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

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

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

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

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

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

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

Now we look for a similar situation for Knowledge Markets.

In the cuurent times, the hiring manager is the person to know if you want to get a job. The manager would read your resume and compare it with “bell curve” in their brain about what has worked or not worked in their past. This was a great system for the industrial economy, but it falls far short in the innovation economy.

The world is evolving so fast with new technology, new disciplines, and global cultures that what worked in the past may not work in the future. Innovation favors different combinations of knowledge where the Industrial economy favored similar knowledge. A hiring manager may not accumulate sufficient experience in a lifetime to make a proper assessment in the complexities of a diverse, global, and technical future market.

If we look in society, there are many vetting mechanism in place. Social networks are by far among the most exciting and important new technology that can serve this purpose. Social networks must now evolve to become a local vetting mechanism for knowledge assets.

Just like the reporting agencies in the credit system, Social Networks can serve an extremely valuable function in permitting human knowledge to emulate a financial instrument by acting as the “Recording Agencies” who have verified the asset in terms of quality and quantity. The knolwedge Inventory acts as the independent variables that are used to calculate the probability of market success. The difference is that the credit score measures mostly negative events while the new system will seek only positive events and can be designed to give the participants much greater influence on how they appear to the market.

One thing is missing. The credit score uses the FICO equation; Innovation Economics will use something called the Percentile Search Engine.

We have defined the currency, the factors of production, and the inventory of the Innovation Economy; we destroyed the old resume system and turned it into a computer language that makes knowledge appear like money in the eyes of the entrepreneur.

Now, we need a system that keeps the game free and fair. For example; EBay does little more than protect the feedback system, Craigslist uses community flagging, Linkedin keeps track of comments and contacts, etc. All markets must have a vetting mechanism in order to operate efficiently. Entrepreneurs do not invest in places without a good legal system and where property rights are not protected. When vetting fails, investors leave – It is that important.

In the Innovation Economy, the knowledge market is analogous to the credit market.

In the old days, the banker was the person to know if you wanted to be successful in town. If you needed to borrow money to start a business or buy a house, the banker would review your work history and financial records as well as your reputation in the community where you both live. If you were deemed an acceptable risk, the banker would lend you money from the deposits of local companies and individuals.

Then an engineer named Bill Fair and mathematician Earl Isaac created the first behavior scoring system to predict credit risk. They formed the Fair Isaac Corporation FICO and their invention came to be known as the FICO credit score. With the credit score, the local banker is almost irrelevant; now a Saudi Billionaire can lend money to a young couple in Boise to buy their first home – and neither of them are aware of the other. The credit score is responsible for the creation of a lot of wealth because it made many more entrepreneurs who invested borrowed money in business. The credit score even allows you to recover if you hit hard times – you just pay more a little interest until you prove yourself solvent again.

The credit score isolates about 22 or so measurements of financial activity and puts them on a bell curve relative to everyone else. These include how much debt you have, how much your assets are worth, your income, etc. These ratings are run through the FICO Equation and out pops your credit score. Anyone can now predict the likelihood that you will default on your obligation.

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

It is interesting that you and I do not compete for our credit score because it is not a ranking system. The old saying “No credit is worse than bad credit”, although inaccurate, is cited often because with bad credit, you are visible to the system and it can adjust to find a suitable interest rate. With no credit, you are simply invisible.

We lose some privacy with FICO, but we accept these terms well because they provides us with tremendous benefit to finance a business, automobile, or a home without needing to save cash. Likewise, we lose some privacy engaging each other on the Internet and in our community, however, the benefit of Social Networks far exceed many perceived privacy issues.

My personal complaint with credit scores is that they track largely negative events and seem to predict failure. What if we had a system that tracks success and used that data topredict varying degrees of success.

In the next section, we will identify the institutions that exist in society and how Social Networks can act to duplicate the benefits of the credit score without the downsides….watch

In American society there is a persistent ideology of winners and losers; there can only be one winner and the rest are losers. We rank things in a very linear way; 1st, 2nd, 3rd, etc. Sports analogies dominate many business expressions; low ball, hail mary pass, ball’s in your court, etc. Our culture is to protect one’s position at all cost, shield away all attackers and decimate our competition. This way of thinking was effective in the industrial economy but today with the emergence of social networks it keeps us from understanding how knowledge actually exists in a community – it lives on a bell curve.

