The previous article identified a recurring trend in human history; each new stage of civilization resulted from the integration of tools invented in the prior stage. That is; the output of one tool becomes the input of another.

In general, this is what defines a “system”. One of the problems with systems is that if one major piece fails, the whole system falters.  Today we have computer systems, transportation systems, social systems and financial system that all behave in this way.

The financial system is built on five integrated pillars

Currency

A currency is a device that people use for both the storage and the exchange of value.  Currency serves as a proxy that represents the value of things that people produce it is not in itself a product.

Inventory

The accounting system keeps track of the things that people produce.  It is helpful to use a currency to represent the the storage and exchange of value from the things that people produce; but again, currency is only a representation of inventory.

Vetting

An economy must have a vetting mechanism that keeps the game fair otherwise nobody would play.  Today this includes a legal system, contracts, and institutions  - such as representative government – that defend the value of things that people produce.

Entrepreneurs

Classically, entrepreneurs are the merchant class who allocate land, labor, and money in various proportions and combinations as a means of organizing and matching the supply of things that people produce with the demand for what people produce.

Society

People define markets.  They supply the inventory that other people demand and they demand the inventory that other people supply.

Examples of financial system failures are legendary

The Enron Fiasco was an accounting system failure caused by a vetting mechanism failure. The housing bubble was a was a currency failure because CDOs effectively divorced the dollar from any meaningful representation of productivity.  The unemployment crisis is a social failure that limits the ability for people to supply the things that they demand.

The Inevitable Economy

So what if the functions of these same five pillars could be achieved and integrated in some other way? What if this is already happening?  Going through the list backwards to reflect a mirror image:

Society

People are reorganizing in new and different ways.  They increasingly use social media and mobile technology to supply and demand limitless information with which they then use to supply and demand many useful things of each other.

Entrepreneurs

Land, labor, and capital are becoming increasingly irrelevant in the age of non-scarce information – instead, entrepreneurs are allocation social, creative, and intellectual assets as a means of matching the supply and demand for the things that people need.

Vetting

Social contracts are playing an increasing role in keeping the game fair. It is not in the best interest for anyone to act with low integrity when they can be Googled in a matter of seconds.

Inventory

The knowledge asset inventory is forming in many applications and platforms – but it is not yet integrated. When this happens, an accounting system for social, creative, and intellectual assets will immediately emerge.

Finally, the currency

Any device that can represent human productivity better than today’s money will become that next currency.  This can only happen after the four pillars begin to integrate.

The currency is supported by the system. The system is NOT supported by the currency.  

]]> http://www.ingenesist.com/general-info/the-5-pillars-of-the-inevitable-economy.html/feed 1 http://www.ingenesist.com/general-info/the-inevitable-next-economy.html http://www.ingenesist.com/general-info/the-inevitable-next-economy.html#comments Mon, 23 Jan 2012 23:31:40 +0000 Dan Robles http://www.ingenesist.com/?p=6652

The Human Productivity Chart:

Human civilization has progressed through many stages.  Each stage arose from the “integration” of the tools developed in the prior stage.  Believe it or not, the next economic paradigm will arise from the integration of the tools being developed in the current stage of human development. Let me explain:

Hunter -gatherer:

We started as hunter-gathers who traveled from place to place to follow animal migrations and seasonal flora.  People would collect fallen branches and burn them for heat or cooking.  Then people started to sharpen rocks that could be used to hunt food better than a dull rock. They sharpened rocks to chop down trees for warmth and shelter.  Soon they sharpened rocks to till soil.

The agrarians

The arrival of the agrarian age came when the arrow, the axe, and the plow were integrated; that is, the output of one became the input of another – allowing people to conserve energy and increasing productivity. The emergence of communities led to the division of labor as people specialized their skills. People soon developed tools and techniques for forging metals, building structures, and harnessing of forces such as wind, sun, water, and domesticated animals.

City-states

The arrival of City-States arose when division of labor, harnessing forces, and transportation became integrated.  Spare time became available to experiment in ideas such as governance, laws, civil services, and currency. Travel allowed for trade of goods, services, and the spread of knowledge across great distances.

Philosophers

The age of philosophy emerged as the leisure class, knowledge exchange, and civil law integrated such that people began to question existence, spirituality, and test theories about the observations that they constantly witnessed in the natural world.

Scientists

The scientific age emerged from the integration of tools developed during the philosophical age.  Written language, mathematics, geometry, came together as alchemists attempting to turn lead into gold, instead created many other new and useful things from the elements. Astronomy, calculus, the scientific method, and modern finance were born.

Industrialists

The industrial age emerged as an integration of the tools developed by the scientific age.  Eli Whitney demonstrated the “interchangeability of parts” paving the way for modern production. The printing press and cotton gin demonstrated the scalability of machinery while capitalization and securitization of value (finance) allowed a merchant class to allocate land, labor, and capital.

Information

The age of information formed from the integration of tools created by the industrial revolution.  All that machinery created a tremendous amount of data.  Computers were developed for processing data creating information that could be used to make productivity more efficient.

Knowledge

The Knowledge age emerged from the integration of tools developed during the information age. The Internet vastly accelerated the amount of information available from which knowledge could be applied as factors of production in physical systems from weather prediction, space travel, medicine, and new ways for people to organize their selves.

Innovation

The innovation age will emerge from the integration of tools developed by the knowledge age.  So called “social media” is creating thousands of platforms upon which people reorganize themselves around interests, affinities, relationship, and commerce.  As these tools integrate; that is, when the output of one tool becomes the input of another tool (and vice versa), a new economic paradigm will emerge.

Wisdom

Keep in mind that the agrarian economy and all previous stages are still with us today. Keep in mind that elements of future economies also exist today.  Keep in mind that the US dollar has not always been the currency of trade nor should we expect that it will always be with us in the future. We can assume that the productivity inherent in people and communities is not dependent on the currency, rather, currency is dependent on it.  Time is the only scarce resource and everyone has an equal amount of it.  As such, time is the only true currency.

]]> http://www.ingenesist.com/general-info/the-inevitable-next-economy.html/feed 4 http://www.ingenesist.com/general-info/ideas-are-the-new-currency.html http://www.ingenesist.com/general-info/ideas-are-the-new-currency.html#comments Tue, 20 Dec 2011 21:30:53 +0000 Dan Robles http://www.ingenesist.com/?p=6623

‘Tis the season for “The Year In Pictures” – the annual new year pictorial accounting of the events of the outgoing year.  Any rational collection for 2011 would include three events; Arab Spring, The Earthquake / Tsunami in Japan, and Occupy Wall Street. These three events eclipsed the Royal Wedding, Steve Jobs, the tenth anniversary of 9/11, the space shuttle retirement and even the end of the war in Iraq.

These three events tell a very interesting story of who we are and where we are going as a civilization.  

Classical economists such as David Ricardo and Adam Smith brought us the idea that a merchant class allocates land, labor, and capital in various combinations as “the factors of production” that match supply and demand for all that societies need via the invisible hand of market capitalism.

Yet, in a single hour, land, labor, and billions of units of Capital were wiped off the surface of the Earth by in Japan.   While we see the images of total destruction, there are hundreds of square miles that were untouched and where all seems quite normal – except for that invisible hand of radioactive cesium.  Land, labor, and capital failed as a an economic cornerstone for all those who had once called this land home.

In the Middle East, with few jobs and even fewer opportunities for youth, the quaint notion of “land and labor allocations” crumbled under the forces of people with mobile access to dynamic data, free information, community knowledge, innovation, and wisdom. Governments, with no relative shortage of money, were unable to challenge the opposing factors.  Again, the idea of land, labor, and capital as the economic cornerstone had failed.

Quite appropriately, Occupy Wall Street was executed on borrowed land, with borrowed labor, and borrowed capital.   The operation was peaceful so nobody died. The stock market did not even crash.  Politicians went largely unscathed and the attorneys stayed in their collective offices. Nothing physical was actually created, and therefore, nothing physical was actually destroyed.  However, a great deal was produced.

All three of these events had something in common – they all produced something very tangible.  They all produced an idea in the minds of others.

