The Social Media Production System

Social Media has demonstrated in many ways capable of meeting or exceeding the deliverable output of many traditional industries such as advertising, marketing, journalism, human resources, design, community organizing, education, and social vetting.

We have also seen social media form communities that increase productivity in manufacturing processes, software development, and project management.  We have seen people self manage in social media to segregate and elevate good information away from bad information.  We have seen communities act with logic, tact, and precision previously thought to be the province of top management guidance.

In short, we have seen social media replace or duplicate almost every structural element of the traditional corporation outside of the construct of corporations.  Can social media provide a corporate structure in and among itself?

General Accounting Practices:

Corporations have an internal accounting system, internal processes, internal procedures, and often their own lexicon and unique job descriptions relative to their product.  This is how a corporation stores knowledge and trades value internally and defends itself from external influence.  The common thread is that each department is accounted, assessed, and compared in terms of money.  Standard balance sheets are compared by banks and investors.

Social media uses the exchange of information, knowledge and new ideas to store value.  Processes, procedures, job descriptions, and accounting are done in a public lexicon that everyone develops collectively.  People share, trade, and exchange information, knowledge, and new ideas like tangible property; and they trade options on futures in the same.  Increasingly, access to the community knowledge inventory is becoming a means be which people can convert productivity to money.

Standard Balance Sheet for Social Media

Most elements of a corporation can be duplicated in social media.  For those parts that cannot, the entrepreneur will soon figure out how they can.   The entrepreneur does not worry about money, they worry about productivity and the money always follows.  The next paradigm of economic development will reside almost entirely on a statistical game of managing risk and return, matching surplus to deficit, and increasing human productivity in the operating system of Social Media.  Every Newspaper that falls to Social Media is simply transferring its value to the new paradigm.  That value is still in play.  This trend will continue until a new currency representing that value is introduced.

Business Plans of the Future:

As you witness the progression of Social Media unfold, look for innovations that contain incentives for people to reorganize themselves.  Look for similarities between new social media developments and traditional corporate departments.  Look for businesses and institutions that support social vetting mechanisms, knowledge exchanges, and groups bringing together strategic combination of diverse knowledge assets, not just similar knowledge assets.  Most importantly; look for the “Last Mile of Social Media”; diverse groups of 5-10 people living within a few miles of each other forming new enterprise.

Threats:

Finally, look for the threats that can corrupt an innovation economy.  Social Media is currently responsible for trillions of dollars of productivity gains – all this money is still on the table for social entrepreneurs to monetize once the integration reaches a tipping point.  Be watchful for attempts at censorship, attempts to monopolize information nodes, and the corporatizations of social networks.   Wall Street was corrupted when the value of the currency became divorced from human productivity.  Don’t let the same happen to Social Media.

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

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

You are a liability.

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

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

Collateralized Innovation Obligation (CIO):

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

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

Enter Social Media:

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

Conversational Currency: The underlying asset

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