The Bell Curve
The Bell Curve

If I examine a group of people on the streets of Seattle in the area of mathematics – I would get a bell curve. If I examined engineering school students in mathematics, I would still get a bell curve. If I examined engineering professors, I would still get a bell curve.

In the Innovation Economy, there are no winners or losers, only different markets. There is a perfectly legitimate market for a Ferrari and there is a perfectly legitimate market for a KIA – in fact the market for KIAs is bigger than the market for Ferrari, so the idea that we compete with each other may no longer be appropriate. In fact, according to game theory priciples, it may not actually be the best strategy to be number one in a single talent – rather, being slightly above average in many diverse talents, on average, pays more for the majority of people engaged in innovation economics.

This is important. All of the tools, methods, and equations in the world of banking, finance, and insurance use interpretations related to this type curve when they try to figure out the value of an asset in the particular market. This is very important for making knowledge look and behave like money. Again, there are no winners or losers, only different markets.

We will need to come up with a way to sample and normalize knowledge in a community. In some ways we already do: Ebay uses a rating system, we rate comments on blogs, best answers to questions, Google placement, number of contacts, college GPA, credit score, etc. So rating are everywhere – there is nothing new here.

Here is what we need to do to make knowledge tangible in a community: when a local community of practice meets, everyone needs define the knowledge that the community shares, then everyone needs to find their place on the right bell curve. Each specialty and proficiency level is a different market. For example, a photography community there may be some competition for who can operate a camera better – but there is competition anyway. The competition disappears when one photographer is also a musician and nature enthusiast while another is also a baseball player and likes political contests. They would each own a unique market; still life and action respectively – and they can now cooperate instead of compete.

In fact, rather than fighting for first place by beating up your competitors, the best strategy in a market may be to have an average level of expertise in as many subjects as possible rather than being the best at one or two obscure areas. It depends on the market – it always has and it always will.

An entrepreneur will not make a bet without odds. We are giving the entrepreneur the information that they need to create wealth. Again, There are no winners or losers, only different markets.

Suppose we used the Dewey Decimal System to write a resume. A person could be described as a series of numbers instead of words and computers can search the numbers as they do key words today.

For example: 302, 307, 330, 607, 17, 500, 519

This person has experience in social interactions, communities, economics, educational research, ethics, natural sciences, statistical analysis

While memories of high school librarians may make us cringe, the computer loves numbers and classifications in this format. This will be important especially where knowledge is very specific. However, this simple list of numbers does not capture the knowledge of a person any better than the flawed “key word” search system that we are trying to replace. So we need to do something more.

If your mind were a library and you attempted to map it all out, one would see that everything is related in some way – intuitively, this is what defines you. If we looked at your brain, we would discover a huge network of experiences, relationships, books read, lessons learned, and people encountered. We would find a system of knowledge rather than random facts. Your likes and dislikes would be reflected in what you do and do not want to do. Everyone is different – nobody is the same. Everyone innovates, everyone has knowledge, and everyone shares information.

Somehow we need to reflect this on our computer readable resume.

The Universal Decimal Classification (UDC) System was built on top of Dewey for precisely this reason, to catalog complex and dynamic knowledge. The UDC system uses symbols to connect and relate the categories.

• Addition (+) allows for a string of subjects to be listed together.

• Forward slash (/) defines a range – or a “system” of subjects matter.

• Colon (:) identifies categories that are related like; sports and medicine, ethics and law; innovation and economics.

• We can even employ Boolean Operations such as IF, AND, OR, NOT statements. For example; we can say Polo IF Horses NOT water OR trade marks

• In a Global Economy, we can employ language and culture assets as well.

Now, we have a system of numbers and symbols represent the knowledge of the person.

For example: {20,12};[302+307], (330):[607+17]+[500/519]

Now we see that a computer language is emerging for human knowledge. This “resume” is for a specialist in Social systems and communities of practice. Knowledgeable in economics related to educational research, ethics, and natural sciences. They also employ statistical analysis in their work and can do it all in either English and Spanish

This is starting to demonstrate several key advantages:

1. It is Infinite and expandable to any field of knowledge
2. Paints a picture of knowledge not simply a list of information about a person.
3. Machine programmable and machine readable.
4. knowledge of several people can be combined to represent the knowledge inventory of a team, group, or company

We are getting closer to the elusive true “Knowledge Asset”. Part 3 will demonstrate how knowledge can be made to look like a buck, walk like a buck, and quack like a buck.

