Capitalism is characterized by the condition where individuals acting in their own best interest consequently act in the best interest of society.  By contrast, Socialism is characterized by the condition where individuals acting in the best interest of society consequently act in their own best interest.

Who are the Socialist?

While America espouses a capitalist system of social organization, the jobs that Capitalists create are contained in corporations that operate much closer to the socialist model of community organization.

In a corporation, employees are motivated to act in the best interest of the corporation as a means to assure their own best interest.  Resources allocation is channeled through ministers who are led by a benevolent dictator responding to the priorities of a family of stockholders.  Tasks are segmented into units of equal pay for equal work. There are limited avenues to advancement. People cannot talk freely against their employer. It is acceptable practice to banish some people for the best interest of the collective.

First Amendment To The U.S. Counterintuition

The opposite holds for the OWS movement – some say the occupiers are socialist, however, the jobs that they create are Capitalist.  There is no benevolent dictator or appointed ministers or hierarchy to allocate resources.  Anyone can join and nobody gets sent to the gulag.  Yet, everyone knows what to do like some kind of invisible hand that elevates an ideal.  Most importantly, there are unlimited avenues for advancement.

The movement was peaceful.

Buildings did not fall.  Mothers did not mourn the death of children. There was no volatility induced on the stock markets, the lawyers stayed in their offices, politicians were relatively unscathed. Those protestors who did suffer are now celebrated in the media, culture, art, music, Facebook, etc.  In short, People acting in their own best interest were in fact acting in the best interest of society.

Reoccupy Wall Street

Now that the movement has been dispersed, and the 89% who still have jobs return to occupy their respective corners of Wall Street.  The global narrative has changed for everything from warfare to environmental protection to income equality.

The products that emerge

Already, mobile apps now exceed CD/DVD sales.  Mobile computing devices will replace PCs. Television sales are going down. Many of us now own our last internal combustion automobile. Social Media Applications are mimicking financial instruments with new systems for trade, exchanges, trust, influence, and value creation.  Allocating social capital, creative capital, and intellectual capital rather than the now quaint but hopelessly static notions of land, labor, and fiat capital is producing real value.

Capitalism and socialism are simply two of many different forms of social organization.  People are reorganizing.

I saw a Fox News commentary on the Occupy Wall Street movement.  They interviewed a bunch of kids who were taking part in the parade and asked them a simple question: “So, what do you expect to replace Capitalism with?”

Then Fox, in their fair and balanced tradition, portrayed their subjects as the poster children of a failed education system (some children left behind after all) and further testimony to the failure of the Obama Administration. because obviously “These kids don’t know how the real world works”.

The Pundits can’t climb the tree any better.

Unfortunately, nobody else has an answer to that question either – none of the pundits or anchors produced anything except the tired argument that we tried Socialism and it failed so therefore more Capitalism is the only way to fix Capitalism.

It’s a Simple Problem

Market Capitalism only articulates value in the things that people make which can physically sit on a market shelf.  Market Capitalism does not articulate the value of individual people; those things that people make in society.

Of course, it is also a double edge sword since those that really don’t produce anything – like hedge fund managers, pundits, and politicians – will become impoverished. Meanwhile, those who really do produce things – like teachers, engineers, and firemen – will become wealthy.  So watch how the lines are redrawn in this debate.

How the world really works

The Internet and social media have shifted the factors of production away from land, labor, and capital to a higher order of human organization.  This is what we need to be talking about.  People today produce things with knowledge – social, creative, and intellectual knowledge.  These are the factors of production for that 99% of the value that exists on Earth.

A Simple Solution

After many a blue face, I’ll say it again; there is no way to build anything meaningful without an inventory of parts.  Car companies have inventories of parts, Banks have inventories of assets, even biology has an inventory of genomes – but there is no knowledge inventory for our communities.  We don’t know what we do or do not know.  We have absolutely no idea how valuable we are yet we complain that we’re impoverished.  Meanwhile corporation create technology to replace people when people could be just as easily be creating technology to replace corporations.

How on Earth can we determine supply and demand for knowledge assets without an inventory?  How can we expect to create any type of fair and rational economy from a bunch of invisible stuff milling around the parks?  There is no escape from Market Capitalism and no path to Social Capitalism without a Knowledge Inventory, period.

A Stunning Omission

This is a very easy problem to solve and we have all the cards waiting to be stacked in our favor using the tools that are right in front of our collective noses.  If we fail at something so simple, then we deserve to be enslaved.  After all, 100,000 years ago, such people would have been eaten by tigers.  It’s time to Evolve.

Structural Folds: Generative Disruption in Overlapping Groups

Entrepreneurship is the invisible hand of Capitalism.  Basically, this means that you can have all the Land, Labor, and Capital in the world, but unless you have entrepreneurs to interact with it, you don’t have much of an economy.