As we review the year we review it is increasingly evident that land, labor, and capital are inadequate to articulate what people actually produce.  It will be through these shortcomings of classical economics that a new economy will form.  The degree to which society actually produces the things that society actually needs, this new economy should not look much different.  The degree to which society does not actually need the things that capitalism produces, great new ideas will emerge.

What was once the land of opportunity can now become a planet of opportunity.

Photo Credit: David Shankbone via Mashable 

The Hub and Spoke system is a time honored formation of commercial aviation. People accept hub and spoke as the most rational way to organize people and planes much like they accept the corporation as the best way to organize production of goods and service.

Meanwhile, social media is challenging every assumption that we hold dear to our hearts as new applications role out which steadily increase the ability for people to organize their selves.

The newest applications such as Google + show us that people are the hub and their various forms of social networks are their spokes. A person has a group for their family, one for their friends, their colleagues, their schoolmates, etc.  While G+ fatigue may wear in as people get tired of classifying their casual contacts, the real value of G+ may arise in the intentional Organization of people for social and financial efficiency.

The similarity between the airport and G+ Hub and Spoke is not a casual coincidence.  There is a very real and physical connection between the way people organize themselves in social media and the way they organize themselves in corporate production and the way their organize themselves in air transportation systems.

Suppose we make the analogy that the person in the center is the customer, the circle that they belong to is the market, and the person in the market is a client.  The analogy hold when we try to “preserve college friendships”.  College is the social market and the friend is the mutual client relationship where the currency is a social currency.

The analogy is still very young, but it is truly profound.  This way of thinking will drive a form of social organization that may rival corporations, government, and even international boundaries.  It is also no coincidence that Social Flights has been modeling this analogy for the 2 years since we first started developing our business plan.

Today, Social Flights is working on some important concepts for defining Travel Tribe Leader functions.  The objective is to duplicate the function of a “concrete” hub and spoke system denominated in dollars with a virtual hub and spoke system denominated in social currency.

Network Characteristics of Travel Tribe leaders:

• Each Travel Tribe Leader is responsible for 10-20 city pairs from their own location.
• Two travel tribe leaders for each city pair (one located at each point)
• Travel Tribe Leader creates revenue by matching people and places
• Builds tribal/shared knowledge
• Redundant, opportunistic, and fault tolerant
• Ideally suited for Twitter, Google + and Facebook Distribution Channels

Conclusion:  The organization of people it figuratively (with G+) and literally (with corporations) is the exact same thing.  This will become obvious when people discover the necessity to organize their selves into productive communities in the absence of corporations and government.  But why wait – we can, and we will use social media to form a new system of social organization.

Citation: http://www.slideshare.net/padday/the-real-life-social-network-v2

The term “Gamification” is pretty cool, except that it is meaningless.  Anyone who has ever worked a day in his or her life knows that the World is already gamed.  Anyone who follows politics and world events sees the game playing out constantly.  Everyone, including the winners, know that the game is stacked.  The last thing anyone needs is another game layer.

If you are like the majority of people on Earth, you are given a game that you can’t win playing by the rules.  If you are like the majority of people on Earth, you would do anything for a chance to play a game that you CAN win.  Imagine the value of an IPO for a gaming company with that prospectus.

What is a Counter Game?

Wikileaks – love them or hate them – is a Counter Game because they turned the lights on a game that was being played in the dark.  Bloggers play a Counter Game because media was editorialized by powerful interests.  Twitter is a Counter Game because it drives the narrative instead of being driven by it. In fact, any place where there is a broker – someone or something that benefits from you NOT having complete information – is an opportunity to introduce a Counter Game.

An astonishing array of Counter Games is forming in social media and the brokers are falling out of the sky like hailstones.  Power brokers, mortgage brokers, energy brokers, media brokers, even Google is gamed by Counter Gamers.  The better they get at hiding information; the better the Counter Gamers gets at rooting it out.  The harder they try to control a message, the better the Counter Gamers gets at disclosing the truth behind the message.

The game creates the Counter Game.

Likewise, to kill the game is to kill the Counter Game. As such, the only way to kill the counter-game is to kill the game. Think about that for a bit…Do we really want to do that?

The Holy Grail of the Counter Game is the global monetary system. Money is supposed to represent human productivity; otherwise people would not go to work to make things that everyone else needs.  The Game has caused Money to become increasingly divorced from actual productivity.  People who produce the most value are exploited while those who produce the least are most grandly rewarded.  The Game is stacked with money.

The Holy Grail of The Counter Game is to replace monetary currency with a True Value Currency.

The financial system stands on 5 pillars: currency, inventory, vetting institutions, entrepreneurs, and value arbitrage. All of these are slowly being replicated, mimicked, or duplicated in Social Media.  When the 5 pillars integrate in social media systems, a new currency will emerge.  People will use it to store and exchange the value that they create through their work. It will be a no-brainer

The Value Game

The Value Game is outlined in this short video using the now proverbial “Corporate Jet” as the turning point in the global economic paradigm.  The Value Game does not kill the Financial Game, rather, it challenges, corrects, and improves it.  The Value game has reached a critical milestone – it has been funded in dollars by investors.

This is not insignificant.

I had a discussion with one of my partners that we need 2.5 million users and Social Flights will manage itself.  The partner said, “You mean 2.5 million dollars”.

No, I said, “I need 2.5 million users”.

The partner said tersely, “No, I really think that you need dollars.”

Again, I replied, “I need users…. “

This went on for a while until we both got it: The value of Social Flights is contained within the users, not within the dollars. After that, the conversation could progress in a meaningful way, priorities found their place, and the teams found their roles – including the investors.

Nothing economic can happen until people get together to build something

Financial analysts are aghast at the magnificent valuations that social media applications are delivering; P/E ratios of 1000, valuations of 100 dollars per member, billions of dollars per billion time hours in game play - these are not the ratios that they teach in B-school.  Is this crazy or does it make perfect sense?

The Great Rapture

While highly unlikely, suppose the Almighty Father called upon all good and pious dollars to ascend unto heaven in a glorious rapture of currency – on a single day, all money disappears from the face of the Earth.  What would be left?  What happens next?

At least for a little while, I’ll still be sitting in this café typing a blog post.  The value of the education and social network of the person who I will be meeting for lunch will still be intact.  The value of the roads, bridges, schools, and highways would remain intact.  The value to teachers, firefighters, and doctors will remain.  The sun will shine and gravity will continue to act on matter.  The money may go, but a LOT of value remains.

No Such Thing As Free Lunch

Of course, things will quickly devolve when I tell the café owner that I can’t pay for lunch because my money has been raptured. Of course that would seem like a relatively minor problem given the fact that their money has been raptured too.  In fact, so has their supplier’s money, and their Bank’s money.  Obviously, there can’t be a bail out because the government has no money either.

Each of us would probably stare at each other for a few minutes until somebody asks the other, “well, then, what do you have that I can use?”  Once that conversation is exhausted, we’ll move on to  “Who do you know that has something that I can use?” Etc.

The mother of all hedge funds

If this were a game, the person that knows lots of people who do useful things would stand a greater chance of being served lunch than someone who is isolated and disliked – no matter how much money they once had before the rapture.  Likewise, if you have a lot of money, what “Bank” would you put it in?  What “Stock” would you buy?

This bubble is different.

It may be that the dollar is in a bubble and the true value of our economy is stored and exchanged in communities of people enabled by social media.  Those magnificent valuations in social media companies may actually reflect true value and act like a huge hedge fund on currency in the absence of any other plausible financial instrument.

As our noble politicians continue to play their game of chicken with the productivity of honest, educated, and productive Americans, they fail to see the polarity shifting away from money and into “true value”.

The value is in the people, not in the dollars. now we can have a different conversation about how to manage ourselves.

Hardwired Control Matrix

It has been a challenging month at Social Flights.   Our soft launch story was broken by FAST COMPANY, then it was quickly picked up by  THE NEW YORK TIMES, BLOOMBERG TV,  FORBES, INC. TECH,  WASHINGTON POST, and MASHABLE, then picked up by various other magazines and bloggers across the web.

Huge Interest in The Business Model

Social flights picked up tens of thousands of hits and several thousand members within a very short period of time.  We also received almost a thousand RFQ’s for charter service and our web traffic rank according to Alexa.com is under 20,000 – better than any other private jet broker in the country, including NetJets.

