The Next Economic Paradigm

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Bitcoin Protocol Future Currency Impact On The Engineering Profession

Beginning with the failure of the NAFTA Mutual Recognition of Professional Engineers followed by an introduction to modern cryptocurrencies, this seminal presentation specifies a future where engineering knowledge represented by a virtual asset may store true intrinsic value.

This presentation was filmed at the 2015 National Society of Professional Engineers Annual Conference, Advanced Leadership Track, July 16, 2015 in Seattle Washington. Daniel Robles, PE, MIB is the founder of Coengineers, PLLC and The Ingenesist Project

Abstract

The Bitcoin Protocol And The Future Currency Impact On The Engineering Profession

In a Wall Street Journal essay, two authors wrote, “The digital currency known as bitcoin is only six years old, and many of its critics are already declaring it dead. But such dire predictions miss a far more important point: Whether bitcoin survives or not, the technology underlying it is here to stay.” This session will cover what digital currency means for the engineering profession.

“Decentralization” is a term being applied to platforms that use the Blockchain Protocol pioneered by Satoshi Nakamoto, the inventor of Bitcoin.  As a cryptographic currency, Bitcoin remains problematic.  However, as an algorithmic protocol, blockchain technology will enable society to cheaply perform common business processes that are now controlled by institutions such as banks, insurance companies, corporations, government, etc.  Today, rapidly emerging platforms are under development to bring “smart contracts” (algorithms based on blockchain technology) into the mainstream.  

An important and essential variant of smart contracts is called an “Adjudicated Smart Contract” that requires an independent 3rd party adjudicator that would “flip the switch” on algorithmic agreements in finance, insurance, and decisions of governance.  There is a staggering opportunity ahead for the engineering profession to position itself for the role of the adjudicator in a wide variety of important and high value transactions.  The caveat is that we too must change the way that we organize ourselves.   

This presentation, Decentralizing the Engineering Profession, begins with the failure of the NAFTA MRD followed by an introduction to blockchain technologies, and ending with specifications on how our profession can jump to the top of the value chain in the era of Social Capitalism – if, and only if, [the engineering profession] can choose to change. 

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New Factors Of Production

From classical economics, we are familiar with land, labor, and capital (money) as those things that the benevolent merchant class allocates as a means of producing all things useful to society.

Today, we observe that the new factor of production in an economy is data. Data is the dominant factor being allocated, or constrained, by the merchant class as a means of producing some useful and some not-so-useful things that society may or may not need.

Yet, the collection, processing, normalization, distribution, interpretation, transmission, integration, differentiation, and segmentation of data are the domain of the engineering profession.

Data are the fundamental building blocks of information, knowledge, innovation, and wisdom.  These are the new factors of production upon which new Capitalism is based.

It would seem then that there is an opportunity for the engineers and technologists to claim this important factor of production as our own and thus allocate data to those things that safeguard the health and welfare of people and property while constraining data from those things that do not.

Blockchain technology allows society a quantum leap to leave abandon legacy data systems, not unlike cellular telephony allows society to abandon land wires. Engineers are at a critical phase right now. Either we ignore block chain technology, or we do not.

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Engineering With Blockchains

Bitcoin uses Proof-Of-Work (POW) to create a new block in a blockchain.   This is analogous to the kidnappers taking a photo of the victim holding the daily newspaper to establish that they are still alive.  Consequently, no proof can last more than a few seconds until the next newspaper is printed.  In other words, the solution to the last puzzle becomes part of the solution to the next puzzle.  In the case of Bitcoin, if we assume that the newspaper has no other reason for existing except to prove that the victim is still alive, it is easy to see how POW can becomes energy and labor intensive.

Proof-of-Stake (POS) is a bit more like Poker. Only after a player shows their cards can a determination be agreed upon by the community of players permitting a payout and allowing the next round begin.

The information required for proof of stake is as follows: 1. the result of the last round of the game, 2. the identity of the card holder, 3. the timestamp that the poker hand was revealed.  4. The account balance of chips on the table, and 5. the result of the playing-card algorithm.

If an account has all of these components, then a new block may be formed. If one draws a rough analogy between POW and POS and compares that to the Professional-Of-Engineering Stamp (POE) Model – and by extension, all scientific validation marks – an interesting similarity emerges:

In an environment of construction, product development, or even research and development, the following is observed:   1. It is relatively easy to use the results of a test, inspection, or observation to establish that a condition exists.  2. The condition the prior event defines the state of play for the next event. 3. the identity of the adjudicator is established in their qualifications (or licensure or Curiosumé) 4. The value of the project is established contractually, by pro forma, or prior block 5. The design of the project represents the algorithm of the game.

Once this information can be established, a signatory can create the new block. The difference between POE (Proof-OF-Engineering) and PWO/POS is that POE has an intrinsic value which is stored in the asset being created (road, bridge, software, security, energy, education, medicine, etc).  Where multiple players engage with a shared asset, they are all intrinsically motivated to preserve the asset rather than consume or destroy the asset.  They will interact with each other accordingly.

Perhaps the bigger question is: Should society emulate cryptocurrencies or should cryptocurrencies emulate society upon our shared asset Earth?

 

 

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Engineering as Adjudicator Of Smart Contracts

The opportunities for the future of Professional engineering are just staggering.   Banks and insurance companies are investing heavily in blockchain technology in order to both head off a threat of decentralized cryptocurrencies and to release fantastic efficiencies for their own centralized processes. However, no matter how big or how powerful these institutions are, they must contend with the issue of representing a physical asset with the virtual asset.  This is the source of widespread liquidity issues across the cryptocurrency movement and a problem that remains largely unsolved.

Financial institutions will need, more than anything else in the world, some provision to identify, the quantity, quality, and variance in  all physical assets represented by virtual currencies. There is simply no way around this.  Sure, crypto-pundits will try to explain this little fact away by claiming that intrinsic value of a currency is no longer a requisite for money.  They are wrong.

The Professional Engineering Community is in a very unique opportunity to serve this extremely important function, in part because of the legal structure that they are associated with as well as the simple fact that the PE stamp already performs a similar function in legacy finance.  As a third party adjudicator of traditional contracts, the engineer flips the switches of money transfer to infrastructure projects (and much more), upon compliance with a legal contract.  This same structure can be readily adapted to the virtual currency domain via engineering as adjudicator of smart contracts.

Engineers need to think about their role in society more like a financial instrument than a commercial service or job function. Only then can they have a direct and profound influence on what is built when, and how.  It is in this capacity that engineers can increase effectiveness in their historical doctrine to safeguard the health and welfare of people and property (planet).

Today, a great many decisions that impact the safety, health, and welfare of people and property (planet) are being made by non-engineers, blind shareholders, financial institutions, and short-term politics.  Yet the majority of the future challenges for civilization will be technical in nature.  The integration of a technical policy in finance is precisely the balance that the global economy needs to transition into the next millennium.

NSPE and A Platform

In order to take advantage of these opportunities, the engineering profession needs to reorganize itself.  The NSPE constrains itself to a mandate that serves only State Licensed engineers.  Taken alone, this makes the PE less of a physical science and more of a political science.  The NSPE, precisely by their State Registration, is also in a unique position to act as the decentralized platform for all engineers.  All engineers must be elevated to the position of financial instruments and interact directly with the Banking and Insurance companies.

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Bitcoin 2.0 Smart Contracts About What ?

– Nick Szabo

The advantages of cryptocurrencies have the potential to be immense.  The first thing that people notice is that there are no transaction fees.  If one wants to email someone 20 dollars, all they need to do is convert 20 dollars to bitcoin, send the bitcoin, and exchange back to dollars – no brokers, no bankers, no fees, no taxes.

People also realized that by keeping their money in Bitcoin, they could buy and sell goods and services without credit card fees, bank fees, or sales tax.  They could even send micro-payments directly to an artist for a copy of a song – no record label, no iTunes, no banks, no taxes, etc.

This functionally resembles the ease with which a corporation can transfer resources internally.  It didn’t take long for people to realize that any kind of contract can be entered into a block chain and irrevocably time stamped. This includes patents, and trademarks, notary, and business agreements, etc.

– Nick Szabo

Now people are looking at the possibility to transmitting even more complicated contracts across block chains; such as an escrow service and insurance.  For example, a buyer could convert cash to crypto coin, and lock it to an escrow contract. If the product checks out, the program passes the payment to the seller. If it does not, the algorithms sends it back to the buyer.

Next, an insurance product is not much more than an escrow account between multiple persons.  Theoretically, people can form their own insurance pools – good drivers can team up and self-insure, no longer needing to subsidize poor drivers.

The blockchain can scale magnificently with near zero marginal cost per transaction.  It is easy to see how this innovation would have profound implications for Banking and Insurance.  This brings us back to the engineering profession and the 3-legged stool.

