The Ingenesist Project

The Next Economic Paradigm

Tag: inventory

Do We Really Need To Fail?

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On November 30, 2011

In General Information

Yesterday, I heard a report on NPR about the resource management department in North West Washington, in response to diminished funding – is certifying private boats for emergency duty in clean up, security, and rescue.  This is logical because nobody knows and understands the waters of Northern Puget Sound and The Strait of Juan De Fuca than the local tribes and others who ply those waters daily.

Today, I heard another report on NPR about how the City of Houston has gained far more from the demise of Enron than their existence.  Enron would recruit the top intellect in the country, move them to Houston and reward them for creativity and hard work.  The collapse of Enron released 4000 hugely talented people to the Houston Economy where many have started new businesses with remarkable success.

Vicious Circle or Virtuous circle:

I will not pass judgment beyond what these reports stated, except that there is something very valid about the “Knowledge Inventory” that exists in a community and their specific location.  The Jane Jacobs externality proposes that endowment of creative and educated people drives economic growth in a community by attracting investment and development, which attracts more smart people, etc.

Vicious Galaxies or Virtuous Galaxies

As the NPR reports suggest, the type of investment and development is dependent on the quality and quantity of knowledge assets that exist in a particular location.  Now, let’s extrapolate that to include all disciplines and talents of knowledge that exist in all communities and we encounter a stark reality that there is no knowledge inventory from which to build – except in the response to a failure such as the corrosion of government spending or in the wake of corruption and associated corporate collapse.

Yes, it is often said that adversity brings out the best in people, but is that really necessary?  Do we really need for the whole rig to collapse before we emerge from the ashes? 

We need to build the knowledge inventory today.  People need to know what people know – that is where the truth lives.   We need to know what can be built from the parts that we have in the bin.  We don’t want to try to build something from the wrong parts any more than we want to misallocate the right parts to build the wrong things.  In any industry in the world, none of these situations would pass the stink test, yet this is the state of our communities today.  We don’t even know that we don’t know what we know.  Seriously, is anyone else wondering about these things?

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Fungible Coupons And Collaborative Production

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On January 13, 2011

In General Information

When we think of coupons, we imagine that most contradictory statement “Buy now and save money”.  Obviously most people recognize that spending is NOT saving but the objective of this apparent contradiction is to project the idea of “value”.  So what is value and exactly how valuable is someone’s the idea of value?  Is Value Fungible?

Inventory management tools

A coupon is a powerful inventory management tool that is made up of several parts.  The first part is the face value, often called “retail price” – this is the price that the retail market is willing to bear. The second part is the discount value which is the actual price of the offering based on a vendor’s need to move inventory.  The difference between the two numbers is the “Value Proposition”.

Public Stock Exchange

Alone, that would be a very simple form of currency creation.  By limiting the number of coupons precisely to the amount of inventory that is subject to liquidation, the coupon becomes a fungible instrument.  If the supply is limited, then people will trade the coupon value that they hold (but don’t need) with people who hold coupon value for other items (that they do need).  Or, since the value proposition is denominated in dollars, they can trade the coupon for dollars up to, but not exceeding, the retail price.  After a while, people will literally form a “stock” exchange out of the community inventory of goods and services represented by coupons.

Most enterprise can expect to spend 10% – 30% of their revenue on advertising.

The third and often misunderstood component of a coupon the friction value – a negative number.  This is the cost of producing the coupon campaign (marketers and printers) as well as the cost of advertising, distributing, and processing the coupon. Finally, there is a certain amount of social friction associated with redeeming a coupon such as clipping, organizing, and presenting the coupon to the vendor.  Rebate schemes will often introduce so much friction that the buyer gives up or forgets the expiration date, etc. On the other end of the spectrum, Groupon often exceeds the inventory intended to liquidate and increases cost of liquidation.

Social Currency

In a coupon economy, we can initially define social currency as the absence of an “anti-social” currency.  We can say that social currency is equal to the coupon’s original value proposition (denominated in dollars) minus advertising friction.  We can make this assumption based on the fact that social capital can be deployed in a community INSTEAD of advertising.

