Deep Web Search Engine is here. This represents a new economic paradigm since increasing the available information increases the rate of change of knowledge across diverse communities. Keep your eyes on this one – it’s a big one.
Tag: creative
Douglas Rushkoff has an interesting post, indirectly on how local currency can spur social capital. As more corporate and governmental institutions fail to meet the needs of society, people will need a currency that they can trade among each other. If the dollar fails, the need will be dire.
The difficulties that will ultimately limit such enterprise is the inability to capitalize and securitize a social currency. Conversational Currency solves this problem by demonstrating how social media, if organized correctly, can simulate many of the functions of corporations and government. As such, people will ultimately trade the currency they trust most.
I like Douglas Rushkoff’s work. I suppose the ultimate test of concept would be if he finds this post and contacts us to integrate The Ingenesist Project and Conversational Currency into his thought leadership. Thanks Douglas!!
A Local Currency Primer-Comfort Dollars
The Earth changes – it always has and it always will. The most interesting thing about Earth is not rock, it is rate of change of rock. Yet it is this rate of change in rock that created oceans, continents and geographical features. The rate of change in the landscape is what created and affects all humanity; global warming not withstanding.
In fact, the rate at which things change is the root of all financial deals, social interactions, creative discovery, intellectual pursuit, even criminal activity. All value is created and destroyed in response to the rate at which something changes. Since change is relative to time, the rate of change is something, like death, and taxes, that you can bank on.
Money, Knowledge, and Power
As a corollary; the ability to measure rates of change in things is the ability to measure value. The ability to cause rates of change is the ability to create or destroy value. It is therefore in our interest to try and express our world in terms of rates of change. For example:
1 Money, interest, and stock price are deeply related. Therefore, the rate of change of money is related to interest. The rate of change of interest is related to growth rate. The change in growth is monetized through a public market for its stock. Stock price affects money and the cycle continues.
2 Information, knowledge and innovation are deeply related. Therefore, the rate of change of information is related to knowledge. The rate of change of knowledge is related to innovation. Innovation creates new information. And, the cycle continues
3 Attention, attraction, affinity, audience, and action are deeply related to each other. Therefore the rate of change of attention is related to attraction. The rate of change of attraction is related to affinity, etc., until finally, the rate of change in action gets everyone’s attention. And the cycle continues.
Achilles’ Octopus
There are a few problems however. If you remove, corrupt, or disengage any of the components, the cycle fails. To complicate matters further, our three examples are also related: money, knowledge, and audience; stock price, information, and action; etc.
Points of failure can occur at any part of the cycle and it is often difficult to identify which failure caused what effect. Does a stock price fail because the public lost affinity or because information was corrupted? Does an economy fail because there is no money to invest in innovation or because our society outsources its knowledge economy? Does a school system fail to deliver the right knowledge to society because the stock market failed or because there is no public action?
Social Media and the next paradigm of economic development
Social media allows us to express the dynamics of our world in real time and at great speed. Feedback loops are shorter and cause and effect can be more easily differentiated. The data that will be generated through the integration of social media will allow entrepreneurs to identify rates of change of the rates of change! Armed with computer enabled search and analysis algorithms, they can mange these complex new relationships to create value for themselves and their community in a new era of social capitalism. Social media is a higher order calculus.
It will take everyone to accomplish this together but we can create a new landscape for our Earth, ourselves, and our children’s future. This is change we must bank on.
The epiphany:
Something very interesting happened when Facebook changed their terms of service. People who use the Facebook platform (for free) organized themselves using the (free) platform to threaten the core validity of the same (free) platform. This could not happen in any other industry.
Saving face?
Ownership is largely characterized by the ability of one party to restrict the access of another party. Judging by the results of this uprising, it seems that for all practical purposes, the users own their content and their impressions no matter what the TOS says. This is a very strong argument for the tangibility of social, creative, and intellectual capital.
Ownership Economics:
The fact that people own and care for their content is what makes Facebook work. Ownership is an extremely powerful force that drives intense participation and innovation. People will attend to their property, improve it, make it valuable, and create value for themselves and those around them. Really, when was the last time you washed a rented car?
Historical perspective:
Most history books present the Homestead Act of 1862 as the product of a wise and benevolent government seeking to reward worthy citizens of a great young nation for populating the vast Western territories. But that is not really true. Most of the land was already occupied by squatters who arrived disheveled, found a nice spot, built their small cabin, and farmed or hunted to sustain themselves. They could not be evicted or charged with trespassing because a “jury of their peers” was also composed of squatters.