Banks and insurance companies fought bitcoin at first.  But now, they are rapidly trying to incorporate blockchain technology into their business system. This allows them to make a quantum technological leap out of legacy data systems while also enabling them to eliminate their own legions of brokers.  The potential profits for the banking and insurance industry are staggering.

Bitcoin 2.0 Smart Contracts About What ?

– Nick Szabo

Unfortunately, they will eventually run into a problem which would be extremely difficult for them to solve. Crypto-currencies are virtual – they don’t actually exist. They can only represent something that actually exists.

It is precisely this “representation” that is the domain of the engineering profession.  The engineer, in their capacity to design and build things is the proxy that can bridge this extremely important gap.  A some point, a crypto contract needs to interact with something that does actually exists.

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The Digital Engineering Stamp

The Professional Engineering licensure is holding on by a thread – albeit a very strong thread – called State Government regulations supported by the Banks and Insurance companies.  However, that may change soon –  not because of something that the government or the engineers are doing, rather, there is a huge technological changes occurring in Financial Services sector.  This article describes how changes in the financial system may impact Professional Engineers.

How FinTech Impacts Engineers

The change is being driven by something called Bitcoin – well, not actually a coin, but the cryptographic process – called Blockchain protocol (BCP).  The Blockchain Protocol is being called by some one of the greatest achievements of the human intellect since Calculus.  Don’t take this lightly – anything that impacts finance, impact engineering, and vice versa.

While the mechanics of the blockchain protocol are extremely complex, an easy way to understand the impact begins with a short history on databases.

Early on, data was stored on tape machines and the computer told the machine to retrieve a bit of data, say, 11 meters down the tape and another bit of data 18 meters in the other direction so that some computation can be performed.

Today modern databases contain all sorts of data about every aspect of their business such as accounting, financial, HR, vendor, client, product, sales data, etc.  Modern data systems are incredibly efficient except when one database needs to talk to another database, then things start to get resource intensive.

But over time we have adapted to this problem with a burgeoning service sector that helps databases communicate.  These include mortgage brokers, insurance brokers, real estate brokers, multiple layers of management who bring the data to market.  Then we developed APIs that help convert the data so that Google, Amazon, or Facebook, can of sell certain parts of their database to partners.  Finally, platforms such as Uber and AirBnB are pure brokers of data.

In fact, Uber is the world’s largest Taxi but owns no cars, AirBnB is the worlds biggest hotel but owns no property, Facebook is the worlds biggest media company but writes no content.  These are the mega brokers because they can withhold information from a market and are worth Billions upon Billions of dollars.  Meanwhile it is impossible for me to email you 26 dollars because the fees to do so are 25 dollars.  Money can be withheld at will.  So if you can withhold information, you and create scarcity which drives price.

So what if you could eliminate the brokers?  Not because they are bad or wrong, just because they are inefficient and introduce a great deal of friction to a free market.  well, there are basically 2 ways to do this.

You can combine data bases of two or more organizations.  This happens with many mergers and acquisitions and nearly always result in surplus labor (i.e., brokers).

The other way is for many organizations to share a common database. This is the general idea of decentralization – it all happens outside the construct of what we now know of as a Corporation.

The Digital Engineering Stamp

The new problem that emerges with decentralization is how do you secure the data? Who is going to take responsibility for maintaining the database? What is to keep someone from giving themselves a raise, or double spending an account entry, or accessing private information, etc.?

This is precisely the problem that the Blockchain protocol solves. In fact, the blockchain protocol, is the digital analog to the professional engineer’s stamp, signature, assurance, or design.  So this is clearly not trivial.

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The Engineering Asset

The professional  Engineering licensure system has developed a qualification system that serves to define the engineer as an asset much in the same form as any financial instrument would format an asset.

Engineers need to understand how this design empowers them as a financial instrument otherwise, they can easily be sequestered in the domain of the “intangible”.   In the mind-eye of Wall Street, the engineer acts as a proxy for the physical asset that is being capitalized.

The Engineering Asset:

In general, engineering licensure is a function of three components where each is represented in the parameters of the licensure process.

1. An accredited education represents the quantity of the asset being described, be it mechanical, electrical, civil engineer, etc.

2. Documented experience represents the quality of the asset as verified by a comparable existing asset.

3. Finally, the examination minimizes the variance in the quality and quantity of the engineering asset.

Since there is some flexibility in the parameters.  For example, it is fairly easy to substitute a bit less experience for a bit more education. Similarly, it is possible to increase education and experience in lieu of an exam.

However, in each and every case, the asset is preserved as a function of quantity, quality, and variance. Otherwise, it ceases to be a stand-alone asset and requires a corporation to house it.

A great deal of engineering falls under the under the corporate exemption. This is neither right or wrong – it is simply another delivery mechanism for engineering services.  There are many different delivery systems that perform essentially the same function such as venture capitalists, university affiliation, grant writing, oppression, and quite predictably, bank loans and insurance contracts.

As such, there is no limit of possible delivery systems as long as they fulfill the governing equation for Quality, quantity, and variance.

 

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The Definition of Asset

The definition of Asset is broadly overlooked in discussions about finance and cash flow.  The definition of Asset must be upheld on the accounting sheet or else the “asset” ceases to exist, is classified as an “intangibles” or becomes a liability.

In the prior post, I make the claim that engineers are money. On certain types of projects, such as construction or product development, there is a period of time between expenses and revenue.  During that period of time, the asset does not actually exist.  Instead it is being supported by the engineering that is actualizing the future asset.

All assets are described by two components; quality and quantity. For example; it is insufficient to say that “water” is an asset without also specifying the quantity and the quality of the water – is it 6 oz of drinking water or is it 6 liters of cooling water in your car.  A value cannot be ascribed to an asset without these two pieces of information – and each has a hugely different value proposition.  Likewise, if either of these two bits of information are missing from the definition of the Asset, it ceases to exist on the accounting statement. During construction, maintenance, renovation, or replacement, either of these two information points may be temporarily compromised.  The term for this is Accountability.

In this case we say that the value of the asset is a function of Quantity and Quality:

In order for that to occur, the asset value needs to be projected upon the engineer as a proxy for the asset.  As such, the engineering assurance must also be described in terms of quality and quantity.

Our next lesson comes from insurance 101: in order to manage risk, you first need to know pieces of information:

1. Can you identify the risk exposure

2. If so, what is the probability that risk exposure will manifest

3. If so, what are the consequences of that manifestation

These are the governing equation for the Accountability of engineering assets; definition, transmission, accounting, and resolution of an asset.

Likewise, the best way to an intangible asset or even a liability, is to impact Quality, quantity, and variance.  This is the domain of engineering

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To Control Engineering Is To Control The World

Engineers are the critical component in Global finance.  They are needed to keep the electricity on, the Internet running, to fight wars,  to provide food, shelter, warmth, and transportation to all mankind.

However, economies are segmented by political boundaries, not necessarily engineering boundaries.  The political laws vary, but the physical laws do not.  It is precisely the ability to sequester engineering behind political, corporate boundaries, and ontological boundaries that gives unfettered prioritization and control of our Planet’s resources to non-engineers and non-scientists. To control engineering is to control the world.

As we saw earlier, V=F(Q,q) relation did not hold for NAFTA engineers but it flew right through for financial services.  Pretty much every trade agreement after NAFTA copied NAFTA and passed along this flaw.  Today, there is no such thing as a Global Engineering system anywhere near comparable to the Global Financial System.

Money Must Represent human productivity otherwise nobody would work in exchange for it. Productivity can include factory production, but also social production like kindness, empathy, parenthood – the things that people normally are by definition part of an economy.

Unfortunately, Money has been largely divorced human productivity through the intricacies of financial exotica and the great speed at which money can travel which productivity cannot. There is a precarious situation where money no longer represent the underlying human productivity asset that underwrites it.  This is dangerous because people will refuse to work in exchange for it, unless forced. Forced liquidity has been known by many names over the course of history.

Money is a social agreement, As soon as a viable alternative currency arises which truly represents the essence of their productivity, they will switch over to use it.

Until then, we must endure non-engineers/scientists making decisions on what is best for our planet.  Non-engineers decide if and when electric cars will replace fossil fuels.  Non-engineers decide what neighborhood gets the best schools or how much desert property is worth 100 yards across the US border.  Non-engineers set technical priorities and allocate engineering – in doing so, they are in fact performing engineering for which they are unqualified.  This is simply another form of forced liquidity.

The laws of physics tell us that the greatest electrical “potential” is defined as the difference between two nodes.  The greater the distance, the greater the potential and the brighter the spark that can jump the node.  By analogy, less developed countries would therefore have the greatest economic “Potential” precisely because the gap is so wide. Poverty ridden cities would have a greater economic potential than exclusive gated neighborhoods. Impoverished peoples would have the greatest potential due to the distance between the rich and the poor.  All of this potential is lost due to a tiny flaw that can be easily corrected.

