The Ingenesist Project

The Next Economic Paradigm

Tag: Social Capital

What Comes After the Knowledge Economy?

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On March 25, 2009

In General Information

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

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

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

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

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I Am Capitalist and So Are You

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On March 16, 2009

In General Information

In case you have not noticed, it is largely in the best interest of one group of people to keep another group of people poor, weak, and disorganized.  I’ll let the reader connect these dots as they see fit, however, the fact is that is how capitalism works – there must be a merchant class and there must be a working class.  And even after all the inequality that this arrangement implies, capitalism is still the only game in town for creating and distributing wealth.

As the burden of supporting the capitalist system is increasing with interest on debt that can never be funded, the pressures on the working class will enter a phase of rapidly diminishing returns.

The Poor:

The inherent conflict is that the working class will always seek to maximize their wages and the merchant class will seek to minimize those wages.  Inadvertently, there is a suppression of information, and therefore education, to the working class.  The result is a net loss of intellectual capital.

The Weak:

The inherent conflict is that the working class is assigned the tasks of carrying out the wishes of the merchant class even if it is not in their own best interest.  Inadvertently, conformity becomes a survival strategy for the working class.  The result is a net loss of creative capital.

The Disorganized:

The inherent conflict is that the working class will organize themselves into collectives as a means to match the relative power of the merchant class.  Again, inadvertently, if people are held below a certain economic threshold, they will fail to organize because their concern is greater for simply feeding their family.  The net result is a loss of social capital.

Diminishing returns

The result of the net loss of social capital, creative capital, and intellectual capital is the inability to create new wealth. While these conditions were once the exclusive domain of less developed countries especially under communism, similar conditions are now arising in the United States under capitalism.  That is, before Social Media was used to enrich, empower, and organize.

I am a capitalist:

The tools of the old merchant class trade are eroding. As the financial crisis envelopes the United States, more and more people are turning to Social media.  Traditional media is over commercialized, polarized, and gentrified while the audience can now control their bandwidth, seek multiple opinions, and become highly diversified. The draw to social media is nothing less than extraordinary even among those who still have jobs.  When people are released from the clutches of the merchant class, they wake up, look around and inspire each other. The innovation economy is upon us.

Innovation Economics

The paradigm shift is really quite subtle.  It behaves as a function of the human embodiment of innovation.  For example; most of us do not wake up every day aspiring to improve the Ipod, the Wii platform, the better mousetrap, or any other inanimate object for that matter– instead, we seek to improve ourselves, and by extension, those around us. This is the self embodiment of innovation – something improved with an economic outcome. To improve one self is to innovate; social capital, creative capital, and intellectual capital are the factors of production and social media is the corporate structure.  I am Capitalist and if you have read this far, so are you.

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The Fertilizer Economy

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On March 15, 2009

In General Information

The bad, the good, and the ugly

The bad news is that United States has a global comparative advantage in producing bullshit. The good news is that we may actually be able to till it into fertilizer for the Innovation economy.

America’s financial crisis was caused by money created from money which was in turn a derivative of wild-eyed speculation in assorted proxies for real productivity, including real estate.  Stock prices were supported by imperfect information in a Tickle-Me-Elmo culture while broker fees are embedded in every conceivable transaction.

America has become a world leader in hype, marketing, lawsuits, and fantasy. None of these industries actually produce anything yet nobody can say they are not immensely creative, induce sweeping social movements, and their propagation demands extraordinary intellectual resources, flexibility, and adaptability.

The Theory of Comparative Advantage

It is not efficient for, say, Ghana to produce rice and Vietnam to produce cocoa. If they each produce their natural endowments and then trade the differences, fewer resources are expended to produce more goods.  This theory is the basis of global free trade and the efficiencies are irrefutable so globalization is here to stay.

Meanwhile, the literature on the subject of innovation agrees that innovation is maximized as a function of endowments in social capital, creative capital and intellectual capital.  Silicon Valley is widely held as the poster child for emerging from the deep social movements of the 1960’s attracting an inflow of diverse people where high tolerance, creative art and music were abundant in close proximity to intellectual centers of Stanford and Berkeley.

Comparative Advantage for Innovation:

By the theory of comparative advantage, if a country does not possess a comparative advantage in intellectual capital, creative capital, and social capital, they would not hold a comparative advantage in an innovation economy.

For example; China has a huge endowment of intellectual capital and throughout history they have been an inspired creative force.  However, the current government thwarts social capital.  Therefore, whereas China has a comparative advantage in a manufacturing economy, they would not necessarily have a comparative advantage in an innovation economy.

Many other countries have endowments of intellectual capital as well as democratic governments, but cultural norms may still constrain diversity related to gender roles, social classes, lifestyle tolerance, or the acceptance of “outsiders”.  As such, they may have comparative advantage in a knowledge economy, but the relative deficiency in creative capital would inhibit a comparative advantage in an innovation economy just as quickly.

The Fertilizer Economy:

That said, the United States has a vast abundance and tremendous economies of scale in social capital, intellectual capital, and creative capital in comparison to any other country in the world.  The problem is that these assets are sequestered behind the corporate veil, suppressed from true wealth creation by the priorities of a financial system built to produce nothing except analyst expectations.  Like sugar calories, lots of energy is delivered, but sustainable health is not.

The harvest in the wind

The brokers, speculators, and marketers are not bad people – in fact, they are brilliant.  They are simply stuck with the wrong set of incentives.  The Ingenesist Project dramatically changes the incentives and promises a far better allocation of intellectual capital, social capital, and creative capital.  By making such assets tangible outside the construct of the Wall Street, the comparative advantage of the United States in an innovation economy will be astonishing.

Where there is fertilizer in the wind, Wall Street will lead. Where there is a harvest in the wind, Wall Street will follow.

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Putting the System Back into Social

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On March 12, 2009

In General Information

Social Media is a demanding master with the uncanny ability to determine the absence or presence of checks and balances.  As a self correcting market, what you do not say can have a greater impact than what you do say.

Of Profit and Peril:

There are great perils in getting social media wrong and great profit from getting it right.  Kids posting negative images can be haunted forever.  Corporations hawking wares can erode their brand. Egocentrics touting their own magnificence can find themselves isolated.  Yet every day, people are controversial, people are selling stuff, and there are is no shortage of egomaniacs in social media space – what are they doing right?