I personally communicated with dozens of 3rd party entrepreneurs that want to plug into our value proposition and we are discussing multiple high value partnerships in North America and around the world.

Are We Hard Wired?

Introducing such a radical approach brings many challenges, especially in the area of customer expectation.  People are hard wired to schedules, and lines, and pat downs, and waiting, waiting waiting. Social Flights was never conceived to dictate on a market how they should fly and to where.  Social flights will certainly not take people someplace where they don’t want to go – like an airport hub for transfer.  Social Flights will never hold a passenger’s dignity hostage behind some hidden cost or irrelevant regulation.

Losing The Hard Wire

We estimate that Social Flights will optimize at about  2.5 Million members – or roughly 5000 people in each of 500 locations across North America.  At that point our service model will begin to “simulate” the selection and convenience of the commercial airlines.  Keep in mind – this system will “simulate” scheduled service except without hard wires.

5000 people X 500 places model

• This is the point where there will be a high likelihood that 8-10 people will all want to go to the same place from the same place within reasonable intervals of departure times.
• This is the point where fluctuations in price and schedule such as de-icing costs, landing fees, fuel cost, or seat cancellation policy can be absorbed across the whole system rather than an individual passenger load.
• This is the point where ground support vendors will commit substantial discount incentives to controlled bundles of passengers.
• This is a point where the data that is generated by The Value Game and held solely by the players becomes valuable enough to predict the outcomes of future Value Games.

Not An Easy Puzzle to Solve:

Social Flights is attempting to do something that has never been accomplished in social media with such high value shared assets.  We seek to answer the question: Can people organize themselves around the concept of “Value” much like we have organized ourselves around the concept of “Money”.  Based on our earliest readings, the answer is that people are not as Hard Wired to money as those who control money would like us to believe. Looks like they’d jump the first plane out of Dodge if given a chance.

The Value Game is becoming increasingly generalized as more entrepreneurs seek to learn how to apply it to new economic realities.  The first company to launch is Social Flights.  Quickly funded, in full operation, booking jets and signing contracts, the Social Flights success trajectory has been truly remarkable.

The Ingenesist Project is deploying several more applications of The Value Game.  Our next venture is to develop Reputation Management for High Net Worth Individuals (HNWI).  Here’s how it goes.

The Social Influence Game:

Player 1: At some point, the government is going to stop supporting many very important social programs such as schools, health care, child care, retirement benefits, and possibly even close the charitable tax deduction.  In order to survive, social causes will need to come up with new forms of support or fund themselves with a new form of currency.

Player 2: Many politically and financially influential people in communities are finding that their “Google Results” often tell a story that is less than flattering.  Some have old lawsuits, unpopular business associates, or just too much personal information that presents a skewed picture of how they actually feel toward their community.  It is risky, difficult, and expensive to change Search engine results and it is nearly impossible to “control” what other people say.

Player 3: Legions of Social Media Gurus have long learned to aggregate and influence markets using social media platforms.  They have learned to match knowledge surpluses to knowledge deficits as a means of building their own online reputation and influence.  Many Social Media Gurus have achieved a strong Social Media Presence, which supports book tours, lecture series, personal brand image, or corporate clients and sponsorships. They constantly seek new content.

Converting Political Currency to Social Currency

The Social Influence Game will match HNWI with Social Causes where the HNWI can exert their political and Corporate currency in exchange for Social Currency.  Many HNWI have a powerful lifelong network of other influential people from whom they can find advice, mentorship, assistance, or discover goods, services, or physical inventory that may become useful and available to a struggling social enterprise.

Social Media Gurus who make these connections will blog, comment, and promote their ability to match power surplus to power deficit.  Internet Search results will redraw the Social Graph.

Holiday Shopping For the New Millennium

In practice, HNWI can “Go Shopping” for social causes.  When they find one that suits their talents and passions, they will be able to see what that organization needs; beds, food, heating oil, legal advice, CEO mentor, someone to lean on the land lord or even exert a position with the local government, etc.  The HNWI then will pull out their lifelong Rolodex of powerful persons and exert their influence in favor of the social cause through the interpretation of the Social Media Guru.

Winning The Game:

After a short while, Google will start pushing the old search results of the HNWI farther and farther down the page as the tweets, comments, and blog posts accumulate.   The Social Media Guru will find gold in their own backyards instead of Corporate Astroturf.  Social Causes will achieve their mission while managing new resources and earning important new friends.

Perhaps most importantly, the HNWI community will collaborate in order to sustain their Social Currency in the community.  They will begin to bias their personal and professional actions in favor of social priorities over Wall Street priorities.

In Short, everyone acting in their own best interests benefits the interests of everyone.  This is Social Capitalism.  If it works well enough, maybe we can finally put those pesky social causes out of business.

If I was a very wealthy person and I wanted to put my money in a hedge fund that protects me from all possible future outcomes or perils in the financial industry – I would be looking for a fund denominated in social currency.  Should things go wrong, the only place you can go for support will be your immediate community.  After all, you can’t eat Gold.

The Cradle of Civilization, again?

Egypt has demonstrated with astonishing clarity in a remarkable twist in human social evolution how this game plays out.  The dictator may have all the money, but the military has all the social currency – domestic AND international.  What do you think every dictator wishes that they had more of right now: guns, money, or social currency?

What would happen in the U.S. if…

…government austerity measures stop funding education, health care, police protection, and the legal system?

Social media applications will move in to fill the void.

….if inefficient industries like the travel industry, publishing, advertising, politics, academia, and financial services hold their customers hostage by acting as the gatekeeper?

Social media applications will pull the gate down.

…if government, industry, and academia can no longer innovate ways to increase the productivity of people in their community?

They will become irrelevant as people will adapt to manage their own productivity on a platform of social media.

The Great Conversion Factor

Off on the horizon, a truly remarkable new financial system is taking shape.  This system will accomplish one very important task – it will provide a conversion factor between financial currency and social currency.

Every political gridlock, corporate controversy, wikileak, and dictator challenged by their own people is adding one more piece of infrastructure to this new financial system.  Each piece will soon join together to complete the chain required to define the social currency and the form of human productivity that will support it.   Hang on grandchildren, we are getting close.

The effectiveness of this currency will not be in it’s ability to replace the dollar, rather, it will be in the ability to convert between Dollars … and Yen, Euro, Pounds, Renminbi, Dinar, Rupee, etc., in the same Game within which world currencies exchange with each other today.

May the best currency win.

(Editors note: The above post is #5 in a series [1], [2], [3], [4], [5] introducing The Value Game to a new class of business methods.  The first real world application is Social Flights; a collaborative production / consumption game being deployed to the market.  If this works, the new business method class will be generalized throughout the economy to catalyze the convertibility of social currency.  Please join us at The Future of Money and Technology Summit in San Francisco on february 28th 2011 where we will unveil the work to the technology community)

The first law of Gaming: If you can’t win a game playing by the rules, stop playing the game, or change the rules. It would seem that Egyptians would add a corollary “Change the Rulers”.

This is not trivial.

Billions of people are walking the planet Earth with the nagging feeling that they cannot win their game playing by the rules they are given.  If America was once the shining beacon of opportunity where hard work and perseverance were the main ingredients of success, and Americans are feeling that they can’t win playing by the rules, then you can expect two things to happen:  People will stop playing the game, AND the rules will change.

Interactive Entertainment

Looking on the sunny side, we see Gaming companies achieving astonishing valuations in Silicon Valley.  What is even more remarkable is that a similar thing is happening concurrently with Travel, Coupons, and Alternate Currencies.  Many people stand back aghast at the sheer size of some of these bets; $120M for Tripit, $5B worth Zynga, $6B for Groupon, $50B for Facebook.  The Market capitalization of Apple ($320B) is almost 2 times greater GDP of Egypt ($188B).

It would be foolish to underestimate the value the gaming component – now called “Interactive Entertainment” – as enabled by the Internet.  Gaming is an extremely mathematical science where designers predict the probabilities that a player will favor one strategy over another.  The better these prediction become, the more interactive and, ostensibly, the more entertaining a game becomes – at least to some people.

