The Ingenesist Project

The Next Economic Paradigm

Tag: surplus

The Innovation Banker

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On September 22, 2010

In General Information

Future of Banking

When I use the term “Innovation Bank”, people conjure up the image of a cheery place where anticipation reigns as starry eyed depositors arrange their intellectual property in neat cubby boxes, Patents fly like cash register receipts and companies troll the halls looking for a cure for their bottom line blues.

This is not exactly what we have in mind, nor is it too far off either. An innovation Bank is simply a knowledge inventory that contains knowledge assets that exists in the format of a financial instrument and can be deployed for the purposes of increasing productivity.  In the process, it makes 10X more of itself every time it is deployed.  It mints its own money.

The Innovation Banker

This is not much different than a financial bank. In fact, in the financial bank, everyone assumes the borrower has the knowledge to execute the business plan and the bank lends the money. Oh, by the way, the money makes more of itself  10X over (fractional reserve system) every time it is deployed.

With the innovation bank, everyone assumes the entrepreneur has the money to execute the plan, and the seek to borrow the knowledge. Other than that, they can be considered identical. The key is in the scope, depth, and format in which the knowledge assets live in a community as well as the ability to track and preserve the creation of new knowledge in a community.  An innovation banker is a knowledge banker

A Virtuous Circle

Together with the financial banking, these two system engage in the dance of the virtuous circle of innovation enterprise. Apart, they collapse into the swirling cesspool of eternal debt and infinite interest (pun intended).

Ingenesist.com

Music by Phil Felicia

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Social Currency And The Innovation Bank

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On February 13, 2010

In General Information

The real estate market is trashed, money markets are unstable, commodities are in the tank, the banking system is corrupted to the core, inflation is looming around every corner, and the politicians are engorging themselves in a game of Cerebral Gridlock.

Literally, there is no safe place to put your money. Instead, people are investing their productivity in social media – social media is simply a storage device for knowledge assets. Soon it will become a stock exchange for knowledge assets. Investors should not take this lightly – the best place to store your money is in the real productivity of real people.

People are trading knowledge assets in social media. This exchange is denominated by a conversational currency. If we consider the structure of conversations and compare that to both the structure of social networks AND the structure of our financial system, we see a huge opportunity to develop an alternate financial system that can capitalize and securitize knowledge assets in social media.

Ingenesist.com

Music by Phil Felicia

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Building a Better Entrepreneur; Google 10^100

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On September 27, 2009

In General Information

Google 10^100 award voting is Launched.  There are two sectors that we believe would have the greatest impact on the greatest amount of people; building a better banking system and funding social entrepreneurs.  You can’t have one without the other – if Google funds these two sectors in concert, the outcome would be incredible.

Build A Better Bank

In the old banking system we assume that we have the knowledge to execute a business plan and we go to the bank to borrow the money.  In the new banking system, we will assume we have the money and we go off in search of the knowledge.  Social Media is an excellent “public accounting system” for knowledge assets.

Our current banking system has gotten it backwards.

Technological change must always precede economic growth. The supranational currency may be backed by productivity and not debt.  Social media provides an excellent platform upon which to design such a banking system. People trade “social currency” at a tremendous rate.  This is evidenced by the amount of destructive innovation is occurring in many legacy sectors due to social media.

Better Banking Tools for everyone

“Partner with banks and technology companies to increase the reach of financial services across the world. Users submitted numerous ideas that seek to improve the quality of people’s lives by offering new, more convenient and more sophisticated banking services. Specific suggestions include inexpensive village-based banking kiosks for developing countries; an SMS solution geared toward mobile networks; and ideas for implementing banking services into school curriculums”.

Suggestions that inspired this idea

1.    Enable prepaid cell phone bank accounts for millions of people working in the informal economy
2.    Create a community-level electronic banking system for rural areas
3.    Build IT-enabled kiosks which provide access to financial services
4.    Create a single world bank or supra-national currency, uniform rules and transparent public accounting

Fund Social Entrepreneurs

Venture Capital is ridiculously expensive. Corporate innovation serves shareholders value over social priorities.  Some say that the financial risk of funding innovation is too high. The top ten reasons why start-ups fail are due to knowledge deficits, not money deficits.  A new banking system that trades knowledge as currency would solve this problem.