Problems arose when squatters could not borrow money to improve the land because they did not hold a title to it. Legitimate landowners could not value their property if the land next door was untitled. Border disputes resulted in gun battles. Stealing was rampant. The children of squatters could not inherit the land without proper title. There was little incentive to produce anything beyond sustenance. When services and capital projects were required to support the increasing population, there was no tax base. Not unlike Facebook, this new frontier could not be monetized.
Wisdom in Government; not always an oxymoron:
Perhaps the greatest moment in government came with the realization that it is impossible to change the behavior of people, rather, the best strategy would be to accommodate what they are going to do anyway. So they legalized the squatters and gave them deed to their land. The occupants could sell or capitalize as they wished. Investment capital flooded the region and entrepreneurs improved the land and created enterprises. The government could then collect taxes proportional to the productivity of the citizens. The result was the development of the Western States as economic powerhouse that we know today.
Use it or lose it:
A very similar opportunity is presenting itself to Facebook and now the road to monetization should be crystal clear. They should go out of their way to create terms of service that protects the rights of each and every member to own and control their content in its entirety, forever.
Next, Facebook should develop applications that allow advertisers to bid for impressions directly with the users compensating them for their time. Users will build profiles that attract those seeking opinion, knowledge, feedback, wisdom AND SALES related to their products. Users should be able to control every aspect of their content including any means that they can dream up to legally create revenue from their social capital, creative capital, and intellectual capital. Facebook should develop a knowledge inventory of what users know and make it available to others like a “Public Library or knowledge assets”. Then they should develop applications to match knowledge surplus to knowledge deficit, etc. Let the trading begin.
The answer in their face:
If smart people can make money using Facebook just by doing what they are going to do anyway, they will flood the system with the most tangible forces in nature; social capital, creative capital, and intellectual capital. If Facebook can’t figure out how to monetize the asset staring them in their face, they will soon encounter a more powerful competitor – their own users.
Résumé: A French word for separating the body from the brain
We are entering a renewal in the work force. The global imperative is for the United States to become an innovation economy now. This is an entirely different animal than the Industrial revolution; I have long argued that the résumé system is by far the most archaic knowledge management “currency” of trade in use today.
The entire premise of the résumé is destitute, if not destructive, in the modern world. Words on a computer screen are a very low level ‘media form’ being used to describe a very high ‘media form’; social, creative, and intellectual capital. It’s like using crayons to design an aircraft.
If the key words are so important, why have any other words?
A manager always hires people that remind them of themselves. They estimate the future success of a candidate based on their own limited, and often static, past experiences. The world is moving so fast and has become so complex that no manager can possibly know enough to capitalize the future based on a viable statistical sample of past experiences – we’re all holding on for dear life in a hurricane of change. The problems and opportunities of the future are so huge, so important, and happening so amazingly fast yet the allocation of human resources is worse than random for a candidate pool.
While the Ingenesist Project discusses a solution at great length, I’ll just stop complaining and share a few comments (self titled) that I’ve picked off some recent Human Resources Blogs:
***
1. And our future goes with it:
“Most recruiting systems I’ve seen screen out innovators. Any résumé that is unique, different or convention-defying gets surreptitiously put in the junk pile.”
2. Start by looking in the junk pile:
“The Innovation Economy requires that the talent that creates the most value for an organization must rise to the top. Innovators are playing an increasing role in creating shareholder value – one might argue that they create the most shareholder value these days – and figuring out how to find and attract this very different breed of talent is one of the most critical initiatives you can launch within your organization.”
3. What part of “share holder value” are we having difficulty with?
“The most innovative people I have ever met don’t follow conventions in their experience or in their résumé. Or, they get bored very quickly when they can’t innovate or are forced to focus on operations, and efficiency. Most might look like (and even be) job hoppers”
4. Here is my favorite comment – I wish I could hug this person:
“I think it takes more than a résumé to screen an Innovator in or out. As blogs, blog posts, social networking, more powerful search tools, personal websites, the emergence of video on the web, talent platforms that offer CRM, etc. etc. etc. continue to become additional tools for an employer to consider in making a hiring decision, is the résumé still a currency for a candidate?”
***
We have an inventory and CAD model of every nut, rivet, and panel that goes on an airplane – why would we try to build anything without one?
So Please, let’s evolve out of the revolutionary times and develop a real community knowledge inventory. It must be computer enabled and based on a taxonomy that everyone knows and understands. It must be read, analyzed, sorted and vetted by social networks and communities of practice. It must integrate with knowledge assets from anywhere in the world. A self-perfecting algorithm must be developed for a predictive percentile search engine in a pull system that seeks, matches, and deploys the ‘secret sauce’ of success, specific to any application, anywhere, any time – and fast.