Family Values:

Corporations and individuals are finding out that the social media space requires a much larger degree of disclosure than traditional media simply because markets are most efficient in an environment of perfect information – that is, when the buyer and the seller have the exact same information as the other when negotiating a transaction.  Only then can the magic of supply and demand arrive at one correct “valuation”.

By contrast, an inefficient market of imperfect information cannot arrive at a true price, rather, somewhere in a range of prices.  This is defined as volatility.  When the price is unknown, transactions fail to occur, and markets devalue.  Volatility is the enemy.

Perfect Strangers:

As entrepreneurs have increasingly perfect access to information, it is no longer a successful dominant strategy for corporations to withhold information.  The corporation no longer competes with their nearest competitor; they compete with perfect information in the reputation market.  So what may seem like the wisdom dance of an enlightened industrial complex is really a shrewd and long overdue acknowledgment that perfect information is in the best interest of everyone.

Neighborhood watch organization:

The next step for Social Media will be the most powerful manifestation of perfect information ever to be crowd sourced; systems of checks and balances.  Where checks and balances are in place, information improves.  If not, information decays.

An easy way to determine the presence or absence of checks and balances is to remove one element form the relationship and see if the other two become disassociated.  Inversely, one way to creating checks and balances is to associate two elements by means of a third:

Triangulation:

1. Information, knowledge, and innovation;  Without one, the other two have little value.
2. Social Capital, Creative Capital, and Intellectual Capital; Without one, the other two have little value.
3. Openness, communication, and accountability; Without one, the other two have little value.
4. Trust, self expression, and connections; Without one, the other two have little value.

Etc.

Putting the System back into Social

The difference between success and failure depend your ability to systemize the social media presence.  Sound confusing?  It shouldn’t be. When you think about it, there rules are not much different between managing social media relationships and off-line personal and business relationships.

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Innovation Bonds: 3 Million Jobs

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On February 26, 2009

In General Information

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

The final frontier; your backyard

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

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

Running Numbers:

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

Dan’s List; Leave a Tip

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

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

Improving Information for Fun and Profit:

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

An Endowment for their Grandchildren:

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

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Got a Life?

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On February 23, 2009

In General Information

Geographic Compatibility:

In the early 1990’s, traffic in Los Angeles was so horrendous, it could take hours to travel a dozen miles.  Commuting was a nightmare and the last thing anyone wanted to do was sit in more traffic.  As a single professional, every time I met a prospective lady friend, I had that elemental question in the back of my mind – and so did she: are we Geographically Compatible (GC)?

The sweet spot:

I recall many a magical conversation ending with that mutual inevitable shrug of the shoulders; a secret code for “have a nice life”.  In Los Angeles, GC peaked in the sweet spot of 1-6 miles.  After that, GC diminished roughly proportional to the square of distance with 20 miles as an absolute maximum.  Any more was no closer or farther than, say, Nashville.

The cost of ownership:

Today, not only must we contend with traffic and the cost of owning a car, we must attend to a warming planet were every gallon of gas burned spews 19 lbs of CO2 to the atmosphere.  In addition, we have a deepening deficit of the most valuable asset in our lives and the lives of those around us; time, bandwidth, productivity, sleep, money, innovation; it’s all the same convertible currency.  All are wasted equally behind the wheel of an automobile.

Social Experiment:

With this in mind, I did a little experiment.  I went to Linkedin and conducted a search for everyone within 6 miles of me.  All that they offered was a 10 mile range and with keyword search too.  The results were very interesting; not ideal but not too shabby.  I tried the same with Facebook, and the best I could do was search by zip code.  It was very awkward and the profile search feature only allowed me to query my existing contacts.  I am guessing that there is some sort of security issue that restricts this type of searching.  Too many nuts, flakes and stalks in that granola, I suppose.

Not unlike the LA dating scene, the future of innovation economics, global sustainability, quality of life, social support structure, family values, and money management will rely increasingly on GC; and the constraints will not end soon.  Social Media must understand the monetization potential of GC and develop robust applications to support it.

If that is not enough convincing, try this:

‘The Jane Jacobs externality’ named after a transformational sociologist of the same name, suggests that concentrations of educated and skilled people attract companies and investment to a geographical area.  The presence of such investment attracts more educated and skilled people to that area; also referred to as “intellectual capital”.

Harvard Professor and Author, Dr. Robert Putnam concluded that people acting in groups can produce far more economic growth faster and better than corporations and government combined. This is called “Social Capital”.

Carnegie Melon Professor and Author, Dr. Richard Florida, suggests that artists and engineers think more similarly 24/7/365, than managers and production workers.  This is called “Creative Capital”.

Factors of production:

All three; intellectual capital, social capital, and creative capital are wholly and utterly dependent on GC.  These are the factors of production of an Innovation Economy.

Evidence of these effects can be demonstrated by the civil rights movement, woman suffrage, neighborhood watch, Silicon Valley, Seattle, Greenwich Village, Austin Texas, Boston, Hollywood, Chicago, NYC, and many more locations where ‘wealth’ is located.  What came first, the money or the people?

So, what part of monetization is Social Media having difficult with?  The sweet spot is 1-6 miles, so get the hint and get it fast. Meanwhile, billions upon billions of magical conversations end with that inevitable shrug of the mouse; a secret code for “have a nice life”.  I say, get a life.

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The Global Financial Crisis; The End Game

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On February 18, 2009

In General Information

The year is 2024, no burning cities, no mass hysteria, no bread lines; the economy is on an exponential growth curve.  It took a while, but the financial crisis of ended in an anticlimactic sort of way.  Sure, lots of hedge fund bankers became unemployed, some went to jail, and many companies once deemed titans of industry have disappeared, but nobody seemed to notice much anymore.

Government debt has been eliminated and Wall Street has become the steward of what has become an Innovation Economy rising from the ashes of debt economics.  The transition, in fact, was surprisingly smooth.  Social Network applications such as Facebook, Linkedin, G+, and many more, developed a clever way to make knowledge tangible outside the construct of Wall Street and the traditional corporations and people began trading knowledge like currency.