The Calculus of Gaming

It is no coincidence that the calculus of gaming and the knowledge assets deployed to the gaming industry are functionally identical to financial and marketing industries such as banking, insurance and demography.  Banks set the price of money based on the probability that you can pay it back (credit scores).  Insurance companies set the price on premiums based on the probability that you will experience a loss (actuarial data).  And Demographers predict what you will buy and who you will vote for. After all, a Bank is really just a game that bets that you will win and an insurance company bets that you will lose, and demographics keeps the game, well, unfair.  But together, they all hedge each other’s risk, not yours.

Watch The Integration, closely

From prior articles; The Travel industry is a proxy for how and where ideas are spread.  The Coupon Industry influences human behavior to accelerate the disruptive innovation and to create new value simultaneously. The Gaming Industry will define the rules by which the new game will be played and provide the ability to predict when, where, and how to value social capital. When the integrated is complete, the ability to capitalize and securitize a new social currency (next article) will emerge to hedge, and then replace, the dollar.

Game over.

***

(Editor’s note: The above post is #4 in a series [1], [2], [3], [4], [5] introducing The Value Game to a new class of business methods.  The first real world application is Social Flights; a collaborative production / consumption game being deployed to the market.  If this works, the new business method class will be generalized throughout the economy to catalyze the convertibility of social currency.  Please join us at The Future of Money and Technology Summit in San Francisco on february 28th 2011 where we will unveil the work to the technology community)

It is extremely important to recognize that, for better or for worse, Discount Coupons can have an extraordinary influence on people and their behavior.  This influence is what makes a discount coupon very powerful and extremely valuable. Coupled with social media, a coupon can be leveraged to influence the behavior of whole communities in extraordinary ways.   The ability to manipulate coupon values is tantamount to the ability to manipulate the value of money itself.

However, coupons, in the marketing world, function as a form of price discrimination that enables vendors to offer a lower price to people who would otherwise go elsewhere.  Since coupon customers are price sensitive and not necessarily loyal to a brand, coupons tend to reward ambivalence in a community rather than trust, commitment, or long term relationship. Normally, one would seek to create incentives for loyalty, quality, and trustworthiness. Instead, such transient market can act against both product quality and new value creation.

Another use of the term “coupon” arises from finance where coupons are used as proof of ownership for a bond, “bearer certificate”, or similar financial instrument. Possession of the coupon is considered conclusive proof of ownership of a tangible asset.  Money, in fact, is simply a coupon representing ownership of a unit of a productivity. Ownership is a cornerstone of all forms of Capitalism, including Social Capitalism.

As such, it is of little surprise that the Internet Coupon industry is exploding with huge valuations of Groupon by Google, The emergence of Google Offers, and Yelp Coupons, and many more.  What is very interesting is that this explosion is happening concurrent with similar innovations in Travel, Currency, and Gaming deemed the “Great Integration”.

The next obvious step is for coupon exchanges to form where holders of one type of coupon can trade value with holders of another coupon not unlike one can now trade Coca Cola stock for shares in The Boeing Company.   Coupons today have limitations on their usage, but over time, continued innovation in “Coupon Currency Games” will result in powerful mechanisms for the storage and exchange of value.

There is a classic business game that plays out in markets everywhere.  Suppose that a vendor offers to discount all prices by 20%.  A competitor simple has to say “We’ll match any price”.  After a day or two, the resulting stalemate is inefficient because it simply resolves to both vendors losing 20% with no net shift in market allegiance, only increased transcience.   This is a the divergent force that weakens ties and introduces susceptibility to disruptive innovation.

Meanwhile, The Value Game uses coupons to leverage relevant communities around physical assets such as airplanes, zip cars, alternative energy, and public infrastructure.  This will be the convergent force that strengthens community ties and introduces huge opportunities for social entrepreneurs to create new value.

As a result, the strategic use of Coupons will play an important role in both the acceleration of innovation disruption AND the subsequent creation of new value. In fact, if used strategically, coupons may help usher out the old economy and bring in the new.  The Domino Effect.

***

(Editors note: The above post is #3 in a series [1], [2], [3], [4], [5] introducing The Value Game to a new class of business methods.  The first real world application is Social Flights; a collaborative production / consumption game being deployed to the market.  If this works, the new business method class will be generalized throughout the economy to catalyze the convertibility of social currency.  Please join us at The Future of Money and Technology Summit in San Francisco on february 28th 2011 where we will unveil the work to the technology community)

I believe that it is important to make a distinction between New Currency and New Value. The potential for confusion is high but the implications of getting this wrong could be catastrophic.

The Storage and Exchange of Value

A currency is a social system designed to store and exchange value.  Value is what people make when they do things together.  Not so obvious is that a particular type of currency may not be very good for storing and exchanging a particular type of value.  It is obvious that dollars may adequately representing the physical value of a computer, however, those same dollars may not be very good at representing the social value of a community using computer systems to interact with each other.

The New Value Movement:

From yesterday’s post: I have encountered hundreds of people developing social currencies with increasingly creative and constructive methods because their community is important to them. People are trying to solve the great puzzle of  human division because their community is important to them. People are trying to resolve the constraints in natural resources and the limitations on our planet, because their community is important to them.

The New Value Movement is precisely that; a movement to articulate, store, and exchange New Value arising from technological advances and NOT adequately served by the existing financial system that enabled those technological advances in the first place.

The Total Value is the True Value

The idea of New Value is not to replace the current financial system, rather, the net total of value articulated by both systems exceeds the maximum value that traditional money alone is capable of processing.  Convertibility between New Value and old currency will be conducted using a yet unknown New Currency that many now call “Social Currency”.  When the total monetary system can articulate the total value of the Earth AND it’s human resources, only then can an organic set of priorities be delivered to a market.

The New Currency Movement:

On the other hand, the image of a New Currency often evokes the wholesale replacement of an old currency brought about by the collapse of a financial system, hyperinflation, destruction of the factors of production, the introduction of some unforeseen peril, induced volatility, political risk, nationalization, war, terrorism, famine, plague, pestilence, etc.,…Obviously, the differences between the two movements could not be more stark…

A Clear and Present dAnger

It is also apparent that the traditional financial system has become fragile and it must never be in the best interest of anyone to benefit from increasing this fragility. The Internet and emerging social media technologies have finally integrated the tools that people need to organize themselves into New Value economic developers. However, during the transition, individual people or groups will hold the power to both stabilize and destabilize.

The danger is that a new currency ideal may seek to benefit from the premature collapse of the old currency system. This is not creating new value, this is the transfer of value by the abuse of power against the very system that supports that power. This is precisely the flaw that the new value movement is trying to correct.

In the last few articles, I’ve discussed the importance of Intentions as a superior means of storing and exchanging value because of the ability to predict economic outcomes.  Only from these conditions can we construct an alternate currency.

For all Intents and Purposes….

Suppose that we suggest that one’s knowledge inventory is a good representation of their intentions to do things.  You can test this by strolling through the aisles your neighborhood Barnes and Noble book store and observing your own reactions to the titles as they flash by.  Notice how your tendency to act  (stop to read the byline or even pick up the book to read the cover) correlates to your organic knowledge, passion, interest, or experience.  Notice which sections you tend to linger in and how your eyes float up and down through the shelves, etc.

So let’s say that you studied business in college.  We can then say that you have an intention to conduct business.  The same holds true if you studied math, engineering, art, music, creative sciences, and/or social sciences. So we can say that a knowledge inventory is an intention inventory – assuming that you are not distracted by ADVERTISING.

Let’s make some predictions:

If you have low knowledge and high interest, your intentions would correlate to those of a student. If you have high knowledge and high interest, your intentions would correlate to those of a teacher.  If your have low knowledge and low interest, you would register no intentions.  If you have high knowledge and low interest, your intentions are ambivalent.

One step deeper:

If we were to assemble a community’s knowledge and interests on a few bell curves, we could make predictions about what a community intends to produce. If a community has high knowledge and high interest to build airplanes then we can place a value on those intentions in a market.

Now here is where the fun starts:

If we can predict future value, we can create and “intention currency” and capitalize it.  That means that we can turn it into a debt instrument and make a promise to pay back the today’s intention currency with future intentions.  If we can capitalize an intention currency, we can securitize a combined pool of many intentions and sell “Intention Bonds” that finance today’s intentions with those of tomorrow. Meanwhile, as we build the airplane, we have the incentive to innovate and create new knowledge that we can use to pay off the intention debt in the future.