We identified the 5 essential elements of a market economy. Then, we discussed the currency of the Innovation Economy; people trade information and turn it into knowledge and new ideas using factors of production; Intellectual Capital Creative Capital and Social Capital. Now we’ll discuss the inventory strategy for knowledge assets.

Most companies have an inventory of every nut, rivet, or panel that they need to build something of value. Innovation Economics will be no different – we need an inventory of knowledge in our community so that we can build things with it.

Google and Wikipedia offer us a huge inventory of information – we read that information and turn it into knowledge through a mental process. Since knowledge can only exist inside people, we need a catalog of what people know. Our Knowledge inventory must be able to catalog and classify all human knowledge from the past, present, and future. It must account for Intellectual Capital, Social Capital, and Creative Capital. If done correctly, our knowledge inventory will begin to take on the characteristics of assets – knowledge will look like money.

Suppose that we say your resume is like a book about you. This isn’t too strange since every book that you have read has become part of your knowledge inventory. Every conversation with another person has become part of your inventory. Every new idea that you have tried, successful of failed, is part of your inventory. The things that you like to do, things that you do not like to do, and things that you do not know are part of this inventory as well.

The Dewey Decimal System is a way to catalog information. Even though Dewey is somewhat archaic, it provides a good example of how a knowledge inventory should be structured. Entrepreneurs will improve it if needed – so let’s just understand the concept for now.

For a quick review, the body of written information is divided into 10 main categories. Each main category is divided into 10 more categories and each of those are divided into 10 categories – and this can go on forever. For example, the term 519 identifies a piece of information. The main category is 5 = natural sciences, sub category is 1 = mathematics, and the next sub category is 9 = probabilities. So to have the number 519 on your resume says that you have knowledge and can solve problems related to probability and statistics.

You will also notice that some Dewey categories favor Social Capital, some favor Creative Capital, and some favor intellectual capital. While a knowledge inventory may sound daunting, computers and modern Internet applications can now do much of the work for us – in fact, they already are doing this work.

Every time humans invent better ways of doing things, the economy gets a little bigger. This is a simple idea. The cave dwellers discovered that they did not have to travel as much hunting and gathering if they could sharpen a rock enough to chop a tree down for firewood or for spearing animals.  That same tool helped them to dig holes to plant seeds.  By growing food and domestication animals, they could stay in one place and conserve energy.  By living in cities, the division of labor led to more efficiency as the farmer, metal smith and rancher bartered their services.  Enough surpluses were created so that a leisure class was free to develop philosophical thought leading to early scientific principals.

After a while, the invention of the printing press greatly advanced the availability of formal education.  In the Early 1800’s, Eli Whitney stunned the world first with the cotton gin and then with his concept of “interchangeable parts” where he disassembled ten working muskets, scramble the parts and reassembled ten working muskets.  What seems trivial today lead to great advances in the industrial revolution, becoming further refined in the manufacturing economy.  Computers then ushered in the Era of Information followed by the knowledge economy that we live in today.

At each stage, there was a quantum leap in human productivity and financial wealth.  Obviously the two are related.

If we look at this history from the big picture, we notice that each level of human development was derived from the prior level by integrating the tools of that prior level.  As such, the knowledge economy was derived from the information era by integrating the computer tools leading to the Internet.  The agrarian economy was derived from the hunter-gatherer tribes by integrating the wheel, wedge, and lever into agriculture and livestock.  The industrial revolution integrated scientific principles from the Renaissance. This is fairly consistent.

If we look at this history from a microscopic view, we see that no single idea drove human development, rather, billions upon billions of little ideas from many diverse sources combined in unique ways to form larger ideas which then combined to form even larger advances eventually leading to those big innovations that we see as the milestones above.

Also, we notice that the over time, rate of change at which these ideas have been combining is getting faster and faster.  The hunter-gatherer phase lasted 2 million years, The agrarian age lasted about 40,000 years. The scientific revolution lasted 1500 years.  The knowledge economy is barely a single generation in play.