When inflation hit, the dollar started to fall in value, people began trading a different currency called the rallod (dollar spelled backwards).  The rallod was backed by future productivity resulting from innovation rather than future productivity supporting debt.  When the dollar finally crashed, it pegged to the rallod and the economy began to grow again with an astonishing, yet peaceful, transfer of wealth and power to open sourced self-regulating communities; i.e., society in general.  The vicious cycle of debt economics was reversed just in time.  It’s still hard to believe what happened.

Today the engines of economic growth are tens of thousands of hot new start-ups that exist in the form of “Value Games” related to specific technology areas rather than the old corporation model.  They automatically cluster around a technology and spin off other start-ups at an incredible rate in a strange nesting arrangement called the “tangential innovation” market.  Most innovation is open sourced because the “Patent” (and protectionism in general) is no longer the center of the innovation finance universe, rather, the “secret sauce” of social, creative, and intellectual capital is the most valuable asset today.

About 15 years ago, something resembling the human genome project mapped all knowledge in the form of social, creative, and intellectual capital that exists in society to a very high granularity.  An API standard was created to represent knowledge assets like packets of code that are processed by a community algorithm. The CV/resume is an old bar joke now. Thanks to a visionary government, 1st amendment protections were built into this inventory with anonymity laws and privatized TOU; creators own what they create.

An open source percentile search engine was created to enable entrepreneurs to build unique collections of knowledge assets and predict the probability that various combinations of these assets could successfully execute a business plan.  High diversification induced hyper-innovation around technologies and the resulting innovations are spun out to be reabsorbed by different and diverse communities of practice in continuous iterations forming a virtuous vortex of new systems, methods, and solutions.  Sketched out, these arrangements looked like electrical “integrated” circuits.  Wealth creation is intense.

Since the knowledge inventory has mapped all knowledge and the Percentile Search Engine calculated probabilities and scenarios, the Innovation bank formed to make most worthy and optimal matches between knowledge surplus and knowledge deficit in a community.  Since the probability of innovation success has become predictable, innovation risk is now diversified away.  Innovation insurance products abound. With near-zero innovation risk the cost of venture capital has approached 5-7 % instead of 500-2000% of less than a decade ago.  Banks now issue innovation bonds on the public market to finance innovation in society.  For an investment of such high return and such little risk, participation is near universal.  This created another virtuous circle; the more innovation that occurs, the more money is created.  The more money that is created, the more innovation occurs.

Instead of having jobs, many people in a geographic area are pinged by the Percentile Search Engine which calculates the likelihood that their interaction together will increase the probability of successful execution of a business plan when combined with other knowledge assets.  Instead of earning wages, people collect micro-royalties specified by contracts on capital asset sub-sections. These micro-royalties add up to substantial residual income enjoying a multiplier effect as their work continues downstream over their lifetime. The government funds social security through it’s own innovation ventures. Service workers such as police, teachers, fire fighters, nurses, local merchants, etc., are key beneficiaries because of their impact on the community is directly associated with productivity.

Many of the senior knowledge workers have determined that they can earn more money by taking an equity position in their students, and the students of their student.  Unlike a decade ago, pyramid schemes in innovation economics are sustainable and generate astonishing profits.  Mentors have entered the landscape in vast numbers and apprenticeships have become abundant.  The income potential for the “creating creators” boggles the imagination.   Again, a virtuous circle has formed between the mentor and the student. In aggregate, wisdom is being retained, refined, and transferred efficiently throughout social networks.

University “degrees” have disappeared in favor of unique combinations of knowledge assets that are continually SEO’d for best Percentile Search Engine Placement.  People do not compete directly, rather, they compete with the Percentile Search Engine in the local market place by cooperating among each other.  As owners of their knowledge assets, the entrepreneurial spirit is ubiquitous.  No individual has either a monopoly or an identical knowledge set as anyone else.  Everyone has perfect information about the knowledge assets in a market.  People are pinged for different reasons at different times for different rates depending on supply and demand.  Continuous education is a social event in itself, often mistaken for recreation!

Even the poorest areas of the planet are getting into the action because, by definition, the parts of an economy with the highest potential for technological change correspond to opportunities that return the highest dividends in an innovation economy.  Arbitrage opportunities between master and oppressor have disappeared worldwide.

Like a neural network, the economic system of tangible knowledge is self-correcting, fault tolerant, and self-regulating.  Governments across the globe tried to stop the social network driven innovation economy – but they eventually gave up.  It was like trying to stop water; it flowed between the cracks and simply eroded the barriers.  The most incredible outcome is that innovation now reflects long term social priorities instead of short term Wall Street priorities.

Oil production has been replaced by superconducting wind turbines, global temperatures have stabilized, all cars are electric or “water leakers” (as the hydro’s are affectionately known), many diseases have been cured, and the list goes on.  It is hard to believe this happened in only 12 years.  Then again, the Internet had only been widely used 15 years prior to 2009.  Did I mention, we’re finally sending a multinational expedition to Mars…

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To Awaken a Giant

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On January 23, 2009

In General Information

“Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished”.

– Barak Obama

.

The gloves are off:

Mr. Obama’s statement is profound; in a single stroke, he liberated social capital, creative capital, and intellectual capital from the oppressive arm of the financial markets.  This sends a strong message to entrenched and corrupted financial operatives that they no longer hold a monopoly on American productivity.

The factors of production carried over from the last century; land, labor, and capital, can be now be challenged by social capital, creative capital, and intellectual capital as factors of production for an Innovation Economy.

The third option:

Q. So how exactly does a country meet a 50+ Trillion dollar obligation?
A. It depends on the social agreement.

First, we could default and let the system crash. Second, we could endeavor to pay it back by committing the next several generations to servitude of the debt.  Or, there is the third option that nobody talks about.

Create a new currency.

Almost every country has done it.  Mexico replaced the old “Peso” with a “New Peso” (worth 1000 old Pesos).  Europe created a new common currency.  Chinese Yuan is a “bridge currency” that gets them from point A to point B. Each of these examples is different, but they have one very important element in common; they are utterly dependent on a social agreement.