The opportunity for America reminds me of the elephant that is convinced since birth that the slender rope tying him to the fence post is stronger than he. When the elephant grows up, he still believes the rope is stronger even though the elephant now has gained the strength to pull the whole building down. Americans are the 8000 pound elephant in the middle of the room. The question on everyone’s mind is: what will the elephant do next?
Throughout history, economists have determined the structure of business, enterprise, and commerce and wisely the government complies. With remarkable success over the last 150 years, corporations had been the source of most innovation sufficient to support the value of a currency. Fortunately, the corporation had become the center of economic policy while the knowledge inventory within them have been fenced inside the accounting term: “intangible assets”. Unfortunately, our corporations can no longer innovate efficiently enough to support the debt. Witnessing GM facing up to this very question, while the government manufactures money like taffy, seems a lot like feeding sugar calories to an elephant that is too big to fit out the door, dead or alive.
What the economists and many of the great visionaries of out time do not anticipate is the emergence of computer enabled society and the tangibility of knowledge outside the corporate structure through developments of social media. Web 3.0 is supposed to bring us a semantic web – a computer program will be able to read the elephant story above and determine whether it is about education, zoology, macramé, Interior decorating, taxidermy, building demolition, or cliché old business metaphors. Perhaps this is our little rope tied to the post as we wait for Mother Corpora to provide solutions. Get a grip, the only computer that can read, classify, and extract a thousand words for any photograph is between our collective big floppy ears. Web 3.0 will be semantic alright, except by the integration and capitalization of human knowledge through social media.
We spend billions on a human genome project to inventory our DNA, but nothing to inventory the knowledge as it exists naturally in society. We will build statistical models to forecast weather, elections, click-throughs, insurance, demographics, and mortgage risk; but nothing to predict the value of various combination of social capital, creative capital, and intellectual capital in society. We have search engines that match most worthy blog to most worthy keyword, but little to match most worthy mentor to most worthy apprentice. The top reasons why start-ups, businesses, innovations, and markets fail are due to the wrong knowledge in the wrong place at the wrong time. It seems that if we solve the knowledge inventory problem, then we can solve the innovation risk problem. That, in turn, will solve the money problem which solves the elephant problem. We need to release the great “intangible asset” into the wild world of tangibility and trust that it knows where to go.
Sometimes it just takes someone to give us permission to do things differently. So here I go: human knowledge is the most perfect, predictable, flexible, and valuable capital asset in our world. Knowledge can become far more tangible than anyone could have ever imagined. Information, knowledge, and innovation are profoundly related – separated they are useless, integrated they are wisdom. Everyone on earth innovates every day, period. The vast majority of people will do the right thing given the right incentives. With the next development of the Internet, we will have the tools to organize ourselves in a far more efficient manner than the command and control structure of a traditional corporation. Management can be outsourced too. Corporations respond to corporate priorities, social networks respond to social priorities. Which one sounds like a business case to curb global warming?
The Ingenesist Project specifies three web applications which if developed and deployed to social media will allow social capital, creative capital, and intellectual capital to become tangible outside the construct of the traditional corporation and inside social networks. Just because people have never organized themselves in an open sourced innovation economy before, does not mean that they never will. But once they do, well, let’s just say that an elephant never forgets.
Hey Kids, It’s 3D:
The objective of this article is to discuss the Great Convergence of computer enabled society. Social media must not be allowed to converge to a single apex – rather, it must converge to 3 distinct and tangible dimensions.
The factors of production for the industrial economy are land, labor, and capital. If you lose one, you can’t use the other two to build an SUV, for example. The factors of production for an innovation economy are social capital, creative capital, and intellectual capital. All production in the new economic paradigm will result from the allocation of a “secret sauce” of social capital, creative capital, and intellectual capital. Again, if you lose one, you can’t use the other two to build anything meaningful.
The congregation of congregations:
In order to find The Great Convergence, we simply need to examine Social Media to discover where social capital, creative capital, and intellectual capital tend to congregate.
One of the more obvious illustrations appears to be playing out between LinkedIn, Facebook, and Myspace. Many people use Linkedin for professional contacts (intellectual Capital), other people use Facebook for friends, family and more diverse associations (Social Capital), while many others use MySpace to post videos of their rock band, Artwork, or to discover the latest Mash up (Creative Capital). Of course there are many more social networks, lots of cross talk, different demographics, rants and raves, etc. I intentionally leave this analysis sparse as these conditions simply reflect the nature of The Great Convergence.
