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: knowledge Page 4 of 5
This Open Letter is directed to all Deep Web researchers, authors, developers, practitioners and people who have a great interest in what lies beyond the popularity contests playing out on the ‘surface web’.
I submit this letter in appreciation for the work that you do I also want to present an important application to your research for which you may not yet be fully aware.
As they say, beauty is only skin deep and the hard work of organizing the Deep Web offers an astonishing opportunity for the next economic paradigm. Very few people are aware of this.
Who are we?
I am the director of The Ingenesist Project, an obscure Think Tank in the Seattle area modestly funded by visionaries. Our job is to specify an alternate financial system that we loosely describe as an innovation economy built on a platform of social media.
Consequently, we also specify a new currency backed by innovation instead of debt. Innovation currency is very similar to debt currency since they both ‘represent’ future productivity. As such, these two currencies would be readily “convertible” in exchange – something that we all may need in the not-too-distant future.
Where do you fit in?
Essential to this concept is the relationship between data, information, knowledge, and innovation which we express as a differential equation. Here is a quick explanation – please bear with me:
We can predict the value of innovation by observing rates of change of knowledge. We can predict the value of knowledge by observing rates of change of information. But the most critical element is the ability to predict the value of information by observing rates of change of data. The most critical element in the next economic paradigm is the human interaction with data.
With that missing piece, a new financial system can then capitalize and securitize these “predicted future values” much like Wall Street does with social debt. Deep Web Researchers literally hold the key to ending the oppression of debt economics worldwide. No kidding.
What’s in it for you?
This is where your work gets us really excited: Google induced economic incentives that drove millions of entrepreneurs into the work of creating new information – and yet direct widespread monetization remains elusive. In contrast, human interaction with the Deep Web will unleash economic incentives that will drive millions of entrepreneurs to create databases. The difference is that new Data are the only thing that a market is willing to pay for – not the popularity contests. And wow, is there a market waiting for you.
I understand that you are all very busy given the magnitude and complexity of your work. If this letter speaks to you, then please speak with me. Let’s discuss how your work would be applied to this very important effort. I’m easy to find in the datasphere.
Thank you
(Editor’s note: some ideas adapted from writings of Peter T. Leeson and introduces the idea of IOUs trading as a proxy for production. The monetization of social media will likely evolve from such an idea)
No sane blogger would post an article suggesting that anarchy is superior to government as a means of producing widespread cooperation…or would they?
As Milton Friedman put it, “government is essential both as a forum for determining the ‘rules of the game’ and as an umpire to interpret and enforce the rules decided upon.” Most great anarchist theories are duly faulted for significant problems coping with cheating and violence.
Nonetheless, large swaths or anarchy exist today. For example, there is no World Court to enforce World Law, if such laws existed. Nor is there a Global commercial law to enforce contracts between Global traders. Even at a local level there is no guarantee that the government will protect your property or enforce your contracts.
A common objection to anarchy is that without government the strong will plunder the weak because the weak have an inherent inability to protect themselves. How can self-governance alone protect the weak?
Social Piracy?
A New Economic System of the country of Montenegro is based on complete and unfettered economic freedom; in other words, the elimination of all barriers to conducting business. Is Freedom A New Economic Paradigm?
Veselin Vukotić ‘s paper titled Economic Freedom and New Economic Paradigm, offers a case study that enlightens us as to some of the core changes, some easy and some difficult, that any proclaimed ‘new economic paradigm’ would place on people, culture, politics, and the markets. From this insight, perhaps we’ll see a new paradigm emerge.
Freedom; A competitive Advantage
Montenegro has achieved a competitive advantage in their Eastern European region by reducing international trade barriers, treating foreign and domestic concerns equally, reducing “contribution” fees and other taxes, reduction of public spending, affirmation of private property, and encouraging entrepreneurship. Veselin Vukotić also notes that the concept of economic freedom is a complete theoretical and practical expression of an idea. He quotes Plato:
The difference between concepts is the difference between starting ideas!