Collaborative Production – when the community decides what to produce

When advertising friction is removed, it becomes a very simple matter to make coupons fungible. In the event that the dollar collapses, people can easily switch from the discount currency to the value proposition currency, i.e., social currency.  After a while, social priorities will drive wall street production priorities instead of wall street production priorities driving social priorities.

Believe it or not, the key to financial sustainability may just be in the wholesale elimination of advertising. The Value Game by Ingenesist project is designed to correct this market friction.

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Zertified Knowledge Assets

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On December 2, 2010

In General Information

The wisest people in history have been saying the same thing over and over again, yet we fail to listen and act: People are an asset, People are the greatest asset.

So Then, Watch your assets

Meanwhile, our “risk based” capital structure accounts only for the observed randomness of individual human nature rather than trying to securitize the potentially infinite wisdom of crowds.  This is a problem, this is our very serious problem.

Everyone is Committed to The Public Domain

Anyone familiar with The Ingenesist Project knows that we commit a new class of business methods to the public domain for other people to use for building the next economic paradigm. For example, The Value Game developed by ourselves, is being used by at least 3 new start-ups as the value creation mechanism of their business plan.  We likewise consult to social entrepreneurs across the World to help them build a new form of capital structure where knowledge assets are the basis of fungible social currency.

Zertify.com

Zertify.com is a business plan that will convert social currency to financial currency and make money for you, dear reader. Zertify.com can employ well over 40,000 people directly (and tens of millions indirectly) in the US alone within months, not years. Zertify.com is a knowledge inventory system that accounts for knowledge assets as they reside in a community – not necessarily as they reside sequestered within a corporation.

Zertify business plan

Here is a downloadable PDF of Zertify.com Sample Business Method. The word “Zertify” comes from the combination of the words “Certify” and the statistical Z-test.  These two things correspond to “Social Vetting” and “Predictive Modeling Capability” – these are the two ESSENTIAL elements for the capitalization and securitization of any asset.  Of course, I have made certain assumptions regarding taxonomies and proficiency criteria – my intention is simply to re-deploy existing market infrastructure as best as possible in this Example.  But go ahead, change it, modify it, understand it, build it, and let us help. Become a billionaire – see if we care.

Why?  because we do care.

In case you were wondering who all those wise people are, flip through this presentation (great to see Tara Hunt among such luminaries !!)

The Great Promise

View more presentations from Oscar Berg.
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A Community of Knowledge Assets

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On February 11, 2010

In General Information

Our culture organizes itself around winners and losers. Corporations reflect this competitive nature to the core of their Capitalist doctrine. Sports analogies abound across the enterprise straight through to the HR department always on the lookout for the most amount of superstar for the least amount of money.

Social media has every industry trying to understand the concept of community. Among the most difficult ideas to grasp is that knowledge assets in a community live on a bell curve, not in winner and loser columns. Everyone is an expert at something and nobody is an expert at everything. Someone who is not performing adequately is simply a misallocated asset, not flotsam subject to jettison at the next layoff or outsource “opportunity”.

A Community of Knowledge Assets

Like most assets, there is a perfectly legitimate market for everyone in a community – nobody need be excluded, marginalized or laid off. Social Media is turning the tables on the hierarchy and old winners who don’t play by the new rules quickly become the new losers. Maybe we ought to run our economy like a community instead of losing so badly at trying to be a winner.

A Community of Knowledge Assets

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Video: Taxonomy for Community Knowledge Inventory

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On February 1, 2010

In General Information

Any taxonomy that is used to classify information is a candidate for the classification of knowledge. This is because knowledge is related to information in a differential equation that also includes data and innovation (another blog post).

The trick is that everyone needs to be using the same taxonomy so that we can all access knowledge inventories of the people around us as easily as it is to access books on Amazon.com. This will lead to a trade in knowledge assets formally the sole domain of corporations through the process of industrialization (yet another blog post) .

Please enjoy these videos, use them as you wish and let us know what you think.

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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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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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The Next Economic Paradigm; Part 4: Institutions

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On April 7, 2009

In General Information

In part 1, we introduced a new paradigm of economic growth; the innovation economy. In part 2, we identified information as the currency of trade for an innovation economy and we defined that currency’s relationship to knowledge and innovation.  In part 3 we demonstrated a structure for a knowledge Inventory that would enable an Innovation Economy.  In this module, we will discuss the institutions in social media that could keep an Innovation Economy, free, fair, and equitable.