Technological change must precede economic growth.  We are going about the process of Globalization as if economic growth can precede technological change.

In short – we got it backwards.  The tragedy is that we got is backwards.  The opportunity is that it can be so easily corrected.

 

 

 

 

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The Death of Global Engineering

The North American Free Trade Act was unique in that it provided for the free trade of professional services such as financial services and engineering services.  Unfortunately, international trade in financial services was accomplished without also achieving international trade in engineering.  This created a vacuum on productivity (The actual giant sucking sound). Most trade agreements that followed NAFTA were modeled after NAFTA.  As such, this flaw was inherited by modern globalization worldwide.  To correct the flaw could reverse much of the misalignment between money and the fact of productivity.

Here is how NAFTA Failed. This diagram comes from an obscure paper that I published in 1996.

 

From prior posts on this topic, The US PE is a function of education which defines Quantity of the asset, Experience which defines quality of the asset, and Examination which reduces variance of the asset.  Education is defined and standardized by ABET, the examination is defined by NCEES, and the experience is defined by an adjustable peer review standard. There is some flexibility such that little more or a little less of one factor can be absorbed by a little more or less of the other factors. This is rational.

Each of the NAFTA countries has their own rendition of this. In the case of Canada – the education is equivalent to the US due to an accord between accreditation agencies.  The Canadian exam is different, however, the experience component is mutually recognized across jurisdictions.  Since 2 out of 3 factors are reciprocated, then the difference can be made up with minor adjustments.

However when you get to Mexico, both the exam and the education were substantially different with no accords with either of the other countries.  Since only 1 of the 3 factors (experience) were reciprocated, an extreme adjustment to the experience standard needed to carry all the weight.  In fact 15-19 years of experience was the only way that an engineer from Mexico could participate in NAFTA

So when you try to get a combined standard, we see that there is no way to assess the Quantity and Quality of the NAFTA Engineer. This is where the negotiations where breaking down when someone said, hey there are hundreds of Mexican Engineers passing the EIT. This is how I got dragged into NAFTA.

Our proposal was that all three countries accept each other’s experience requirement – they were already willing to do this.  Then we suggested that everyone take the same examination – assuming it could be published in Spanish.  Then, the feedback of the exam can be fed back into the education system so that they can be reconciled over time.

The purpose of this solution was not to toss a political hot-potato.  It was to preserve the formulation of the asset. In doing so, insurance companies would be willing to insure the asset and banks would be willing capitalize the asset.  As such, the flow of financial instruments could be applied to infrastructure and the process of economic development could begin for all participants.

 

Unfortunately, this proposal was rejected for reasons far too trivial and irrational to dwell upon here.  The bottom line is that on a planet where the laws of physics are nearly identical at single every point, there is no Global engineering profession.

This is, and continues to be, an utterly tragic outcome.

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Cryptocurrencies 101

To describe how Cryptocurrencies would be applied by Professional Engineers, we need to start with a brief discussion on cryptocurrencies and blockchains.

Cryptocurrencies 101

It all starts with something called a hash. Basically, a computer program generates a large random number.  Then a key generation program fashions the random number into keys that are mathematically related to each other – so the keys recognize each other.

One key becomes the public key, and the other becomes the private key.  As the names suggest, the Public Key is made available to everyone via a publicly accessible repository or directory while the private key remains in the possession of the owner.

For example, if Bob wants to send sensitive data to Alice, and wants to be sure that only Alice may be able to read it, he will encrypt the data with Alice’s Public Key. Only Alice has access to her corresponding Private Key and therefore is the only person who can decrypt the encrypted data back into its original form. Even if someone else gains access to the encrypted data, it will remain confidential as they should not have access to Alice’s Private Key.

There are many ways to arrange cryptographic keys in a relationship, or even among additional operations with Boolean logic such that: If A and Not B, then C.  Such logic statement are the basis of a new form of production delivery called “Smart Contracts”.

Blockchain 101

However, cryptographic key sets are only part of the solution.  In order for a contract to be valid it needs to be recorded or institutionalized to some type of ledger or accounting statement which is equally secure, protected, maintained, and most importantly, it must be consensus from the users that the ledger is valid.

A Blockchain is sort of like a metronome that marks time.  Once a block of time passes, a new block starts.  The motion is caused by what are called “miners”. Miners are computers tasked with solving a difficult puzzle.  When the puzzle is solved, a new block is formed and the solver gets a prize – often called a coin.  Once a block is closed, it can never be reopened – the contents can be viewed by the users (to maintain consensus), but they cannot be changed.  They are cryptographically Sealed for all eternity.

These coins are often mistaken for money because they have some of the characteristics of money such as like creating an incentive to perform work.  Unfortunately, they do not have all of the characteristics of money such as possessing an intrinsic “earthbound” value.  Neither is the value trivial – the etherial value of the coin is proportional to all the things you can do with cryptocurrency that you cannot do without cryptocurrency.

The Blockchain protocol moves along opening and closing blocks that form a long chain that records every transaction that ever occurred since the so-called “Genesis” block.  Users interface now being developed for various blockchains incorporate features such as personal wallets and exchanges.  The current problem with most cryptocurrencies, despite their utility, is the limited number of people who are willing to part with their dollars in preference for the coin.  This is called the “liquidity crisis” and remains a problem yet to be solved.

In short, the blockchain protocol solves the broker/handshake dilemma with cryptography and incentives.  Social behaviors are still adjusting.

 

 

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Engineers Create Money

Here is a picture of one class of over 100 Mexican educated engineers sitting for the California EIT exams. During the 2 years that we conducted this program, we sent over 250 Mexican educated engineers to these US Board Exams. I must say that the whole process of making this happen was the most profound experience of my career. believe it or not, Engineers create money.

(Note: while professional engineering licensure reflects on a specific regulatory process discussed here, the use of the term engineer may be generalized to include all sciences and technical workers)  

But listening to the talk and banter of NAFTA, they were throwing around these words like money, value, risk, in ways that were simply did not match what I was seeing:

How could so many brilliant engineers be found in such a technologically underdeveloped country? The simple answer lies in the fact that for the developed world, modern finance allows for the capitalization of infrastructure projects. Engineering is, in fact, an extremely important financial instrument.

The Miracle of Capitalism

There is a large time gap between the moment that money flows to a project and the time that the project generates revenue. During this time gap, the profession of engineering serves to maintain the asset on the balance sheet. Engineering provides something called “assurance”. A bank and the insurance industry hedge each other’s risk, but without assurance the project cannot be capitalized. Again, capitalization and securitization FAILS without engineering assurance.

The 3-legged stool

In the preceding article, I said that the failure of NAFTA was that the financial service were successful in becoming a service of free trade while the engineering profession largely failed.  It is precisely the failure of the engineering profession to negotiate a meaningful Mutual Recognition Document which led the NAFTA to under perform. In essence, we kicked out one leg of the 3-legged stool.

Without the assurance of a viable professional engineering community, foreign direct investment in Mexico was limited to very high ROI investments, Government guaranteed construction, or partnerships with the Mexican oligarchy – in order to supplant an absent independent engineering sector.

Very large contracts for the sale of otherwise worthless desert land were being written contingent on 500 engineers being available to work in the foreign factory that would be built and guaranteed by the government.  Tacit or implicit, there certainly would be an incentive on all sides to not give engineers “wings” so that they could fly away, let alone enjoy free will.

I ran into trouble when the Federal Government found out that my program was doing precisely that – Mexican Engineers who passed the US Board exams were being scooped up by US Companies outside the jurisdiction of Mexico.  There was deep fear of a brain drain if the World learned that Mexican Engineers were as strong as we were measuring.

At one point a representative of the Mexican Federal Government negotiating NAFTA asked me to leave the country.  When the State of Baja California (governed by the opposition political party) heard about this, I was asked to stay and I lived in a private home under armed guard until the program could be completed.

The Big Flip

There is a great deal more to this story than I can not reveal in a short blog post, but the idea is clear.  Engineering productivity is an extremely important resource for the flow of money. Engineering assets play an important part in contractual agreements for tangible assets such as land and factories (factors of production).  They are central to the design and execution of international trade agreements.  Everyone wants to control engineering because to do so controls productivity.  In essence engineers CREATE money – money does NOT create engineers.

 

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The Big Bang of Modern Globalization

The early 1990’s saw the end of the Cold War,  spectacular advances in computers, the Evolution of the Internet, and a new world order fueled by commerce instead of warfare. Upon this landscape,  NAFTA is considered to be the Big Bang of modern Globalization. What is not often considered is how NAFTA, for better or worse, was to influence every free trade agreement that followed.  The Secret of NAFTA was the failure of engineering mobility and therefore the failure of real economic development.