Therefore, he concludes that the idea of economic freedom is freedom of an individual to conduct business (earn money), and that business is the key factor of a society’s development and individual wealth. While we now know that unfettered capitalism breaks down at some point, he does accomplish something important – the elimination of all government as a defining element of freedom.
The Singularity Solution
We know it is often easier to solve a problem if we can remove certain elements, even temporarily, and analyze components individually. Suppose we eliminate Government from the equation, corporations would rule. However, corporations are made up of individuals, so individuals would rule…they would rule whom? The logic also breaks down.
There is one exception: what if all individuals were corporations and they ruled only themselves? Corporations are keeping government out of their affairs by keeping people off the books. The solution is for everyone to structure their existence as a corporation contracting to each other for every conceivable business arrangement. Heck, it only costs 40 dollars to open a business in the the U.S.
Self-regulating Freedom?
Knowledge would be shared freely, people would be paid for their productivity, diversity and strategic combination of knowledge would be rewarded. Everyone would own their knowledge and would seek to accumulate more. Trade barriers would be eliminated, taxes would be reduced, private property would be affirmed, and entrepreneurship would be encouraged. Like a family, no corporation could become wealthy at the expense of another corporation for very long.
Would you be willing to pay the government to leave you alone? Is that Freedom or a new economic paradigm or both?
(Editor’s note; This is the first in a series of articles that challenges the “degree system” of knowledge measurement as archaic and irrelevant to what is actually happening in the world today. Like the resume system – it is ridiculous if not outright damaging to the prospect of knowledge behaving, and therefore, trading like a financial instrument.
Why do we still care about college ‘degrees”?
The information that fuels the next economic paradigm will not be captured in the form of college degrees; rather, it will be captured in extremely detailed granularity of unique collections of knowledge assets in diverse combinations of persons that solve complex puzzles – and then share the solution with others.
This begs the question, why do we still care about University Degrees?
Innovation economics is an economic doctrine that reformulates the traditional model of economic growth so that knowledge, technology, entrepreneurship, and innovation are positioned at the center of the model rather than seen as independent forces that are largely unaffected by policy.
Innovation economics is based on two fundamental tenets. One is that the central goal of economic policy should be to spur higher productivity and greater innovation. Second, markets relying on price signals alone will not always be as effective as smart public-private partnerships in spurring higher productivity and greater innovation. This is in contrast to the two other conventional economic doctrines, neoclassical economics and Keynesian economics.
A Definition for Innovation Economics
Yikes…
Unemployment tops 10%. Add in the under-employed, part timers, young adults trying to enter the job market, the ones who have given up or otherwise marginalized, and we’re well into the 15-20% range.
Mediated Reality:
When will people come to the realization that a new financial system is needed to represent the new social order? When will people realize that they have in their possession the most important tool ever devised by humanity for the benefit of humanity? When will they shut off the TV and reject the barrage of mediated reality that blinds them with propaganda at every turn?
The September Job Numbers are out and the trends are disturbing. Millions upon millions of Americans are now wondering how they are going to safeguard the health and welfare of their families and property. As these people lose their “money” they become increasingly invisible, powerless, and marginalized – except for one single, solitary, beacon of earthly influence. Social Media.
Now, more than ever, we need to implement an alternate economy with an alternate currency. I am not pitching some “anti-dollar-therefore-anti-American” platform, I am talking about what the hell will millions of unemployed people and their families do if they don’t have a functional currency they can trade for basic needs and services.
These same people have tons of practical experience, diverse knowledge, and worthy intellect – but no money? It makes absolutely no sense that “productivity” should become so divorced from the value of a solitary currency.
We must come to the immediate conclusion that social media can be a fabric that binds the American economy. If done correctly, Social Media can become the basis of an economy that rewards social priorities over Wall Street Priorities. But ONLY if done correctly.