Social Contract Broker

Most social contracts are made today by Brokers who have the ability to connect supply and demand.  Brokers, for the most part, gain their influence from the natural or unnatural divisions that may normally restrain information from the supply side to the demand side, and vice versa.  ”Social Brokers” are extremely important for exchanging information across different parts of a community that do not normally intermix.  However, such “Trust Economics” depends on a closed system where community accountability is strong.

Trust economics and an open economy are mutually exclusive.

In an open economy, the job of the broker shifts to the job of administrating social accountability – a completely different animal.  The moral hazard, of course, is that communities with great entrepreneurial potential are instead brokered for profit. Many “special interests” have crept up through the years in everything from banking, real estate, second-hand markets, international trade, airlines, politics, and even corporate M&A activity – that protect broker interests.  As a result, brokers create structured holes at the expense of social inter-cohesion.

A Different Approach

At Social Flights, we take a different approach.  We unite several completely different communities; travelers, vendors, and airplane operator around a shared airplane asset.  In the middle, we place a community leader – an entrepreneur who is enabled to see all the diverse connections and combine information in new and useful forms.

Instead of forming better brokers as a principle driver of economic growth, Social Flights introduces a Value Game that forms a greater degree of intercohesion among disparate communities simulating a closed economy within an open economy.

The Social Flights Manifesto

We know that there are millions and millions of entrepreneurs in our communities who can create tremendous value if they are given a game that they can win – or not get ripped off.  The underlying entrepreneurial force is that people will always combine several old ideas in new ways to create the new ideas that incite new actions.  We depend on entrepreneurs to drive these ideas and drive these actions.  For this reason, it is in our best interest to set them free and keep them free.

The Social Broker’s Commission: Social Profit

We create an environment where it is in the best interest for communities to share deep information in a closed economy where trust dynamics can take effect.  Then we provide a way to transport their trust economy into the open economy.  But it goes much farther than that – it goes as far as an airplane can take you.

(Note: this article was inspired by segments of two wonderful papers titled: Structural Folds: Generative Disruption in Overlapping Groups, by Bala ́zs Vedres Central European University and David Stark Columbia University and Structured Holes Versus Network Closure as Social Capital - By Ronald S. Burt, University of Chicago)

There are two sets of values in an economy. Financial value and social value. The value that is required to make something is financial value. The value that a product provides to a community of people is called social value.

Financial Currency

In order to make something, money is used to purchase raw materials and labor. After these ingredients are integrated, the product is then marketed, transported and sold for more money that the input costs. This is called financial profit in a system called market capitalism. The degree to which financial profits are gained or lost is the degree to which a financial value system is functional or dysfunctional.

Social Currency

When the product enters a community, it helps people to occupy their limited time on Earth in a more peaceful and productive manner. The product unites families and communities around human attributes such as happiness, joy, comfort, security, and wellbeing. This is called social profit in a system of social capitalism. The degree to which social profits are gained or lost is the degree to which the social value system is functional or dysfunctional.

Domination

In market capitalism, no enterprise is allowed to make less money than they consume for very long without being punished. Yet, in social capitalism there is no common means to even account for social profits or losses. There are no formal inventory of raw social materials, social value added labor, social marketing, transport, storage or exchange of social capital – the social value system is largely irrational.  The profit accounting and structural mechanisms are what make market capitalism dominant over social capitalism.

Bankers should be studied

For better or worse, the financial system works exactly as it is supposed to. Bankers do exactly what they were designed to do. They will do the same thing tomorrow as they did yesterday. Bankers are extremely predictable.  The problem lies in our irresponsible design for social capitalism and our dependency on anything but ourselves for economic outcomes.  All of the means and methods that we call an “unfair advantage” are available to each and every one of us if we simply copy bankers.

Look beyond the symptoms and you’ll find the cure

By virtue of the range, complexity, and scope of problems that surround our species it should be somewhat obvious that social capitalism is poorly executed. It does not represent a system of human attributes and values. Social Capitalism is unorganized, unaccounted, and unworthy to act in the interest of the participants. That is where the problem lies and that is where the solutions need to be applied.

Must admit that WE have a problem

Anyone can point their finger at the bankers and blame them for all the bad things in the world.  It is a completely different matter to exert the mental discipline to fully understand what makes a banker rational and what makes a banking system accountable, then to generalize this genius for applicability to ALL forms of Value, including but not limited to social value.  If the bankers accept or reject any value system, they will do it rationally.

Be a Banker

Social media provides an extraordinary set of tools for social capitalists.  Specifications that mimic the banking system in social media are readily available.  Important awakening projects are arising that take responsibility for the future rather than lay blame on the past.  It’s time that we all become bankers.

The over-reaching objective of the alternate/social currencies movement is to create an alternate storage and exchange device to contain “Value”.