Preoccupied or unoccupied?

If is sounds crazy, be assured that it happens all the time by corporations, marketers, demographers, politicians and even among some prison inmate populations.  Of course they will never tell you this, but unfortunately communities of people, social networks, and all the knowledge inventory sequestered inside corporations or messing around on Facebook have not figured out how to monetize all these intentions for themselves.  This is because they are preoccupied by an influence currency called – ADVERTISING

What is more valuable, their Influence or their intentions?

The heat is on to discover a new currency

Obviously, money is supposed to represent productivity otherwise why would people work for it?  But, everyone is pretty much resigned to the fact that the dollar – and indeed most global currency – is irreversibly divorced from actual productivity.

No Alternative  Algorithm?

The reason why people must trade dollars is that there is no other alternative, and the computer algorithms that control the value of the currency have yet to tell us otherwise.  That’s it, really.  The questions remain, how, why, and when will people stop working for it and what will they work for which can replace it?

This will not be as simple as living in yurts, trading cheese cultures and tweeting about it. Complex infrastructure like a judicial system, transportation, medical care, clean water, energy and food production rely on a financial system that can capitalize and securitize whatever the replacement currency may be.

Influence vs. intention

The latest twist in the new currency movement is the idea that on-line influence can be used to support a currency.  There is no shortage of noble leaders aspiring to “define the standard” in their own image as a service to the lesser masses who seek their respective place in the great new economic void.  PeerIndex and Klout are the two main players that promote a social score based on influence, obstensibly to mimic the credit score upon which all currency depends.

Bad Influence is worse than no influence

Unfortunately, influence is a flawed measure.  Marketers are the target beneficiaries of such influence which is clearly defined as the ability to get other people to take action on a marketing message. My ability to influence others to buy Twinkies does not an economy make. In other words – influence is a consumption currency, not a production currency.

A far better marker is “intention”

For comparison; today, money is conjured into existance by banks based on the signature of a loan candidate who states in writing their intention to produce enough value by their future words and actions to exceed the value of the currency being borrowed (created from thin air) plus interest.  That’s how debt works.  That “intention” is then capitalized, combined with the intentions of others, and securitized into bonds that finance important social services and institutions that support those intensions.

Likewise, a social currency may be similarly conjured into existence – based on a person’s promise to increase human productivity in the future, not however, to increase human consumption in the future.  The social marker for the next currency must be an intension to produce something, not an intension to consume something.  The real danger, of course, is if we define the next currency as just another consumption currency or whether it can truly be married to productivity.

Obviously, it would be helpful to have an inventory of what value an individual is willing and able to produce in the future since this is the best marker of intensions.  It would be even more helpful if there were a public knowledge inventory of what value people in a community are able and willing to produce together.  I’ll stop here because a knowledge inventory for communities does not exist – and curiously, none of the great minds in Social Media are clamoring to define that standard.

Likewise, that is where the great opportunity for the future resides.

I have been approached by many brilliant social entrepreneurs in recent weeks.  They each have several things in common. Each has an incredibly creative idea and a strong passion linked to a deep seated observation that social currency has value.  As nebulous as that may sound, it is very real, specific, and clear in the minds of those who I’ll call, The New Entrepreneur.

Nothing Economic can happen until two or more people get together to build something.  Likewise, when two or more people get together to build something, economic things happen. The objective of this post is to demonstrate the 3 underlying actions of a new class of business plans that will become dominant in the next economic paradigm.

Our recipe is simple:

Step one: convert financial currency into social currency

Step two: Create value denominated in social currency

Step three: Convert new social currency back into financial currency – if needed

This simple recipe forms the basis of the business plans for several start-ups including Social Flights and The Social Value Network as well as numerous other projects that we consult to in the US, Greece, Brazil, Australia, China, and Mexico.

So here is how it works

The Old Business Model:  Suppose you buy a truck and you use it to haul stuff for your own personal and business interests. After 5 years, you can sell the truck for about 1/2 what you paid for it.

The New Business Model: Suppose that you buy a truck to hauls stuff for your own personal or business interests.  Suppose that you also let The Boy Scout troop leader borrow it to pick up christmas trees for sale.  Suppose you let the Kiwanis use it to pick up supplies for their annual salmon bake.  Suppose you let the YWCA haul donated furniture to their satellite facility.  Suppose you help your neighbor use it for a home improvement project.  After 5 years, you sell the truck for about 1/2 of what you paid for it.

The difference is that now your community is engaged with your personal interests.  You have converted financial capital into social capital and created new value denominated in social currency.  One notable example includes Neighborgoods, but there will undoubtedly be thousands of variations of this leveraging every conceivable physical asset.

Now, how do you transform this back social capital into financial capital?   Well, that’s what the emerging science of Social Capitalism is all about.  Social Profit is like a fungible option with a face value.  If structured correctly, an option can have a face value equal to the difference between discount and full price. That face value can be traded like money.  When you are engaged in a community, people know who you are, they trust you and they share with you.  People are trading options – the right without the obligation to exercise a financial position in the future.

Options have real value as an asset if you have them or as a liability if you don’t

Future of Banking

When I use the term “Innovation Bank”, people conjure up the image of a cheery place where anticipation reigns as starry eyed depositors arrange their intellectual property in neat cubby boxes, Patents are peddled like newspapers, and flush pocket companies troll the halls looking for a cure for their bottom line reflux disease.

This is not exactly what we have in mind, nor is it too far off either. An innovation Bank is simply a knowledge inventory that contains knowledge assets that exists in the format of a financial instrument between people’s ears and can be deployed for the purposes of increasing productivity. Oh, by the way, knowledge makes more of itself every time it is deployed …. Interesting?

The Assumptions

This is not much different than a financial bank. In fact, in the financial bank, everyone assumes the borrower has the knowledge to execute the business plan and the bank lends the money. Oh, by the way, the money makes more of itself (interest rate) every time it is deployed.

With the innovation bank, everyone assumes the entrepreneur has the money to execute the plan, and the seek to borrow the knowledge. Other than that, they can be considered identical. The key is in the scope, depth, and format in which the knowledge assets live in a community as well as the ability to track and preserve the creation of new knowledge in a community.

A Virtuous Circle

Together with the financial banking, these two system engage in the dance of the virtuous circle of innovation enterprise. Apart, they collapse into the swirling cesspool of eternal debt and infinite interest (pun intended).

image source

Ingenesist.com

Music by Phil Felicia

I recently published a video suggesting that Social currency is backed by Time as part of my series on Social Capitalism.  I made the argument that time is the true scarce commodity because it is not easy to debase, counterfeit, or forge; it is therefore the perfect basis for a currency.

Still, a few people always come back with the idea that influence, reputation, game tokens, tweets and more recently “checking in” (a la Foursquare), are all social currencies – citing the experts, of course.

There are several problems with this.  First, none are really scarce – I can find an honest person anywhere.  None are actually commodities because nobody is deploying the identical influence as any another person.

The idea that “currency” as the storage and exchange of value is also insufficient – a glass of water stores value as does a digital camera or a even a goat.  Nobody in Silicon Valley is twittering feverishly about the latest surprise goat farm acquisition.

Indeed influence and reputation are valuable and may act like a financial Instrument but until the purveyors come out and actually describe it as such, I need to call them on their choice of words – and I have.  A typical response is, “Well, uh, you know what I mean”.  My response: “…And, uh, you DON’T know what you mean?”

Beanie babies, tulip bulbs, and CDOs were financial instruments too.  Seriously kids, clarification is extremely important because the consequences of misconception, especially in this important emerging subject area, are tangible. Real people trying to make the wrong ideas real actionable are wasting their real precious time.

Here is what they mean to say:

a Derivative is something whose value is derived from the value of something else.  So when we talk about influence, the value of a person’s influence can be derived from the value of many things.  If you are in a burning building, the influence of the firefighter is different than an endorsement from Shaq, yet both may be valuable at different times.

The premise of my argument is that the basis of all currency is in Time.  Time is limited for everyone.   A good reputation saves people time.  The right influence applied in the right places at the right time saves people time.  Passion, purpose, productivity and persistence are measures of how someone spends their time.  Checking in at the trendy hotspot on foursquare is an expression and commitment of time. Co-location is a function of place and time. Like love, the value of time is in the eyes of the beholder. Valuable yes, currency, no.