People must agree to exchange the new currency on the streets.  Social agreement, creative agreement, and intellectual agreement drives entrepreneurship and all must be achieved completely or “black markets” will form undermining the entire system.

The Tipping Point

We know a few things about currency outcomes.  If inflation occurs, people with “cash” will lose it, while people with “debt” will see it deflate.  The US can erase the deficit by inducing inflation and deflating the debt if production capacity remains undiminished. People, organizations, and governments that have exactly as much cash as they have debt will see no net loss or gain.  In fact, the entire world’s financial system is worth exactly as much as it owes to itself – minus the value of social capital, creative capital, intellectual capital and natural resources – now, set free. 

Social Agreement

As inflation progresses, there will be a point where a critical mass of the “social agreement” will hold the same amount of cash as they hold debt – their net loss will be zero.  That’s when the system can reboot.  obviously there will be serious consequences to any of the options, but this time, unlike any other time in history, social media will be the vehicle upon which the social agreement is catalyzed and not necessarily mandated by policy makers.

The Obama Factor

“Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America”

Mr. Obama is right – the outcome depends on us. We cannot expect government or corperations to attend to all of our needs because we are the ones who individually and collectively own and control the factors of production that will support the next currency. The road to opportunity has been cleared and the invitation has been cast.  We must now reach deep into our imagination and define the new business system where social capital, creative capital, and intellectual capital are directly tangible in a new global economic imperative; the Innovation Economy.

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The Relationship Economist

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On January 21, 2009

In General Information

The Office of the Relationship Economist of the United States:

President Obama said in his inaugural address;

“Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished”. 

This is true; so what changed?

Mr. Obama’s statement is profound; in a single stroke, he divorced human knowledge, talent, creativity, and intellect from dependency on the financial markets.  In one short statement, he reversed the old world order where economic growth drives relationships rather than relationships driving economic growth. Mr. Obama has made people tangible as financial instruments in their own right.  The language needed to change, only then could the relationships change and therefore, the economics.

Calculus: The Science of Change.

Change is everywhere.  The only thing certain is change itself. We vote for change we can believe in, we are aware of climate change, and we see the world constantly changing all around us. Each of these sentiments is an expression of the mathematical discipline of Calculus

Calculus got a bad rap with most of us in High School. Calculus has boring charts, funny symbols, strange sentences, and objects flying around in a frictionless space – nothing could be further from reality, so it seemed.  In reality, however, nothing could be simpler.  Early civilization noticed that seasons change over time. Farmers noticed that plants changed over time. Isaac Newton noticed that the speed of the apple changed over time as it fell.  Copernicus noticed that the location of the planets changed over time, etc.  We all notice and respond to change.

Economics: The science of Incentives:

Bankers noticed that the value of money could also change.  To lend money out for future repayment, there is a likelihood that something will change; good change, bad change, or no change. So, in order to avoid bad change and to keep good change, the lender charges “interest” on the money.  Interest represents the change of money over time – but not the reality of the change itself. Consequently, the change of money induced incentives for people to behave differently and this changed reality. For better and worse, reality reflected the incentives rather than the incentives reflecting reality.

The Language of Change:

Today our language is changing at an incredible speed – most words associated with the human condition have changed in definition over only a few decades ago. The words “relationship”, “society”, “marketing”, “innovation”, “media”, “democracy”, “productivity”, and many others, all have expanded meanings.  Now we need to create new words to describe new realities; Computer enabled society, Social Capitalism, Web 3.0, relationship economy, innovation economy.  What is the incentive?

Relationship: The Science of Communication

Now here is where Calculus gets complicated: If words are changing and communication is connected to the words, then communication is changing too.  If communication is changing, and productivity is connected to communication, then productivity is changing too. If productivity is changing, and the economy is connected to productivity, then the economy is changing too.

The Relationship Economy:

Just like money, the change in our relationships induces an incentive or disincentive to behave a certain way.  For better or worse, incentives will reflect reality rather than reality reflecting the incentibes.  That’s a game changer.

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Social Clipping and the Amazing Disappearing Economy

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On January 14, 2009

In General Information

In the early 1990’s, the NAFTA Mutual Recognition Document (MRD) for engineering professionals was the first modern attempt to treat knowledge like a financial instrument. Unfortunately it failed because of a tiny little flaw that I call ‘social clipping’.

Most trade agreements that followed were modeled after NAFTA and, as such, inherited the clipping flaw.  The flaw is that ‘products’, but not the knowledge assets that created them, are mobile in a global economy.

The MRD handed the knowledge economy to Mexico on a silver platter; but they turned it down.  The government did not want to give their engineers “wings” because they were afraid that they would fly away.  Instead, Mexico chose to sell their extraordinary young engineering talent off cheap to meet quotas promised to Asian, European, and American companies to relocate huge manufacturing plants to the country. Today, Mexico competes with China in a race to the bottom of a manufacturing economy and almost no indigenous design industries.

Two-way street:

Back then, the protesters raged about an influx of cheap foreign engineers to the US.  But many US engineers saw that Mexico needed everything that engineers make – roads, bridges, infrastructure, etc. The needs were endless and the objective was clear; to increase human productivity in Mexico was to create real and sustainable wealth.  Maybe then, the citizens would not need to fly away.

These infrastructure projects could have been funded because the Professional Engineering License behaves like a financial instrument mitigating project risks (so that nothing “disappears”). Only then banks would lend and insurers would insure.  The transfer of knowledge and accountability to Mexico would have been extraordinary; the relationships, profound; their development progress, astonishing.

The Disappearing Economy

But the MRD died by clipping.  Mexican Engineers would have been required to take the same engineering examinations as US engineer.  The government refused citing concern that they could not pass. So, in 1994-1997, this author directed a large comparative education project sending over 250 engineers to the US professional engineering examination (EIT).  The Mexican Pass rate was extraordinary – they were easily comparable to the US pass rate in most subjects and flat-out superior in mathematics.  There was nothing wrong with Mexican engineers, or the culture; there was something wrong with the financial system that keeps them invisible.