Bizarro Capitalism

Coupons regularly portray value in Bizarro World where “Save” really means “Spend Faster”.  The vendor outlet artificially prints the Bizarro Currency which can only be redeemed in Bizarro World.  No social value is created, rather, it is destroyed.

But, if my friends sell me the product, why should I pay a salesman?

Quit complaining, the new business plan is very simple:

Step 1: Convert financial currency into a social currency,

Step 2: Create Value in the social environment (denominated in the social currency).

Step 3: Convert surplus Value back into financial currency.

Example: Suppose Alphonso publishes his knowledge inventory to a social network as follows

Career mechanical engineer, aspiring photographer, outdoors lover, economics blogger, social media index top 20%, etc.

Based on this profile, Nikon USA gives Alphonso a coupon for $500 off of any purchase of $1000 dollars.  In other words, this coupon has a tangible face value of 500 dollars. Obviously Nikon can’t discount all of their products by 50%, so they announce that only 10,000 of these coupons will be placed in circulation with some fairly distant expiration date.

The Value Game:

Suppose that Alphonso already owns a Canon so he lists the 500 dollar coupon on Craigslist for 250 dollars.  From there, he meets another photography enthusiast in his local community and keeps the difference to buy some new camping gear.

Now, we are in familiar Groupon territory; a 500 dollar deal for 250 dollars.

The value of the coupon decreases as the expiration date nears but the value of the coupon increases as the scarcity increases.  Nikon can regulate values and incentives by changing the rates at which they issue coupons. The Par value of the coupon reflects these external market forces.

People will reach into their social networks to play the value game

People will get their friends together to go on a Nikon spending spree, groups of people can buy and share community camera gear, they can donate the coupon to their kid’s high school photography class – all in exchange for Social Value.

Creating Social Value

This process of people working together around a leveraged asset (such as a 1000 dollar camera) creates social value.  It quickly becomes in the best interest for Alphonso to strengthen the photography community because his increased status will enhance his knowledge inventory and increase the likelihood of receiving additional discounts from Nikon and many other brands.

Converting Back to Currency

Every time Nikon is mentioned in conversation, this is an advertising impression – it is done in a positive light of social value creation.  This is exactly the task that an expensive ad agency would be hired to play Bizarro World.  Nikon would be largely agnostic over where the ad budget is allocated as long as measurable sales result.  Likewise, Alphonso and his friends strengthen their financial position in a market

The Future of Money

Eventually, an environment would emerge where coupons never actually need to be converted to cash. All coupons from all vendors can go into an exchange pool much like a Bond Market rated on a “social value score” and trading at a par value dependent on market forces. The difference is that Value would now be allocated according to social priority rather than Wall Street priority.

The total value of the exchange pool can become the basis of a new currency standard to fund new production of new social products and innovations.

by animeartist67

Nothing grabs people’s attention these days like a discussion about the future of money.  Yet few subjects diverge as wildly. The stakes are high since personal and political fortunes are cast against the ideals of what money is, what it has been, and what it will become.  The temptation to cast the future of money in one’s own image is a tale as old as time and likely the source of most social conflict.

The Future of Time

There are two futures of money being foretold today. One is predicated on the demise of Capitalism and persistent denial that scarcity is a real economic element, despite the obvious scarcity of time in one’s life, for instance. The other future seeks to correct the flaw in Market Capitalism so that one’s scarce time may become more equitably allocated and less easily exploited by others.  Social values such as freedom, liberty, family, community, trust, health and welfare are derived from how one is allowed to prioritizes their own time, not how one is able to prioritizes the time of others.

The United States of Mind

The reason why this distinction is important is that no great economic paradigm of human civilization ever came about as a result of wholesale collapse of the prior economic paradigm. Rather, each new state of human social organization was derived from the prior state through an integration of tools created in that prior state.

It is now time to take account of these tools and figure out how to integrate them correctly.  This is the only way to foresee where we need to go and how we can get there.  The only way to defeat gravity is to understand gravity. The work will be difficult, it will be scientific, it will be intellectually challenging, and it will be inclusive of all living systems – including those that we seek to change. The trick to the future of money business will be to cure the disease without killing the patient.

Unfortunately, we may not have much time

The Big Mac Index is published by The Economist as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries.  UBS Wealth Management Research has expanded the idea of the Big Mac index to include the amount of time that an average worker in a given country must work to earn enough to buy a Big Mac.

Time is the true scarcity

Everyone is allotted a certain amount of time before they must leave the game and how they choose to allocate their time defines how they stand in the economy playing out before us.   People may store, exchange, borrow and give their time to others.  People can also steal, exploit, and waste the time of others.  Likewise, the greatest innovations are those that create time and the greatest scourges of our civilization are those that kill time.