Talk about how your product lives in time and you’ll earn all the social currency that it’s worth – not the other way around.

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

The difference between market Capitalism and Social Capitalism is that factors of production are reversed.  In Social Capitalism, creative capital, intellectual capital, and social capital are the “tangibles” while land, labor, capital become the “intangibles”.

But the currency for social capitalism must still represent productivity – otherwise nobody would “work” for it.   Productivity is defined as “all the stuff we can make within a certain period of time“.  Market capitalism is built on “stuff” while Social Capital is built on “Time”.   Waste stuff and you’ll lose money.  Waste time and you’ll lose social currency.  Every living person is allocated a certain amount of time on Earth.  Time is impossible to forge, debase, or otherwise counterfeit – unless stolen from someone else – as such, Time makes an excellent currency.

What is the ROI on Land, Labor, and Capital in Social Capitalism?  ROI is wholly dependent on the knowledge assets deployed upon that Land, Labor, or Capital.

So what exactly is the underlying asset that supports Social Currency?

WIKiD Tools introduced the idea that everything we produce will ultimately come as a result of transforming data into information, or transforming information into knowledge, or transforming knowledge into innovation, or transforming innovation into wisdom.  We can articulate a very powerful Equation to model productivity in Social Capitalism.  This equation can be translated as follows:

Wisdom is proportional to the rate of change of innovation with respect to time.  Innovation is proportional to the rate of change of knowledge with respect to time.  Knowledge is proportional to the rate of change of information with respect to time.  And Information is proportional to the rate of change of data with respect to time.

Note that in each case, the “rate of change” (hence, time) is the underlying asset.

The creation of Social Currency:

Sounds complicated?  Well, it happens every day in every city where a person sees an important issue and convenes a conference where they invite relevant speakers and guests into the discussion.  It happens when a manager notices people talking about something important to them and incorporates it into their job description.  It happens when a teacher helps a student to the next level.  It happens when someone spends some of their time so that you can enjoy more of yours.  It happens with stay at home moms.  It happens with volunteerism.  It’s created by mentors, parents, neighbors, civil servants, and everyday citizens. It is created in Communities, not factories.  It is created by time.

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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

In the 1960’s Superman comics, Bizarro World was a place where everything was the opposite as Normal World.  On the planet Htrae (Earth spelled backwards) lives Bizarro Jimmy Olsen, a Bizarro Lois Lane, Bizarro Superman, etc.  Of course, Normal World is the standard bearer for all that is great and good to the reader.

Normal Capitalism:

In the study of Normal Economics, currency always represent productivity – otherwise nobody would “work” for it.   Productivity is defined as: all the stuff we can make within a certain period of time. We measure it with expressions like “dollars per hour”, “miles per hour”, “5% compounded annually”, board-feet per minute, etc.

Abnormal Capitalism:

Suppose we were to describe a Bizarro currency as:  All the Time that can be produced within a certain amount of stuff.

After all, every living person is allocated a certain amount of time on Bizarro World.  Time is a scarce resource whose value is determined by supply and demand.  Time is not easily forged, debased, or counterfeited.  It makes for a perfect Bizarro currency.  Of Course the Bizarro Currency would be called the Rallod (Dollar spelled backwards).

Bizarro Capitalism:

In Normal Economics, land, labor, and financial capital are the factors of production called “Tangibles” while social capital, creative capital, and intellectual capital are called “Intangibles”.  By contrast, in Bizarro Economy, social capital, creative capital, and intellectual capital are Tangibles while land, labor, and financial capital are the Intangible factors of production.

Of course in Bizarro World, it takes rallods to make rallods.  So if you want to get rich, you need to invest your time in one of two things: Saving time for other people, or reducing the amount of stuff they need to consume on their time.

Likewise, in a Normal Banking, an entrepreneur assumes that they have the Knowledge to execute a business plan and they borrow the money. In Bizarro Bank, the Entrepreneur assumes that they have the money to execute a business plan and they borrow the knowledge.

In Normal World, money is backed by debt.  In Bizarro World, money is backed by innovation.

What if we got it backwards?

Probably the most immediate concern is whether the Rallod can hedge the Dollar, or will the two planets collide?

Material based on video series here

I often make the point that a currency is simply a social agreement. People need to agree that a monetary unit represents their productivity so that they will use it to trade their productivity with the productivity of another person. The test question for any so-called currency (coined by Jay Deragon) is: “Yeah, but can you buy groceries with it?”

I am now seeing a SHARP increase in the social interest for an alternate currency to the dollar. The dollar does represent productivity – albeit future productivity in the form of debt – that’s why it is still exchanged for the work that we do. My suspicion however is that the social agreement regarding the dollar is, in fact, increasingly becoming a social disagreement.

People have a deep seated unease with what the dollar is and what the dollar represents. To escape the dollar is to escape a tangle of influence that impacts everything we say, do, and think about ourselves and about each other. It almost seems that to escape the dollar is to escape ourselves.

That’s just the idea that came to me after watching this video about a soldier questioning the occupations. He is saying something very interesting:

War is simply the soldier’s willingness to fight it. It is a social agreement.

I came across an interesting business model for the deployment of a social currency. Stock Harmony, quite simply, sells itself to interesting people. Those people then interact with each other adding social value to Stock Harmony. The more social value is created, the more the original shares are worth. The more the shares are worth, the more interesting people will join further increasing the value of the shares. From that position to deploy social value, Stock Harmony can amplify the voice for social priorities over Wall Street priorities, effectively re-allocating factors of production.

Actually, the same thing happens all the time in typical social circles, networks, affinity groups, and political action committees. However, I am not certain that anyone has yet been successful (ethically) in using social circles as a way to store and exchange value. That is why Stock Harmony is interesting.

It sounds so simple, right? Well, … not really….

It’s all about structure. The way that a process or system is structured determines how people interact with it. Structure also determines how governments, markets, laws, politics, and even public opinion interact with the process or system as well. Interestingly, the structure of facts often keeps secrets tight. In short, structure shapes human behavior and human behavior shapes structure.

Companies sell shares to raise money. Per SEC regulations, the “sale of shares” must comply with certain disclosure and accounting standards. The SEC regulates companies in the sale of shares as a means to safeguard investors.  In other words, it is illegal to sell shares without government oversight.

Raising Money

The possibility that anyone can sell shares in themselves or their private enterprise as a means of raising money is, by default, relegated to the banking system. A person essentially sells shares on their productive time on Earth to buy a house, a car, or a business, etc. The structure begins to crumble when the employment contracts begin to crumble. As people leave the old system, they take their value with them and tend to create new ones. This is where Stock Harmony treads.

What if the shares are issued in non-dollar denominations?

Today we see many non-dollar denominated structures arising apparently at the same rate that the financial system is failing. Google secretly invests 100M in Zynga – a gaming company with a common gaming currency. Facebook established a system of currency-like Credits. Groupons deploy social currency to incite monetary discounts, etc, and PayPal stands ready for the next killer currency app. Any of these transaction systems are poised to hold a black market currency if fiat currencies fail. If the fiat currencies fail to recover, the black market becomes a gray market and ultimately a legitimate market. So, there is a lot at stake.

Currency must act as a proxy for human productivity;

So this is what makes Stock Harmony interesting. The successful “next currency” will be the one which best represents human productivity. Only then will someone be willing to trade their productivity for that of another person using a currency note as an exchange mechanism. This is where other alternate currencies fall apart and where Stock Harmony shows greater strength. After all – what would you rather accept in exchange for your services – Farmville gaming currency or a currency backed by the harmony and productivity of real people in real community?

It will all come down to structure.

The subject of privacy and anonymity are again rising up with the latest move by Facebook to integrate updates across the Internet onto the Facebook platform.

Conspiracy theories about Facebook and the CIA continue to flourish.  Meanwhile, the marketing and advertising industry seems poised to reboot their dwindling influence under a new cloak and dagger of social media data hustling and predictive demographics rather than playing by new rules of engagement.

Money is one thing and value is another.

I am astonished that people willingly and freely give up huge volumes of information about themselves when they really don’t have to.  In earlier times, marketers and advertisers would pay a great deal of money for far less information that people give them for free.  People do not understand the value that is stored between their ears or how easy it would be to set up an alternate economy that trades in social currencies.