Knowledge is Power

As the story goes, Mexico has a family oriented culture where hierarchy is often based on seniority; a common examination may favor recent graduates.  It would be inappropriate for a young engineer to have authority over a more senior engineer.  Dig a little deeper and the real problem was power. In Mexico, power is concentrated among very few people.  It would have been unacceptable for transparency to exist.

We are facing a similar situation in America today.  Power has been steadily consolidating over the years.  A huge and fast stimulus package will enter a financial system with a shortage of vetting institutions. There is a strong pull toward ‘business as usual’ – creating J-O-B-S; not necessarily more entrepreneurs, engineers, or mentors, and certainly not empowering whistle blowers.  In the knowledge economy, Americans salaries are pegged to off-shore outsourcing. This is a game that we can no longer win playing by the rules.

Social clipping

As we have seen with less developed nations; when people are held below a certain economic level, they fail to organize for innovation, social change, entrepreneurship, and value creation because they are too busy trying to pay off debt and feed their families.  Social capital, creative capital, and intellectual capital are muted; that’s when the magic of innovation disappears. That’s social clipping.

America must move on to the next level of economic growth.  The Innovation economy is a game we can win playing by new rules. Government must trust the people, empower social media, and not clip our wings with an outdated economic model.

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Socialism, Capitalism, or Social Capitalism

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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 Shift to Social Capitalism

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On January 8, 2009

In General Information

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

Economic and Privacy

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

Social Media and Privacy

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

Cover your Assets

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

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

Computer Enabled Society

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

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

Next Generation Business Methods

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

Social Capitalism and The innovation Economy

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

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Out of Cache; Will Work For Bandwidth

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On December 31, 2008

In General Information

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

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

Natural Resources of Bandwidth

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

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

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

Innovation = Bandwidth Created / Bandwidth Expended

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

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

Business case

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

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

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

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

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Social Media Frequent Flyer Miles

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On December 22, 2008

In General Information

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

Computer enabled society:

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

The analogy continues:

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

Three Web Applications:

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

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

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The Balance Sheet for Knowledge Assets

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On November 6, 2008

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Innovation economics has a way of forcing us to look at the mirror image of conventional wisdom.  This article will look at knowledge assets as they might appear on an accounting balance sheet.  You may be surprised at what happens at the bottom line.

Wall Street will often reward a company that has a large backlog of orders. This can appear in the eyes of most observers as an asset. After all, who would not want a backlog of orders?  However, in the world of social media, a huge backlog causes a serious problem – it represents commitments made that have not yet been delivered. An unfulfilled promise in a social network is a liability and not an asset.  By extension, a backlog in an innovation economy is a liability and not an asset (note: climate change).

Applying conventional wisdom to an innovation economy, we find that most companies have an excellent inventory of the “liability” but a poor inventory of the “asset” that will execute those promises. All of their plans, specifications, blueprints, job descriptions, policies and procedures, etc., are liabilities in an innovation economy because these define the promise that is unfulfilled, not the asset that will fulfill them.

Until recently, companies assumed that the right knowledge assets will always be available – an assumption that for a long time has limited the level of productivity that humans can achieve, specifically, the sustainability of natural resources. The absence of a knowledge inventory limits the complexity of problems that humans can solve much like industry was limited to custom machinery before Eli Whitney demonstrated the concept of interchangeable parts less than 200 years ago.

Further, if the product line is expected to have a life cycle of more than a few years, the knowledge inventory must extend beyond the doors of the company and into the surrounding community.  Therefore, the knowledge inventory must take on the taxonomy of the community, not the taxonomy of the corporation such as skill codes, levels, titles, etc. The requirement is now clearly in the domain of social networks.  Yet, I still hear grumblings in the blog sphere that social networks cannot be monetized – nothing should be further from the truth.

So, let’s talk about the bottom line.  For example, Boeing announced today that their greatest future challenge would be the availability of engineers. Boeing has a market capitalization of $34B and a $300B backlog.  Money has a 10:1 multiplier as it travels through and economy.  For a balanced accounting statement, what would be the real value of a social network that can capture the correct knowledge inventory to support Boeing; 34B, 300B, or 3T?

In general, valid estimates of the bottom line can vary by 2 orders of magnitude depending on the point of view of Wall Street, corporate management, or the social network community.  Who would be the better steward?

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Social Enterprise; Can Innovation Be Manufactured?

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On October 28, 2008

In General Information

Manufacturing is the use of tools and labor to make things for use or for sale.  When I think of manufacturing, I see images of machines spinning out high precision components into colored inventory buckets that are transported to clean areas to be precisely combined with other precious components creating some magnificent device such as an aircraft, computer, or medical CAT scan machine.  Each device is a product of countless human interactions.

Each little piece is designed, discussed, and depicted with great care and precision so that it fits perfectly with the next piece.  Everything about each part is planned long in advance; the composition of the material, the tolerances of all dimensions, and the strength/weight/wear characteristics.  However, each piece alone has little value without the other pieces.  Yet, if one piece fails the whole machine can fail.  When the machine has completed its service life – those beautiful, intricate, and worthy creations of human interactions are simply discarded.

Since the invention of the cotton gin, the economic growth resulting from the human interaction involved in precision component making (literally and figuratively) is undeniable.  Until the era of Social Networking, however, few could envision that human interactions are themselves components of an invisible inventory. Each element of human interaction is precisely honed from some invisible raw material by social machinery and deposited into colorful garments and transported to clean areas where they combine with other precious components creating some magnificent device such as an airplane, computer, or medical CAT scan machine.  When the machine is scrapped, the product of those human interactions lives on…but where and how?

The greatest constraint to the emergence of an innovation economy is the invisibility of knowledge assets; social capital, creative capital, and intellectual capital.  We have an inventory of every nut, rivet, and panel on an airplane, but not the knowledge asset that created things.  It is like society is keeping a big secret from itself.  This is the great opportunity for Social Media.

People are still asking “where is the money in all of this social media stuff?” The answer is “everywhere – the door is unlocked, but the lights are off”.  The irony regarding the visibility of knowledge assets is that they lay right in front of us but we refuse to see the obvious.  All we need to do is switch on the lights. Until we can inventory knowledge assets outside the construct of a corporation, social networks cannot themselves become the corporations of the future.