In civil society, there are laws and regulations that protect our constitutional rights; these are essential institutions.

The legal system of the United States is extremely expensive, however, the expenditure is necessary to keep the society upright, productive and prevent it from falling into chaos.  Where a country’s legal system fails, so does its economy.  Entrepreneurs do not invest in places without a good legal system and where property rights are not protected. It is that important.  Investment abhors risk.

Arguably, the most important element of the Innovation Economy will be the vetting mechanism.

Fortunately, social media has the potential to serve this function; in fact in many cases it already does.  A feedback system supports Ebay ($35B Cap), community flagging supports Craigslist (40M ads/mo), peer review supports Linkedin (150M users).  These are not small numbers.  All markets must have a vetting mechanism in order to operate efficiently and if done correctly, social vetting has vast economic implications for an Innovation Economy.

First, let’s return to our financial analogy.

In the old days, the banker was the person to know if you wanted to be successful in town.  But with the emergence of the credit score, the “banker” became digitized; now a Saudi Billionaire can lend money to a young couple in Boise to buy their first home – and neither is aware of the other.  The credit score is responsible for the creation of great wealth because many more entrepreneurs could borrow money to invest in enterprise.

The credit score is statistical in nature; it isolates about 30 or so indicators of your 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 because these same organizations have a vested interest in a system of correct credit scores.

We are competing with ourselves.

It is interesting that you and I do not compete for our credit score because it is not a ranking system. On the other hand, with no credit, we are invisible and the system shuts us out.  With bad credit, the system shuts us out. We lose some freedom and privacy, 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.

Now we will draw the comparable analogy from the social media.

In the old days, the hiring manager was the person to know if you wanted to get a job.  They would read your resume and compare it with “bell curve” in their experience about what has worked or not worked in their past.  This worked great in the industrial economy, but it falls far short in the innovation economy.  Innovation favors strategic combination of diverse knowledge where the Industrial economy favored identical packets of similar knowledge.

Not unlike the FICO score, the knowledge inventory is a collection of statistical variables and the social network is the reporting agencies who have a vested interest in a system of correct values.  Unlike FICO however, the variables are infinite and it responds to positive event input.
Social networks are by far among the most exciting and important new technology for an Innovation Economy.

Social networks must now evolve to become the vetting institutions for knowledge assets.

All the pieces are almost in place; now we need to develop a new type of search engine.

The Percentile Search Engine is generic term for the ability to make statistical predictions about all types and combinations of knowledge Assets in a network. Conceptually, the percentile search engine is where all of the equations that we use to analyze financial assets are now applied to knowledge assets.  The main characteristic is that the search engine returns probabilities for the entrepreneur to test scenarios.

For example; an entrepreneur may want to know if her team has enough knowledge to execute a business plan.  Perhaps the team has too much knowledge and they should try something more valuable.  Maybe the team does not have enough knowledge and they should attempt another opportunity or accumulate training.

The search engine can look into a network and identify the supply and demand of a knowledge asset. If it is unavailable or too expensive, the search engine can adjust for price, risk, or options that may emerge at a later date.

Talent will bid up to their productivity value, and brokers will bid down to their productivity value.

Competitors can scan each other’s knowledge inventory to compete, cooperate, acquire, or evade. If a key person retires, the entrepreneur would simulate the knowledge that is lost and reassign people strategically. All of these scenarios can be examines prior to spending money. They can be made during the project cycle, or after the project is completed.  Lessons learned can be used to adjust the algorithm perfecting it over time.

For example: companies such as Disney and Boeing both use Engineers, each would have proprietary algorithm of knowledge that represents their “secret sauce” of success. These recipes can be adjusted and improved to reflect and preserve the wisdom of an organization.

When the innovation economy will catches fire….

Over time, these algorithms will far more valuable then the Patents and Trade Secrets created by them – this will allow technologies to be open sourced much more profitably and shared across more industries.

In the next module, we will talk about the entrepreneurs.