While the institutions around us falter, social media will increasingly duplicate – for all practical purposes – the functions of these institutions in our society. As this transition takes place, we must lead social media in specific and intentional directions. This cannot be a “traditional” market driven process – the market is what we’re trying to correct. This cannot be a random process or else it will become reactionary and feed on itself. Instead, Social Media needs to be organized in a manner that allows information, knowledge, and innovation – the basis of human productivity – to trade like a financial instrument.
What if I told you that it would be a lot easier than it sounds? What if I told you that almost all of the components needed to build this new economy already existed in the social media landscape? What if I told you that Government, Corporations, and Wall Street will not do this for us. What if I told you that the risk from not doing anything far outweighs the risk of trying to develop and implement an economy built on a social media platform.
Everyone must have a productive role in the next economic paradigm – employed, unemployed, communities, traditional media, even existing corporations and their advertising departments. All of the existing infrastructure is in place – it only needs to be rearranged a little bit. That is what The Ingenesist Project hopes to initiate. We may not be 100% correct and the process that actually arises may be substantially different, but we need to start somewhere.
Meanwhile, here are the Jobs stats for September;
Headlines: 263,000 “jobs lost” and unemployment rate up to 9.8%.
That’s not good – there goes the “second derivative” argument. Weekly earnings are also down by $1.54, which is bad news too. But the Household Data is VASTLY worse than reported. Here are the month-over-month changes, and they’re in the realm of frightening.
Civilian Labor Force: 154,879,000 to 153,617,000 this month.
Employed: 140,074,000 down to 139,079,000 this month.
That’s a loss of 995,000 jobs, not 263,000, and the labor force contracted by 1,262,000 people!
THE INVISIBLE PEOPLE: The people “not in the labor force” rose by a staggering 1,516,000 in the last month (”unemployed” who have given up and exited the labor force).
Google 10^100 award voting is Launched. There are two sectors that we believe would have the greatest impact on the greatest amount of people; building a better banking system and funding social entrepreneurs. You can’t have one without the other – if Google funds these two sectors in concert, the outcome would be incredible.
Build A Better Bank
In the old banking system we assume that we have the knowledge to execute a business plan and we go to the bank to borrow the money. In the new banking system, we will assume we have the money and we go off in search of the knowledge. Social Media is an excellent “public accounting system” for knowledge assets.
Our current banking system has gotten it backwards.
Technological change must always precede economic growth. The supranational currency may be backed by productivity and not debt. Social media provides an excellent platform upon which to design such a banking system. People trade “social currency” at a tremendous rate. This is evidenced by the amount of destructive innovation is occurring in many legacy sectors due to social media.
Better Banking Tools for everyone
“Partner with banks and technology companies to increase the reach of financial services across the world. Users submitted numerous ideas that seek to improve the quality of people’s lives by offering new, more convenient and more sophisticated banking services. Specific suggestions include inexpensive village-based banking kiosks for developing countries; an SMS solution geared toward mobile networks; and ideas for implementing banking services into school curriculums”.
Suggestions that inspired this idea
1. Enable prepaid cell phone bank accounts for millions of people working in the informal economy
2. Create a community-level electronic banking system for rural areas
3. Build IT-enabled kiosks which provide access to financial services
4. Create a single world bank or supra-national currency, uniform rules and transparent public accounting
Fund Social Entrepreneurs
Venture Capital is ridiculously expensive. Corporate innovation serves shareholders value over social priorities. Some say that the financial risk of funding innovation is too high. The top ten reasons why start-ups fail are due to knowledge deficits, not money deficits. A new banking system that trades knowledge as currency would solve this problem.
The key is to match most worthy knowledge surplus to most worthy knowledge deficit. Google is perfectly able to build a search app for knowledge assets if there were an inventory of knowledge assets. With the most worthy match, Risk can be reduced and new financial instruments can be developed such as the innovation bond, innovation insurance, tangential innovation markets, and destructive innovation transition contingency options, etc.