The Next Economic Paradigm:
We need to watch The Great Convergence with laser focus and deep personal interest because it will be extremely important for the development of what comes after the knowledge economy. Whatever form this next economic paradigm takes, globally and locally, will depend upon The Great Convergence. The Innovation Economy is the only wrench left in the toolbox for resolving the vast global problems that we face today.
The Innovation Economy must end global warming, restore financial accountability, enact sustainable enterprise, and institute renewable energy – or not. This is a huge burden to ask of the next “greatest generation”. It is clearly in everyone’s best interest to identify, encourage, and support The Great Convergence to form in 3D, before the old single-apex game “resets” and starts all over again, perhaps for the last time.
[The Ingenesist Project discusses this concept at length and identified various predictions, methods, and scenarios, including specifications for an Innovation Economy.]
Innovation: The rate of change in knowledge with respect to time
[In earlier post we identified the 5 essential elements of a market economy. What would be the currency of an innovation economy? Currency is anything that serves as a medium of exchange, a stored value, and a standard of value. Basically we are asking; What are those things that people are out in the World trading among each other today?]
Today, innovation is repeatedly cited as the only thing that can get us out of the financial/environmental/sustainability conditions that find our ourselves in, yet the most common definitions for this term are deeply and tragically flawed.
Most definitions for innovation boil down to: “a new idea introduced that has an economic outcome” or “something new that is useful”. While these definitions match some observations, they are reflective and “You know it when you see it”. As such, there is little to define innovation before it happens or to make more of it from this definition. It is like defining “Art” as the thing that people stare at. Unfortunately, this is just the beginning of our troubles.
“Innovation is a new idea introduced that has an economic outcome” is impossible.
This definition defines one unknown quantity (innovation) with four other unknown quantities: what is new; what is an idea; what constitutes “introduced”; and what is an economic outcome? From High School Algebra we know that you cannot solve one equation with two unknowns – let alone four. There is little that you, I or anyone else can do to satisfy this definition. Therefore, it is not useful.
Granted, this definition sells plenty of ad copy as the guru of the week wax-poetic over those four pesky unknown thingies. I found one consultant who claims that innovation has 51 variables and only he can solve that matrix – for a price.
What is the truth about the phenomenon of Innovation?
A useful definition must clarify the subject in a manner that is repeatable and measurable.
If we look at history we know that economic “benefit” and innovation are mutually dependent – you can’t have one without the other. Wealth has been created by increasing human productivity through innovation in agriculture, manufacturing, computers, etc.
Next, we observe that information, knowledge and innovation are also mutually dependent – you cannot have one without the other two. Wealth is created by integrating information, knowledge and innovation.
Next; look at our society; everywhere we turn, people are collecting information from each other, building their knowledge, and innovating together, i.e., coming up with better ways to do things. All of these little exchanges obviously add up to something because things like IPods and Airplanes get built and lots of stuff rolls off assembly lines.
Innovation is anything that increases human productivity
Next we can say that information, knowledge and innovation can be related as follows:
- Information is defined as facts and data
This should not surprise anyone.
- Knowledge is proportional to the rate of change of information (facts and data) over time.
This is a little trickier to grasp. But any good teacher knows that information must be introduced in a certain order and at a certain speed before the information can become knowledge – this is called learning. Learning is a mental process for turning information from a book, a lecture, or personal experience into knowledge that can be used later. Therefore, knowledge is proportional to the rate of change of information and can only exist inside a person’s head.
- Innovation is proportional to the rate of change of knowledge over time
trickier still, but for example; everyone has had an ‘Ah-Ha!’ moment during a brainstorming session, some incredible event that we witness, or even after some real bad mistake that we made. The Ah-Ha moment is a spike in our knowledge that happens in a very short period of time. Innovation is related to this high rate of change of knowledge. Then we blurt it out, or write it down, or make a sketch, give a lecture, in the form of information, etc.
Definition of Innovation:
a. Innovation is anything that increasing human productivity.
b. Innovation is proportional to the rate of change of knowledge and information.
Admittedly, not as sexy in the sound bite but this definition does include all conversations, sketches, dreams, and ideas of all people on Earth and allows them to combine with the sketches, dreams, ideas, of all people on Earth to become designs, methods, and processes which further combine to become products, systems, and institutions, etc.
Let entrepreneurs worry about the economic outcome
Since innovation can be difficult to observe directly. Our new definition allows us to use a proxy that is easier for entrepreneurs to see. For example; if you want to identify innovation as it is happening, simply look for high rates of change of knowledge in a community. If you want to create innovation, do things that create high rates of change of knowledge. Likewise, if you want to identify knowledge, look for high rates of change of information. If you want to create knowledge, do things that create high rates of change of information.