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The Next Economic Paradigm; Part 3: Knowledge Inventory

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On April 6, 2009

In General Information

Welcome back to the New Economic Paradigm Series.  The objective is to develop an innovation system that emulates the financial system.  In order to do this, we look for the social component that could best duplicate the function of the closest corresponding financial system component.

Part 2 discussed the currency of trade.  Part 3 will discuss the inventory of knowledge assets.

Most companies have an inventory of every nut, bolt, rivet, or panel that they need to build something tangible.  In innovation economy, we will need to have an inventory to assemble knowledge assets so that we can build something tangible and support the currency.

Your resume is like a book about you.  Conversely, every book that you have read has become part of your knowledge inventory.

Every experience you have had, every conversation you have participated in, every new idea that tried, successful of failed, is part of your knowledge inventory.  The things that you like to do, things that you do not like to do, and things that you do not know are part of this inventory and the way it is organized in your consciousness.

The Dewey Decimal System is a way to catalog information in books. Keep in mind that The Dewey System is archaic; however, it does provide us with some key insights:

From our earlier definition; to organize information is to organize a proxy for knowledge and innovation.

The decimal classification structure has a great advantage for the computer and mathematical analysis.  Additionally, tens of thousands of librarians are fluent and most people in the US have at least a minimal familiarity with it.

For a quick review, the body of written information is divided into 10 main categories.  Each main category is divided into 10 more categories and each of those are divided into 10 categories – and this can go on forever.

It is useful to note that the Dewey Decimal classification has a bias toward the three factors of production for the innovation economy; Social capital, creative capital, and intellectual capital:

Most resume reading programs just pick up key words, so why have any other words?

Your resume can be a series of Dewey numbers instead of words and computers can tag the numbers as they do key words today. For example:

302, 307, 330, 607, 17, 500, 519

If your mind were a library and you attempted to map it all out, one would see that everything is related in some way – intuitively, this is what defines you. If we looked into your world, we would discover a huge network of experiences, books read, lessons learned, and people encountered.

We would find a system of knowledge rather than random facts that you have organized.  Your likes and dislikes would be reflected in what you do and do not want to do. Everyone is different – nobody is the same.  Everyone innovates, everyone has knowledge, and everyone shares information.

If we add some mathematical symbols and Boolean logic, perhaps we could capture the system of knowledge a little better. Your resume may now look like this:

{20,12};[302 AND 307], (330):[607 AND 17] OR [500/519]

Now need to make this look like money.  Before our knowledge can behave like a financial instrument we need to add one additional factor – the quality of the knowledge.

In American society there is a persistent ideology of winners and losers; there can only be one winner and the rest are losers.  We rank things in a very linear way; 1st, 2nd, 3rd, etc.  Our culture is to protect one’s position at all cost, shield away all attackers and decimate our competition.  This way of thinking was effective in the industrial economy, but today it keeps us from understanding how knowledge actually exists in a community.

We need to switch to a bell curve distribution for knowledge assets because it better reflects reality and eliminates unproductive competition; there are no winners or losers, just different markets.

There is a perfectly legitimate market for a Porsche as there is for a Toyota.

Statistical distributions are used extensively in finance to value financial instruments; we need to do the same now for our knowledge assets. To make financial sense out of our random world, we must classify knowledge assets on a bell curve.  Consider the following resume:

{20:95%,12:80%};[302 AND 330]70%:(607 AND 17)80% OR [500/519]90%

This person is a specialist in Social Interaction and economics at the 70th percentile related to educational research at the 80th percentile. She (or he) has a Background in applied mathematics and physics at the 90th percentile. She (or he) is a trained ethicist at the 75th percentile, philosopher, and artist specializing in musical theory and orchestration at the 50th percentile. Fluent English and Spanish

Now, we have a system of numbers and symbols represent the knowledge of the person in a tangible manner.

Keep in mind that this is only a demonstration, however, we see some key advantages:

1.    The Inventory is Infinite and expandable to any field of knowledge
2.    Paints a picture of knowledge and not simply a list of information about a person.
3.    Machine enabled, programmable, and readable.

Now, all of the tools, methods, and equations in the world of banking, finance, and insurance can be used to combine, amalgamate, and diversify knowledge assets in an innovation market.