What made NAFTA unique was the provision for the trade of services specifically, financial services and professional engineering services.  The former succeeded while the latter largely failed.  Herein lies the flaw that needs to be corrected.

Many people remember NAFTA as that giant sucking sound of US jobs going South of the Boarder. When I was a young and idealistic engineer I saw NAFTA as Mexico needing everything that US engineers provided. With the free trade of financial services, engineering projects could be capitalized – this had to be huge.

Intangible Assets are the REAL tangible assets

I found myself in Mexico in 1994 taking what was supposed to be a temporary assignment in a small engineering department of a private university right over the California border – I ended up staying 3 years.  This turned out to be the most profound experience of my professional career.

What struck me the hardest was how intelligent, resourceful, and creative the Mexican engineering students were.  By contrast, I saw the general stage of development of Mexico – at the time it was still being described by the Cold War label as a “Third World Country”.   Soon after, I witnessed a tragic devaluation of the Mexican Peso, where the local currency lost about 1/2 of it’s value against the dollar seemingly overnight.  To observe the reaction of the Mexican citizens, was simply indescribable.  I wondered how could money and jobs just disappear when there was so much work to do and so many people who could do it?

I decided that I’d like to test the Mexican engineering students against a known standard.  I developed a program that prepared a select group of 12 students to take the NCEES EIT examination (The Board Exams for US Engineers).  Their success rate was exceptional; 11 out of 12 passed.   Over the next two years we sent a random sample of over 250 Mexican engineers to the US Exams with a success rate comparable to the US engineers pass ratio.  If the engineers were equally intelligent and equally educated as US Engineers, then something else must be happening here.

Cause and Effect

I would later learn that economic development is a hugely complex subject.  However, at the time, I was deeply intrigued by the following idea:

If you throw economic growth (money) at a country are you guaranteed increased productivity?

The answer is NO. 

However, if you throw productivity at a country, are you guaranteed economic growth?  

The answer is YES.

Herein lays a tiny and nearly imperceptible flaw in NAFTA that needs to be corrected.

Technological change MUST precede economic growth. Economic Growth cannot precede technological change. 

We have gotten it backwards

Banks and and associated securities exists for the sole purpose of creating money to fund innovation. The REAL economy lives where the fact of innovation creates the REAL money.  This is the domain of Engineering, therefore, this is the direction that The Ingenesist Project has and will continue to focus on.

 

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The Internet of Productivity

(The Internet of Productivity challenges the Internet of Money and the Internet of Things the prevailing objective of the Internet / Crypto Currency ecosystem)

The simple idea that Crypto currencies represent “The Internet of Money” could be an extremely dangerous idea unless properly and fully considered. The problem may lie in the perception of money rather than the perception of the Internet’s ability to articulate money.

There are billions of words written about what money is and what money is not.   One of my guiding principles, however, is as follows: whenever I hear the word “money”, I replace it in my mind with the term “productivity”.  If the idea still makes sense, I’ll read on. If not, I’ll move on. The reality is that money must represent human productivity or else nobody would be willing to work in exchange for it; hence, there is a liquidity crisis.

True willingness is true freedom.

The operative, of course, is the term ‘willingness’. Shackles made slaves willing to work in exchange for sleep. Debt entraps people into the willingness to give up their future to survive the present. Free trade agreements are little more than sequestered productivity. Austerity measures are controls on money where there is no associated shortage of productivity.

Banksters on Steroids

Crypto-currencies are about to accelerate financial transactions to an astonishing rate. The organizations investing most heavily in crypto currencies today are the banks and insurance companies. Blockchain technology will allow them to eliminate their own brokers and the regulatory environment that constrains them while executing trades far faster than actual productivity can keep up. Thousands of hot-new BCT start-ups are looking for their day in the Wall Street sun. Governments are curiously absent, except for inserting their back-door taxation clause.   Meanwhile, start-ups demonstrating true benefits to mankind often fail for lack of money – not a lack of productivity.

The Big Play is on Productivity.

Everyone learned in high school economics that the factors of production for the Capitalist System are Land, Labor, and Capital (money). We learned that the benevolent merchant class allocates these factors in various combinations to produce everything that society needs. Today we learn that the BTC will accelerate the flow of capital and smart contracts will accelerate the allocation of land (title to property).  Decentralized exchanges will trade securities in an unregulated decentralized environment.  This is good because we can eliminate the labor of brokers.

What about labor? What about physical component of labor – the dreams and aspirations of 7 billion people? What about the physical component of land, our little spaceship Earth? Where does Blockchain technology explicitly accelerate human rights, where does blockchain specifically reallocate Earths precious resources for mankind through the miracle of decentralized consensus?  We need to keep our eye on the ball – it’s all about stealing the productivity of others.

The entire game is still contingent upon everyone in the World showing up to work everyday until they are no longer able to do so. It really has little to do with money, it has everything to do with productivity. Money is not where the focus needs to be.

Why Curiosumé?

My fear is that crypto currencies will fail to find decentralized liquidity without accounting for the fact of productivity in the consensus ledger. Curiosumé is the missing link that converts your “productivity” to cryptography.   A person’s past, present, and future productivity can be owned, controlled, and stored by that individual.  We all become capitalists of our own factors of production. It is available only to ourselves for exchange in whatever they feel is the highest allocation of our talents. That is true decentralization and something people are willing to work for.

Curiosumé is an analog to digital converter of knowledge assets that allows people to bypass the barter system and enjoy the same scale, liquidity, and capitalization of productivity as banks, governments, and corporations do with your money and title assets.

Things get really interesting when Curiosumé is combined with Blockchain Technology.   Anonymous until the point of transaction, Curiosumé creates a cryptographic tollbooth on personal data. If anyone wants to access the productivity of another person, they need to pay for it with their own.

The Internet of Money and the Internet of Productivity should be synonymous in the next global accounting system.  Wherever BTC proponents use the word money, insert the word “productivity” then imagine things like: Decentralized Integrated global productivity system, Decentralized and integrated global flow of productivity, decentralized smart keys to unlock decentralized smart contracts, decentralized exchange of productivity, Micro productivity.  But most importantly, consider a liquidity crisis on non-productive activity such as warfare, hatred, corruption, prejudice, endless consumption, etc.

The Complete Picture

Blockchain technology, not unlike the Internet itself, may someday be regarded as one of the greatest achievements of the human intellect. But like many great technological achievements before it, there are both positive and negative outcomes. We have a unique opportunity to alter the course of humanity in profound ways, but it is essential that we address the fundamental flaw of market capitalism: there is no accounting system for intangible assets – that is why they are called intangible.  We need to give people ownership of their own user-generated assets, that is, their productivity.  We need to build Curiosumé.

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Smart Contract Application For The Construction Industry

Rendering by Autodesk

The Ingenesist Project is developing a new class of business methods called The Value Game (TVG). When combined with Curiosumé, TVG forms a set of alternate economic incentives that may reward the preservation, renewal, and acquisition of shared assets, such as infrastructure and community.

BidPool is a smart contract application (for construction) that accomplishes 2 things:
1. It lowers the cost of procurement bidding from AxB to A/B.
2. It minimizes competition costs and rewards high integrity in a bidding process.
The Value Game: Bid Pool 

Problem:  Procurement/bidding competition is highly redundant, consumes a great deal of resources, and promotes variability.

For example: 5 contractors may spend $10K separately marketing, researching, and bidding on a project that only one will win. Further, each contractor may win only 1 out of 5 bids. The cost of these losses is ultimately wrapped into the total market cost of the industry. The Incentive to bypass is high.

Cost of bidding = A x B;  

where A = cost of goods sold, and B = number of bidders

Adjudicated smart contract:

Consider a process where a project owner and 5 contractors, are all selected by qualifications to play The Value Game.  Each one commits a $10K promissory note into a blockchain escrow account – this is what they would spend anyway for each bid attempt.  A 3rd Party Engineering firm writes the “Statement of Work” for the project. This SOW serves as common research for all contractors submitting a bid.

The Value Game:

Whoever submits the winning bid will pay the engineering fees ($10K) to the 3rd-party who produced the report. Everyone else gets his or her note cancelled or converted to a cryptocurrency to be used in future TVGs. If the owner does not select, the owner then pays for the report and can use it to hold another Value Game in the future.

Cost of bidding = A / B; 

where A = cost of goods sold, and B = number of bidders

Aligned Incentives

The Value Game realigns major incentives. As such, the projects benefit from:

  • Improve matching of qualifications – those most qualified to perform a job will inherently produce a better price.
  • Improve quality and seriousness of owners – owners will not wastefully exercise contractors and resolve unknowns prior to bid.
  • Eliminates bidding redundancy – everyone bidding on the same package instead of duplicating research, advertising, sales.
  • Reduces project variance – SOW migrates to contracts and downstream.
  • Reduces marginal cost of additional bidders – electronic SOW can be projected over wider market area.
  • More bidders can participate – New entrants can enjoy unbiased access to projects without retribution.
  • Increases transparency – SOW, RFP, RFQ, contract award becomes part of public ledger.
  • Reduces project costs – less volatility equals less risk. Fewer parts are duplicated between players.
  • Insulates conflict of interest – 3rd Party adjudication insulates potential COI’s
  • Corruption resistant – adjudication and public ledger creates transparency.