Social Value Index

There are many indices that help us to track comparative values. These include the Dow Jones Industrial Average and the S&P 500, etc. People track them over time to help define productivity. Productivity (you and I going to work everyday) is what gives the dollar it’s value, not the other way around. Likewise, the Social Value Index will compare the financial profit (or loss) of a product or service with the social profit (or loss) of that product with respect to time.

Future of Money

The future of money will most likely arise from entrepreneurs influencing the social value index with thousands of new business models rather than the creation of some new independent currency.  The ratio between financial currency and social currency may in fact become that “new currency” standard.  As the dollar loses it’s steam, the social currency will gain steam and the Social Value Index will rise (not unlike like the S&P 500 index since 1945) to reflect a measure of social economic growth; i.e., abundant social factors of production will define productivity instead of scarcity of land, Labor, and Capital.

The trick is to cure the cancer without killing the patient

A new social currency will be born from the slow and steady evaporation of the old debt as the dollar atrophies, rather than the wholesale demise of Capitalism. As such, the Social Currency will become increasingly biased toward social priorities instead of Wall Street priorities and the pesky little flaw in Market Capitalism will correct itself.  This is the primordial soup from which ideals such as the environment, renewable energy, wealth disparity, education, etc., will become highly profitable social enterprise.  This can be achieved quickly and cheaply with existing technology if we index the data correctly; that is, with respect to time.

I am deeply concerned with the Liberal / Conservative flame wars. Countless Facebook discussions start with a casual reference to one position or the other, then quickly devolve into deeply divisive language. I see it in forums, Chats, Comments on blogs, news articles and YouTube Videos.

It’s getting worse – people can no longer agree to disagree.

I do not believe in big government. On the other hand, I do not believe that corporations should be the sole protectors for safeguarding the social charter. Call me an idealist, but I truly believe that given the right incentives, people can govern themselves to a very large degree.

Weapon of Mass Reconstruction

We have at our disposal the most powerful tool ever created for the potential benefit of humanity. Societies since the beginning of our time would have envied us beyond words – as their villages were pillaged, as the plague spread, or as the hurricane hit shore – if they had a system that could unify and organize people as we can do today with social media.

My fear, is that we will use this tool to divide instead of unify. Traditional media and the advertising industry are in deep trouble as people go online to self-select their news and content.

Trust me, I’m your friend

Unfortunately, traditional media (TV, print, and Radio) are under extraordinary pressure not just to maintain ratings, but to increase ratings to subsidize less successful areas of the enterprise. As a result, the content must become more and more sensational in order to keep people watching commercials. If I earned one dollar for every minute of YOUR time that I could waste, would you trust me? Yet people do.

The Terrorist Within

I am terrorized by the notion that Americans will turn against Americans. The problems facing this nation are so complex, so controversial, and so far reaching into the past and the future that it is unlikely that any intelligent person is more qualified than any other intelligent person to hold the highest office. Barrack, Hillary, Sarah, John, would all have the same pressures pushing back on every move leading them down 95% similar paths. None could be better and none could be worse – we’re officially in this together.

So until the super-star with extra-human discernment rides out of the clouds, People should really really be looking for a third way through this. Pure Communism is a Failure, Pure Socialism is a failure, and we are quickly learning that Pure Capitalism also runs out of track.

The Next Great American Civil War will be a battle against ourselves – all of the artifacts of past generations that pull at our subconsciousness; the reactionary fight or flight instinct of our ancestors. We are being called to something new. Let’s get on with business and find out where this road leads – together.

Our culture organizes itself around winners and losers. Corporations reflect this competitive nature to the core of their Capitalist doctrine. Sports analogies abound across the enterprise straight through to the HR department always on the lookout for the most amount of superstar for the least amount of money.

Social media has every industry trying to understand the concept of community.  Nature and our environment continues to demonstrate to humanity that there is far more cooperation going on than competition. There is tragedy looming at both ends of our political spectrum and some people are realizing that we are all in this together.

Twitter shows us that everyone is an expert at something and nobody is an expert at everything.  Corporations must understand that someone not performing adequately cannot be treated as flotsam subject to jettison at the next layoff or outsourcing opportunity.  They soon see that their customers disappear as well – because they are the same.  Communities, people, social networks, and their integrated knowledge assets are the mis-allocated asset being squandered by losing management teams, not land, labor or capital.

Like most valuable assets, there is a perfectly legitimate market for everyone in a community – nobody need be excluded, marginalized or laid off. Social Media is turning the tables on the hierarchy.  Old winners who don’t play by the new rules quickly become the new losers. Maybe we ought to run our economy like a community instead of losing so badly at trying to decimate our competition; each other.

Our culture organizes itself around winners and losers. Corporations reflect this competitive nature to the core of their Capitalist doctrine. Sports analogies abound across the enterprise straight through to the HR department always on the lookout for the most amount of superstar for the least amount of money.