The key is to match most worthy knowledge surplus to most worthy knowledge deficit.  Google is perfectly able to build a search app for knowledge assets if there were an inventory of knowledge assets.  With the most worthy match, Risk can be reduced and new financial instruments can be developed such as the innovation bond, innovation insurance, tangential innovation markets, and destructive innovation transition contingency options, etc.

Help social entrepreneurs drive change

Create a fund to support social entrepreneurship. This idea was inspired by a number of user proposals focused on “social entrepreneurs” — individuals and organizations who use entrepreneurial techniques to build ventures focused on attacking social problems and fomenting change. Specific relevant ideas include establishing schools that teach entrepreneurial skills in rural areas; supporting entrepreneurs in underdeveloped communities; and creating an entity to provide capital and training to help entrepreneurs build viable businesses and catalyze sustained community change.

Suggestions that inspired this idea

1.    Provide targeted capital and business training to help young entrepreneurs build viable businesses and catalyze sustained community change
2.    Create a non-profit, venture capital-like revolving fund to invest in high-impact local entrepreneurs
3.    Send young American entrepreneurs to underdeveloped communities to help create small businesses that would economically benefit those communities
4.    Create schools in rural areas to teach local people how to become entrepreneurs
5.    Create a private equity fund to help immigrants in developed countries finance business development in their countries of origin

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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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Business Plans of the Innovation Economy

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On December 3, 2008

In General Information

There is no shortage of money in the world but there is plenty of risk. Most business failures are due to knowledge deficits such as the inexperienced management team, a poor assessment of market conditions, underestimating the amount of money needed, underestimating a competitor, loss of a key employee, poor understanding of the technology, etc. These are knowledge problems not financial problems, yet they can sink the most promising companies.

To solve the knowledge problems is to decrease the risk of innovating. To decrease the risk of innovating will decrease the cost of venture capital. Decreased cost of money to innovate will induce innovation economics.

With a computer enabled knowledge inventory in the correct format and a Percentile Search Engine that returns probabilities on strategic combination of assets, the business plan of the innovation economy becomes very simple; The Innovation Bank does one thing very well over and over again – it matches correct knowledge surplus with the correct knowledge deficit at any point in time for any strategic reason. This process is then repeated over and over in infinite different combination.

The first business structure is made up from two single knowledge transactions arranged in parallel – like a parallel circuit. This arrangement represents a brainstorming session between two or more people.

The Percentile Search Engine matches the person with the knowledge supply to a person with the knowledge demand. The transaction can be as simple as a conversation, sketch on a napkin, or white board flow chart. Each time the cycle goes around the new ideas of one person ignites a new ideas in the other person. Each time the transaction occurs, there is a net increase of new knowledge. The conclusion is usually some tangible action, system, or method. The conversation stops when no new knowledge can be created in either person – or when people just get tired (rate of change approaches zero).

The entrepreneur is very interested in the outcome of these conversations and uses the Percentile Search Engine to select, regulate, modify, adjust, analyze, and record the transactions. The Percentile Search Engine is used again to select diverse participants for the parallel business structure with the intention of producing a specific outcome.

The second business structure is made up from two single knowledge transactions arranged in series – like a series circuit. This arrangement represents the product development cycle.

Again, the Percentile Search Engine matches the person with the knowledge supply to a person with the knowledge demand. The transaction is a simple conversation and the outcome is a prototype process, system, or method. Each step in the series is an improvement to the method. Each time the transaction occurs, there is a net increase of new knowledge. The conclusion is the development of the system, business plan, or method. The conversation stops when the product is ready for another iteration or the market. The Percentile Search Engine is used again to select diverse participants to continue the series business structure with the intention of producing a specific outcome.

The entrepreneur is very interested in the outcome of these iterations and uses the Percentile Search Engine to select, regulate, modify, adjust, analyze, and record the transactions.

Now if we mix the parallel and series circuits, we form what looks like a neural network of parallel and series networks. Now, we are squarely in the regime of “designer” Social Networks. Participants are paid in micro-royalties instead of wages. By definition, a relatively small input produces a very large output – if it can be captured.  This will be the source of wealth creation from the new corporations of the Innovation Economy.