These are important concepts because later, when we build a mathematical model for the next economic paradigm, we will use a few tricks of calculus called the “derivative” and the “integral” to describe how things change over time so that we can measure and analyze productivity and wealth creation in the new economy.

Finally, we ask, what comes after the knowledge economy?  There are two things that we can be certain of.  The next great leap in economic development will be derived from the knowledge economy by integrating the tools that we developed in this knowledge economy.  I strongly suspect that computer enabled society – or social networking will have something to do with it.

Welcome to the Innovation economy.

In earlier articles, I described Social Media evolving into user-generated productivity in the new science called Social Capitalism.  A social currency will be required to represent ONLY real productivity, not simulated productivity.

Monetization means that social currency must be convertible with financial currency or accepted widely enough to stand alone across all phases of production.

What exactly will people produce in Social Capitalism and from what raw materials?

We know that buying a can of Tuna Fish at the grocery store is a very simple transaction.  This is because the institutions that support that transaction are incredibly complex;  there are catchers, processors,  banks, transportation, inventory, outlets, etc. – all are very complex pieces that need to integrated in order for that final transaction to be very simple.   |

Those same complex institutions must exists in Social Capitalism in order to ultimately make transactions in a social currency very simple and widely accepted so that one may eventually be able to buy groceries with it.

In classical economics, entrepreneurs deploy land.labor, and financial capital in various combination in order to produce stuff.

In social economics, entrepreneurs deploy social capital, creative capital and intellectual capital in various combination to produce stuff.

Now, what is the stuff of Social Capitalism?

WIKiD stands for Wisdom, Innovation, Knowledge, information, and Data.  Value in Social Capitalism is created by transforming one of these elements into another one of these elements.

For example: Transforming data into information creates value.  Transforming information into knowledge creates value.  Transforming knowledge into innovation creates value, and transforming innovation into wisdom created value.

We see this today

In social media bloggers transform data into information, people take that information and combine it with their own to create knowledge.  They get together with friends and share it creating new ideas that transforms their businesses.   This makes everyone wiser as they see the success or failure of their own or another enterprise.

All this value is being created there just is no way to express it in an economic paradigm except through some increasingly irrelevant association with Land Labor and financial Capital.

In WIKiD Tools, the word “Tools” refers to how each of the WIKID elements is related to each other.  You can’t have knowledge without information and you can’t have information without data, nor can you have wisdom without innovation.  If you take away one element you lose the others.  So these are all related.

On the other hand, you cannot create one without the others.

We can now say that wisdom is derived from trail and error, that’s innovation.  Innovation is derived from knowledge. Knowledge is derived from information, and information is derived from data, etc. These are the production “tooling”


The word productivity means all the stuff we can produce within a certain period of time.

So now we can say that:

  • The value of wisdom is related to the rate at which innovation can be produced.
  • The value of innovation is related to the rate at which knowledge can be produced
  • The value of knowledge is related to the rate at which information can be produced
  • The value of information is related to the rate at which data are produced.

On the flip-side:

Suppose a social entrepreneur wants to create value. They would simply look for high rates of change of information in a community.  That tells them value is being created and all they need to do is transform that information into knowledge and they will enjoy a profit.

If the social entrepreneur sees a diverse group of people getting together to share their knowledge about something, this is a big red flag that value is being created and all they need to do is transform that information into knowledge and they will enjoy a profit.


The Monetization of Social Currency:

This value can be measured sincee Internet analytics record all the required data and their time functions.  Analytics can tell the entrepreneur what information is aggregating and where. Entrepreneurs can determine  that diverse groups people are getting together at Conferences, Meet-ups, and Social Media Clubs.

Now, Geolocation will accelerate innovation as people populate the last mile of social media.  Deep web search engines are mining data at an unprecedented degree of relevance and inter-connectivity – all of it is measured with respect to time.


With WIKiD Tools, we have an extraordinarily powerful algorithm for creating,  measuring, storing, and exchanging value that we can represent with a social currency.  Since social currency represents real productivity (as opposed to Simulated Productivity) it can therefore be fully convertible to financial currency.

Please Vote for The Ingenesist Project to present at SXSW 2011

The Ingenesist Project specifies an Innovation Economy built on a platform of social media as the next economic paradigm.  60 minute solo presentation in the advanced technical track.  Your help is deeply appreciated. All comments welcome.  Material based on video series here