Social media has every industry trying to understand the concept of community. Among the most difficult ideas to grasp is that knowledge assets in a community live on a bell curve, not in winner and loser columns. Everyone is an expert at something and nobody is an expert at everything. Someone who is not performing adequately is simply a misallocated asset, not flotsam subject to jettison at the next layoff or outsource “opportunity”.

Like most assets, there is a perfectly legitimate market for everyone in a community – nobody need be excluded, marginalized or laid off. Social Media is turning the tables on the hierarchy and old winners who don’t play by the new rules quickly become the new losers. Maybe we ought to run our economy like a community instead of losing so badly at trying to be a winner.

Meet the new Org Chart

A corporation is simply a legal entity – otherwise, it is fictitious. A corporation is made up of people who have a social agreement among themselves to do what is in the best interest of the legal entity.

There is very little about a corporation that cannot be duplicated in social media. This calls into question the nature of social media vs. the nature of corporations.  Here we uncover a third pillar to the US economic recovery; Social Capitalism.

Leading into 2010, The Ingenesist Project will release a series of videos that specify the construct of the Next Economic Paradigm.  We begin at the beginning.

The following video discusses the flaw in modern globalization market economics that started with the failure of an obscure sub section of NAFTA – the free trade of services. The objective of the Ingenesist Project is to correct a tiny little flaw in market economics. This simple adjustment will result in dramatic change.

(Editor’s note: in all fairness, the GS initiative does represent a fundamental shift away from the Friedman doctrine of amoral capitalism.)

Money does not represent gold, solver, or oil.  Money represents human productivity – yours and mine.  Goldman Sachs is about to award the greatest ANNUAL payout for its employees – over 700,000 dollars EACH.

The words “money” and “productivity” should be interchangeable. So, what exactly did Goldman Sachs produce in order to amass such astonishing amounts of “money?”  Where is the corresponding astonishing productivity?

The line of fire is quite obvious; the productivity is really “future” productivity in the form of debt – yours and mine.

WSJ: Some of the largest shareholders in Goldman Sachs Group Inc. have urged the Wall Street firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors, according to people familiar with the situation.

Uhhmmm…15% of the shares are owned by the Goldman employees – sounds like the 2nd tier of the pyramid are getting anxious.  Like a street gang, they battle for a piece of the turf.  Perhaps Goldman should do something for the 3rd tier too.

Joseph Palermo Writes: It’s truly touching that Goldman Sachs’ CEO Lloyd Blankfein, who recently said that his too-big-to-fail, Fed-backed holding company is doing “God’s work,” has offered a mea culpa (of sorts) for his firm’s past sins. Our beneficent overlords at Goldman Sachs promise to bestow upon small business a boon of $500 million. This generous sum is about 3 percent of the $16.7 billion that Goldman has set aside for its employees this year — a year of expected record-breaking profits on Wall Street.

“Small Business” must also include of the high-powered international PR firm, Brunswick, to make sure every American knows of this “Good Deed”.  Goldman spent more on touting their benevolence than most Americans earn in a life time. Goldman pulled out of the financial tailspin by an improved market (= game of your productivity) and by muscling out weaker competitors (companies less competent at gaming your productivity).  So they pass 500 Million dollars down to keep the 3rd Tier of the Pyramid inflated.

Farther down on 4th tier of pyramid, the stockholders of America – every man woman and child in the US – will get a warm and fuzzy message from the “Sage of Omaha” that good deeds are coming, but only get their DNA etched with the oppression of new debt.  People have no choice but to try to be more productive in order to support the Ponzi Scheme that keeps them warm – and they are killing themselves to do it.

Seriously, when are the American people going to wake up to such blatant criminal activity?  It’s like we just open the door, show them to the kitchen and go sit down on the couch while we watch them haul away all the nourishment.  The next time they come, they will be hauling us away and taking the house.  They also tell us that health insurance is bad because it rewards those who are not productive (i.e., the sick) – you are not worth anything to them anymore.

There is a way around this.  The Next Economic Paradigm is an alternate financial system that is constructed exactly the same way as the current financial system except that it introduces a currency that is backed by real productivity – yours and mine.  Let them play their games with their own productivity, not ours.

I am amazed at how many of my friends say that they do not understand economics – then I visit their facebook page only to find all the trappings of advanced economic theory.  Economics is the science of incentives and currency is the medium of exchange.  I posted the following article about the basics of YoVille currency because you can almost exchange the words “YoCoins” and “YoCash”  for any real-world description of money.

YoCoins is analogous to cash, YoCash is analogous to most common financial instruments, and the “offers and surveys” is analogous to what we have come to call Modern Capitalism.  All incentives are in place to keep the player playing and playing and playing…..