We need to give the entrepreneur a game they can win. The key is that everyone must be included in the game. This is a definition that can be used by anyone and everyone, in fact, it already is.
notes:
[Anyone familiar with differential Calculus can see an equation forming where Innovation is the derivative of knowledge and knowledge is the derivative of information. Calculus is the study of change like geometry is the study of space. Since the mathematics is beyond the scope of this article, I’ll finish with the following analogy for defining information, knowledge, and innovation more intuitively: “Information is to knowledge is to innovation what distance is to velocity is to acceleration”]
The Game
The knowledge economy will be outsourced to low cost countries. There is little rational analysis that suggests otherwise. Information, knowledge and innovation are profoundly connected – lose one and you lose the other two … and so goes our innovation potential. The very technology invented and developed by American knowledge workers is the exact same technology that now constrains them. This is not the fault of corporation or of the financial system – they are behaving exactly as expected; a dog will hunt. This is the limitation of the knowledge economy itself – let me explain.
It is very easy and inexpensive for the rest of the world to just watch what the United States does, copy what works and reject what does not work, and then effectively compete. The rest of the World now speaks English so they can now jump on the Internet and learn everything they need to know about us while we are largely unable to reciprocate. In addition, money is global and does not need a visa to work in another country. All of these things stack up against both the US knowledge and foreign knowledge workers. If left alone, these conditions will not go away any time soon.
As a nation, America is either at the edge of something really good or something really bad. We need to do something so radical, so audacious, and so creative, that the rest of the world will shake their heads in disbelief at how America always comes up with an unbelievable play just when the game looks like it is over. It’s called The Great American Hail Mary Pass.
The Competition
First we must realize that America does not have anyone else to copy or compete with in order to climb to that next rung on the economic development ladder except ourselves. Many Americans are in denial that we too must also develop just like we claim other countries must do. In the past, we have relied on shocks to the global system in order to move forward; usually in the form of wars, but obviously, as a modern innovation strategy, warfare has severe limitations. Maybe we just don’t know how to develop on our own. Perhaps the current financial crisis may be the disruption that we need to see those next few critical steps that we need to take.
The Field
Here are some other historical facts to consider. Like all previous development phases, the next economic paradigm will be derived from the earlier economy by integrating the tools of that earlier economy – in this case, the knowledge economy. We have painfully learned that intellectual capital can be found and duplicated almost anywhere on Earth. However, social capital and creative capital cannot be easily sourced elsewhere. Both China and India have political or cultural constraints on social capital and creative capital – so they cannot compete with us here. This is where the next Great American Hail Mary pass needs to go.
The Team
America has a distinct comparative advantage over most of the World in our cultural diversity, global language, and freedoms of assembly, expression, and association. In addition, and likely as a result, America is inventing one of the most profound technological advancements in human history. One which has the potential to secure American economic prosperity for many generations into the future.
The Play
Social Media has the potential – if we are clever – to allow human knowledge and interaction to become tangible outside the construct of a corporation. The new economic paradigm will have factors of production of social capital, creative capital, and intellectual capital, instead of the classical land, labor, and monetary capital model. That means that a team, community, or a social network can be capitalized directly much like a corporation, or any financial instrument in itself, as a means toward increasing human productivity. Admittedly, and as space allows, this is a very vague definition of an innovation economy, but the implications are sweeping and vast. A more detailed structure and description is specified at https://ingenesist.com.
The Ball
It is imperative that knowledge workers recognize this opportunity. We must have a national conversation about the next great leap and not just dwell on the current quagmire or roll over while the dark ages set in. It is essential that we recognize our responsibility to ourselves, our communities, and the planet to build a sustainable economy that reflects long term social priorities rather than short term profit taking – this is ultimately in the best interest of even the short term profit takers! Finally, it is our responsibilities to continue developing this great Internet technology that the generation before us created for peaceful, open, and productive means; and obviously never intended to enable a race to the bottom.
The Perfect Storm:
We are at an historic time in human history; one that may never repeat itself again. The current financial crisis may provide just enough disruption for a completely new economic paradigm to emerge; the Innovation Economy. We cannot squander this moment arguing over common logon for our Twitter and Facebook profiles; a far greater integration is required from Social Media.
Advertising is not the correct revenue model.
It is astonishing that Social Media, in general, has not figured out how to make money. Social Media IS money. All wealth on Earth was created from the social capital, creative capital, and intellectual capital of people – wealth creation is already crowd sourced. Now, there is an opportunity for Social Media to harness this engine of economic growth and wealth creation – if they could only see it.
