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The Next Economic Paradigm; Part 1

by Dan Robles on April 3, 2009

Technological change must always precede economic growth. We are going about the process of Globalization as if economic growth can precede technological change. This is the singular flaw of market capitalism that needs to be reversed.

The Innovation Economy will not be delivered by corporations, Government or Academia. There no single person, country, ideology, or philosophy that can meet the challenges of the future alone – everyone will be required to participate because everyone has a stake in the outcome.

The Ingenesist Project outlines a very optimistic future. The problems ahead have a relatively simple solution that can be implemented today using existing tools and infrastructure. These tools acting in the right system can have profound impact on future economic growth and the sustainability of our resources.

The Ingenesist Project identifies a core problem:

This is the human productivity chart. Every time humans invent better ways of doing things, they become more productive. Where more people are more productive, the economy gets bigger. This is a fact.

About 50,000 years ago, humans began to make tools using tools and innovation increasing exponentially. Tools made hunting and gathering easier. As farming developed so did the emergence of cities. When people could produce more than they needed, they had time to think about things like philosophy, art, astronomy, written language. This led to a scientific revolution that continued to make new observations about the world. These observations were applied to systems that made people still more productive. The industrial revolution followed. Industry produced a lot of information. The ability to process that information using computers led to the information revolution. Soon people began seeing new trends among the information, facts, and data. This ability largely defines the knowledge economy that we see today.

Obviously, There were economic “eras” in the past and there will be more in the future; of this is not the end of human economic development. Something else will happen after the knowledge economy. This next economic paradigm is not easy to see.  Many people have a sense that civilization is changing – it must change.

Looking at the productivity chart, we notice a few interesting trends.

  • Every level of economic development was derived from the prior level of economic development.
  • That transformation was achieved by integrating the tools that were developed during the prior economy.

The two greatest tools in the knowledge economy are the Internet and Social Media. The Innovation Economy must integrate these tools.

Now, this is the Human Gross Domestic Product Chart. This is obviously very similar to the productivity chart except that the bottom axis is labeled with Global Gross Domestic Product over the same time period. The global GDP of 50,000 years ago was about 200 Million in current dollars.

Today, the Global GDP is about 65 Trillion Dollars.

If this curve was to continue, and it can, the next level of economic development could easily value in the Quadrillions. However, this cannot happen without some adjustments to the current system:

The only way to create more money is to increase human productivity and the only way to increase human productivity is to Innovate. This is the guiding principle of an Innovation Economist.

The problem is that the financial system is highly organized while the “Innovation system” is nearly random.

Economic growth with “money” as the scorecard lives in a complex, global and highly integrated system where billions of dollars circle the globe daily at the click of a mouse.

By contrast, human innovation lives in the patent system which is extremely slow, static, and prohibitively expensive. Of course, innovation certainly happens in places like Silicon Valley, Government Laboratories, Universities, and let’s not forget the proverbial “Steve’s Garage”; but these sources are not integrated and they do not behave like a system – except at the mercy of the financial system.

Innovation is market driven, markets should be innovation driven.

It is clear; there is no Innovation system to match the financial system in speed, efficiency, and integration. The objective of the Ingenesist Project is to specify an innovation system that integrates the tools of the knowledge economy into a structure that mimics the financial system. If it looks like money, it will behave like money and people will trade it.

The Financial system has 5 essential components that interact with each other as a system.

The 5 Essential Components of an Economy

1. A Currency to store value

2. An Inventory to account for the storage and exchange of value

3. Institutions that are supposed to keep the game fair

4. Entrepreneurs to do the “fuzzy math”

5. Business Plan or philosophy such as “Capitalism”

If any of these pieces are missing or corrupted, the market will fail. All 5 of these elements must be operational and integrated in order for a market to be efficient.

In the next several articles, we will go through each of the 5 elements and develop the corresponding knowledge system that will be integrated as we create the structure of the Innovation Economy.

If you give people a game they can win, they will play it all day long. In this regard, human behavior is highly predictable.

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