The following summary from Hannah Del Porto does a great job in identifying the State of the Art in Building The Social Economy.  Such “Thought Infrastructure” is essential to what will evolve into the next economic paradigm.  For years, we have specified an Innovation Economy Built on Social Media platform.  The thesis is published Here.

The key, we believe, is for the Social Financial System to emulate the critical components of the Monetary Financial Systems that support capitalization. Hence, “Social Capitalism” will emerge as a replacement for both Socialism and Capitalism.  We are deeply excited in observing this integration of knowledge assets

Thanks Hannah!!!

Personal Democracy Forum Session: Building The Social Economy

Posted by: Hannah Del Porto

Personal Democracy Forum Session: Building The Social Economy: Craigbucks, Newmarks, and Making Whuffie
Panelists: Tara Hunt and Doughlas Rushkoff

Who are they?*

Douglas Rushkoff is an author and though-leader. His most recent book is Life Inc. He is best known as the originator of the terms media virus, social currency, and digital natives, as well as for applying open source principles to government, religion, and economics.

Tara Hunt is the author of The Whuffie Factor which focuses on the importance of social capital in B2C relationships and pinpoints the rise of online communities as the force that makes social capital unavoidable for businesses going forward. Her next book discusses the the psychology and economics of happiness as the basis of your successful business model.

What are they talking about?

The basic premise is that there is a social economy that exists alongside our currency-based economy. Each person has (or lacks) social currency in the same sense that people have (or don’t have) paper currency.

Tara Hunt, one of the speakers, refers (rather incessantly) to social currency or capital as “whuffie.”

What makes a social economy?

As explained by the speakers, a social economy is the exchange of goods and services among individuals, rather than between individuals and corporations.

Doug calls this “reclaiming commerce as a human activity” and points out that commercial does not mean corporate. He described the rise of the corporation as a system of exploitation and gives the social economy as an alternative to outsourcing trade to corporations and banks.

What is social capital?

It was kind of hard to pluck a definition from the session, but you could think of it as your worth to others in non-dollar terms. It’s what you have to offer to the community – your expertise and participation.

Some rules of social capital from Tara:

- The inability to save social capital encourages reinvestment.
- The value of social capital increases as it circulates.
- The law of suckage says that social capital will attract the sucky [plagarizing] element that tries to monetize and detract from the quality of the original contribution to the social economy.

Doug adds that in order to create social capital you must contribute first-hand to the social economy. For example, franchises do not add original value and therefore have no, um, whuffie.

How do I know how much social capital I have?

You don’t. According to Tara, the “good thing” about whuffie is that it means something different to everyone. So, you can’t measure whuffie. You can’t compare it. You can’t cheat it. Don’t even try inflating your whuffie. It won’t work (unless you’re a talentless celeb with a great PR team).

How do I increase my social capital?

I’m not really clear on this. I think we all understand the concept of being valuable to the community by being willing and able to contribute time and talent. And that value is qualitatively perceived by the community.

But both speakers agree that “personal branding” – defining yourself by your professional expertise – is “an oxymoron” because individuals are not corporations and should not impersonate them.

It would seem natural that to increase your social capital, you would increase your talent then let the community know so that they can take advantage of (and revalue) your contributions. If you’re not able to brand yourself according to your niche or expertise, or to promote your talents, I’m not sure how social valuations change.

The necessity to discover each and every other economy member’s value organically seems extremely inefficient. I think this would create an obstacle to the replacement of the currency-based economy with a social one, which seems to be the ultimate objective of the panelists.

How can I be successful in the social economy?

Tara gave some tips for interacting in the social economy which can be applied to your online customer engagement.

1. Turn the bullhorn around: Stop talking and start listening to your stakeholders.
2. Be part of the community you serve: Be a member of social platforms before conducting commerce there.
3. Create amazing customer experiences: Look for feedback and build ongoing relationships.
4. Embrace the chaos: You can’t control (or measure) the social economy.
5. Find your higher purpose: You get back what you give.

*Bios stolen from the PDF conference website.

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Follow Hannah on Twitter.

History often provides clarity in the present. I was searching the term “Social Currency” and I found these two posts on a forum from all the way back in 2001.  The authors are quite explicit in their expectations of social currency in their present and deep into the future.

A framework for the future:

I find such framework to be useful in grounding my own opinions, expectations, and aspirations in the social media space.  The authors here are quite intimate in their views and we would all be remiss in not searching the hidden layers of our consciousness on the subject.  Enjoy.

(I left all the links in hoping that this would suffice for credits back to the source  http://everything2.com/title/social%2520currency)

(June 2001)

1: A sociological term.

Social currency is the monetary unit we use in everyday friendships and conversations. It’s things like jokes, little factoids and bits of data that we pick up, not because we’re especially interested in the subject – but because it’ll make an interesting conversation piece. Something better than the weather.

