Tag: factors of production

If it Quacks like a Buck…..

On August 13, 2009

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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Socialism, Capitalism, or Social Capitalism

By Admin

On January 13, 2009

In General Information

Throughout history, technological change has also brought changes in the organization of society around the new ways to allocate resources. The industrial revolution spawned the two prevailing economic theories of our time; Capitalism and Socialism.

The current wave of technological change will likely spawn new economic theories and social organization systems as well – it makes no sense to look to the past for reference to the future of anything.

Capitalism arose from feudalism and is roughly characterized by a merchant class that owns the factors of production (land, labor, and capital) and a working class whose physical toil adds value to natural resources. The capitalist acting in their own best interest is ultimately acting in the best interest of society by creating jobs that employ people.

Then Karl Marx came along and noted the inherent conflict where the workers would seek to maximize their wages and the merchants would seek to minimize wages. He argued that class struggle would ultimately result in a communist system replacing the capitalist system. The communist acting in the best interest of society is ultimately acting in their own best interest. Socialism is widely regarded as the transitional stage between capitalism and communism.

But the struggle is really over the control of the means of production, or factors of production. “Are land, labor, and capital” private property or public property? Are these notions even relevant in the age of the Internet?

Today, computer enabled society engaged in an innovation economy presents an entirely new set of conditions. What happens when the factors of production are social capital, creative capital, and intellectual capital? How are these “means of production” going to be controlled and by whom?

This is a serious philosophical quandary that will be brought down upon us in the next generation of social media because neither socialism or capitalism are applicable in a traditional sense. Like Heisenberg’s theory of indeterminacy – the more control you have over one factor, the less control you have over the other. This is not a condition related to the ability to control someone or something, rather, it is a condition related to the nature of the system itself. That’s a big deal.

For the traditional Socialist: in order to control social capital, one must equalize society – as such, the system retains little innovation production value. In order to control creative capital, one must standardize creativity – likewise, the system retains little innovation production value. In order to control intellectual capital, one must control the intellectual development of another – again, the system retains little innovation production value.

Likewise for the traditional Capitalist: In your world is no ROI to curb global warming, there is no ROI to educate the poor, there is no ROI for human rights, and there is no ROI on the national debt, etc. As such, the system is constrained by the social burden to innovate – you can no longer scale.

There is, however, a business plan to liberate social capital, creative capital, and intellectual capital as tangible financial instruments in their own right, by definition, reflecting social priorities in an innovation economy. This is where the next generation of social media is leading to – and it scales magnificently. Have you noticed?

That is Social Capitalism.

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The Credit Score Analogy; Part 2

By Admin

On September 17, 2008

In General Information

Now we look for a similar situation for Knowledge Markets.

In the cuurent times, the hiring manager is the person to know if you want to get a job. The manager would read your resume and compare it with “bell curve” in their brain about what has worked or not worked in their past. This was a great system for the industrial economy, but it falls far short in the innovation economy.

The world is evolving so fast with new technology, new disciplines, and global cultures that what worked in the past may not work in the future. Innovation favors different combinations of knowledge where the Industrial economy favored similar knowledge. A hiring manager may not accumulate sufficient experience in a lifetime to make a proper assessment in the complexities of a diverse, global, and technical future market.

If we look in society, there are many vetting mechanism in place. Social networks are by far among the most exciting and important new technology that can serve this purpose. Social networks must now evolve to become a local vetting mechanism for knowledge assets.

Just like the reporting agencies in the credit system, Social Networks can serve an extremely valuable function in permitting human knowledge to emulate a financial instrument by acting as the “Recording Agencies” who have verified the asset in terms of quality and quantity. The knolwedge Inventory acts as the independent variables that are used to calculate the probability of market success. The difference is that the credit score measures mostly negative events while the new system will seek only positive events and can be designed to give the participants much greater influence on how they appear to the market.

One thing is missing. The credit score uses the FICO equation; Innovation Economics will use something called the Percentile Search Engine.

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The Credit Score Analogy; Part 1

By Admin

On September 17, 2008

In General Information

We have defined the currency, the factors of production, and the inventory of the Innovation Economy; we destroyed the old resume system and turned it into a computer language that makes knowledge appear like money in the eyes of the entrepreneur.

Now, we need a system that keeps the game free and fair. For example; EBay does little more than protect the feedback system, Craigslist uses community flagging, Linkedin keeps track of comments and contacts, etc. All markets must have a vetting mechanism in order to operate efficiently. Entrepreneurs do not invest in places without a good legal system and where property rights are not protected. When vetting fails, investors leave – It is that important.

In the Innovation Economy, the knowledge market is analogous to the credit market.

In the old days, the banker was the person to know if you wanted to be successful in town. If you needed to borrow money to start a business or buy a house, the banker would review your work history and financial records as well as your reputation in the community where you both live. If you were deemed an acceptable risk, the banker would lend you money from the deposits of local companies and individuals.

Then an engineer named Bill Fair and mathematician Earl Isaac created the first behavior scoring system to predict credit risk. They formed the Fair Isaac Corporation FICO and their invention came to be known as the FICO credit score. With the credit score, the local banker is almost irrelevant; now a Saudi Billionaire can lend money to a young couple in Boise to buy their first home – and neither of them are aware of the other. The credit score is responsible for the creation of a lot of wealth because it made many more entrepreneurs who invested borrowed money in business. The credit score even allows you to recover if you hit hard times – you just pay more a little interest until you prove yourself solvent again.

The credit score isolates about 22 or so measurements of financial activity and puts them on a bell curve relative to everyone else. These include how much debt you have, how much your assets are worth, your income, etc. These ratings are run through the FICO Equation and out pops your credit score. Anyone can now predict the likelihood that you will default on your obligation.

All of the data that feed FICO are collected from public records, your employer, and the people who you borrow money from – all of these organizations have a vested interest in a system of correct credit scores.

It is interesting that you and I do not compete for our credit score because it is not a ranking system. The old saying “No credit is worse than bad credit”, although inaccurate, is cited often because with bad credit, you are visible to the system and it can adjust to find a suitable interest rate. With no credit, you are simply invisible.

We lose some privacy with FICO, but we accept these terms well because they provides us with tremendous benefit to finance a business, automobile, or a home without needing to save cash. Likewise, we lose some privacy engaging each other on the Internet and in our community, however, the benefit of Social Networks far exceed many perceived privacy issues.

My personal complaint with credit scores is that they track largely negative events and seem to predict failure. What if we had a system that tracks success and used that data topredict varying degrees of success.

In the next section, we will identify the institutions that exist in society and how Social Networks can act to duplicate the benefits of the credit score without the downsides….watch

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