Tag: vetting mechanism

I am heavily quoting an article below from the DOW JONES NEWSWIRES written By Tom Barkley because this situation leads us into a discussion about alternate currencies in which Conversational Currency is applicable.

We predict that the structure for an innovation economy will be built on a platform of Social Media where conversational Currency is the currency of trade. We admit that this is a far cry from a declaration of government foreign or domestic, sorry about that. We also admit this is a far cry from what Corporations, Banks, Insurance Companies and traditional media barons would espouse, Ooops.

The best management policy is to accommodate what people are already doing. People are ADOPTING Social Media in a frenzy of applications which were not even predicted by those who developed the platforms – this is a reality, not a fantasy or a blip in the radar screen. Social Media will have an extraordinary role in the value of currency – if people don’t like it, they won’t trade it; Game over. The next Global Currency will be represented by human productivity traded in social media. The most productive country will hold the most currency – this is a game that the US can still win.

WASHINGTON (Dow Jones)–U.S. Federal Reserve Chairman Ben Bernanke waded into the international debate over the fate of the dollar Thursday, pledging to do his part to avoid what he sees as a longer-term risk to the dollar’s status as the world’s predominant reserve currency.

[China and Russia have been the major drivers behind calls for an alternative reserve currency, blaming the U.S. for the global crisis and worried that its growing debt load could pose a further threat to stability. That view gained some additional force this week when World Bank President Robert Zoellick predicted that the dollar would face increasing as a reserve currency and its status would depend on how well the U.S. can manage its debt.]

Here is the Social Media Pitch:

[The G-20’s plan to reinforce country measures to address imbalances through peer reviews “would perhaps strengthen the mechanism” for enforcement, he said.]

Social Currency?

At the end of the day PEER REVIEW will be the global vetting mechanism that supports the value of a currency. What part of Social Currency are we not understanding here?

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YOU are MONEY

By Admin

On September 18, 2009

In General Information

Some HR bloggers are calling for a new profession called “Social Media Administrator”. While there are many opinions and wide agreement about the roles and responsibilities – most of which I fully agree with – I would like to add the following considerations:

The corporate social media administrator should have a direct connection, responsibility and accountability with other social media administrators external to the corporation. Not unlike a board of directors having diverse membership. The membership and reputation of member of a Social Media BOD is also on the line.

Social media is just that, social. It cannot be sequestered fully behind corporate walls and must be open and transparent in it’s message. The Social Media administrator must protect the voices of those who speak. While there is a constitutional amendment for freedom of speech in our government and the basis of democracy, none exists for corporations who use the information or the social media enterprise that hold “possession” of the information for eternity.

A market can only be efficient with adequate vetting mechanisms; the SEC vets Wall Street, The FAA vets Airlines, and the system of Checks and Balances vets government. When the vetting mechanism fails, so too does the market.

Few people can see why this is important largely because the reasoning lies in economics and market theory. Simply put, we are entering a new economic paradigm unlike anything we have ever seen or could imagine. The idea that each and every iota of knowledge, experience, and opinion that exists between your ears behaves like a financial instrument has not fully been explained. YOU are MONEY in every definition of the word. Your productivity supports the value of the dollar. You own your knowledge, it is your property – you can waste it, you can mint more of it, you can borrow it, and you can lend it – and you should be able to capitalize in any currency of your choosing.

The only thing missing is a financial system for your knowledge. If we are smart – and ONLY if we are smart, this system will arise with the continued convergence of social media. Among the KEY elements that MUST be in place is a public accounting system for Social Media Administration.

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Collateralized Innovation Obligations

By Admin

On June 9, 2009

In General Information

Collateralized Debt Obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets. In the case of the current financial crisis, the underlying assets were home mortgages. It is not necessary for the CDO buyer or seller to know who lives in the home and what they produce; the asset is a contract backed by future productivity.

CDOs vary in structure and underlying assets, but the basic principle is the same. To create a CDO, a corporate entity is constructed to hold contracts as collateral and to sell packages of predictable future cash flows to investors. The more money handed out in home loans, the more money could be collected in CDOs

You are a liability.

While corporate leaders proclaim that people are the greatest asset, corporate accounting practices specify otherwise. Employees are an expense and their salaries, benefits, and pensions are liabilities to be reduced any time the opportunity arises. So what’s the problem? Liabilities can’t innovate.

Suppose for a moment that people were in fact an asset on the accounting sheet and their salaries, benefits, and pensions were “investments”.

Collateralized Innovation Obligation (CIO):

The CIO would obviously be a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets, specifically, the output of productive and motivated people.

Like the CDO, a CIO would vary in structure and underlying assets, but the basic principle is the same. To create a CIO, a corporate entity is constructed to hold assets as collateral and to sell predicted future cash flows to investors. It is not necessary for the CIO buyer or seller to know who is innovating or what they are producing; the asset is a contract backed by future changes in productivity. The more money handed out in innovation loans, the more money could be collected in CIOs. For all practical purposes, we could call it an Innovation Bond.