After all, when we hear a joke, what are we really doing – listening to it for ourselves, or remembering it to retell to another? It’s a bit of both – we enjoy the pleasurable laughing response, but we also like the feeling of making others laugh, because of the endorphins it gives us.

Lots of social currency, and charisma in deploying it is basically what everyday conversation and small talk are about.

(November 2001)

2: I can see the future…
Once biophysics and cybernetics have been more developed there’s no doubt that the entire so called third sector will be capitalized. Even everyday conversations are recuperated and Noung’s wu is realized in totally different light. There’s how it goes:

With tiny little censors they can approximate the level of happiness by measuring the concentration of chemicals in your body, especially in the brains. It is already known that brains dispense certain chemicals, say endorphins, when you are having good vibes. Thus your level of happiness can be measured.

Once you meet your friend or a stranger and you’re about to tell him a joke or you’ll kiss her you have to identify yourself i.e. log into her cybernetical implants. If you already know each others this can be done with speech recognization but with strangers we need more innovative identification systems. But that’s not our trouble here since there are plenty of decent solutions. Now, if a cybernetical computer system, maybe using a fuzzy logic or something, concludes that it’s you who caused the pleasure for the person you can instantly cash in.

If you’re having s*x with your girlfriend watch out that you are not enjoying too much if you’re short of cash. Otherwise your microchips will either cause you to go bankrupt or coit*s interruptus.

I can see also other great applications here with biophysics and cybernetics, namely personal pricing, but I think the social currency will take capitalism to the other level. Industrial and information revolutions are nothing compared to this step! ]]> http://www.ingenesist.com/general-info/social-currency-history-matters.html/feed 0 http://www.ingenesist.com/general-info/socialism-capitalism-or-social-capitalism.html http://www.ingenesist.com/general-info/socialism-capitalism-or-social-capitalism.html#comments Wed, 14 Jan 2009 06:38:01 +0000 Dan Robles http://www.ingenesist.com/?p=745

Throughout history, technological change has also brought changes in the organization of society around the new ways to allocate resources.  The industrial revolution spawned the two prevailing economic theories of our time; Capitalism and Socialism.  The current wave of technological change will likely spawn new economic theories and social organization systems as well.

Capitalism arose from feudalism and is roughly characterized by a merchant class that owns the factors of production (land, labor, and capital) and a working class whose physical toil adds value to natural resources.  The capitalist acting in their own best interest is ultimately acting in the best interest of society by creating jobs that employ people.

Then Karl Marx came along and noted the inherent conflict where the workers would seek to maximize their wages and the merchants would seek to minimize wages.  He argued that class struggle would ultimately result in a communist system replacing the capitalist system. The communist acting in the best interest of society is ultimately acting in their own best interest.  Socialism is widely regarded as the transitional stage between capitalism and communism.

But the struggle is really over the control of the means of production, or factors of production. Are land, labor, and capital private property or public property?

Today, computer enabled society engaged in an innovation economy presents an entirely new set of conditions.  What happens when the factors of production are social capital, creative capital, and intellectual capital?  How are these “means of production” going to be controlled and by whom?

This is a serious philosophical quandary that will be brought down upon us in the next generation of social media because neither socialism or capitalism are applicable in a traditional sense. Like Heisenberg’s theory of indeterminacy – the more control you have over one factor, the less control you have over the other.  This is not a condition related to the ability to control someone or something, rather, it is a condition related to the nature of the system itself.  That’s a big deal.

For the socialist: in order to control social capital, one must equalize society – as such, the system retains little innovation production value.  In order to control creative capital, one must standardize creativity – likewise, the system retains little innovation production value.  In order to control intellectual capital, one must control the intellectual development of another – again, the system retains little innovation production value.

Likewise for the capitalist, many people understand social capitalism to be capitalism with a social benefit.  While this is correct, it is likely not scalable in the current form.  There is no ROI to curb global warming, there is no ROI to educate the poor, there is no ROI for human rights, and there is no ROI on the national debt, etc. As such, the system is constrained by the social burden to innovate.

There is, however, a business plan to liberate social capital, creative capital, and intellectual capital as tangible financial instruments in their own right, by definition, reflecting social priorities in an innovation economy.  This is where the next generation of social media is leading to – and it scales magnificently.  Have you noticed? That is Social Capitalism.

The Known Universe

Computer enabled society has been called an “alternate universe“.  If Social Media intends to make serious money, perhaps it should act like one as well.  In finance, Risk is also often called an alternate universe.  Beneath the surface of this little 4 letter word resides a complex network of financial instruments that do far more to channel and direct the flow of money than any commercial trend, marketing campaign, or hot new web app.

Risk is actually a very simple thing to understand.  All you need to do is answer all three of the following simple questions:

1. Can I identify the peril?
2. What is the probability that the peril will get me?
3. If it does get me, what are the consequences?

