The Ingenesist Project

The Next Economic Paradigm

Tag: social contract

The Flight Of The New Entrepreneur

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On April 20, 2011

In General Information

Structural Folds: Generative Disruption in Overlapping Groups

Entrepreneurship is the invisible hand of Capitalism.  Basically, this means that you can have all the Land, Labor, and Capital in the world, but unless you have entrepreneurs to interact with it, you don’t have much of an economy.

Social Contract Broker

Most social contracts are made today by Brokers who have the ability to connect supply and demand.  Brokers, for the most part, gain their influence from the natural or unnatural divisions that may normally restrain information from the supply side to the demand side, and vice versa.  “Social Brokers” are extremely important for exchanging information across different parts of a community that do not normally intermix.  However, such “Trust Economics” depends on a closed system where community accountability is strong.

Trust economics and an open economy are mutually exclusive.

In an open economy, the job of the broker shifts to the job of administrating social accountability – a completely different animal.  The moral hazard, of course, is that communities with great entrepreneurial potential are instead brokered for profit. Many “special interests” have crept up through the years in everything from banking, real estate, second-hand markets, international trade, airlines, politics, and even corporate M&A activity – that protect broker interests.  As a result, brokers create structured holes at the expense of social inter-cohesion.

A Different Approach

At Social Flights, we take a different approach.  We unite several completely different communities; travelers, vendors, and airplane operator around a shared airplane asset.  In the middle, we place a community leader – an entrepreneur who is enabled to see all the diverse connections and combine information in new and useful forms.

Instead of forming better brokers as a principle driver of economic growth, Social Flights introduces a Value Game that forms a greater degree of intercohesion among disparate communities simulating a closed economy within an open economy.

The Social Flights Manifesto

We know that there are millions and millions of entrepreneurs in our communities who can create tremendous value if they are given a game that they can win – or not get ripped off.  The underlying entrepreneurial force is that people will always combine several old ideas in new ways to create the new ideas that incite new actions.  We depend on entrepreneurs to drive these ideas and drive these actions.  For this reason, it is in our best interest to set them free and keep them free.

The Social Broker’s Commission: Social Profit

We create an environment where it is in the best interest for communities to share deep information in a closed economy where trust dynamics can take effect.  Then we provide a way to transport their trust economy into the open economy.  But it goes much farther than that – it goes as far as an airplane can take you.

(Note: this article was inspired by segments of two wonderful papers titled: Structural Folds: Generative Disruption in Overlapping Groups, by Bala ́zs Vedres Central European University and David Stark Columbia University and Structured Holes Versus Network Closure as Social Capital – By Ronald S. Burt, University of Chicago)

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Should Educators Command an Equity Position in Students?

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On February 19, 2010

In General Information

The idea that a mentor may take an equity position in a protege is not new – it happens in families and extended families as elders are fully aware that the children will provide for the family in the future. The connection is not to hard to grasp that it’s in everyone’s best interest to help the kids – all of the kids. This is the social contract.

Somehow that connection gets lost when everyone is competing for the same set of limited jobs and everyone is responding to the pressures of insurmountable debt to banking institutions.

As Social currencies begin to replace the decaying monetary currency, a new set of social instruments will arise. The scope and range of new social contracts is unlimited and should be expected to increase substantially. These social contracts will become tangible in a communities and may he used in a system of trade that stores and transfers knowledge efficiently in a community.

If a father can teach a son how to become successful in the family business, why can’t a community of fathers teach a community of sons to be successful in a community of businesses? This may need to happen whether we like it or not.

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Video: Intellectual Property in the Social Media Cloud

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On February 3, 2010

In General Information

The Patent system is slow, static, and expensive. Sure it’s great for corporations and wealthy institutions, but what about the rest of us? How do we get paid for our intellectual property? We make rapid fire decisions every day that can make or break markets – who’s got time to patent?

Or maybe the last thing that Wall Street wants is for Engineers, Architects, designers, and creative people to get “royalties” on their work. That is What Wall Street does, they collect the royalties of the creative people in America….until now. Social media is a social contract, IP is our currency.

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Is a social contract legally binding…and who cares?