The problem is simple: Globalization is proceeding as if economic growth can occur before technological change. Some time in the past, we got these two things up mixed. It does not take money to make money; it takes innovation to make money. Technological change MUST ALWAYS happen before real economic growth can occur. Anything else is a transfer of wealth, not the creation of wealth. All that is unsustainable today – the economy, the environment, natural resources, energy – is due to this itsy bitsy anomaly of current market economics. Today, we can easily correct this little flaw with almost a flip of a switch – but the window of opportunity will be short – and we need to be clever.
The idea that human knowledge is tangible and behaves individually and collectively like a financial instrument is still considered impossible. The ability to place a market value on the social capital, creative capital, and intellectual capital of a team, community, or geographic population of people – let alone a social network – has never been accomplished. This idea remains the Holy Grail of finance and one that Social Media is uniquely positioned to capture. If the finance industry can invent “tangible derivatives” out of thin air paper, then we ought to be able to do the same with knowledge assets that live and breathe tangibly all around us.
If it looks like money, it will behave like money, guaranteed:
First, we need to build a knowledge inventory system that includes everyone; and which can be anonymously codified and amalgamated with logic in machine readable format (the Universal Decimal Classification System is a good candidate). Second, we need to sample our inventory in a community using the proverbial “Bell Curve”. Third, we need to develop a search engine that returns the probability that a strategic combination of knowledge assets can execute a given objective. Fourth, we need an innovation Bank that will “pull” knowledge surplus and “pull” knowledge deficits together from diverse communities. (Please see the IEc101 at https://ingenesist.com)
This should not sound too weird; it is the same game that Wall Street plays. The switch is flipped when we engage our innovation system with the financial system.
Go where the money is:
Social Media is perfectly positioned to develop these features in their products and in our communities. We first must understand that innovation is predictable. We may not be able to say exactly where the innovation will lead, but we can be sure that if we place a group of strategically diversified persons in a room, innovation will happen. If the fact of innovation is predictable, risks related to the invented can be pooled, morphed, or diversified. If risk can be diversified, it can be hedged to zero. If innovation has zero risk, Wall Street will salivate to issue “innovation bonds” to finance diverse communities of practice. If innovation capital is inexpensive and accessible, a great amount of innovation will occur. The anomaly of capital markets can be reversed, and the result will be sustainable economic growth.
Naturally, the compensation structure will be in the form of dividends, both financial and in social welfare. New corporations will emerge and the old corporations will become more efficient. What is invented will tend to reflect social priorities rather than today’s short term Wall Street priorities. America must innovate at an intense and sustained rate in order to compensate for the imbalance of debt economics that has been created in its absence. Social Media can be, and must be, the infrastructure upon which an Innovation Economy is built. Again, this opportunity is staring us straight in the eye. This is the conversation that must be having today if we will meet the challenges of tomorrow.
It is very interesting to watch Social Media follow familiar trajectories as earlier paradigms in finance. I see many social media platforms struggling to make human knowledge tangible in their respective markets. The challenge is so simple, yet so complex. Let the litmus test for knowledge tangibility be as follows; “Can you buy groceries with it?”
The Romans Empire had a similar problem; how to sack Europe and bring home the booty. The only thing most people had at the time were sheep, fish, and wine. So the emperor created a coin that represented a peasant’s productivity in raising sheep, catching fish, and making wine – and it was a lot easier to collect taxes. The conquest of a continent has far more to do with the social acceptance of the currency than the actual pillaging – pillaging, after all, would be counter productive in a social network.
Today the dollar also represents human productivity – except a ‘necessary flaw’ was introduced to finance innovation leading to fantastic worldwide economic growth from which many people benefit greatly. Now, this flaw threatens to topple the whole system. Money still represents productivity, except it now represents future productivity allocated to paying debt. As long as innovation increases fast enough to outpace debt, everything is OK. Problems happen when debt exceeds our structural ability to innovate.
We do not need to restructure the financial system – we need to restructure the innovation system. The human race is exceedingly fortunate that the end game for debt economics will happen at the exact moment in history that the technology required to start a new game of sustainable innovation economics has arrived. If done correctly, Social Media (computer enabled society) can become the most important human invention since to the printing press.
Today, human knowledge, in the form of social capital, creative capital, and intellectual capital, is captured and hidden inside corporations. Each corporation has its own business plan, lexicon, culture, organization, structure, and processes by which human knowledge is exchanged in the creation of a “product”. Outside the corporation, however, true knowledge assets are either invisible, incomplete, or only appear as a proxy of the corporation. This leads to stagnation, silos, mis-allocation, vulnerability to external shock, and greatly limits the diversity needed for sustainable innovation.