If advertisers can pay someone to cold call me, to graph my data across the web, or sneak around my social networks, then they can certainly pay me to answer the phone.

The Ingenesist Project specifies an Innovation Economy built on the platform of social media.  While that thesis is extensive, let me summarize that the primordial soup of the Innovation Economy is called the Knowledge Asset Inventory.  Think about it as your resume represented in “code” not unlike the Dewey Decimal system represents the contents of your High School library.

Anonymous assets

One essential element of the new economic paradigm is the ability to combine knowledge assets so that innovation becomes predictable and therefore capitalized. However, a side effect is that such code makes the individual containers anonymous.  Marketers will have to pay you to find you.  here is why:

Now think about it this way – if you remove 20-dollar bill from your wallet to buy a Latte, you do not know (nor do you care) whether the last transaction performed by that 20-dollar bill was a donation to a charitable cause or a drug deal.  The dollar bill is anonymous – but you, as an asset, are not.

Social Currency is a Social Imperative

Dollar denominated money is a system to control social currency at a leverage factor of 1000:1.  Take away the dollar currency, and the leverage disappears.  Add a social currency and the national debt disappears.

Almost as a bonus, it is an absolute impossibility for marketers and advertisers to store and exchange value denominated in a social currency without extraordinary changes to the way they engage their clients….like, uhm, …don’t waste our time.

If we are smart, we can shut down the privacy issue in a hurry – anonymity of knowledge assets is the key.

I don’t often run a full repost from other people on this blog, but this post by Seth Godin was just too rich to leave alone.

I have been posting a lot lately on the irony of social media devolving to spammers spamming spammers, especially the recent Twitter plan to charge advertisers for jumping to the front of the line by exploiting data provided voluntarily by the users (Twitter Me Elmo).

All of this tells us that Social Media is up against the ropes on the monetization plan. As a result it is starting to consume itself. This may be the first indication that the Dollar is NOT the currency of trade in the social media space, it’s a yet unnamed Social Currency. This definitely tells us that something new must happen soon.

Of course, The Ingenesist Project specifies an alternate financial system that can accommodate a social currency, but the lure of the almighty dollar remains strong enough to blind the choir itself and out-pitch the humble whisper new economic paradigm evangelists.

Anyway, here is Seth’s post in it’s entirety. Buy his books and read his blog, get his feed for daily email enlightenment. Seth, I apologize in advance for posting without your explicit permission…etc…just trying to “keep the convo rolling….”

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Cannibalism and spam

By Seth Godin:

So, these two cannibals are eating a clown, and one says to the other, “does this taste funny to you?”

We don’t often have conversations about cannibalism. We don’t trade recipes or talk about health issues. That’s because it’s off the table, not permitted, inconceivable.

Marketers should feel the same way about spamming people. Spamming them by email, by text or yes, by calling their cell phones with a robot, repeatedly, just because it’s cheap and because they can.

If anyone should know better, it’s the Word of Mouth Marketing Association. And yet, not only did they spam thousands of people by phone, they want us to “keep the convo rolling”. And when I spoke to their Executive Director, she had a hard time understanding that what they were doing was spam.

Spam is unanticipated, impersonal, irrelevant junk I don’t want to get. Not only that, it costs them less to send it than it takes me to figure out what it is and deal with it. That doesn’t scale. In fact, it destroys the medium.

Why would anyone join, pay their dues, go to their meetings or want to engage with an organization that’s willing to cross a line like this? Even once? (and then brag about it!) Maybe I’m getting cranky, but the relentless march of marketers into our lives is really getting to me.

In case you missed the first part of our show, the future of marketing is based on permission. It’s based on sending messages to people who want to get them, who choose to get them, who would miss you if you didn’t send them. It’s not easy and it’s not cheap to earn permission, but so what? This is my attention, not yours, and if you want to use it for a while, please earn the privilege.

PS If I ran Twitter, I’d build my new ad service about a socially acceptable way for corporate users to build large lists of followers, people who would give permission to get news and discounts and insights from advertisers. Twitter knows who likes what and they have permission from users to be a bridge between the user and those that might want to talk to them. That’s a powerful place to be.

Using cheap technology to spam people is not.

The following question appeared on a Linkedin Forum that I follow:

Complete this sentence: The ONE factor that is MOST important to innovation is… and here’s why…

I have said this in a few blog posts and I’ll say it again here: The current definition for “innovation” may be the single most disastrous eliminator of innovation.

Innovation Suicide:

Yeah, it kills itself. Really, look it up – it’s a horrible cacophony of buzz bits and weasel speak that amount to nothing more than “Ya know it when ya see it”.

Any definition is supposed to give the reader enough information to duplicate, recognize, and identify instances of the subject – Preferably before the event has ended. Think about it – if the definition for Innovation were clear, nobody would be asking this question.

I am always amazed at how simple the answers to complex questions – and how complex the answer to simple questions – can often be.

Question: THE ONE: Complete this sentence: The ONE factor that is MOST important to innovation is… and here’s why…

My Answer: The Definition of Innovation

Here is why:

Information, knowledge, and innovation are obviously related to each other.

1. You can’t have one without the other two.
2. If you cannot measure one, you cannot measure the other two.
3. where all three are integrated, the system becomes efficient.

Yet, the definitions of each term do not include the other two. Therefore, the current definition of innovation is insufficient to describe the condition. That is why this is the ONE most important factor.

Let me prescribe the following analogy; distance, velocity, and acceleration are obviously related.

1. You cannot have one without the other two.
2. If you cannot measure one, you cannot measure the other two.
3. where all three are integrated, the system is efficient.

This is because distance is the point between two facts, velocity is the rate at which the distance between two points changes. Acceleration is the rate at which the velocity of travel between two points changes.

Therefore let’s re-define innovation as follows:

Information are facts and data. Knowledge is defined by rate of change of information. Finally, innovation is defined by the rate of change of knowledge in a community.

If we can accept this definition, everything changes. Seriously, everything changes.

Now, that’s Innovation!!!

* note: If you are familiar with differential Calculus you may see how a new economic paradigm may arise from this algorithm.

I guess that is could be considered sacrilege for a college professor to suggest that higher education is inadequate in some way.  My position is that the college degree must go away in favor of strategic combinations of high resolution knowledge assets.  The irony is that those who really “get it” understand “school” better than the schools.

The price of college education compared to the value of college education in society is skewing toward obsolescence. The news reports are filled with stories of unemployed MBAs and Engineers.  Over qualified, out of date, over generalized, specialized into obsolescence are all risk conditions that can make college a liability, not an asset.

There are many articles in these archives that outline my opinions on the subject. So here is what the kids say….

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At the end of the day, everyone is arguing over money. How are we going to heal the poor? How are we going to police the world? How are we going to bail everyone out? How are we going to preserve the environment? The answer is always the same…it takes money to solve all of these problems.

What people do not realize is that currency is a social agreement, not a disagreement. Money is whatever people agree to use as a storage container for the value of their time, labor, intellect, or other resources. A criminal can steal your time, labor, intellect and possessions, or they can just steal your social agreements and replace them with a social disagreements.

It is easier to steal from the poor than the rich

Stealing money is not as difficult as some may think. Whenever people are held below a certain economic level, they fail to organize in communities that would otherwise protect them from outside influences. These people are often too busy holding a job, paying off debt, or traveling in search of work, or worse, a place to live – they become easy targets.

Blind leading the blind

Currency, by fiat or black market, is just a way that everyone agrees to store and exchange value. So, when people are at each other’s throats over a system of beliefs, they are effectively blinded to their true opponent – their inability to make a social agreement regarding the storage and exchange of value.

The current political strains pulling at this country are dangerous. The real problem is not your colleague or neighbor who is in favor of universal healthcare. The problem is not your old classmate on facebook calling Obama a liar. It’s OK to oppose the government – it’s our right. It’s OK to oppose bankers, they are accountable to a social charter.

The problem is that people are opposing each other.

There is no way to pay off a 50 Trillion dollar debt. All politicians know this. You would need to harvest every fish in the ocean, pump every remaining barrel of oil, and cut down every tree to extract this amount of “value” from what is left of the Earth. To whom exactly would this value be delivered and how? It simply cannot and it simply will not be repaid without some magnificent productivity gains on the order of nuclear fusion or superconductivity.