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On July 13, 2009

In General Information

Trillions of dollars in play:

Trillions upon trillions of dollars worth of value that once coursed through the veins of Market Capitalism is being transferred to social media from the legacy economy now stifled by insurmountable debt.  These numbers are indeed spectacular because they account for the invisible value “lost”, and most importantly, the calculations provides clues on how to “find” it again.

What is a Social Contract worth?

According to Legacy Economics, the term “social contract” describes a broad class of theories that try to explain the ways in which people maintain social order. The notion of the social contract implies that people give up some rights to a government or other authority in order to receive or maintain social order. Otherwise, we would each have unlimited natural freedoms, including the “right to all things” and thus the freedom to harm all who threaten our own self-preservation; there would be an endless “war of all against all”.

Take me to your leader

By contrast, Social Media begs the questions: who or what exactly is that authority?  Isn’t the greatness of the Internet the lack of an all powerful authority? So why aren’t we at a war of all against all?  What keeps social media at peace instead of an endless flame war?  Whatever this alien is, it is capturing and storing trillions upon trillions of dollars of value away from the legacy economy, but where?

Separating facts from fiction

According to the old economy, it is a “fact” that human knowledge is an “intangible asset” of which there are only two types defined:

1. Legal intangibles such as trade secrets, copyrights, patents, and goodwill (brands).

2. Competitive intangibles such as knowledge activities, collaboration activities, leverage activities, and structural activities.

However, when we consider social media;

1.    There is no law governing the phenomenon – so there are no legal intangibles.

2.    Collaboration, leveraging and structural activities are not being conducted in a competitive environment (the context of one “Company” against another).

So, the definition fails to account for knowledge assets in social media. The Ingenesist Project discovers the lost trillions simply by treating the social contract like a legal contract.

Tangible assets are managed by contracts

Technically, any oral agreement between two parties can constitute a binding legal contract. The legacy economy limitation, however, is that only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck.

But social media, email, and blog posts, etc., all constitute vast “written” agreements and material evidence as far as most people are concerned.   So what is missing?  Are we waiting for permission from government, Wall Street, corporations, attorneys, or the Federal Reserve to say it is OK for people to stop competing with each other or to renegotiate the terms of the social contract (and currency of exchange)?

The mystery is no mystery

Guess what, there is nothing there. Absolutely nothing except philosophical barriers carried over from legacy economics built upon political division. The mystery is that there is no mystery except using social media to unite people.  After all, the biggest Brand in the world is a Community Organizer.  Such calculation provides clues on how to “find” value again.

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1.3 Trillion Dollar Professional Contact Market

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On June 30, 2009

In General Information

“Hey, I know a guy who owes me a favor …”

It is only a matter of time until professional contacts will be for sale.  The problem is that the ROI (return on investment model) is such a poor valuation tool for social media. Another valuation tool used in finance is called Real Options.  An option is the right, without the obligation, to act on an opportunity at some time in the future.  Social Networks, friends, family, and professional contacts behave much more along these lines.

Five Easy Pieces:

While the calculation for the value of an option is complex, the things we need to plug in are fairly simple in the context of social media:

1.    There must be an inventory of the assets
2.    The future date when the asset can be acquired must be known
3.    The cost of acquiring the asset must be known
4.    The value effects on the enterprise must be estimated
5.    The uncertainty related to the asset must be estimated

The term “asset” in social media space may include: Knowledge, skill, an undertaking of a new project, or the generation of a new idea, etc.

The Social Networking Manifesto:

The objective of the building a social network is to know where the knowledge assets are, how much they can help you, how much they cost to exercise, and the certainty that they will be applicable, available and useful when you need them.   Conversely, the best way to increase the value of a social network is to be visible to others, tell people what you can do for them, tell people what you need from them, and establish a reputation for reliability.

Most importantly, everyone must have the right, without the obligation, to accept or decline the opportunity.  This is what jump starts ‘supply and demand’ and makes a market a market

Let’s consider all options:

To estimate the value of an option to call on anyone in your network use a financial option calculator tool on the web and plugged in social media numbers.  Let’s use Linkedin as the knowledge inventory; 40 million knowledge assets also hold options with their contacts. Say that the expiration date is 1 year (for tax reasons).  Assume the market value of their skill is 100 dollars and that at some point in the next year, the value of their skill relative to yourself becomes 200 dollars. The right to buy the asset at the earlier price is worth a premium.  Suppose that the volatility of the asset is 50% and the interest rate is 7%.