Help social entrepreneurs drive change
Create a fund to support social entrepreneurship. This idea was inspired by a number of user proposals focused on “social entrepreneurs” — individuals and organizations who use entrepreneurial techniques to build ventures focused on attacking social problems and fomenting change. Specific relevant ideas include establishing schools that teach entrepreneurial skills in rural areas; supporting entrepreneurs in underdeveloped communities; and creating an entity to provide capital and training to help entrepreneurs build viable businesses and catalyze sustained community change.
Suggestions that inspired this idea
1. Provide targeted capital and business training to help young entrepreneurs build viable businesses and catalyze sustained community change
2. Create a non-profit, venture capital-like revolving fund to invest in high-impact local entrepreneurs
3. Send young American entrepreneurs to underdeveloped communities to help create small businesses that would economically benefit those communities
4. Create schools in rural areas to teach local people how to become entrepreneurs
5. Create a private equity fund to help immigrants in developed countries finance business development in their countries of origin
The New Reverse Order
If someone can track your spending, they can predict your behavior. It is also true that if someone can track your behavior, they predict your spending. The next economic paradigm is simply a higher order of the same.
On the next higher order, if someone knows your “Knowledge Inventory” they can predict how you will manage changing conditions – that is, how you will innovate. Likewise, tracking how people innovate exposes the development of new knowledge assets (the ‘gold-standard’ of conversational currency).
Everyday some new headline shows that we are getting closer and closer to that point – for better or worse – where humanity learns to manage an innovation economy.
Profound Issues Arise.
The following article about Wal-Mart adopting the debit card (Wal-Mart to Staff: Bye-Bye Paycheck, Hello Debit Card) as a means of issuing paychecks represents a quantum leap in the monetization of knowledge assets. We expect many more will closely follow in one of the most important financial developments in financial history – virtual currency. If food stamps can be delivered on a debit card, why not frequent flier miles, Disney Dollars, coupons, rebates, tulip bulbs, beanie babies, or a new global currency such as the Rallod?
A Vetting Zoo
The only questions that remain are related to Vetting. By all accounts Social Media is developing into the mother of all vetting mechanisms. Who controls the card? What system is it replacing? Who can pull money off? Who charges fees to whom and why? Who gets the business intelligence? What is the PR spin? Can advertisers interact with the card to apply discounts and rewards? What types incentives motivate what types of people and can it go on a debit card?
A Steep Departure
Each of these questions, and the companies they spawn, will live or die by Tweet and Blog – this is a steep departure from the past. For example; 30 years ago, if every American were told that their social security number would be tied to a credits score that is tied to their driving record, employability, insurance premium, health care, mortgage rate, and, yup, their debit card – the cities would have burned in protest.
Nobody could have seen this future except those who designed it. Today, the designers are you and I – see the future now, see the future here at Conversational Currency.
The idea of trust as social currency is appearing in more articles, conferences, and books. This is all highly consistent with the TIP thesis on Innovation Economics which describes the necessity of a vetting mechanism among the knowledge inventory as a means for the emergence of a currency in a market – that is, a conversational currency. People need to trust the currency if they are to trade the currency.
Shefaly Yogendra provides some excellent insights below. Keep in mind that American Culture does not have a monopoly on the definition of trust. It should not be an American expectation to define the conversational currency in our own image. Indeed, convertability of such currency will be, and must be, global.
I kept the analysis sparse on this article because it is a valuable exercise to form one’s own perspective on trust prior to diving into someone Else’s opinion. After all, it’s your currency – you own it. Good luck.
******************
by Shefaly (please see her Bio here)
Trust is a non-negotiable essential in business. The post linked here refers to web-based business-to-consumer interactions. But as social currency, Trust is the most significant in interactions amongst organisations, customers, employees and regulatory bodies.
Definitions
Wikipedia defines social currency as “information shared which encourages further social encounters“. Social currency is different from social capital which refers to “connections within and between social networks and individuals“.
