I published the following paper in 1996 as part of my participation in the negotiations for mutual recognition of Engineering Professionals under NAFTA.  We had just completed a program that ultimately sent close to 200 Mexican Engineers to the U.S. NCEES Engineering Board Exams with the support of CETYS Universidad and The State of California BOPELS.  In short, the performance of Mexican Engineers on this exam was extraordinary.  Their pass ratio was comparable in every way (especially when language disparity was removed), to US engineers who took the same exams.

Please follow this link for PDF: INCNE596

This work is highly significant because it represents original research toward what was likely one of the first modern attempts to trade ‘human knowledge’ like a financial instrument.  The idea was that Mexican, American, and Canadian Engineers would be allowed to practice engineering in the exchange of services across all three borders.  The hope was that the financial structure that supported the American and Canadian engineering profession as a vetting mechanism [for the technical risks details associated with major infrastructure projects] would transfer into Mexico.

Comparative Education

It is also significant because this may be one of the largest comparative education projects between the Mexican Education system in Engineering and the US engineering education system as measured by an established standard examination.  For example, data clearly showed an advantage in Mathematics for the Mexican engineers but a disadvantage in physics and chemistry – likely correlating to the cost of producing such education (labs and equipment) between the two systems.

Relative States of Development

It is abundantly conclusive that Mexican Engineers, and therefore the Country of Mexico, is highly capable of development and technology enterprise based on the education criteria in which America measures itself.    So when looking at the relative states of development between the two countries, the question arises; if the difference is not in the quality of engineers, then where is it? Of course, the answer does not surprise us when we see political turmoil as the source of most wealth disparity metrics.

Language Disparity

Finally, on a relatively minor discovery, this research measured a language disparity of approximately 15% in the speed that the engineer from Northern Mexico can accurately interpret an engineering problem expressed in technical English.  This is useful when planning timed exercises such as examinations where language differences are difficult to remove from the sample set.

Epic Value Game FAIL

As it turned out, the Mexican Negotiators did not accept the author’s recommendations presented here in stead adopting an MRD strategy that was highly restrictive to both the mobility of engineers and the vetting requirements of financial institutions. America literally handed Mexico the Knowledge Economy on a silver platter and Mexico refused.

This author argued in 1996 that Mexico would compete in the future with emerging economies such as China and Vietnam in the the low-value labor market rather than competing with, say, India for the highly valued knowledge market.   It is unfortunate that they chose the former.  I’ll leave my opinions as to why, for a future post.

Each stage of economic development in human history was derived from the prior stage by integrating the tools developed in that prior stage; The agrarian era, the scientific revolution, the industrial revolution, the information era, the knowledge economy all followed this pattern.

Whatever happens next will be extremely interesting.

Today we are rapidly emerging era of human history where there is great cause for optimism. The tools developed from the Knowledge economy are truly remarkable.  For the first time in modern history, Value is not represented by things, it is represented by the space between things.

Symbionomics

The Symbionomics project is produced by world class film maker Alan Rosenblith and visionary Sustainable Community Developer, Jay Standish.  Their objective is to reveal the next great truism in the context of human economic systems. Please watch the following trailer and please support this essential project.  The hardest secret to keep is the truth.

LandingPage from alan rosenblith on Vimeo.

In an earlier article (Cluster Funk) I argued that Industrial clusters can lead to stagnation, vulnerability to external shocks, and the erosion of social capital. Since I’m not one to complain without also providing an alternative, this article argues that the future will favor technology clusters rather than industrial clusters.

Make it up as you go along

Technology clusters serve what we call the tangential innovation market – or diversity innovation dynamics. Don’t worry if you have not heard of these things, I’m making this up as I go along.

For example; composite materials technology is very useful in many applications like aircraft, medical devices, transportation, recreation, and even musical instruments. The airplane company has no intention of building cellos and the automobile company has no intention of building snow boards.

Why compete when you can collude?

As non-competing industries, they can readily share technology and people. The system is naturally diversified and inoculated against stagnation, shocks and silos; if one industry encounters hardship, people and capacity can shift easily to another industry preserving knowledge and expanding social networking benefit while the damaged industry heals or dies off. Corporations may not like this idea, but social networks should.