The value of the “call” is worth about $3.47 dollars.  The Call is an option contract that gives the holder the right to buy a certain quantity of an underlying security from the writer of the option, at a specified price up to the specified expiration date.

The value of options in a network:

For the above scenario assuming all assets are equal in price of 100 dollars; if someone has 10,000 1st and 2nd level contacts on Linkedin, the value of their implied call option is about 34,700 dollars.  If Linkedin were a stock market, the value of the social contracts that people have with each other is 34K x 40M = 1.3 Trillion Dollars market value for the contracts that people hold and trade.

This is not even the value of the transaction – only the right to have a transaction. The value of the social contract is in the conversations that they hold.  Contracts are a financial instrument that can be traded, combined, diversified, and aggregated for real money.  It’s only a matter of time.

The Ingenesist Project specifies the structure of an innovation economy where a knowledge inventory, a percentile search engine, and an innovation bank will facilitate and aggregate the 5 components of Option Valuation.  Social media applications form the operating system for the market in options.

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The Trojan Horse; A Classic Social Fraud

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On January 12, 2009

In General Information

Periods of change in any market open the doors for abuse as control systems often lag behind the waves.  This is especially true for social capitalism where the social contract is changing rapidly and the enforcement mechanisms are largely non-existent.

All markets must have effective vetting mechanisms in order for the market to be viable.  If the game is not fair – real investors and real entrepreneurs don’t walk, they run…away.  While much fraud is obvious and predictable, the most damaging is the type that nobody sees coming but can destroy the standard of trust for everyone, forever, like the Trojan horse.

Hypothetical Case Study:

A self-proclaimed innovation consultant runs a blog out of anywhere USA.  They have a catchy domain name and their ranking is unusually high for a 5 month old blog with splashy but infrequent articles.

In the spirit of the X-prize, the blogger promotes an Innovation Contest offering $60,000 dollars worth of his company’s “Marketing Consultation” services as a prize to the next innovation that will change the world! … as judged by a “panel of experts”.  The blogger encourages all entrants to send their social network to vote up their innovation as this will weigh heavily into the judging.  Many people submit their work and diligently mine their Facebook and Linkedin networks for the vote.

The contest ends and the winning idea earned zero external votes but it is in an industry that is very popular in mainstream media and slated for government stimulus.  However, it is clearly not up to par with many of the other entrants.  Upon inquiry, the blog author does not specify the criteria for judging, he does not itemize the prize, he does not publish his “panel of experts” and he does not post any dissenting opinions or inquiries submitted to the moderated comments.

A few days later, a press release appears on Google news; “$60,000 dollar innovation contest prize awarded for breakthrough in targeted industry”.  Leading tech media pick up the story and the “consultant” is hailed for defending the struggle of the unsung heroes of the innovation economy.  It appears to the contestants that the consultant is promoting himself at their expense.

So, what’s wrong with that?

First; for all of the innovators who submit themselves to judgment and expend their social capital on votes, the integrity of the contest must be bullet-proof.  The definition of the objective, the judges, and judging criteria must be specified absolutely. Otherwise, good ideas will not be shared.

Second; if potential sponsors of a legitimate X-prize-type contest are challenged in their sincerity to promote world-changing innovation, and instead are accused of self-promotion and media bias, a tremendously valuable resource of the innovation economy will be squandered.

Finally; if a person’s social networks are mobilized to vote in any type of contest – they must know that the time they invest will be respected and valued or they will no longer participate in other contests.

To this day, the clever ruse of the Trojans remains the fraud of choice for new market technologies. It has also marked the standard of trust that we hold forth in our relationships and invitation to our inner circle. Sharing of one’s friends is a deeply intimate act of faith and trust many times greater than sharing one’s ideas. The caregivers, those who hold forth the willingness to nurture that trust, must be qualified as stewards of the public endowment of social capital, creative capital, and intellectual capital.

Social Capitalism depends heavily on the function and performance of communities. A “paranoid bias” could be vastly damaging – possibly constraining the next great paradigm of economic development from achieving critical mass.   Social Capitalism is not a game, it’s serious business.

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