Social currency – some characteristics
a) No distinction between ‘physical’ and ‘virtual’ worlds
b) No distinction between ‘individuals’ and ‘corporate entities’
c) No distinction between validity of negative or positive normative labels
Determining the value of Trust as social currency
a) Verifiable Identity and antecedents
b) Consistency
c) Reliability
d) Peer recognition
e) Value of the network
f) Individuality and collaborative consciousness
The original article can be found here and it elaborates on each of the points above.
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.
The Ingenesist Project Community concerns itself with the value of social reach since this will most certainly impact he relevance of those conversing as well as the relevance of the conversation to some business activity. Obviously, innovation is about having the right team in the right place at the right time.
Furthermore, business activities such as marketing and advertising need to make their communications more relevant and less wasteful of their audience’s limited bandwidth – lest they risk being perceived as “anti-social”.
Stated somewhat more clinically; the most worthy knowledge surplus must be matched with the most worthy knowledge deficit in order to produce the most valuable outcome.
Brynn Evans offers the following observation:
The future of search involves social networks, social graphs, or social filtering in some capacity. Companies will live or die by whether they get the “social” part right: creating the right level of intimacy, trust, reliability, social connectedness, and accuracy in their results listings. Of course, this specifically means that their user experience must at least meet or, preferably, exceed that of Google’s.
To achieve this, we must first stop arguing over the different flavors of search.
Real-time search. Social search. Semantic search. These distinctions are essentially meaningless, especially when we can’t even agree on definitions and when each of their boundaries remain undefined. Instead, we should recognize that they’re all part and parcel of personalizing and contextualizing search for individual users. Let’s stop playing the “name game” and start thinking holistically about how each (and all!) affects and improves what we think of today as “search.”
Defies analysis, defies control:
Ms Evans’ excellent analysis continues to identify numerous problems with attempting to classify Social Relevance – each system is merely trumped by new issues related to semantics, context, and proximity. It seems as if the more you try to “control” social media, the more it defies control. The more you try to study it, the more it shows you a mirror of yourself. Introspection is the irony of extroversion.
The great big Sucking Sound
While nobody, including Ms. Evans can tell you how to increase your social relevancy, we can probably all agree on what does not. If your message sucks, your social relevancy will also suck. If you are trying to sell a product that does not actually save people time and increase their net productivity, your product will fail and your social relevancy will suck. If you are in any way trying to match unworthy knowledge surplus with unworthy knowledge deficit, your social relevancy will suck.
Give up Control in order to gain control:
Business intelligence is the science of knowing what sucks and what does not. Let Social media carry your message wherever it wants to carry it. The sooner the market tells you what it wants, the sooner you can adapt your products and services to meet the needs. Things happen fast in social media space and the corporation needs to be faster. This may mean corporations need to give up control in order to gain control of both the threats and opportunities of the future. After all, even by the playbook of Corporate America : survival of the fittest is the only relevant social rank.
(Ed: Brynn Evans is a PhD student in Cognitive Science at UC San Diego who uses digital anthropology to study and better understand social search)
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.
Collateralized Debt Obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets. In the case of the current financial crisis, the underlying assets were home mortgages. It is not necessary for the CDO buyer or seller to know who lives in the home and what they produce; the asset is a contract backed by future productivity.
CDOs vary in structure and underlying assets, but the basic principle is the same. To create a CDO, a corporate entity is constructed to hold contracts as collateral and to sell packages of predictable future cash flows to investors. The more money handed out in home loans, the more money could be collected in CDOs
You are a liability.
While corporate leaders proclaim that people are the greatest asset, corporate accounting practices specify otherwise. Employees are an expense and their salaries, benefits, and pensions are liabilities to be reduced any time the opportunity arises. So what’s the problem? Liabilities can’t innovate.
Suppose for a moment that people were in fact an asset on the accounting sheet and their salaries, benefits, and pensions were “investments”.
Collateralized Innovation Obligation (CIO):
The CIO would obviously be a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets, specifically, the output of productive and motivated people.