Can innovation be manufactured?  Of course, with the right tools, innovation can do whatever it wants.

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Social Enterprise; Show Me The Money

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On October 27, 2008

In General Information

The term social capital is thrown around with great ease without really understanding what the word “capital” implies.   Capital is money used to earn more money; that means that social capital must somehow be related to, or derived from money.  There is no shortage of blog posts asking the timeless question “Where’s the money in all this social stuff?”

If social capital is money, it needs to behave like money.  So for our litmus test today, let’s talk about financial derivatives – the same ones that got us into the mortgage crisis mess.  A derivative is something whose value is derived from something else.  The price of an SUV is often derived from the current price of fuel.  Not so obvious are collateralized debt obligations – but they are kind of similar.

So where is the money in all this social network stuff, what on Earth is a social capital derivative, and how can it be “capitalized”?

Suppose I start a social network for my neighborhood. The objective of this social network is to make certain all of the data collected by, and posted on Zillow.com (a real estate valuation site) is accurate.  After all, it is not in anyone’s best interest for an overpriced house to stay on the market too long because it raises questions about the value of the other houses.  Nor it is in the best interest for a house to be undervalued – that too brings down the value of the other houses.  It is in everyone’s best interest that all the houses are correctly priced.  If this could be accomplished, then a discount real estate broker can be used saving 2-6 percent on the transaction.  That sounds like real money to me.

Meanwhile, it is in the best interest of all of the neighbors to help all of the other neighbors to improve those things on everyone’s homes that increase correct market value by the most; kitchen, bath remodels and a little landscaping, etc.  Again, this supports the value of everyone’s house and improves people’s decisions on how to invest their home improvement money.  Wow, that sounds like real money too.

A sample of persons living in a community would surely reveal a whole range of specialized knowledge useful to others in the neighborhood. Neighborhood watch organizations are better crime deterrents than police patrols.  Further, local contractors, banks, stores, and businesses would love to target such an organized and focused group of people. They may even pay the community for advertising on the site… cha ching!  Nobody would dare provide poor service since reputations would be quickly damaged on the community forum; likewise, disputes are handled quickly and equitably since it is everyone’s best interest to do so…

Now for the derivative:

The number one attribute for increasing the value of a home is a good neighborhood.

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The Ingenesist Project

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On October 17, 2008

In General Information

The Ingenesist Project; Putting an End to Debt Economics

The U.S. National Debt is over 10 trillion dollars. Assuming deficit spending stops today, every man, woman, and child in the US is responsible for $33,500.00.

This means that $33,500.00 of every person’s productivity has already been spent. Obviously, the only way to pay the debt is to increase every person’s productivity by exactly $33,500.00.

The only sustainably way to increase human productivity is innovation. The Ingenesist Project is an open source economic development program that will meet this challenge head-on by inducing an Innovation Economy.

The Innovation Economy:

The Ingenesist Project has identified three relatively simple web applications which, when applied to Social Networks, will allow human intellect, social capital, and creativity to become tangible outside the construct of Wall Street, Corporations, and Government.

The Ingenesist Project will build a mirror economy trading rallods (‘dollar’ spelled backwards) in an innovation economy. Rallods will be backed by “innovation” whereas dollars are backed by “debt”, hence, a mirror economy.

The Ingenesist Project has a Patent Pending for an Innovation Banking System and will release all rights to the public domain. By definition, The Ingenesist Project holds 10 Trillion rallods – and counting – to spend on development.

The Ingenesist Project will generously award rallods on a reputation scale for posts to The Ingenesist Project public forum toward the design, development, and improvement of the three web application (did I mention TIP has 10 million million rallods to blow?).

The New ‘Stock’ Market

Countless “new-to-the-world” business plans and patentable methods, systems, and devices will result from the The Ingenesist Project.

Entrepreneurs are encouraged to patent, protect, or contain all intellectual property that they develop and become as wealthy as they possibly can under the condition that they pay royalties, equity, or options to their knowledge inventory.

The entrepreneur’s “Secret-Sauce”, however, must be shared with The Ingenesist Project in order to improve the Percentile Search Engine Algorithm for the benefit of the public domain.

Participants eventually be able to trade services among each other in Rallods.

Objective:

Deficit spending is unsustainable. The existing financial system has exceeded its ability to pay back the debt and is being consumed by the interest on this debt.

As the dollar crashes, society will need an alternate economy to trade upon – one whose currency is backed by something tangible – our own productivity!

The dollar may eventually peg at some exchange rate to the Rallod.

More Information:

Please review www.Ingenesist.com
Please review Articles in Sequence (18 short articles explain the concept)
Please review Patent Pending

<a href=”http://technorati.com/claim/qy3cxbstqg” rel=”me”>Technorati Profile</a>

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INGENESIST PROJECT: Submission to the 10^100

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On October 8, 2008

In General Information

INGENESIST PROJECT: Submission to the 10^100 Innovation Contest; www.project10tothe100.com

Single sentence:
The Ingenesist Project is an open source economic development program to induce the Innovation Economy utilizing Social Networks.

Tell us more (300 words)
The current financial system has reached the limits of its effectiveness. Interest on debt has exceeded the system’s ability to pay it off. But debt is simply a promissory note on future productivity – any caveman can tell us that the only way to increase productivity today is to innovate yesterday, not tomorrow.

In modern times, this means that the only way to sustainably create more money tomorrow is to innovate today. This is the flaw on Wall Street that Innovation Economics will correct.

Ingenesist has specified three simple web applications when applied to Social Networks, will allow Knowledge to become tangible outside of the organizational construct of a corporation, government, or academia. To develop these applications would unleash substantial innovation and wealth in society.

*The Knowledge Inventory
*The Percentile Search engine
*The Innovation Bank

Knowledge is an excellent tangible asset upon which to peg a currency – better than Gold, Silver, or Debt.

The factors of production for an Innovation Economy are Social Capital, Creative Capital, and Intellectual Capital. The knowledge Inventory classifies knowledge assets in social networks. The Percentile Search Engine assembles unique knowledge asset combinations and returns their probability of executing a given business objective. The Innovation Bank matches most worthy knowledge surplus to most worthy knowledge deficit. Finally, entrepreneurs elevate knowledge assets from lower states to higher states of productivity thereby creating wealth in communities.