The Ingenesist Project goes a step further by modeling the business structure of tangential innovation markets as an integrated financial system. Suppose and Originator Company has a promising new composite technology idea but is unable to meet the ROI requirements of their stockholders? Today, such innovation would be shelved. In an innovation economy, tangential markets are factored into the business case.

New applications of social media will identify other industries that would be most worthy borrowers of your technology, if developed. The Innovation Bank can estimate the return on investment that can be expected through the tangential market as if it were another customer. The additional revenue projection would allow the originator to meet the ROI requirement prior to committing development funds.

Intellectual Property can be managed with contracts enforced through social network vetting. The originator can hold an option to see further development conducted by tangential users effectively multiplying their R&D reach and further adding to the expected return.

Then something magical will happen. At some point, the value of the tangential innovation market would exceed the value of the origination market. The originator will begin to specialize in pure innovation as a primary product and airplane applications as the secondary product. As all industries in the technology cluster begin sharing technology among each other, R&D costs and risks are effectively spread across industries. As risk is diversified away, the cost of venture capital approaches single digit rates.

Then, another magical thing will happen. As the mixing of people and ideas accelerates, the definition of corporate boundaries will become more fluid. Ownership will exist in the form of contracts among entrepreneurs now defined by social networks, options, and derivatives in a diverse innovation enterprise.

While the boom bust cycle of Industrial Clusters has brought us a great distance in economic development, technology clusters in an Innovation Economy supported by social networks may turn out to be vastly more efficient at economic growth without the perils of Cluster Funk.

I recently attended another one of those economic development summits where a bunch of people with long titles gets a chance to speak on a panel touting the mysterious benefits of a mysterious innovation clusters that create mysterious wealth that can only be realized if their mysterious department is funded.

Nearly every speaker concluded with the following paraphrase: “if only government would fund this or that, everything will be fine”, or, “if only corporations would fund this or that, then we’ll all be better off”

Uhmmm…sorry to break the news, it ain’t gunna happen.

Innovation clusters are all the rage in regional economic development circles. Actually, they are “industrial clusters” because several companies in similar industries collocate in the same geographical area. The industrial cluster then attracts supporting industry and often causes the migration of educated and motivated people to the prospect of jobs. I suspect the ‘innovation’ moniker comes from the notion that new ideas will somehow result from similarity of ideals and purpose.

Group Think Tanks

There are, however, a few drawbacks to industry clusters; they are vulnerable to stagnation, silos, and external shocks. As companies become organized and technologies mature, patents and trade secrets take hold. As they ‘go public’, SEC regulation effectively places a gag order on everyone and sharing slows while stagnation sets in.

Soon after, dozens of nimble companies consolidate into a single giant to achieve economies of scale. Finally, silos form under the weight of multiple layers of management while jobs are mechanized or outsourced.

Then, something somewhere happens to shock the cluster; the end of the cold war leveled the So Cal aerospace cluster. 9/11 busted the Seattle Aerospace cluster. The dot.com bomb stunted Seattle, Silicon Valley, and Route 128. Hurricanes and environmental disasters hit the petroleum cluster, stem cell and genetic engineering legislation stalled biotechnology, and corruption continues to shock financial institutions. At the end of the cycle, companies divest, people defect and a new planet starts to form someplace else.

Remember “scrubbing bubbles”?

While occasional cleansing, in a Schumpeterian sense, is good for industries, the extreme volatility takes a horrendous toll on that invisible turbine of the economic engine – social fabric. Families, friendships, professional networks are strained or collapse and those who dedicate their life to a career path – the pure innovator themselves – can be left marginalized by obsolescence.

The term “Innovation Clusters” makes for a good soundbite for politicians because it fits on the “Jobs R Us” banner they can stand in front of (thumbs up) for the next election cycle.   The term keeps funds flowing to organizations to publish studies that conclude that more studies are needed. Maybe these summits ought to be renamed to Cluster Funks because that is largely what they actually promote.