I will not speculate exactly how the currency fails. There are plenty of examples in history. Instead, I will speculate on what will replace the failed currency in the age of social media.

Social media is taking on some very fortunate characteristics, especially in the area of organizing people and communities around a common goal. Too often that common goal is to oppose another force of social media. This will change, it must change. When the dollar fails, people are going walk out their front door, look at their neighbors, and introduce themselves.

So, There you have it – that’s where all the money went. It is stored and exchanged in our social agreements.

One of my favorite video program on the web is Dr. V’s (Amy Vanderbilt) Trend POV broadcast live on Friday’s at 2:00 pm EST/11:00 am PST. In a recent program, Dr. V exposes the trend in commercial airlines toward option based pricing.

The poster child for ancillary fees is none other than Ryan Airlines for going far and beyond the line of duty in treating their passengers like, well, how one would treat a mushroom, I suppose.

“We award RyanAir the Self Tending Mushroom Award (or STeMie) for relentlessly innovating new ways to charge passengers so that passengers are charged less”

Savvy RyanAir passengers can choose from an extensive menu of priced options including the following:

• Check-in online (mandatory)
• To check in at the Gate (alt mandatory),
• To pay for your ticket (mandatory),
• Have priority boarding,
• Take your infant with you,
• Check one bag,
• To check a second bag,
• To take your infant’s equipment with you,
• Take sports equipment with you,
• Take a musical instrument with you,
• Change your flight,
• Change the name on your ticket,
• Print another boarding card,
• Check bags that are more than 15kg,
• Carry your own checked bags to the plane (mandatory),
• Eat, drink or use the toilet in-flight (proposed),
• and many more. “

The best one is being charged for checking in. Hmmm, that means you are paying them to pay them!” (ed. Yikes)

Soaring With Eagles, Flying With Fish

Steven Frishling from www.flyingwithfish.com is one of the most respected commercial aviation bloggers and travel strategists in the country. Dr Vanderbilt interviewed “fish” on her program for his many insights. He reveals more interesting facts as well as important ways that Social Media can reverse the trend of what he calls “unbundling”.

“People shop airline tickets by base price but by the time all of the [mandatory] options are factored in, there is not much of a discount after all”.

Putting the “anti” in social

Another disturbing trend is the transfer of expense to the passenger. Airlines will often negotiate lower landing fees at a minor airport further from the hub and then the traveler needs to ride a bus for several hours to get to the hub airport.

There are many example is the market where unbundling of fees is quite typical. We see in happening in the extended warrantee we are offered on all types of appliances. We see in premium on perceived features such as popular colors or “stainless steel” appliances. Many companies may be looking to expand the practice. However, the experience of commercial airlines lends a cautionary tone to those considering ancillary pricing as a profit center.

Predictions for the Future

Steven Frishling predicts that there will be a schism in the industry, some airlines will take on the race to the bottom with ancillary fees and others will realize that every angry customer is an opportunity to migrate to a superior travel experience.

Charging is obnoxious – every hit hurts. In fact, Expedia makes the majority of their fees off everything except airlines, why can’t airlines?.

Steven suggests that the opposite of bundling – integrating hotels, taxis, sponsors, etc even using frequent flyer miles – is a the best way to improve the experience of flying. Airlines should provide targeted portals, build sponsored content, attract sponsor revenue, supply hotlinks, etc. All of these are clever ways to derive revenue without alienating passengers.

All this “cost-saving” of ancillary pricing can quickly become a huge liability as competitors come along with comparable prices and superior service. Social media is proving to be an excellent tool for reaching out to passengers and understanding the needs. This allows them to package features smartly, unbundle fees in a way that adds value to the experience, not by squandering trust and respect at every opportunity.

Today we see Social Media duplicating many of the functions of earlier society by storing community wisdom, applying social vetting, and deploying social currencies.

It takes a Community

Here is an article is about a a person who learned through social media profiling that her fiance was active in hobbies that conflicted with her moral constitution – before the wedding instead of after.  In the old days, the community would also profile each individual based on the social record of their behavior.

Social Capitalism

Here is a video article that discusses how social media is  duplicating many functions of the corporation outside the construct of the corporation. Factors of production increasingly enter the org chart as a social media application.  We now question whether the corporation itself is the sole vehicle of wealth creation.

Social Currency

We see social media duplicating many of the functions of the financial system where currency, credit scores, banks, land, labor, and capital are being replaced by social currency, social vetting, social capital, creative capital, and social entrepreneurs.

Macro vs. Micro

We see divisions of scale from the long-winded one-sided content of the static web presence to the micro blogging applications that more closely resemble a conversation.  Time factors are accelerated to the point where real-time is not fast enough.

Local vs. Global

We see an emerging segmentation between Local Social and Global Social. At first global leverage was the awarded the small entrepreneur with something to offer to the world.  Now ‘Local Social’ enjoys substantial leverage over global corporations by reorganizing the way people prioritize and experience each other and their community.

Everyone is a node

Taking an analogy from the physics of electricity, the term “potential” means the difference in energy between two nodes.  The greater the difference, the bigger the spark and the greater the impact.   The local energy at each node influences the direction and size of sparks between nodes.  As people accumulate ‘Social Current’, their position relative to those around them changes. Likewise, their potential also changes relative to the ‘Social Current’ of others. Everyone has some potential relative to every other node.

Integration has arrived

Much like the knowledge economy integrated, but did not replace, the agrarian economy, Social Media will not replace the corporation, the financial system, dissertation, conversations, localization or globalization.  Rather, everyone becomes a corporation, everyone prints their own social currency, everyone publishes their intentions, everyone has local and global leverage.  That’s what Integration is all about.

A ‘culture of one’ is moot.

It is not surprising then that our culture itself is now being defined in terms of social media with effective aggregation of  social norms, storage of social wisdom, and medium of exchange for community ideals.  The true test of “culture status” is when engagement is no longer an optional.  Without engagement, there is no culture.

In the state of Washington, it costs 200 dollars to establish a Limited Liability Corporation. All the documents are online and there is no shortage of tutorials on the process. It’s a whole lot easier to get a job because it’s real easy for one corporation to hire (and fire) another corporation. Taxes are simple.

Everyone’s liability is limited and transactions are conducted under a uniform commercial code. And there are no incentives for people doing what they are not good at and every incentive for people to do what they enjoy most.

A corporation is fictitious.

A corporation exists in the form of a bits and bytes simulating a folder of papers in a virtual file cabinet. A corporation gets to deduct all of their expenses from their taxes. A corporation has a credit score, it can borrow money, and even have a bankruptcy just like a person. A corporation can donate unlimited amounts of money to a political candidate. Corporation garner social respect. Laws favor corporation. In fact, the cards are stacked in favor of the corporation over the employee; unless, of course, you are both.

It’s all in the Management….of knowledge assets.

All of the business theories are written to apply within the construct of the corporation. Corporate accounting provides a host of clever ways to manage assets. You can depreciate assets, you can inflate or deflate “intangibles” as needed for whatever valuation purpose. You don’t need to show anyone your accounting either (unless you are a public corporation). American corporations don’t even need to hire American employees, or any employees for that matter. Outsourcing goes to other corporations.

Land, Labor, and Capital

Corporations allocate Land Labor and Capital – well, that’s the theory anyway. Land is underwater in a real estate bubble. Labor is tragically unemployable or under employed or outsourced to the political slave markets. Capital is being consumed by the “interest” monster conjured into existence from the debt. Uuhhmmm….So how’s that workin’ for ya’ll??

So why not become a corporation??

Social Media is able to perform almost all of the functions that a corporation would normally do internally. The “Last Mile of Social Media” is when local communities organize themselves on, say, Facebook. High integrity is rewarded and low integrity is punished. Now you can reliably find other corporations to do your accounting, Human Resources, Marketing, and content design and distribution.

If you need to actually produce something “solid”, well there will always be a corporation willing to do that too. All of these things are only a keystroke away. So why isn’t everyone a corporation?

No, seriously……

We teach our kids to be good employees, not to become good corporations.  How do we expect social priorities to compete with Wall Street Priorities?