By analogy; in the early 1800’s Eli Whitney performed a demonstration for members of Congress by disassembling 10 working muskets, scrambling the pieces and reassembled 10 working muskets. It may seem trivial to us today, but that simple feat astonished the world; it led to the industrial revolution, and unlocked a vast amount of innovation and wealth creation. Innovation Economics is the modern day equivalent.
What Problem does it solve (150 words)?

Technological change must always precede economy growth. We are going about the process of globalization as if economic growth can precede technological change. This simple reversal is the cause for much of what is unsustainable in the world today. Innovation Economics corrects this flaw.

To make knowledge assets tangible is the Holy Grail of financial accounting. The Ingenesist Project asserts that knowledge assets are not intangible, they are simply invisible – this is a much easier problem to solve. Innovation economics solves this problem.

True valuation of knowledge assets allows for direct capitalization of people and their social, creative, and intellectual capital. Networks of knowledge assets form a new type of corporation that is fault tolerant, self regulating, risk diversified, and responsive to social priorities. Wall Street becomes the steward instead of the master. The whole game changes.

If it becomes a reality, what happens (150 words)?
If Innovation Economics becomes a reality, Social Networks will become the driving force of economic growth because human knowledge (as social capital, creative capital, and intellectual capital) can be capitalized directly. Creative knowledge workers would benefit most initially.

Eventually, publically traded Innovation Bonds backed by productivity gains will replace venture capital at vastly reduced risk and cost thereby unleashing an extraordinary amount of primary and tangential innovation creating a virtuous circle.

Areas of low productivity, such as poor communities and under-privileged populations will become targets for highest returns on innovation applications. Millions of new-to-the-world businesses will emerge and nearly all existing businesses will become more efficient where human knowledge is tangible and free to assemble itself in infinite, diverse, and strategic combinations.

If done correctly, eventually most people on Earth would benefit by freedom from the shackles of debt economics.

What are the initial steps to make it happen (150 words)?

Phase 1: The initial steps are: publish our research to a wider audience, prosecute our patent application (USPTO: 20070226361), release it to public property, and begin receiving public input.

Phase 2: Publish several animated videos which describe step-by-step the role that Social Networks must play to induce the Innovation Economy. Collect more input.

Phase 3: Create an open source development platform where ideas can be collected from the global community on how to develop the three web applications specified herein.

Phase 4: Develop and release common architecture web applications for The Knowledge Inventory, The Percentile Search Engine, and The Innovation Bank.

Phase 5: Exist indefinitely as an NGO to keep the game fair and build out emerging opportunities as needed.

What is the optimal Outcome and how is it measured (150 words)?
The intended outcome is for the innovation economy to arise from the knowledge economy as the next level of economic development. The optimal result would be an improved wider distribution of wealth and the transfer of corporate prioritization to communities regarding what gets innovated and what does not. Or likewise, which existing markets dynamics are disrupted and which are not. The optimal outcome would be the emergence of sustainable enterprise over forest-to-dump consumerism.

Metrics are inherent to the algorithm of the Percentile Search Engine as follows: innovation is proportional to the rate of change of knowledge with respect to time and knowledge is proportional to the rate of change of information with respect to time. Differential Calculus is the mathematical tool used to monitor all performance indicators of this system. In fact, all of the analytical methods of finance similarly apply to knowledge assets, by design.

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A Few Predictions for the Innovation Economy

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On September 18, 2008

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Here are a A Few Predictions for the Innovation Economy

Social Network will become the corporate structure of the future. They will spit out start-ups at an astonishing rate.

The “resume system” will be banished forever possibly earning the title of the cruelest human invention since the lobotomy.

The University System will be challenged – the relevance of the college degree will be questioned in an economy that favors unique combination of knowledge assets rather than everyone having the same “degree”.

Everyone will have visibility of supply and demand for knowledge assets meaning that employers and employees will have equal information about cost, availability, and demand.

Creative knowledge workers will earn micro-royalties for their participation in thousands of brainstorming sessions and product development discussions. Earnings will be shared openly and the percentile Search Engine.

The new Patent will be the “Secret Sauces” – the algorithm that entrepreneurs will develop to select their knowledge assets when producing specific innovation.

Teachers will forego salary in favor of an equity position in their students. The best teachers will make the most money. Universities will forego tuition in favor of an equity position in students; the best students attract the best mentors and universities. Apprenticeship will become commonplace.

The knowledge inventory and Percentile Search Engine system rewards people for doing what they are most passionate about. The dominant strategy for all players in an Innovation Economy (that which produces the most revenue) is for participants to pursue what they are naturally good at and passionate for – as long as there is a market for it.

Innovation bonds will return 80% interest or more with near-zero risk. Institutional investors, insurance reserves, and foreign investors will flood the market with venture capital.

Knowledge workers will outsource management.

The Fed will peg the dollar to productivity, not gold or silver – interest on deposits will track productivity increases due to innovation.

Social priorities will impact what gets invented or what stays on the shelf; Global Warming, Alternative Energy, Sustainable environments will have net positive business cases.

The flaw in market economics will be reversed. Technological change will precede economic growth eliminating the economics of debt (ref video). The financial system will be restored to a sustainable condition.

We know that innovation is the engine of all wealth creation and it will live in an integrated system. Knowledge will be reformatted to emulate a financial instrument.

A good article from business week

A great Blog: Jay Deragon and the relationship economy

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The Capitalization of Knowledge – Innovation Bonds

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On September 18, 2008

In General Information

With a computer readable knowledge inventory, local communities of practice, a percentile search engine algorithm, and the virtuous circle of finance, then future innovation cash flows can be predicted much more accurately and with far lower risk than with, say, the venture capitalists acting alone.

Were risk is predictable, cash flows are predictable and the portfolio of innovations can be diversified so if one business fails there is an equal chance that another will succeed and the risks cancel each other out. The cash flow of all the innovation enterprises can be combined into a single large steady cash flow. Just like companies do to raise money for expansion, the innovation bank can issue innovation bonds on the open market. The revenue from selling Innovation Bonds can return to the community to finance innovation and fund wealth creation at very low interest rates compared with venture capital today.