Summary:

Bid Pool is a Value Game that reduces the cost of procurement while realigning incentives to reward high integrity rather than low integrity in the construction industry.  Mined value is derived from front end COGS and the reduction of downstream project risks.  All additional project milestones may also be extended from the initial TVG or adjudicated on it’s own TVG.  These milestones may include contracts, work orders, exclusions, subs, insurance, financing, and change orders.

Finally, Curiosumé would generalize TVG to allow for  “anonymity-until-point-of-transaction” (AUPOT) while decentralizing the knowledge assets deployed to a project.

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Bitcoin Protocol Impact on the Engineering Profession

I will be delivering a very serious presentation at the Nation Society of Professional Engineers Annual Conference on July 2015 in Seattle.  My point will be crystal clear. Money must represent human productivity. Period. The base layer of any economy is a nation’s infrastructure.  As such, any new Cryptocurrency MUST be associated with the engineering domain otherwise it is equal to any other financial derivative whose value is also ultimately dependent on the value of engineered infrastructure.

It’s time to stop the poetry and time start building a civilization we can all be proud of.  It is time to build Curiosumé

Abstract: 

The Bitcoin Protocol and Future Currency Impact on the Engineering Profession

In a Wall Street Journal essay, two authors wrote, “The digital currency known as bitcoin is only six years old, and many of its critics are already declaring it dead. But such dire predictions miss a far more important point: Whether bitcoin survives or not, the technology underlying it is here to stay.” This session will cover what digital currency means for the engineering profession.

“Decentralization” is a term being applied to platforms that use the Blockchain Protocol pioneered by Satoshi Nakamoto, the inventor of Bitcoin.  As a cryptographic currency, Bitcoin remains problematic.  However, as an algorithmic protocol, blockchain technology will enable society to cheaply perform common business processes that are now controlled by institutions such as banks, insurance companies, corporations, government, etc.  Today, rapidly emerging platforms are under development to bring “smart contracts” (algorithms based on blockchain technology) into the mainstream.  

An important and essential variant of smart contracts is called an “Adjudicated Smart Contract” that requires an independent 3rd party adjudicator that would “flip the switch” on algorithmic agreements in finance, insurance, and decisions of governance.  There is a staggering opportunity ahead for the engineering profession to position itself for the role of the adjudicator in a wide variety of important and high value transactions.  The caveat is that we too must change the way that we organize ourselves.   

This presentation, Decentralizing the Engineering Profession, begins with the failure of the NAFTA MRD followed by an introduction to blockchain technologies, and ending with specifications on how our profession can jump to the top of the value chain in the era of Social Capitalism – if, and only if, [the engineering profession] can choose to change.  

Date:

Thursday, July 16, 2015
Start Time: 3:15 pm
End Time: 4:15 pm
Number of PDHs: 1
Speaker: Dan Robles, P.E.
REF:

Bitcoin Protocol Impact on the Engineering Profession

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The Best Digital Currency

Nothing Economic happens until two or more people get together to make something useful.  This could be a house, a meal, a friendship, or an education. This has been true since the dawn of civilization and it is true more than ever today. Therefore, the best digital currency must facilitate and “account” for precisely this uniquely human activity – bringing people together in a useful way – not driving them apart. Everything else is a derivative.

The Best Digital Currency

Curiosumé is an analog to digital converter for knowledge assets. Curiosumé will rapidly scale and accelerate the matching and accounting for the best digital currency.  Everything else that would be needed already exists.  The working title of this currency is called Gen.  The asset that underwrites Gen is human productivity.

The difference between Gen and the dollar is that the dollar no longer represents human productivity.  Instead, it represents interest on debt, financial exotica, endless war, political influence, unsustainable consumption, etc.  These things are no longer useful to the majority of people.  As a result a lot of “economics” that should be happening, cannot happen. No current digital currency resolves that problem because they are all still derivatives of the dollar.

Gen is the digital currency of TIP (The Ingenesist Project).  Initially, Gen will act as the unit of account between technologists as they  trade Gen among themselves while collaborating on useful projects. For example, a mechanical designer would exchange Gen with a website developer to render a product to a community. Curiosumé resolves the dual coincidence restraint on traditional barter encounters.

As transactions become more complex, the Gen will begin to represent the generalized technological knowledge stored in infrastructure such as buildings, clean water, schools, and farms. Since these things are useful to a lot of people, those people would gladly accept Gen in exchange for their own useful non-technological services that they provide in a community.  In this way, everyone gets what they need using a currency that represents the utility of what they can produce together.

Economic incentives will be altered:

1. To produce useful things that people need.

2. To build high quality things that last a long time.

3. To preserve useful things for as long as possible,

4. To discard things and ideas that are not useful.

5. There is no incentive to cheat.

Don’t be fooled by crypto-hype, the best digital currency is between your ears and only you can hold the keys to that vault.

Curiosumé is an analog to digital converter for knowledge assets. The rest of the components can be found in technologies that already exist.  Let us know if you think that Curiosumé would be useful and we’ll build it together.

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Bitcoin is Already a Derivative

Many a Bitcoin company executive seeks a way to hedge the balance sheet risk of their business.  It would be useful to have a liquid (ostensibly, dollar backed) futures and options exchange market that would provide hedging opportunities for speculators while providing much needed price stability.  It sounds like Bitcoin is already a derivative.

What is a Derivative:

In the most basic definition, a derivative is something whose value is derived from the value of something else. Derivatives have no intrinsic value in and of themselves. Their value is based on the expected future price movements of the underlying asset.

Bitcoin is Already a Derivative

A bitcoin does not have an intrinsic value in and of itself, rather, the value of a Bitcoin is derived from the value of all the glorious things you can do with Bitcoin which cannot be done without Bitcoin.  Indeed this value is significant: bitcoin adoption promises to eliminate the gatekeepers of banking, insurance, law, and even governance.

Hey wait, Aren’t all those gatekeepers derivatives too!!!

Bankers, insurance brokers, lawyers and politicians do not have any intrinsic value in and of themselves either.  They produce nothing intrinsically edible, healing, nor comforting for anyone.  Like Bitcoin, the value of banks and insurance companies and legislators is derived from all the things that you can do with them which cannot be done with out them. These include capitalizing seed or machinery for growing food, or constructing a home or factory for increasing human productivity, or providing a salary to a teacher or doctor (in the conspicuous absence of a currency not of the gatekeeper’s design).

What isn’t a derivative?

The food we eat, the clothes we wear, the building that keep us warm and dry, the machinery that transports us and makes us healthy and the teachers that show us how to do useful things are NOT derivatives.  They have intrinsic value in and of themselves.

What is an Integral?

In mathematics an integral is the a function of which a given function is the derivative.  Creating an integral is the reverse of creating a derivative. That is the direction we should be headed in.

For example, integral of a teacher may be the school building within which everyone gathers.  As such, the value of the teacher can be derived from the change in value of the building that keeps everyone warm and dry during their lessons.  The integral of the food we eat is the machinery that allows the farmer to be more efficient.  In this case, the value of the food (nutritional) is derived from the quality of the farming practiced that created it.

The Opposite of a Derivative is an Integral.

When all is said and done and we’ve followed the integral to its origin, we will always find an Ingenesist. An Ingenesist is someone who invents, creates, designs, envisions, and brings forward into reality something that supports the health, welfare, and safety of people and environment.  Those are the only intrinsic values that truly exist.  Seriously, what else is there?

So when the financial world is contemplating derivatives of derivatives of derivatives of derivatives, we are contemplating the integrals of the integrals of the integrals.  Bitcoin is already a derivative. Ingenesist is already an integral.

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Decentralized CRM With Curiosumé

(Photo: New York Times)

Modern CRM (Customer Relationship Management) emerged from the boiler rooms of corporate sales departments. They needed a way to keep track of contacts, leads, calls, and ping schedules.  Soon they added client information like DOB, Spouses name, neighborhood news, etc.  The customer responded remarkably well, in fact, perhaps too well – they started asking for things like better service, warranty claims, and “can I get that in purple”.

Salespersons, being so closely tied to the revenue, began telling the service department that they are choking revenue,  and telling the warranty department when customers are defecting, and telling engineering to introduce new features.  They got away with it because they had management support as a revenue driver.  Pretty soon CRM systems began migrating across the enterprise evolving along the way. Ironically, CRM now finds itself losing touch with the customer despite the ever increasing amount of data that now populates the hit sheets.