“Group Buying” was an idea that first surfaced during the “dot com” boom and ultimately failed to build any momentum. The idea is again gaining popularity in the era of social media where scalability can be introduced as aggregation cost diminish on applications such as Facebook and Twitter.

Ditch the gatekeeper, axe the marketers, lose the spam.

My first reaction is to find the most unsavory business transactions today and eliminate all the unnecessary middle men and their costs, gateways, noise pollution, and inefficiencies.

Why can’t there be one cell phone store where I can buy anything for any mobile device? Why do I have to pay to use my credit card and pay to not use my credit card? Why am I still treated like a terrorist precisely when I am doing everything that I can to avoid terrorists?

There are some glimmers on the horizon.

Applications such as SocialBuy, Groupon, and Living Social, use their social media platforms that offer vouchers for steep discounts on a variety of goods, once a minimum threshold of consumers is reached. People have an economic incentive to promote products in their social network (on Facebook and Twitter) in order to reach those thresholds more rapidly and consistently.

Social Buying

Suppose the group buying experience could aggregate packages of products. Strategic products would then be aggregated as “A Network of Products” that together increase net value. Yes, you heard me…a ‘combination of products’ with Twitter followers. A zip car, a movie ticket, Segway rental, and a dinner coupon could be aggregated into an entertainment / shopping package.

This is not so strange.

Apple’s enduring success is very much a model of commercial social aggregation. Nobody can compete with an iPhone without also offering iTunes, iMovie, iPad, and all the social trappings of the iStore. Perhaps Google, with its social commercial network can compete resulting in a duopoly. Group buying can empower the smaller players and bust monopolies in an infinite array of combinations.

Why not air travel?

The door-to-door travel time and social cost to fly between two small cities, say, 500 miles apart using commercial airlines is greater than just driving. There is no other alternative, sans high-speed rail, and the economic result is that the two cities remain small with very little new commerce or diffusion of new ideas that air travel benefits a region. People just don’t travel much between, say, Omaha NE and Cheyenne, WY.

Yet, small city pairs within 500 miles have strong extended family roots, migration patterns, and social network density. It would be relatively easy to offer Group Buying on a 20-25 seat private airplane for less than the cost of driving; and in 1/10 the time!

The travel package could include ground transportation, shopping coupons, and maybe even a A zip car, a movie ticket, Segway rental, and a dinner coupon could be aggregated into an entertainment / shopping package.

Every small city economic development agency in the country should be in this business of building social networks and matching them with product networks between other small city pairs…

Micki Krimmel, CEO; NeighborGoods

When I moved to LA out of college (many years ago), I would always pick up a magazine called The Recycler. The Recycler was a used-stuff magazine localized by proximity in a vast and complicated City of Los Angeles. I bought my motorcycle, skies, concert tickets, furniture, and tools – all at incredible savings.

After a while, I began to notice that most of my friends – the people who I rode with, skied with, went to concerts with, and shared hobbies with – were in some indirect way connected through The Recycler. I soon began to strategically use The Recycler to buy, sell and trade stuff for the sole purpose of meeting interesting people.  I was finding parties, events, and communities that I would never have been exposed to otherwise. When the Aerospace industry crashed, I turned to my community for employment. It flat out worked and I experienced a remarkable transition into … etc.

Good Neighborhoods start with good interaction

My new favorite social networking concept is from Micki Krimmel, CEO of NeighborGoods, LLC. I had the pleasure of meeting Micki at the Future of Money and Technology Summit in San Francisco. NeighborGoods is a brilliantly simple concept where people in a neighborhood can list items that they are willing to lend or rent to others. This application is scaled to a highly localized community in our social landscape otherwise scaled to the automobile, commercial centers, and the Global Internet itself.

The Social Media Imperative

It has long been my contention of Social Media that nothing happens until the rubber meets the road; where people get together to actually produce something. In fact, the ‘corporation’ is an example of a hyper-local environment. It is also my prediction that as financial constraints sever the ties of traditional corporate structures, many of the functions of corporations and government are shifting to social media.

For this reason, applications such as NeighbborGoods will serve – no, they must serve – a greater role in unifying communities. I know this sounds really clinical, but Micki’s work is supported by urban theory luminaries such as Jane Jacobs, Richard Florida, and Robert Putnam.