The Insurance industry is absolutely gigantic – too important to fail – yet it produces nothing that can be held in the palm of one’s hand.  Insurance lives and breathes in an alternate universe of information.  Any place where these three questions cannot be fully and completely managed, you will find an insurance product.  Where there is no insurance product, there is no capitalism.

Here is how it works:  suppose there are 10 identical cabins in the woods.  Each cabin is worth exactly 1000 dollars.  There is a 100 percent probability that 1 of cabins will burn down every year, but nobody knows which.   Therefore, each cabin owner needs to have 1000 dollars sitting in a savings account in case their cabin burns that year.  Together, 10,000 dollars sits in a bank not being invested in productive enterprise.  Along comes an insurance company to reorganize the assets by offering to replace any cabin if all 10 cabins agree to pay 100 dollar per year premium (plus an admin fee). Now each of the cabin owners can pay 100 dollars per year and release 9000 dollars to the economy as productive capital.

Insurance opens the floodgates of wealth creation; bankers lend, investors invest, and entrepreneurs innovate where risks are reduced to zero; all bets are hedged.  But there is a trick; the peril must be identified (fire), the probability must be known (10%), and the consequences must be quantified ($1000).  This only works if the assets are pooled in identical lots that have the same probability of loss and suffer the same fate.  This is valuable information and it’s worth a whole lot of money.

Social Media is poised to open the floodgates of wealth creation in a similar way – by connecting local communities, neighborhoods, peers, and colleagues with computer enabled society.  Today, it is often easier, cheaper, and safer to make friends online than in person, but nothing tangible can really happen until the rubber meets the road;  people need to congregate.   The Ingenesist Project suggests that the 3 dimensions of human capital, creative capital, and intellectual capital can be identified, normalized, quantified and pooled into risk sharing cooperatives through social media as a means of eliminating innovation risk.

The trick is for society to organize itself in a slightly different way – this is where Social Media needs to position itself with the next generation of applications.  If so, the business model for social media will become hugely important to an innovation economy – too important to fail.

Technological change must always precede economic growth.  We are going about the process of market capitalism as if economic growth can precede technological change.  Somewhere along the line we have gotten the cart in front of the mule.

It seems that this situation can be fairly easily corrected – after all, it’s the same cart and the same mule.  All we need to do is get the same driver to point the same carrot on the same stick in the opposite direction; and the system should turn itself around.  Impossible we ask? Well, maybe not….yet.

The same species…

Economic growth and technological change are the same species; each is represented by human productivity.  If I take a loan to buy a house, the debt is “counted” as economic growth backed by my future productivity.  If I go to work and invent a method that provides a better way for people to accomplish something, that same productivity increases with my innovation.  They should hedge each other much like insurance.  The problem arises when we forget to count the mule.

If A = C and B = C, then A = B

If any two currencies are backed by the same standard, they should be readily convertible.  If Euro’s and Dollars are both backed by Gold, they would be convertible between each other and the market can simply choose to trade one or the other.  Arbitrage opportunities would keep the system balance.

This is the same case with debt and innovation; two currencies represented by the same standard, i.e., productivity.

What if a new currency was introduced and pegged to human productivity?  That currency would also be proportional to the dollar. Arbitrage opportunities between debt and innovation currencies would seek a balance. The two scorecards would hedge each other as they should.

It is going to happen eventually, why wait?

While this may seem odd to talk about one State, two currencies, it is not so odd to talk about what happens if the dollar fails.  People will start trading a different currency.   The Plumber will trade ideas with the lawyer who will trade with the doctor, carpenter, teacher, grocer, laborer, etc.  A computer enabled society will build a knowledge inventory of who knows what.  Reputations will arise thus organizing knowledge in the form of a financial instrument.  This social medium will be the tool that organizes trading schemes and establishing supply and demand.  An Innovation Bank will keep track of who owes what to whom and distribute wealth in the form of tangential innovation.  Venture “capital” will be the cheapest money in town – it’s like money in the bank for an innovation economy. This is in fact, the nature of society and largely the function it has served for thousands of years.

Little carrot on a big stick

The difference between now and any other time in history is that society is computer enabled.  Human knowledge has been held hostage behind the construct of “intangible assets” on a corporate balance sheet for too long.  There is a great deal of energy building up and it can now find a productive outlet through social media.  The best government policy is to accommodate what people will do naturally.  It would be extremely inexpensive to empower society to form an innovation economy to hedge market capitalism. People need a currency that is first and foremost natural for them to trade.   Later, Wall Street can convert and gamble at their peril. But first, point the stick in a different direction and the system will correct itself.

[The Ingenesist Project (http://www.ingenesist.com) has specified three web application which if deployed to social media would allow social capital, creative capital, and intellectual capital to become tangible inside social networks.]