Like the CDO, a CIO would vary in structure and underlying assets, but the basic principle is the same. To create a CIO, a corporate entity is constructed to hold assets as collateral and to sell predicted future cash flows to investors. It is not necessary for the CIO buyer or seller to know who is innovating or what they are producing; the asset is a contract backed by future changes in productivity. The more money handed out in innovation loans, the more money could be collected in CIOs. For all practical purposes, we could call it an Innovation Bond.
Enter Social Media:
Social media is teaching us an important lesson about innovation. Every time you get a diverse group of people together to share ideas, new ideas form. Every idea is useful as long as it is shared; thousands of bad ideas must expire before the good one appears. Conversational currency is the vetting mechanism of all ideas. While not every good idea becomes a great invention, every great invention is built from good ideas. Machines cannot produce ideas and no single company, country or person holds a monopoly on ideas. Innovation and the creation of all wealth arise from the social, creative, and intellectual interaction of people.
Conversational Currency: The underlying asset
The underlying asset that supports both the Collateralized Debt Obligation and the Collateralized Innovation Obligation is a person and their ideas; one is an asset and the other is a liability. Both types of people go to work every day to interact with other people. They both share ideas and create better ways of doing things. People increase human productivity through fault tolerant networks and support systems. They transform information into knowledge and innovation – and both pay their mortgage.
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.
Charging interest on money was at one time illegal. The concept of “interest” was legitimized by the argument that lenders needed to be compensated for the risk that they assumed. As such, currency is married to risk and not necessarily actual productivity.
Whoops.
Risk can never be negative because it is a measure of volatility where zero is the lowest possible value. There is such thing as good volatility (winning the lottery) or bad volatility (my 401K) or zero volatility, but volatility can never be negative; hence the term “Breaking the Buck” which is considered a failure of the monetary system. Interest rates respond causing inflation or deflation relative to other currencies, causing more volatility, thereby inducing more risk, etc.
Who wants to be a numéraire?
The dollar is a “numéraire” – the standard by which value is compared. Recently there has been a strong call for a global currency to change the numéraire to something else. Ideally, the numéraire should be able to manage negative interest rates to keep volatility pegged to real productivity and not speculative emotions. This would keep the system from crashing in a whirlpool of volatility that incessantly feeds on itself.
So what are the practical implications?
With a positive interest rate, I am penalized for borrowing currency since I need to pay the risk premium to a lender while I produce something with the currency. On the other hand, I am rewarded for lending currency because someone pays me the risk premium to borrow it.
With a negative interest rate, I am rewarded for borrowing currency (because the lender is deeply penalized for not lending it) so that I can produce something with the currency. Then I am penalized for not lending (or spending) the currency that I made from the thing that I produced.
Enter Social Media:
The whole idea of risk as the justification for interest does not make much sense any more. In fact, during periods of deep inflation or deflation, currency becomes divorced from actual productivity and people hold some other store of value instead.
People are flooding to social media because information, knowledge, and innovation are behaving like currency. Social currencies are perfectly suited to accommodate negative interest rates. For example: if information were a currency, I would be rewarded for giving it away and penalized for hording it. If knowledge were a currency, I would be rewarded for sharing it with others and penalized for withholding it when it is needed. If innovation were a currency, I would be rewarded for crowd sourcing and penalized for patenting. Does this sound familiar?
The Next Economic Paradigm
Conversation and relationship are two of many denominations of the new global currency called the ‘rallod’ which is allowed to float against the dollar. Continual development of social media tools, systems, economics and aggregation will facilitate the exchange of social currencies by increasingly enabling the ability to store, form, access, and exchange them. Social networks and communities of practice will allocate social currencies as factors of production: social capital, creative capital, and intellectual capital – for the production and dissemination of innovation.
The Next Numéraire; human productivity
Let countries compete in the economy where net human productivity is the standard by which all value is compared. With the constraint on land, labor, and capital, this is the game we all need to play now.
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.