With a lower cost of venture capital and a system that supports open source innovation an astonishing amount of innovation will be unleashed in society.

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The Capitalization of Knowledge – The Virtuous Circle

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On September 18, 2008

In General Information

We have set up a new game for entrepreneurs to play called Innovation Economics. We have defined a currency and an inventory where knowledge is visible outside the construct of the corporation – and resident in social networks. We have also described a way for entrepreneurs to visualize the knowledge asset and the supply and the demand for knowledge assets. We have given them a tool for matching assets for profit. We have described how social networks will keep the game fair. We have outlined the structure of new business plans; the brain storming session, product development cycle, the neural network, and the multiplier effect. Future businesses will be built upon combination of these four structures and whatever else entrepreneurs can dream up.

We have described all of the pieces needed to form a new economy. Now we need to connect with the financial markets so that knowledge is readily convertible to other currencies.

For review;

With the financial bank, the entrepreneur assumes that they have the knowledge to execute a business plan and then they look for the money. The risk is that the entrepreneur does not in fact have enough knowledge.

With the Innovation Bank, we assume that we have the money, and we go to the bank to search for the knowledge. The risk is not having enough money to purchase sufficient expertise.

With both banks acting together – the risks cancel each other out and the innovation economy tends toward a ‘risk free’ cycle; the more knowledge you can assemble, the more money you can borrow. The more money you can assemble, the more knowledge you can assemble.

Now we have a virtuous circle. The more knowledge you have, the more money you can borrow; and the more money you have, the more knowledge you can borrow.

There is no shortage of money circling the globe – only a shortage of risk free places to put the money. The innovation economy is an environment of very high return for a very low risk and will attract a great deal of money to fund innovation enterprise.

Earlier we demonstrated that money represents human productivity. It follows that the places that have the greatest potential for increasing human productivity can create the greatest amount of wealth. Therefore, poor areas and marginalized economies with under utilized knowledge inventories or the injection of specific knowledge inventories, become the highest ROI centers in a risk-free system; a condition the explicitly favors the wealth equalization rather than wealth disparity.

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The Knowledge Inventory; Part 2

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On September 17, 2008

In General Information

Suppose we used the Dewey Decimal System to write a resume. A person could be described as a series of numbers instead of words and computers can search the numbers as they do key words today.

For example: 302, 307, 330, 607, 17, 500, 519

This person has experience in social interactions, communities, economics, educational research, ethics, natural sciences, statistical analysis

While memories of high school librarians may make us cringe, the computer loves numbers and classifications in this format. This will be important especially where knowledge is very specific. However, this simple list of numbers does not capture the knowledge of a person any better than the flawed “key word” search system that we are trying to replace. So we need to do something more.

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 at your brain, we would discover a huge network of experiences, relationships, books read, lessons learned, and people encountered. We would find a system of knowledge rather than random facts. 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.

Somehow we need to reflect this on our computer readable resume.

The Universal Decimal Classification (UDC) System was built on top of Dewey for precisely this reason, to catalog complex and dynamic knowledge. The UDC system uses symbols to connect and relate the categories.

• Addition (+) allows for a string of subjects to be listed together.

• Forward slash (/) defines a range – or a “system” of subjects matter.

• Colon (:) identifies categories that are related like; sports and medicine, ethics and law; innovation and economics.

• We can even employ Boolean Operations such as IF, AND, OR, NOT statements. For example; we can say Polo IF Horses NOT water OR trade marks

• In a Global Economy, we can employ language and culture assets as well.

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

For example: {20,12};[302+307], (330):[607+17]+[500/519]

Now we see that a computer language is emerging for human knowledge. This “resume” is for a specialist in Social systems and communities of practice. Knowledgeable in economics related to educational research, ethics, and natural sciences. They also employ statistical analysis in their work and can do it all in either English and Spanish

This is starting to demonstrate several key advantages:

1. It is Infinite and expandable to any field of knowledge
2. Paints a picture of knowledge not simply a list of information about a person.
3. Machine programmable and machine readable.
4. knowledge of several people can be combined to represent the knowledge inventory of a team, group, or company

We are getting closer to the elusive true “Knowledge Asset”. Part 3 will demonstrate how knowledge can be made to look like a buck, walk like a buck, and quack like a buck.

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The Knowledge Inventory; Part 1

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On September 17, 2008

In General Information

We identified the 5 essential elements of a market economy. Then, we discussed the currency of the Innovation Economy; people trade information and turn it into knowledge and new ideas using factors of production; Intellectual Capital Creative Capital and Social Capital. Now we’ll discuss the inventory strategy for knowledge assets.

Most companies have an inventory of every nut, rivet, or panel that they need to build something of value. Innovation Economics will be no different – we need an inventory of knowledge in our community so that we can build things with it.

Google and Wikipedia offer us a huge inventory of information – we read that information and turn it into knowledge through a mental process. Since knowledge can only exist inside people, we need a catalog of what people know. Our Knowledge inventory must be able to catalog and classify all human knowledge from the past, present, and future. It must account for Intellectual Capital, Social Capital, and Creative Capital. If done correctly, our knowledge inventory will begin to take on the characteristics of assets – knowledge will look like money.

Suppose that we say your resume is like a book about you. This isn’t too strange since every book that you have read has become part of your knowledge inventory. Every conversation with another person has become part of your inventory. Every new idea that you have tried, successful of failed, is part of your 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 as well.

The Dewey Decimal System is a way to catalog information. Even though Dewey is somewhat archaic, it provides a good example of how a knowledge inventory should be structured. Entrepreneurs will improve it if needed – so let’s just understand the concept for now.

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. For example, the term 519 identifies a piece of information. The main category is 5 = natural sciences, sub category is 1 = mathematics, and the next sub category is 9 = probabilities. So to have the number 519 on your resume says that you have knowledge and can solve problems related to probability and statistics.

You will also notice that some Dewey categories favor Social Capital, some favor Creative Capital, and some favor intellectual capital. While a knowledge inventory may sound daunting, computers and modern Internet applications can now do much of the work for us – in fact, they already are doing this work.

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