Recently, we were asked to consider scenarios for Curiosumé applications in a CRM role in the financial industry. There are several important features of Curiosumé that can reconnect the customer to the enterprise.

Top level ontology in the commons
Instead of controlling people’s information, set it free and watch where the client leads you.  When all market channels pull their information from the same network of nodes and branches, they can always be current and synchronized. When the client adds information to the commons, this becomes available to the vendor outside of a firewall eliminating many security issues.  You don’t necessarily need (or want) to know the ID of the client in order to serve them better.

Anonymity layer / autonomous matching:
AUPOT (Anonymous Until Point of Transaction) allows clients to deploy anonymous personas so that they will be more willing to;

  • reveal true intentions to the commons,
  • perform their own pre-analysis in the commons
  • increase their insights and contribute that to the commons.

Customer Controls Their Data:
Help the client own and control their own engagement data.  Give them the same tools and opportunities to experiment as researchers as the Big Data wonks have.  Allow them to delete, save, edit or have as many different personas as they want. Let them deploy and retract personas as a way of finding you.  A better and more efficient relationship will emerge between both sides of a transaction.

User interface layer:
Instead of leading your client like cattle through an arbitrary ontology tree, show them photographs that corresponds to nodes in the common ontology.  These can then be matched algorithmically to advisors, products, or different departments in the firm, in real time.   In essence, you can create a multi-agent algorithmic game in a user interface that could be fun, engaging, and sticky as heck.

Advisor interface:
When a client chooses to engage the advisor or a product or a transaction,  they can submit their persona into the algorithm to select specialized advisors or a team of advisors. Only at the point of mutual acceptance, both players cross the firewall and engage in honest, trusting commerce. Layers and layers of bureaucracy, vetting, and security breaches can be eliminated until the actual exchange is made.

(Photo: The Philadelphia Orchestra)

Powerful Feature:
One of the most powerful and least recognized features of Curiosumé is the ability to constrain a “score” to a number or a range. One reason for this is to create imbalance around the mean – when the system is not balanced, it can never be static and will always have some movement (regression toward the mean).  It will become largely self-managing, self centering, and even a little joyous.

For example: if we constrain the client to having a Curiosumé score of zero; that means that for the total of all (+) sigmas, they must also accumulate an equal and opposite total of  (-) sigmas such that their net total is zero, in order to pass “go”. When we lay this back on to the top level ontology (Wikipedia), we can find a series of paths that unite the (+) sigmas to the (-) sigmas.  This path tells us a GREAT deal about where the client wants to go.  Likewise an older client may prefer a net (+) portfolio where a younger client may prefer a net (-) portfolio.  Decentralized CRM with Curiosumé can also be applied to risk pooling in the same manner. The deviation s from the mean and resulting movements are precisely how we would price the derivatives of intangibles, i.e. tangibles.

Outcome:
Decentralized CRM with Curiosumé is readily ready to happen. We know that people, advisors, and products can be brought together in personal and emotional engagement when they intersect paths of common interest. This is the weakness of both the barter system AND modern technological Capitalism  If we can envision interests flowing dynamically along vectors, we will have the ability to align human incentives and the markets that depend on them.

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The Future Is Common Knowledge

Image Credit

Few people recognize the true economic potential of Wikipedia. Obviously, Wikipedia is an important resource for individuals and profit making companies.  It would take Billions of dollars to recreate it from scratch. But the true value of Wikipedia does not end here.

Wikipedia is a really huge set of interconnecting nodes – a massive dynamic database in the commons. When two points are connected, the magnitude and direction of the resulting line provides information about the data and proximity to other data.  Wikipedia is a venerable roadmap of connections between significant people, places, things, and ideas. Not unlike the Facebook social graph, Wikipedia in aggregate is a knowledge graph of humanity.  It is therefore as perfect a representation of humanity because it was created by humanity.

Mass Encryption

One of the more effective ways to encrypt data is to hide it among other data. In fact, your personal knowledge graph, stripped of  personally identifiable information can be hidden – like a needle in a haystack – among the wikipedia knowledge graph.  Your knowledge graph can then extrapolated along the nodes, edges, and paths of Wikipedia to draw inferences, make decisions, or set priorities for yourself and your interaction with the community.  It’s like your own private Big Data engine that only you can see.

The idea behind Curiosumé is to develop that vehicle from which a person can interpret actionable information when they overlay a persona (or Proxy) of themselves on the Wikipedia commons.  When many people overlay their personas to the Public Wikipedia Haystack, they can specify criteria out of nodes and branches of the wikipedia knowledge graph to find each other, to work together, to learn and teach.

Enter Block Chain

Each owner holds a private key in a cryptographic vault to their proxy that they can share, rent, or retract from others. The Private key is the only way to associate the owner with their proxy and with the commons. Mutual private key exchange will define a market for intangible assets among owners of such assets.  This exchange device would be ideally suited for a cryptographic platform such as Maidsafe protocol or Bitcoin Protocol.

Connections, intersections, and resultant “vectors” will reveal patterns from which decisions can be made.  The future economy may include the exchange of private keys.

Level Playing Field

As long as proxies – or personas – are anonymized, it would be OK for everyone to have access to them in the commons.  In fact, the quantity and the quality of the personas in the commons for a community or location could underwrite the currency of that community.  Everyone would have the ability to test their persona in the public domain upon any market to reveal their greatest economic potential.  Such a community currency would have a relative value to other communities not unlike, say, Forex.

The community can even test their own combined personas against a host of scenario proxies such as job proxies, investment proxies, etc., all without committing personal information. However, when two or more parties engage in transaction and/or interface with a regulatory agency, they will need to reveal their private key in order for a transaction to pass a pre-established compliance proxy that is also comprised of nodes and branches in the commons.

The Art of War

It would be very difficulty for people to violate another person because they will need access to the other person’s private key as well as a change in the commons in order to formulate a deception. If they modify the commons, they will in fact reveal themselves as a transaction.   If a perpetrator can somehow change the other person’s proxy, then they will notify others connected to that proxy of that change. Further, the perpetrator may be unwittingly doing more harm to themselves than good in their own connection to other proxies when attacking a particular persona – any action, except the truthful action, could have implications that are unknowable.

As such, there is little incentive to cheat.

Cloud Wars  

As such, any disputes will be fought in the commons and not at each individual node where the world engages in wars, competition, and oppression today. Wars would be fought in the info commons rather than being shrouded in the fog of ground ops.

The Future of Common Knowledge

 The future of common knowledge is the “commons”.  If every person, corporation, or institution were to index to a commons based data source, we could all observe each other while maintaining our privacy.  Economic scenarios could be run without expending money.  Disputes could be handled in the cloud.  The maintenance of the commons could become a new form of governance.

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Means and Methods of the Curiosumé DApp

The Mechanics of the Curiosumé DApp are extremely simple. In fact, perhaps the greatest challenge of building the application will be to truncate the features of Curiosumé to the simplest functional form.

Means and Methods of the Curiosumé DApp

The only thing that Curiosumé is really supposed to accomplish is convert a résumé, CV, or project description from an analog form to a digital form so that the accounting, production, storage, and exchange of intangible assets can be machine enabled in a meaningful and valuable way. Centralized applications such as Facebook and Google perform this job quite effectively within their fortress for sale to 3rd parties, Curiosumé will do the same for decentralized applications between two parties only where value is retained by the creators and owners of the data.

An analog to digital converter for knowledge assets.

Curiosumé is a “writer” that is given away free to the Commons, open sourced, and decentralized. Ideally, an independent instance of the totality of Curiosumé could reside on every device. Applications that import Curiosumé data are called “readers”. Readers will be developed by entrepreneurs to accelerate any number of business models that are otherwise unviable in the current economic paradigm or simply under-performing due to the friction of the current economic model. Reader application may be for-profit giving the network an incentive to maintain Curiosumé. How an entrepreneur uses Curiosumé could be a trade secret rendering many patents obsolete.   These Reader Applications may include Decentralization schemes (DApps), P2P exchanges, and community cooperatives.

As such, the preferred interface between the reader and the writer will be likely be more suited to the MaidSafe protocol of secure P2P exchange of data. This would be similar to other intangible assets such as music, art, and literary works. It is easy to imagine a persona of one’s life story to be a real-time literary work – if not, then it should be.

Converting knowledge assets from analog to digital form:

Step one: User tags themselves with URL’s from Wikipedia articles that best represent intentions to interact with their community.

Step two: User self-selects their placement on a spectrum comprised of endpoints: student of that content, and teacher of that content (Note; midway across the spectrum corresponds to degrees of collaboration).

Step three: Curiosumé creates a digital persona in a specific form

Step four: Export persona to “reader” applications for analysis and processing.

This is the extent of the functional requirements of Curiosumé.