Your resume can now be combined with other resumes to represent the collective knowledge of a community.  This expression carries all of the information that an entrepreneur needs in order to estimate the probability that the community can execute a business plan.  We will discuss predictive characteristics extensively in future modules.

In the next section, we will talk about the institutions that exist in our communities through computer enabled society which will keep this game free, fair – and most importantly, equitable.

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A System of Innovation

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On December 2, 2008

In General Information

We have established that Innovation and wealth creation are profoundly related and that one cannot be sustained without the other.  A huge problem is becoming apparent because Money lives in a complex, global and highly integrated system where billions of dollars can circle the globe daily at the speed of light. Meanwhile, innovation does not live in an equally diverse, integrated and global system.

Instead, innovation lives in the patent system which is extremely slow, prohibitively expensive and full of secret language and legal strategy – certainly not accessible to most people who actually do the innovating.  In the immediate financial crisis where we are printing money at an astonishing rate, we must increase the speed, quantity, and quality of innovation at a comparable rate in order to preserve the balance.  We need an Innovation System to balance the Financial system.

Everyone knows that innovation happens in places like Silicon Valley, Corporations, a bunch of research labs, someplace in Japan, and of course the proverbial “Steve’s Garage”; but these places do not behave like a system, they are not integrated and they often compete rather than cooperate. Everyone knows what money is – but innovation is treated like some sort of mystery potion related to supreme knowledge among the gifted few.

Nothing could be further from the truth. Remember in the last chapter, the billions upon billions of tiny ideas are basically crowd sourced.  These ideas are combined into larger advances and that process continues until, say, an IPod rolls off the assembly line.   We readily call the IPod the innovation, but not the billions of tiny ideas.

A System of Innovation

Our accounting system is used to keep track of money, it is not designed to keep track of billions of tiny ideas.  So it calls human knowledge “intangible” while the IPod is “tangible”.  Somewhere along the line our culture reinforces this idea.  The truth is that knowledge is not intangible – knowledge is simply invisible.  This is a much easier problem to solve.

Intellectual Capital, social capital, and creative capital are locked up inside corporations sitting behind processes, job descriptions, and insulated from tangibility by multiple levels of management.  The command and control system arose from the industrial revolution, and with the help of Wall Street, is responsible for great innovation advances leading humanity to a global gross domestic product of 65 trillion dollars. However, the volume of innovation under this system is no longer sufficient to sustain the debt that it has also created.

Today, the phenomenon of Social Networks is showing us that human knowledge is desperately trying to become visible, and predictably, innovation in this area is increases at a remarkable rate!  The challenge now is to marry the phenomenon of social media to the financial system just like corporations are married to the financial system through Wall Street.

In market economics there are five components that are essential for a market to work properly; first, there is a currency of trade; like Dollars, or Euros, or Yen. Second, there is always an inventory so we can find pieces, count them, and build stuff. Third, there are financial and government institutions that are supposed to protect property rights to keep the game fair so that the people that own things don’t get ripped off. Fourth, we have entrepreneurs to do the fuzzy math, they interact with the system, they fill in the grey areas, and they manage risk. Finally, there is a business plan so that the entrepreneur can do what they do best – buy low, add value, sell high and pocket the difference. That’s how a market works. It’s quite simple.

Now listen carefully, these five elements are tightly connected and must be present in some way at every transaction. If any one of these elements is missing, disconnected, or corrupted, the system will fail. This is the underlying cause of the financial crisis, the system became disconnected.

We need to make “knowledge” look like money, walk like money, and talk like money and some real interesting things should happen.

The next several modules will go step by step through the five elements of market economics and we’ll uncover as best as we can those same five elements as they exist today in our knowledge economy.  Then we’ll connect the dots, fill in the blanks – and out pops the innovation economy!!!

After that, we’ll discover the new business methods of the innovation economy. And finally, we will talk about the thousands of new “corporations” that will arise. Literally, every business that we know of can be made more efficient in an environment where knowledge is tangible and a great deal of new wealth creation will occur.

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Social Media; The Opportunity of a Century

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On December 1, 2008

In General Information

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.

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