Enter Social Media:

Social media is teaching us an important lesson about innovation. Every time you get a diverse group of people together to share ideas, new ideas form. Every idea is useful as long as it is shared; thousands of bad ideas must expire before the good one appears. Conversational currency is the vetting mechanism of all ideas. While not every good idea becomes a great invention, every great invention is built from good ideas. Machines cannot produce ideas and no single company, country or person holds a monopoly on ideas. Innovation and the creation of all wealth arise from the social, creative, and intellectual interaction of people.

Conversational Currency: The underlying asset

The underlying asset that supports both the Collateralized Debt Obligation and the Collateralized Innovation Obligation is a person and their ideas; one is an asset and the other is a liability. Both types of people go to work every day to interact with other people. They both share ideas and create better ways of doing things. People increase human productivity through fault tolerant networks and support systems. They transform information into knowledge and innovation – and both pay their mortgage.

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The New Economic Paradigm; Part 5: The Entrepreneurs

By Admin

On April 9, 2009

In General Information

There is no shortage of entrepreneurs in this world.

6 Billion of them wander the Earth looking for assets that exists at a low state of productivity waiting to be elevated to a higher state of productivity.

The entrepreneur must first be able to identify an asset as an asset. Next they need to identify the lower level of productivity and they need to be able to imagine the higher potential level of productivity. The entrepreneur must identify and manage some risk, perform leadership tasks; and as a result, elevate the asset to the higher state of productivity. Profit is the difference between the lower and the higher state – minus expenses.

Unfortunately, today this process starts at the forest and ends at the junkyard.

This is how our economic system is organized. The next economic paradigm flips that idea over. Instead of accounting for natural resources as the tangible element and human knowledge as the intangibles element; the next economic paradigm must account for the natural resource as the intangible element and the human knowledge as the tangible element.

The current problem is not that knowledge is intangible; rather, knowledge is simply invisible.

The Ingenesist Project will make knowledge assets visible by provisioning all of the information that an entrepreneur now needs to identify the knowledge asset and the associated states of productivity. Entrepreneurs can then increase human productivity using knowledge assets applied to natural resources, instead of natural resources applied to consumption. The implications are vast.

Returning to the financial analogy:

With a financial bank, the entrepreneur assumes that they have the knowledge required to execute a business plan and the go to the Financial Institution to borrow the money.

With an “Innovation Bank” the entrepreneur assumes that they have the money to execute the business plan, and they go to the innovation institution to borrow the knowledge.

While this may sound trivial, the implications are vast:

1. A virtuous circle now exists between society and the financial system
2. Profit is derived from increasing human productivity not natural resource exploitation.

Economics is the science of incentives:

A financial Bank seeks to match a surplus of money with a deficit of money. It is in the best interest of the bank to find rich people who will not need their money for a while, and poor people have the best likelihood of paying the money back in time. The process assumes that the borrower has the knowledge required to execute a business plan when they seek to borrow money. However, that FICO score does not measure knowledge explicitly, so little incentive exists to make it tangible. All of the top ten reasons why businesses fail are due to failures of knowledge. The financial system is collapsing under the weight of failed knowledge.

By contrast, the Innovation Bank seeks to find people who have a surplus of knowledge and people who have a deficit of knowledge about what they intend to produce. The innovation bank then uses a series of statistical calculus (the same calculus as the credit/insurance/risk management professions) to match most worthy surplus of knowledge assets to most worthy deficit of knowledge assets. Here, the opposite assumption is made; everyone assumes that the borrower has the money required to execute the business plan and they go to the innovation bank to borrow the knowledge. People have an incentive to accumulate knowledge.

Simplicity that defies comprehension:

The business plan for the new entrepreneur is deceptively simple to do and nearly impossible to monopolize; anyone can do it not just the wealthy and their chosen few. The next 3 modules will outline how new enterprises will be constructed from the virtuous circle created between the financial bank and the innovation bank. This changes everything …. and did I mention that the implications are vast?

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The Next Economic Paradigm; Part 4: Institutions

By Admin

On April 7, 2009

In General Information

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

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

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

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

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

First, let’s return to our financial analogy.

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

The credit score is statistical in nature; it isolates about 30 or so indicators of your financial activity and puts them on a bell curve relative to everyone else. These include how much debt you have, how much your assets are worth, your income, etc. These ratings are run through the FICO Equation and out pops your credit score. Anyone can now predict the likelihood that you will default on your obligation.

All of the data that feed FICO are collected from public records, your employer, and the people who you borrow money from because these same organizations have a vested interest in a system of correct credit scores.

We are competing with ourselves.

It is interesting that you and I do not compete for our credit score because it is not a ranking system. On the other hand, with no credit, we are invisible and the system shuts us out. With bad credit, the system shuts us out. We lose some freedom and privacy, but we accept these terms well because they provides us with tremendous benefit to finance a business, automobile, or a home without needing to save cash.

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

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

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

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

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

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

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

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

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

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

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

When the innovation economy will catches fire….

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

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

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Tag: vetting mechanism

Dollar Pressures Force Talk of New Currency

YOU are MONEY

Collateralized Innovation Obligations

The New Economic Paradigm; Part 5: The Entrepreneurs

The Next Economic Paradigm; Part 4: Institutions

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