NeighborGoods from sparky rose on Vimeo.

GNP: Gross Neighborhood Product

The problem is that outside the construct of a corporation, there is no accounting system for the social value that strong neighborhoods produce. There is no measure in America’s gross domestic product for the value generated by unified communities. There is no line item on the balance sheet of industrial and corporate concerns for active, diverse, and well-balanced communities.

Yet, tangential evidence abounds.

There are plenty of data that suggest that vibrant and unified communities attract active and productive people. Companies locate jobs to productive communities. Home prices are more stable in these communities. Crime and delinquency is reduced. Silicon Valley itself is cited as a perfect mixture of social capital, creative capital, and intellectual capital in it’s communities. The best way to decrease the size of government, create jobs and create wealth is to unify neighborhoods.

Use it or lose it

While the dollar-denominated monetization of NeighborGoods may appear modest, however, the true social value that NeighborGoods brings into a community is off the charts.

Every municipality, chamber of commerce, economic development agency or anyone claiming to politically liberate or conserve anything in America should be looking at solutions designed and developed by visionary social entrepreneurs and community leaders like Micki Krimmel and NeighborGoods.

]]> http://www.ingenesist.com/general-info/neighborgoods-good-neighbors.html/feed 0 http://www.ingenesist.com/general-info/america-the-next-developed-country.html http://www.ingenesist.com/general-info/america-the-next-developed-country.html#comments Fri, 05 Feb 2010 08:01:10 +0000 Dan Robles http://www.ingenesist.com/?p=2656

America is stuck in the Industrial Revolution. A loose paraphrase from Seth Godin points out “our entire education system is designed to prepare people to work in factories, consume stuff, and believe this makes us happy”

Now that the factories are gone and the rest of the World has copied all of our tricks (while not copying our mistakes) it is time to move on. What is that next watershed economic paradigm? Who is going to figure this one out? The one who does will define the new meaning of “A Most Developed Country”

In finance, an option is the right, without the obligation, of taking a financial position some time in the future.  As with any financial term, options are associated with “code speak” such as: volatility, exercise, strike, call, put, etc., glazing over many an eye.  At the same time, people want, buy, and trade options all day long in everyday life without even knowing it.  Options have value; otherwise people would not want them.

The ROI model of valuation fails when applied to social media.  The number of hits per ad dollar just does not translate to brand loyalty or scale into rivers of cash flow.  There is little surprise that corporations have great difficulty socializing because they simply don’t exist, except as a folder labeled “ROI” in the filing cabinet of an attorney in Bermuda.  In fact, losing control of the message makes for an expensive funeral in that same filing cabinet.  The Social Media industry is trying to live in the ROI structure and struggling to create revenue.

The cardinal rule of business is to collect assets and shed liabilities.  A “right” is an asset while an “obligation” is a liability.  An option is an asset without the liability, to make a decision some time in the future.  As such, options favor long term planning and strategic nurturing rather than short term profit taking of the ROI model. Asian countries and corporations set a good example of buying options in the future through product quality, education, and economic patience.  American corporations should do the same if they hope to benefit from social media.

People do not want ROI, they want options.  They want the option to separate peers from mentors from friends from family.  They want the option to experience before buying.  People want the option to meet their physical, mental, emotional, and spiritual needs.  They want the option to be anonymous or public in their interaction.  They want the option to collaborate and support others.  They want the option to overcome physical barriers.

People want to meet new people, get new ideas, and hold the option to act on those new ideas or collect on past ideas shared with others.  If they exercise an option and discover another along the way, they want the option to pursue many options to meet a changing market. If they create something in one market, they want the option to apply it to adapt it and access other markets.  If they help someone else up the ladder, they want an option to access what that person, in turn, has created from their help. If they make a friend, they want the option of meeting their new friend’s friends.

Likewise, when people are in trouble, they will turn to their collection of options and start exercising them as society has for millenia.  The great financial transformation will occur when on-line society gets threaded into the fabric of off-line society through the trade of options.  This is the area that needs to develop so that all the pieces can fall into place.  This may in fact become the lasting legacy of the financial meltdown.

