of despair upon Unemployment Air Line.

Computer enabled society:

The great opportunity of our generation in the fair, sustainable, and equitable creation of wealth through innovation in a computer-enabled, open-sourced, and democratic society that can organize its own knowledge in the form of a financial instrument.  The great danger, of course, is if we miss our flight and engender a computer simulated society where it is easier to interact with online community than our own neighbors.  It’s like getting on an airplane for the fine view, good food, and interesting conversation.  Social capital is by far the most powerful force of change and social media must now touch the ground in a meaningful, systemic, repeatable, and scalable manner.

The analogy continues:

The earliest days of aviation were a novelty at best.  Some commercial enterprise emerged in the form of barnstorming, carrying the mail, light cargo, aerial photography, and warfare. Likewise, the evolution of the internet brought us on-line gaming, e-mail, e-commerce, assorted photography, and hacking, etc.  It was not until the invention of municipal airports that the airplane became a true time machine by increasing human productivity and allowing us to see history that would otherwise be unavailable traveling by sea.  The true value of both commercial aviation and social media over “sail mail” is precisely through the increase in human productivity to transfer information to the ground.

Three Web Applications:

First, social media needs to develop a knowledge inventory system by geographic areas.  Second, Social Media needs a search engine at a local level that combines knowledge assets to form “strategic” social networks that can execute a specific business plan at reduced risk; cooking the “secret sauce”.  Third; an Innovation Bank must “pull” knowledge surplus and “pull” knowledge deficits together from diverse communities.  These three applications will provide everyone with the tools needed to create wealth in their communities.

Social Media has the potential to become the airport of the Internet Transportation System.  Nothing meaningful can happen until the rubber meets the tarmac.  So, let’s start building runways.

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