We determined in an earlier chapter that information, knowledge and innovation are related as mathematical derivatives.  The accounting system will identify innovation by measuring the rate of change of knowledge transfer within a social network.  Any number of current methods, systems, or innovation consultants can deal with this.  Similarly, in order to identify high rates of change of knowledge in a social network, the accounting system will measure high rates of change of information.  This too is quite simple using common systems, methods, consultants and tools.  No new infrastructure is required with the exception of the knowledge inventory, percentile search engine, and innovation bank.

The entrepreneur can now do what they do best; identify assets operating at low productivity and reallocate them to areas of high productivity by running them through an innovation system.  Remember, most businesses fail due to knowledge deficits.  To reduce or eliminate these risks will make the fact or innovation predictable and therefore negotiable.

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Tangible Knowledge; Options and Contingencies

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On November 19, 2008

In General Information

In order for knowledge to become a tangible asset, we need to come to grips with the fact that human knowledge is fluid and mobile, whereas a condo or a piece of machinery is static.  A machine can’t walk away if it does not like their management.

With knowledge assets, the typical “Return on Investment” (ROI) model breaks down.  When assets have a mind of their own, there is no reliable way to calculate ROI without somehow corralling the asset inside some form of closed contract, a corporation, political system, social class, or by introducing barriers to exit, etc.  In the modern financial system, human assets are held tangible by debt obligations – today many people go to work in servitude of debt, not in creation of new ideas.

An option* is the right, without the liability of obligation, to exercise a decision in the future.  Human interaction accommodates this valuation model quite readily; it’s called free-will.  Therefore the option valuation model is an adequate method to assess knowledge assets as a means of making them tangible.

The value of a financial option can be calculated if one knows the following 5 variables: The asset price, the strike price, the date of maturity, the risk free interest rate, and the volatility – or, the odds on the bet.  By contrast, the ROI model requires us to know basically the same things; the cost today, the strike price (future sale price), the date of maturity, the risk free interest rate, and the probability of success – or variance of the expectation.  The equation is just a little different.

Individually, human behavior often appears chaotic and irrational, but in aggregate, we know that human behavior is really quite predictable.  If you put similar people together, you get similar ideas.  If you put extremely different people together, you get extremely unpredictable ideas.  If you put strategic combinations of people together, you should be able to predict the variance of the ideas.  This is all the information we need to place a value on our bet.   If human behavior is predictable, it is tangible.

Suppose we enter into a ROI venture and it fails miserably; the market was wrong or the product was wrong, or the people were wrong, etc.  Even though the investment failed, the knowledge accumulated from the attempt can be exercised in many other projects in the future. While the Patent may turn out to be worthless, the knowledge gained by the team can be used over and over again.  Each person gains a statistical data point in their experience set with which to assess comparable situations in the future.  This is an option and this option has value.  If the team were disbanded without somehow capturing the inventory of new knowledge assets, a very valuable set of options becomes squandered.

Some companies such as Google, try not to kill an idea, they morph the idea into something else.  Free-range knowledge tangibility must achieve those same objectives.  Today we see people building networks on Linkedin – this activity resembles the collection of options on future opportunities.  People post on social media to see and be seen by other knowledge assets as a means of collecting more options for their careers or actions. People would not be doing it if there was no intrinsic value.  The next big leap will happen when knowledge tangibility is married to the financial system through the direct valuation and capitalization of options.  Did I mention there is an equation for that?

The Ingenesist Project specifies a method and system for knowledge inventory that would produce a variance for knowledge assets.  The Percentile Search Engine would pull knowledge assets in combination that diversify variance into a highly predictable surplus assets and deficit assets.   The Innovation Bank would match most worthy surplus to most worthy deficit.  As such, the Innovation Economy itself is now a most worthy option for supporting a feeble financial system.

The ROI model is the mother of all squandered knowledge assets – the very same assets that are really purchased on a project, successful or not, are often willfully abandoned.  All of the parameters of an option valuation model can now be met with social media and The Ingenesist Project integration methods. Free-range knowledge assets can then be directly financed toward business objectives.  The idea of an innovation economy based on knowledge tangibility is well within our grasp technologically, culturally, and systematically.