Options can be the traded like money throughout and across on-line and off-line social networks if there were a way to keep track of them.  While The Ingenesist Project specifies promising strategies for trading options in a social network with varying levels of practicality, we can say with great confidence that it this next paradigm of economic development will never happen with an ROI mentality.

Innovation clusters are all the rage in regional economic development circles.  Actually, they are “industrial clusters” because several companies in similar industries collocate in the same geographical area.  The industrial cluster then attracts supporting industry and often causes the migration of educated and motivated people to the prospect of jobs.  I suspect the ‘innovation’ moniker comes from the notion that newer industries locate near centers of venture capital, like planets forming from the dust of the cosmos.

There are, however, a few drawbacks to industry clusters; they are vulnerable to stagnation, silos, and external shocks.  As companies become organized and technologies mature, patents and trade secrets take hold.  As they ‘go public’, SEC regulation effectively places a gag order on everyone and sharing slows while stagnation sets in. Soon after, dozens of nimble companies consolidate into a single giant to achieve economies of scale.  Finally, silos form under the weight of multiple layers of management.  Then, something somewhere happens to shock the cluster; the end of the cold war leveled the So Cal aerospace cluster. 9/11 busted the Seattle Aerospace cluster.  The dot.com bomb stunted Seattle, Silicon Valley, and Route 128.  Hurricanes hit the petroleum cluster, stem cell and genetic engineering legislation stalled biotechnology, and corruption continues to shock financial institutions.   At the end of the cycle, companies divest, people defect and a new planet starts to form someplace else.

While occasional cleansing, in a Schumpeterian sense, is good for industries, the extreme volatility takes a horrendous toll on that invisible turbine of the economic engine – social fabric.  Families, friendships, professional networks are strained or collapse and those who dedicate their life to a career path – the pure innovator themselves – can be left marginalized by obsolescence.

The Calculus of Innovation Economics does not oppose industrial clusters; however, it does favor something called “technology clusters” in a business structure called the “tangential innovation” market.  For example; composite materials technology is very useful in many applications like aircraft, medical devices, transportation, recreation, and even musical instruments.   The airplane company has no intention of building cellos and the automobile company has no intention of building snow boards.  As non-competing industries, they can readily share technology and people.  The system is naturally diversified and inoculated against stagnation, shocks and silos; if one industry encounters hardship, people and capacity can shift easily to another industry preserving knowledge and expanding social networking benefit while the damaged industry heals or dies off.  Corporations may not like this idea, but social networks should.

The science of Innovation Economics goes a step further by modeling the business structure of tangential innovation markets as an integrated financial system.  Suppose and Originator Company has a promising new composite technology idea but is unable to meet the ROI requirements of their stockholders. Today, such innovation would be shelved.  In an innovation economy, tangential markets are factored into the business case.  The Percentile Search Engine can determine what other industries would be most worthy borrowers of your technology, if developed.  The Innovation Bank can estimate the return on investment that can be expected through the tangential market as if it were another customer.  The additional revenue projection would allow the originator to meet the ROI requirement prior to committing development funds.  Intellectual Property can be managed with contracts enforced through social network vetting.  The originator can hold an option to see further development conducted by tangential users effectively multiplying their R&D reach and further adding to the expected return.

Then something magical will happen. At some point, the value of the tangential innovation market would exceed the value of the origination market.  The originator will begin to specialize in pure innovation as a primary product and airplane applications as the secondary product.  As all industries in the technology cluster begin sharing technology among each other, R&D costs and risks are effectively spread across industries. As risk is diversified away, the cost of venture capital approaches single digit rates.

Then, another magical thing will happen. As the mixing of people and ideas accelerates, the definition of corporate boundaries will become more fluid.  Ownership will exist in the form of contracts among entrepreneurs now defined by social networks, options, and derivatives in a diverse innovation enterprise.