In the 1700’s Banks printed their own currency – these were called “bank notes” because they were little notes that declared who had a surplus and who had a deficit of money relative to the bank. People would trade these notes in society to purchase things, buy feed or seed, and to keep track of things. Everyone had a job to do and the general flow of these notes is what “incorporated” townships. Unfortunately, such banking also lead to industrial stagnation, silos of wealth, and lack of diversification leading to corruption, bank failures, and ‘bottle necks’ in the flow of capital.
Barely 150 years ago, the U.S. government established a central banking system with common currency, common practices, common accounting, and common regulation. The system became much more efficient, diversified, and accessible across the landscape. The industrial revolution, manufacturing revolution, lots of wars, the era of information, and the Internet Industries were all financed through a central banking system. Human productivity increased at a tremendous rate and the relative wealth that we enjoy today is a tangible result of innovation.
Now the Pied Piper has come to take the children to sea. The banking system needs to invent new, exotic, and increasingly risky financial instruments for trading your productivity in order to keep the game alive. Meanwhile, the tangibility of human knowledge is stuck in an 18th century banking system. There is no common knowledge inventory, there is no common accounting practice for skills and abilities, there is no way to measure social capital and creative capital – the system is too biased toward “intellectual capital” measured by Ivy League degrees and access to wealth. Knowledge assets are not tangible, organized, classified, or collected in a society in any structured way. “Can you buy groceries with it yet”?
With the emergence of Social Media, we have an extraordinary opportunity to make knowledge tangible outside the construct of a corporation much like banks notes became tangible outside the construct of a single township. There are vast and crushing problems in the world today. The only way out of this mess is to massively increase the rate of innovation in society. Like off-shore drilling – vast wealth in the form of social capital, creative capital, and intellectual capital lays hidden beneath thousands of layers of philosophical limestone. Social Media and the first amendment = drill baby, drill.
The only thing separating us from a debt economy and an innovation economy is social agreement. The philosophical chasm holding us back is about to be broken by The Ingenesist Project: In the current paradigm, money is backed by future productivity allocated to pay off today’s debt. In the social media paradigm; money will be backed by future productivity created by today’s innovation. At the end of the day money still represents productivity. The conquest of a continent has far more to do with the acceptance of the currency than the actual pillaging. Hey, why not buy groceries with it?
Knowledge Tangibility should be the most important conversation in Social Media circles given the current financial situation in America.
I lived through financial devaluation in another country and the effects were crushing: after the run on the banks, there will be a run on Walmart. People will buy TVs, small appliances, shoes, and useful stuff that will hold more value tomorrow that they cost today. These items may become a de facto currency of trade. Americans will be astonished by how fast a devaluation event plays out; hours and days, not months or years. When things settle down, the government will retire the old dollar and introduce a new currency at an exchange of, say, 1 megabuck equals 1000 old dollars. Then the chips are cleared, assets are transferred, and the same game can start all over again.
The difference is that for the first time in history, there is a window of opportunity for social media technology to break this cycle. Please let me explain:
Suppose that a BMW costs $50,000 dollars and a KIA costs $10,000 dollars. These prices reflect the quantity and quality of the car in terms of availability and popular amenities such as, handling, road noise, comfort, status, etc. Suppose the government introduces a new currency called the “megabuck”. Suppose the government pegs the megabuck to cars saying that all cars will have a value of 30,000 megabucks. Since these cars are not equal, people will begin trading; the BMW will be bid up to 50,000 megabucks and the Kia will be bid down to 10,000 megabucks based on supply and demand – right back where they started.
Admittedly an oversimplification, but the point is does not matter what you call the currency – the most important thing is the quantity and quality of the asset. This brings us back to the idea of knowledge tangibility.
Suppose that, on average, 1 hour of human labor is worth 20 megabucks. As above, hard labor will be bid up while soft labor would be bid down. The same is not really true with knowledge because knowledge is invisible and it can’t be counted with bricks or bushels. There is no knowledge inventory in America’s communities. Therefore, there is no way to establish supply and demand for knowledge assets. People in a community do not know what other people in the community know. This is where social networks will make a huge difference.
Human knowledge, if formatted correctly, would make an excellent asset upon which to peg a currency. Today, accountants say that human knowledge is “intangible” but social media demonstrates otherwise; human knowledge is simply invisible – hidden inside corporations under the thumb of Wall Street. Social media demonstrates that knowledge assets are itching to be release to the public domain in a highly tangible manner. Believe it or not, we are now 95% of the way toward real knowledge tangibility today. We should be very excited about this because everything changes.