Social media has an astonishing opportunity to integrate social, creative, and intellectual knowledge assets to trade that single most important part of the puzzle, tangible knowledge assets.  I suspect that this outcome will depend on whether these new tools are treated to an ROI valuation model or on an options valuation model.

* Italic used for clarity

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The Innovation Bank

By

On September 18, 2008

In General Information

So now, what are the entrepreneurs going to do with this percentile search engine?

Entrepreneurs wander the earth looking for valuable things that are being used at a low level of productivity and they move those assets to a higher level of productivity and then pocket the difference, called profit.

Think pet rock, condo conversions, sand, corn, etc.,…it goes on forever.

The entrepreneur needs to have a clear view of what the asset is, the lower level of productivity, and the higher level of productivity of the asset. These three elements are the focus of all business plans. Then they set things in motion and give life to the market system.

When we look at financial banks we see the classic entrepreneurial activity. In the simplest form, banks do little more than find people who have a surplus of money and they match them with people who have a deficit of money.  Bankers have a clear view of the asset, the lower level of productivity and the higher level of productivity for the asset.

They pay a lower interest to the depositor than they do to the borrower and pocket the difference. In addition, they enjoy a multiplier effect that allows them to lend the same money many times effectively creating money from a promise to pay, or debt.

It is in the best interest of the bank to find rich people who will not need their money for a while, and poor people that have the best likelihood of paying the money back in time. This is to minimize the risk that the depositor will pull out their deposits and the risk that the borrower will not pay back the loan. The problem is that some assumptions need to be made, some of which may no longer be valid:

The bank assumes that the borrower has the knowledge required to execute the business plan that they are financing. Unfortunately, the credit score does not predict knowledge on future ventures.  For this reason, new ventures are not easy to finance.

The financial bank makes the assumption that the entrepreneur has the knowledge to execute a business plan that they seek money to fund.

On the other hand, the Innovation Bank makes the assumption that the entrepreneur has the money available to execute the business and is searching for the knowledge to do so.  This service will be required in the innovation economy since no single person can live long enough to possess as much knowledge as is required to manage the complexity of problems that face the World. We will need to mind meld.

The Innovation Bank simply matches most worthy knowledge surplus with most worthy knowledge deficit and a market is born.

The challenge for the innovation Bank is to match the most correct knowledge surplus to the most correct knowledge deficit. This is accomplished with the computer enabled knowledge inventory. A search can be conducted of the supply and demand for knowledge assets. The Percentile Search Engine will calculate the probability that the specific business objective will be successful.

The business plan for the entrepreneur is very simple but the implications are vast.

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The Percentile Search Engine

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On September 17, 2008

In General Information

The Percentile Search Engine is a way of using a computer to make predictions about all types of combinations of knowledge Assets.

Conceptually, the percentile search engine is where all of the equations that we use to analyze financial assets are now applied to knowledge assets. The main characteristic is that the Percentile Search Engine returns probabilities – that is, what’s the probability of success for any number of scenarios.

For example; an entrepreneur may want to know if her team has enough knowledge to execute a business plan. Maybe the team has too much knowledge and they should try something more valuable. Maybe the team does not have enough knowledge and they should find someone else, take training, or try something simpler. The Percentile Search Engine can look into the community and identify the supply and demand of a knowledge asset. If it is unavailable or too expensive, the Percentile Search Engine will even tell them what training they need to increase their probability of success.

The entrepreneur may also want to determine what competitors have a dangerously high probability of competing with her new business. The Search Engine will allow competitors to scan each other’s knowledge inventory to determine how long it would take for their secret sauce copied. They can take then choose to take evasive action, compete, or cooperate. If a key person retires, the entrepreneur would simulate the knowledge that is lost and reassign people strategically. All of these scenarios can be examines prior to spending money. They can be made during the project cycle, or after the project is completed. Lessons learned can be used to adjust the algorithm perfecting it over time.

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

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

Literally thousands of new business plans will emerge from this important new paradigm. Knowledge will become tangible outside of the organizational construct of the corporation. Knowledge combinations will become the new corporate structure. The rate of change of knowledge with respect to time is the key metric and fundamental building block of the innovation economy.

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