The knowledge inventory will house the assets rather than office cubicles.  The ‘secret sauce’ of knowledge asset allocation becomes more tangible, safer, flexible, and liquid than any patent could ever be.  Innovation will always be proportional to the rate of change of knowledge that the more diverse assets yields. The Percentile Search Engine will match surplus “secret sauce” to deficits of “secret sauce” much better than multiple layers of management in the past. The Innovation Bank will account for all transactions, obligations, and participation and distribute dividends (rather than hourly wages) to the owners of knowledge assets.  The system will regulate itself through social vetting rather than supporting a cumbersome HR department.

New ideas will get developed in the technology cluster where they would never have been able to meet ROI in the industrial cluster.  The innovation economy induces a multiplier effect on innovation by reducing risk, eliminating barriers to sharing ideas, and lowering the cost of capital.

While the boom bust cycle of Industrial Clusters has brought us a great distance in economic development, technology clusters in an Innovation Economy supported by social networks may turn out to be vastly more efficient at economic growth without the vulnerabilities of industry clusters.

The Ingenesist Project; Putting an End to Debt Economics

The U.S. National Debt is over 10 trillion dollars. Assuming deficit spending stops today, every man, woman, and child in the US is responsible for $33,500.00.

This means that $33,500.00 of every person’s productivity has already been spent. Obviously, the only way to pay the debt is to increase every person’s productivity by exactly $33,500.00.

The only sustainably way to increase human productivity is innovation. The Ingenesist Project is an open source economic development program that will meet this challenge head-on by inducing an Innovation Economy.

The Innovation Economy:

The Ingenesist Project has identified three relatively simple web applications which, when applied to Social Networks, will allow human intellect, social capital, and creativity to become tangible outside the construct of Wall Street, Corporations, and Government.

The Ingenesist Project will build a mirror economy trading rallods (‘dollar’ spelled backwards) in an innovation economy. Rallods will be backed by “innovation” whereas dollars are backed by “debt”, hence, a mirror economy.

The Ingenesist Project has a Patent Pending for an Innovation Banking System and will release all rights to the public domain. By definition, The Ingenesist Project holds 10 Trillion rallods – and counting – to spend on development.

The Ingenesist Project will generously award rallods on a reputation scale for posts to The Ingenesist Project public forum toward the design, development, and improvement of the three web application (did I mention TIP has 10 million million rallods to blow?).

The New ‘Stock’ Market

Countless “new-to-the-world” business plans and patentable methods, systems, and devices will result from the The Ingenesist Project.

Entrepreneurs are encouraged to patent, protect, or contain all intellectual property that they develop and become as wealthy as they possibly can under the condition that they pay royalties, equity, or options to their knowledge inventory.

The entrepreneur’s “Secret-Sauce”, however, must be shared with The Ingenesist Project in order to improve the Percentile Search Engine Algorithm for the benefit of the public domain.

Participants eventually be able to trade services among each other in Rallods.

Objective:

Deficit spending is unsustainable. The existing financial system has exceeded its ability to pay back the debt and is being consumed by the interest on this debt.

As the dollar crashes, society will need an alternate economy to trade upon – one whose currency is backed by something tangible – our own productivity!

The dollar may eventually peg at some exchange rate to the Rallod.

More Information:

Please review www.Ingenesist.com
Please review Articles in Sequence (18 short articles explain the concept)
Please review Patent Pending

<a href=”http://technorati.com/claim/qy3cxbstqg” rel=”me”>Technorati Profile</a>

INGENESIST PROJECT: Submission to the 10^100 Innovation Contest; www.project10tothe100.com

Single sentence:
The Ingenesist Project is an open source economic development program to induce the Innovation Economy utilizing Social Networks.

Tell us more (300 words)
The current financial system has reached the limits of its effectiveness. Interest on debt has exceeded the system’s ability to pay it off. But debt is simply a promissory note on future productivity – any caveman can tell us that the only way to increase productivity today is to innovate yesterday, not tomorrow.

In modern times, this means that the only way to sustainably create more money tomorrow is to innovate today. This is the flaw on Wall Street that Innovation Economics will correct.

Ingenesist has specified three simple web applications when applied to Social Networks, will allow Knowledge to become tangible outside of the organizational construct of a corporation, government, or academia. To develop these applications would unleash substantial innovation and wealth in society.