Operational Requirements:

The operational requirements of the application are somewhat more complex. The following six conditions must me secured by the Curiosumé application. If any of these 6 tenets are compromised, the mathematics behind the applications will fail and the intended outcomes will be suboptimal.

1. All public and private Wikis should reconcile upward to a top level Wikipedia entry

2, Rankings must span a non-competitive “student-collaborator-teacher” spectrum

3. Users must be allowed to self-select their placement on the spectrum.

4. The data format must be uniform as;

5. Persona must be indelible to anyone except the owner.

6. Interactions must be anonymous until the point of transaction

These 6 Tenets are unpacked a bit more below:

The Calculus of Curiosumé 

In this form, clean data may be easily normalized for statistical inference while remaining anonymous until an actual transaction of personal data may be negotiated on a P2P basis.  In essence, the criteria described here will produce extraordinarily useful data.

Rule 1: This rule secures a commons based knowledge inventory.  Much like air, water, and Earth, the knowledge assets in the commons are visible components from which useful things will be produced as regulated by supply and demand for the same components.

Rule 2: Students and teachers do not normally compete, rather, in the case of Curiosumé DApp, they represent “supply” and “demand” in a proto-economy. Collaborators represent factors of production in an economy where complementary knowledge can replicate a iterate – these are the engines that create value – this is the mining function.  These data will form a bell curve providing statistical inference to the commons where social value is mined in aggregate.

Rule 3:  The process of self-selection will be deeply personal to all participants and represents the individual mining of value for deposit in the new bank of intangible assets.  All this “mining” can be measured to form the basis of generalized reciprocity of social crypto-currencies.

Rule 4: The common format of of the Curiosumé output function will assure the ability to mix, match, exchange, discover, or test any scenario of social production imaginable.

Rule 5: Gives each person ownership of their data.

Rule 6: Not unlike Craigslist, anonymity until point of transaction is important for allowing people to view the public dataset and test their own participation to find opportunities for productive interaction.

Reader DApps:

When a match is made, a transaction can be negotiated.  However, this functionality is beyond the scope of the Curiosumé writer.  Instead, an innumerable amount of Readers will be developed by entrepreneurs to collect, form, and test scenarios negotiating the decentralized production of all useful things.

Innumerable use cases will create moderate generalized disruption across the current economic paradigm until a tipping point is reached where factors of production will flip from finite tangible to infinite intangible basis of account. Social priorities regarding what is invented and produced will be altered in favor of shared asset preservation rather than private asset consumption. Income equality, by design, will be normalized.  Collaboration will replace competition eliminating the need for over reaching controls and associated force.

 

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An Analog To Digital Converter For Knowledge Assets

Curiosumé is an analog to digital converter for knowledge assets.

The single most destructive characteristic of the Market Capitalism is the dependence on resources extracted from the Earth to fuel constant economic growth. Natural resources are finite while constant growth model is infinite.  There are several ways to manage this disparity; the first is to expire Capitalism, the second is to base that dependence on an infinite resource. Given the shortcomings of most viable alternatives to Capitalism, the latter is likely more plausible than the former.

Many perils to society that manifest today have their beginnings in the thesis by Adam Smith called “The Wealth of Nations”. In this document Mr. Smith outlines the conditions of Capitalism where a merchant class would arise to efficiently allocate land, labor, and capital in various combinations in order to produce all of the useful things that society needs. The working class would hold the system in balance; too much growth would result in a shortage of labor that would constrain capital through higher wages (supply and demand). Government would be hardly necessary in a self-balancing system. Ironically, A great deal of innovation has arisen from the prospect of eliminating labor, which allowed growth to continue beyond the natural constraint.

Karl Marx identified the inevitable situation of constant struggle between the working class and the merchant class. One group strived for greater wages while the other strived to lower wages. From this struggle arose a spectrum of adjustments ranging from labor unions and calculated government regulations (Socialism) all the way to full State allocation of public resources (Communism). Herein lies the dawn of geopolitics and competing ideology.

It is fairly easy to see from this short history where hierarchy, competition, politics, exploitation, environmental crisis, and monetary corruption are intimately related. Today, these elements are enshrined in our culture in B-schools, sports, warfare, education, 2-party representation, etc. The result is that people are forced to compete with each other for jobs, money, food, water, air, education, civil liberties, etc.

But it does not have to be this way. A relatively simple modification to the existing paradigm can realign the economic incentives, and therefore social priorities, from consumption to preservation of our planet without necessarily triggering a collapse and subsequent reboot.

Consider the proverbial “basket of goods” – an economic standard used in a variety of analyses including Relative Price Index, Forex, Gross Domestic Product, etc.  The basket of goods consists of unit quantities of tangibles such as food, housing, energy, transportation, etc.  Now consider the human knowledge required to produce that same basket of goods. One can easily imagine economic standards articulated as either the tangible basket of goods or the intangible basket of goods. Both have the same outcome.

Yet, knowledge is an infinite resource that can underwrite so many more dimensions of human existence than a select basket of goods.  The problem is that there is no accounting system for intangibles as there is for tangibles. There is a reason for this – it is called control. Therefore, to create an accounting system for knowledge assets is to take control of productivity and the currency that represents it.  That is the evolution we ought to focus on.

This is a much simpler challenge than trying to solve every problem that our civilization faces individually. This is a much easier problem to solve than trying to change the minds of entrenched ideologies. This is a much easier problem than changing all the laws and institutions that exist to make the old game as fair as it can ever possibly be.  In fact, the solutions for our most complex problems as a civilization are stunningly simple to create.

Did I mention that Curiosumé is an analog to digital converter for knowledge assets?

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Is Curiosumé is a Bad Investment?

Over the years we have identified several features of Curiosumé that every investor wants to change – but these are so fundamental to the operation of Curiosumé that to change them would make the application useless.

However, the follow-on applications could be so hugely profitable that we make the claim: “When hundreds of millions of entrepreneurs see the format of the data output from Curiosumé, they’ll know exactly what to do next”.  The hurdle is to build Curiosumé right while dodging the VC “gauntlet” of control.

Is Curiosumé a Bad Investment?

The following is a list of Curiosumé tenets that we hold critical to the development of the application and why each of these pass across the grain of traditional investment community to make the application difficult to fund:

A. The topmost ontology must belong to the Commons.  We specify Wikipedia, or other public databases for Curiosumé.  There will always be a strong tendency from investors to want to own the database or to define the ontology because there is a legacy ideal that this is where the value is. Private data, such as corporate wiki, can certainly be used to run Curiosumé, but MUST reconcile upward to the commons data base at higher order definitions. There will be a strong desire to own the ontology – we must resist this.

B. Non-competitive ranking system: This will be tough enough for the culture to accept – but we all must change ourselves at least as much as we expect others to change.  Our culture is steeped in tradition of competition; war, sports, even evolution (survival of the fittest), etc – all purport the necessity of competition. It was very difficult to find a suitable rating systems that did not invoke hierarchy and competition.  In reality, Nature exhibits many more examples of collaboration than competition, yet collaboration is not intuitive to the American psychology. We are not saying that competition is bad, it is just inefficient on a crowded planet because it manufactures more uncompensated losers than compensated winners.  There is always a strong tendency for investors to rank business components on a hierarchy – we must resist this.   There is a legitimate market for everyone.

C. Self-selecting: People must self-identify their participation in a community – a great deal of thinking, intention, and VALUE is created and deposited into the system through this extremely important process of self expression – this is where assurance is mined. The only way for it to work is to eliminate the incentive to cheat. The only way to eliminate the incentive to cheat is to eliminate the component of competition. If we eliminate the incentive to cheat then we can disaggregate hugely expensive vetting mechanisms that too often add crippling friction to a system.  There will be a strong desire by investors to rank other people in their own image and to sit on top of a hierarchy to control people – we must resist this.

D. “Learn-collaborate-teach” scale provides demand- production-supply metric. This is extremely important that the selection criteria provide these components that form factors of production for a proto-economy based on intangibles. Later we can design other non-competitive scales as they arise, likely as a smart contract application.  For now, there is so much baggage associated with competition in society that we should best stick with Learn-collaborate-teach scale for now.

E. Anonymity until the point of transaction: Big Data is valuable to the degree that it allows people to perform scenario testing with the community (commons) data. Anonymity allows for the benefits of big data to occur without any detriment of self-identifiable markers and associated moral hazards.  Like Craigslist – when two parties choose to interact with each other, they can then expose their identities in a P2P/block environment and communicate directly with each other equitably. There will always be a strong desire from investors to create a one-way communication channel (advertising, propaganda, control, etc) especially because Curiosumé data format will be near-perfect for targeted ads – we must resist this. However, advertisers can interact on a P2P basis with agents on a mutually agreed (economic) basis. This will be the interface to smart contracts.