Like the example with the cars, we need to have a comprehensive inventory of the knowledge assets in our communities so that they can be strategically combined into productive organizations. This inventory must be formatted in terms of quantity and quality and include all knowledge living including social, creative, and intellectual capital. If done correctly, it will not matter what happens to the dollar or what currency is used as a scorecard, the value of human knowledge assets will remain intact.
Again, the value is in the asset, not the currency – it is in you, me, and our diverse communities who will favor community priorities rather than Wall Street priorities. This is how where we will find equity, sustainability, and fairness in a capitalist system.
The Ingenesist Project has specified exactly how to create knowledge tangibility in a capitalist model using 3 simple web applications for Social Networks; a Knowledge Inventory, a Percentile Search Engine, and an Innovation Bank. Please read the intro and the articles on page IEc101. If you agree, please pass it on. If you do not agree, please help us make it better. If you don’t understand, email me. This needs to happen fast and unfortunately nobody will do it for us – we must do it ourselves.
I read many articles with rants like “all this social network stuff is cool – but show us the money”. Innovation Economics offers a way to see new markets and new businesses that are currently hidden by “the old way” of doing things. This article is part of a series called ‘Business Plans of the Innovation Economy” which will identify ways that Social Networks can command huge markets and drive vast revenues – if, and only if, they align themselves in a specific way….
Managers manage through experience. They observe a situation and compare it to prior situations they have encountered. Through a process of intuitive (statistical) analysis, they calculate the probability of success based on the success or failure of prior experience. This is the reason why managers are often older and also why youth correlates with inability to manage. The depth and breadth of one’s experience is often called wisdom.
Today’s problems, business opportunities, technological change, and competitive strategies are so complex and so integrated across the globe that no single person can accumulate in a lifetime the experience needed to manage at what is called a Pareto Efficiency. A Pareto Efficiency, named after Italian economist Vilfredo Pareto, is an economic condition where a one’s actions benefits at least one person while leaving no other person less better off.
The problem with the “top-down” management structure is that the “top” no longer has a statistically relevant sample of prior experiences from which to fully understand the probable future outcome of their actions – the consequence is that someone always gets screwed (Pareto Inefficient).
The concept of Pareto Efficiency may be what people are today inadvertently calling “sustainability”. I recently saw the movie Syriana with George Clooney about the petroleum industry in the Middle East. It was a convoluted mix of 5 different stories. Each story had its hero doing what they thought was in the best interest of those they represent – “the common people”. Yet the combination of actions carried out by these heroes was absolutely disastrous for all of them. So no matter how benevolent one’s intentions are – and I believe that most corporate managers are acting in the highest integrity that they know – this systemic failure of knowledge will always hurt someone, continually adding to those already at the fringes.
The world of imperfect information is therefore the enemy of sustainability. Perfect information is when everyone associated with a business transaction has the exact same information as everyone else. Perfect information is what makes markets efficient and decisions rational. Agreement is perfectly mutual, supply and demand are perfectly aligned, all risks are perfectly predictable and cause and effect are perfectly transparent.
It follows that any business plan that simply improves information in a market can command revenues proportional to the degree at which market efficient is improved. For example; Ebay owes its 50 Billion dollar market capitalization to the feedback system which supplies improved information in a market. Carfax, The FAA, Craigslist, Democratic Government – all have vetting mechanisms that make their prospective markets more efficient.
Likewise, when the vetting mechanisms fail, the market fails. I attended a lecture once with Charlie Munger, CFO of Berkshire Hathaway. Regarding Enron, he said (paraphrase) “It’s tragic enough when the accounting profession goes bad, but God help us if we lose the engineers”.
This brings us back to management. The business plan of the millennium will be the art and science of perfect information. We know that no single human can accumulate enough experience, however, we also know that perfect information can reside in many people – it is simply a matter of finding the perfect group of people who collectively possess perfect information.
This relatively simple task is entirely and irrevocably the domain of Social Networks. Social Networks are sufficiently enabled by current technology to perform this essential and highly lucrative task – if and only if they align themselves accordingly. Social Networks need to hold a complete and detailed inventory of resident knowledge. Social Networks must cooperate to codify social capital, creative capital, and intellectual capital so that computational methods can be used to assemble unique collection of persons holding unique collections of experiences. That unique set of knowledge assets must then be deployed precisely in the market, ideally targeting specific transactions.
If Real Estate Agents can command 6% of a gazillion dollar housing market and bankers can take another huge chunk – and not even do a very good job at providing perfect information – only to get bailed those at the fringes. Social Networking have a moral, ethical, and entrepreneurial obligation to compete in the sustainability game.