*The Knowledge Inventory
*The Percentile Search engine
*The Innovation Bank

Knowledge is an excellent tangible asset upon which to peg a currency – better than Gold, Silver, or Debt.

The factors of production for an Innovation Economy are Social Capital, Creative Capital, and Intellectual Capital. The knowledge Inventory classifies knowledge assets in social networks. The Percentile Search Engine assembles unique knowledge asset combinations and returns their probability of executing a given business objective. The Innovation Bank matches most worthy knowledge surplus to most worthy knowledge deficit. Finally, entrepreneurs elevate knowledge assets from lower states to higher states of productivity thereby creating wealth in communities.

By analogy; in the early 1800’s Eli Whitney performed a demonstration for members of Congress by disassembling 10 working muskets, scrambling the pieces and reassembled 10 working muskets. It may seem trivial to us today, but that simple feat astonished the world; it led to the industrial revolution, and unlocked a vast amount of innovation and wealth creation. Innovation Economics is the modern day equivalent.
What Problem does it solve (150 words)?

Technological change must always precede economy growth. We are going about the process of globalization as if economic growth can precede technological change. This simple reversal is the cause for much of what is unsustainable in the world today. Innovation Economics corrects this flaw.

To make knowledge assets tangible is the Holy Grail of financial accounting. The Ingenesist Project asserts that knowledge assets are not intangible, they are simply invisible – this is a much easier problem to solve. Innovation economics solves this problem.

True valuation of knowledge assets allows for direct capitalization of people and their social, creative, and intellectual capital. Networks of knowledge assets form a new type of corporation that is fault tolerant, self regulating, risk diversified, and responsive to social priorities. Wall Street becomes the steward instead of the master. The whole game changes.

If it becomes a reality, what happens (150 words)?
If Innovation Economics becomes a reality, Social Networks will become the driving force of economic growth because human knowledge (as social capital, creative capital, and intellectual capital) can be capitalized directly. Creative knowledge workers would benefit most initially.

Eventually, publically traded Innovation Bonds backed by productivity gains will replace venture capital at vastly reduced risk and cost thereby unleashing an extraordinary amount of primary and tangential innovation creating a virtuous circle.

Areas of low productivity, such as poor communities and under-privileged populations will become targets for highest returns on innovation applications. Millions of new-to-the-world businesses will emerge and nearly all existing businesses will become more efficient where human knowledge is tangible and free to assemble itself in infinite, diverse, and strategic combinations.

If done correctly, eventually most people on Earth would benefit by freedom from the shackles of debt economics.

What are the initial steps to make it happen (150 words)?

Phase 1: The initial steps are: publish our research to a wider audience, prosecute our patent application (USPTO: 20070226361), release it to public property, and begin receiving public input.

Phase 2: Publish several animated videos which describe step-by-step the role that Social Networks must play to induce the Innovation Economy. Collect more input.

Phase 3: Create an open source development platform where ideas can be collected from the global community on how to develop the three web applications specified herein.

Phase 4: Develop and release common architecture web applications for The Knowledge Inventory, The Percentile Search Engine, and The Innovation Bank.

Phase 5: Exist indefinitely as an NGO to keep the game fair and build out emerging opportunities as needed.

What is the optimal Outcome and how is it measured (150 words)?
The intended outcome is for the innovation economy to arise from the knowledge economy as the next level of economic development. The optimal result would be an improved wider distribution of wealth and the transfer of corporate prioritization to communities regarding what gets innovated and what does not. Or likewise, which existing markets dynamics are disrupted and which are not. The optimal outcome would be the emergence of sustainable enterprise over forest-to-dump consumerism.

Metrics are inherent to the algorithm of the Percentile Search Engine as follows: innovation is proportional to the rate of change of knowledge with respect to time and knowledge is proportional to the rate of change of information with respect to time. Differential Calculus is the mathematical tool used to monitor all performance indicators of this system. In fact, all of the analytical methods of finance similarly apply to knowledge assets, by design.

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

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

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

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

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

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

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

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

Welcome to the Innovation economy.