F. Formation of the Asset: An asset can only be described as a [quantity] X {Quality} of /something/.  For example: . [100 gallons] X {potable} /water/ is an asset.  Likewise [2014] X {BMW} /SUV/ is an asset.  [2000 likes] X {Pepsi} /Facebook/ is an asset, etc.  Alone, “SUV”, “100 gallons”, “200 likes” are not assets and cannot be traded.  As such, from critical elements above, the ASSET must be defined as [A]X{B}/C/.

This is called a unit asset and represents a node in the network. A persona is then constructed from this node and its relatedness to the public database (wikipedia) Personas can be combined and all the nodes will remain attached and compared by degrees of separation. Degrees of separation will define relevance and VALUE. This formation must be indelible until the agent changes it – this makes it a good candidate for block articulation.

In summary, I have described at least 6 elements of Curiosumé that will always be rejected by traditional investors, yet are absolutely essential to the ability to set ourselves free from the oppression of market capitalism.  Is this a coincidence?

Is Curiosumé a Bad Investment?

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Decentralized Integration of Complex Systems

The recent Panel at The Future of Money and Technology Summit on Fueling the Decentralization Movement ended on a very interesting point: The Integration of Complex Systems.

The last comments from Chris Peel suggested that the iPhone program was more complex than Apollo and that we are a far way off from the ability to decentralize production to the degree that a space program or revolutionary consumer product would require. From my years in aviation, I am keenly aware that the complexities associated with an aircraft program would be extremely difficult and risky to manage with a series of autonomous agents and smart contracts – as we know them today.

Wisdom of Crowds

However, the proposition made by Joel Dietz at Swarm is significant. Swarm proposes to crowd-select, crowd-vet, and crowd-fund start-ups. Several efficiencies are cited:

1. The crowd knows best what is needed in a specific time and domain,

2. The same crowd is also the first user/customer/advocates of the product, and

3. The same crowd is the first to iterate the project.

Such diverse and comprehensive “single source” domain expertise is unlikely to be available from any Venture Capital Firm.  Instead, far too many start-ups are designed specifically for the Venture Capital process effectively inbred with the centralized DNA.  The VC formula is fairly simple, well documented, and contains suitably developed infrastructure. The VC process efficiently removes promising innovations from a decentralized ecosystem, repackages them, and injects them into the 20th century finance model of banks, brokers, and IPOs.

Today, the decentralization movement is portrayed in the media by silos like AirBnB and Uber, who may eventually expand into other markets (such as Amazon did from books), but from a relative monopoly position of acquisitions, scale, and market dominance – which is the antithesis of decentralization.

Fueling The Decentralization Movement

This Panel at Future of Money was selected in a very different manner.  The idea that I was trying to get at is that an ecosystem is like scaffolding being populated with individual applications. At first they are sparse, but soon they expand to depend upon each other. At first, each of the panelists seemed very different and related only by ideology. As the session progressed, we could see the each of the panelists were filling in the gaps between themselves soon appearing like a full stack.

Paige Peterson suggested that Maidsafe’s ideas and technology would solve specific problems in the crypto-space that the blockchain could not. Christian Peel suggested that Swarm and Maidsafe may reduce scale risk with what Ethereum has to offer. Sam Yilmaz at DApps Fund is betting on cryptoequity and a broad spectrum of “work proofs” as a means of holding these DApps together rather than letting them become disassembled by a single minded Venture Capital process. Of course, our interest at The Ingenesist Project is precisely on decentralizing both supply AND demand as a means of articulating intangible assets to society (ref: Coengineers.com and Curiosumé).

What is Cryptoequity?

“Cryptoequity,” as defined by Swarm (from this Source) is an umbrella term that covers various applications of cryptographic ledger offerings.

These can include:

(1) Product presales in which the token serves as a coupon redeemable for a real world good (i.e. the Comic Book sale done via Swarm)

(2) Product sales in which the token is redeemable for some service in a decentralized network (i.e. Storj or Ethereum)

(3) Product sales which serve as a “subscription” or membership to some decentralized network (i.e. Swarm)

(4) Token which serves as a license to use some type of intellectual property, potentially with an attached legal contract (i.e. sales being conducted in the Swarm 5th of November launch)

(5) “Shares” serving as stock equivalent for organizations that have no legal entity (i.e. BitShares)

(6) Shares serving as stock for legal entities (i.e. Overstock/Medici)

Efficiency in Zero Marginal Cost

The relative benefit of many of these is that it solves an interesting problem related to the near zero marginal cost of software distribution; the fixed scarcity of a good or service allows the market to determine the appropriate price point for a product rather than centralized forced scarcity or management selection.

Decentralized Integration of Complex Systems

If we are to ever reach a point where complex systems (such as space travel or consumer products – or even equitable governance, environmental stewardship, and fair wealth distribution)  can ever be achieved in a decentralized manner, we must start with the integration of decentralized applications among themselves in a decentralized way.  We should not exclusively extract and seal critical components off from an ecosystem and run them through the VC gamut – the disruption goes both ways.

 

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Fueling The Decentralization Movement

I recently moderated a panel at The Future of Money and Technology Summit in San Francisco on December 2, 2014.  When I put this panel together, my intention was to make the distinction more intuitive between an economy based in tangible assets and an economy based in intangible assets.   Whether they realized it or not, this particular group of panelists provided early  characteristics of a “full stack” new economic architecture as we described in this early 2009 series: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7

Here is the video of the conference panel.  Below that, are the questions that I had prepared for the group – most of which I did not need to ask.  This panel, in my opinion not only represents some of the most forward thinking people in the crypto-space but also the extremely important integration of applications that are arising in crypto-space.  That is the landmark condition that I am looking for, where applications integrate with each other.

Fueling The Decentralization Movement

 

Below is my prep sheet for the panel;

 

Dan: Welcome to Fueling The Decentralization Movement

 

How many people know what bitcoin is?

Are you familiar with decentralized applications beyond currency?

Would you know how to issue your own currency?

How many people are familiar with Ethereum?

Open: 1-2 minute introduction from each panelist

Q1; Sam. Please define Decentralized Applications (ref: whitepaper) and what you look for in an “investment grade” DApp.

Q2; Paige: Please expand definition of DApp to include non-block chain applications and discuss the off-BCP ways of accomplishing similar results.

Q3: Chris: Where does Ethereum fit in the DApps movement (now and in the next revision) that would facilitate DApp formation and integration.

Q4: Joel: Traditional VC are looking for 1000% on money. Banks lend at 10%, so obviously, there must be a whole lot happening between 10-1000%. What does that look like to you? How could we all release this potential.

Open: Suppose there is a spectrum where on one side, traditional bankers are the ledger holders and adjudicators conjure new money into existence. And on the other side, Bitcoin is a fully decentralized ledger and algorithm that brings new coins into existence. At some point, aren’t we trading one master for another or isn’t their some hybrid model that solves the problems of each? The goal it seems is to be judged as somewhat better than the banking system rather than somewhat less perfect than bitcoin. Do we have priorities s traight?

Open: What are people talking about in the Bitcoin Meetups and the Ethereum Meetups? What is the range of discussion and how viable are the ideas that people are bringing forward? What is the size and demographic of the meet up communities? What do they want to achieve? What are the resentments and where is the optimism?

Open; Nothing economic happens until two or more people get together to build something useful. Virtual goods are cool but something eventually has to touch the earth – to make something real. What can DApps do to bridge the virtual and the real? Stated in another way; when can I buy groceries with my altcoin?

Open: Bitcoin cryptographic “proof of work” creates a new coin and establishes order. The Fiat Banker’s “Proof of future productivity (debt)” also creates a new coin and established ownership. Assuming this to be a trust spectrum; how would “mining” be defined along this spectrum? Can adjudicated smart contracts serve as proof of work to mine coin into existence?

Open: Please describe differences between proof of work, proof of stake, proof of incentive, proof of resource, proof of performance and any number of proofs types. How interchangeable are they, what individual purposes do they serve? Can they combine to serve additional purposes?

Open: Do you believe that decentralization can reach a point where people become their own coin mined by themselves as they accumulate knowledge asset, collaboration, innovation capacity, i.e., representing their own productivity?

Open: What happens when the output of one DApp becomes the input to another forming a fault tolerant network or DApps? Ultimately this has to do with the convertibility of each other’s coins and ultimately convertibility with Fiat currency. What will these exchanges look like?

Open; I like to draw the distinction between classical economics and the New Value Movement. Classical economics posits merchant class allocation of land, labor, and capital for the ideal production of the things that society needs. The New Value movement is describing a decentralized allocation of social capital, creative capital, and intellectual capital for the ideal production of the things that society needs. Where are we on that spectrum and when do you believe that a big flip will happen between the two (if any)? Will it be gradual or sudden? What externalities are involved? Does one hedge the other? What are the possible worldwide implications of this?

 

 

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