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With Respect To Time

by Dan Robles on May 18, 2012

Yesterday’s post “This is what I believe” I make the following 4 statements:

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

In clinical terms, this is called a “Differential Equation”

I always get a lot of questions about these. Most people’s eyes glaze over as their expression goes blank with far off images of high school Calculus class. Few people realize that these relationships are so common and so intuitive that we are all performing “Calculus” in many of their thoughts, words, actions, opinions, observations, and conclusions about the world around us.

But, just in case there is any doubt about the pervasiveness of differential equations in our culture and thinking, listen to the experts:

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“Move fast and break things” – Mark Zuckerberg

The idea here is that it’s OK to fail because this is how learning happens (rate of change of knowledge) but make sure you do it fast (with respect to time) because the objective is to innovate, not to not make mistakes.

honor your creativity and you don’t ever ignore it or go against what that creative image is telling you. - Lady Gaga

Here she is referring to the proportionality component of creativity. The magnitude of the inspiration (rate of change of one’s knowledge of a matter) is greater than all other thinking moments, but it is constrained in time (with respect to time).

“The Googly thing is to launch [products] early on Google Labs and then iterate, – Merissa Mayer, Google VP

Marissa is talking about Wisdom. While innovation is proportional to the rate of change of knowledge, wisdom is proportional to the rate of change of innovation. The speed at which Google can innovate is how Google creates wisdom of what to do next.

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Here are a few more. See if you can spot the differential equation:

“What Mark worries about the most is the lack of change, the lack of innovation” – Sheryl Sandberg, COO Facebook

“Every new thing creates two new questions and two new opportunities.”- Jeff Bezos, Founder of Amazon.com

“It’s always about timing. If it’s too soon, no one understands. If it’s too late, everyone’s forgotten.’” – Anna Wintour, Editor in Chief, Vogue Magazine

“All technology starts as a spark in someone’s brain”. - Nathan Myhrvold, Intellectual Ventures (hint: sparks travel at the speed of light)

“As people innovate and learn faster, they help generate new ways of performance improvements for everyone while progressing toward their own higher goals” - John Hagel, The Big Shift

Differential Equations are used to describe a vast array of phenomena in our physical universe.

These include the the forces of particles in motion, diffusion of medicine through cell walls, the decay of radioactive substances, and effects of gravity on bodies, weather, energy, chemical reactions, even the creation of money itself. It should not be a shock then that bankers, CEOs, politicians, and all “investors” are not actually concerned with money, they are concerned with the rate of change of money with respect to time.

The question now becomes, why would their NOT be an algorithm for human values of knowledge, innovation, and wisdom when there is an algorithm for everything else with respect to time.

Additional information can be fount here: Exoquant; an algorithm for Social Capitalism

The Facebook Basket of Goods

by Dan Robles on May 14, 2012

Facebook does not produce anything. Facebook sells personal information to advertisers. This is not to say that Facebook is not worth a lot of money, but it certainly deserves a little perspective. In order for Facebook to be worth anything, people must be doing things, making things, and organizing things – otherwise, there would be no need for the utility that Facebook provides.

Consumer Value Index

In order for people to do things and make things, there needs to be basic infrastructure like energy, clean water, telecommunications, food, roads, bridges, and airports. There needs to be housing, education, and health care. There needs to be an effective and fair legal system, equitable political representation, and civil decency.

Debt or Human Potential

Facebook adds value to the human productivity potential that already exists. It is precisely that invisible human potential that seems to be worth most of the money that Facebook commands. When we estimate a value of 100 Billion dollars for Facebook – an astonishing 99 times their advertising revenue – we estimate that the market believes that intangible value exceeds tangible value by a factor of 100:1; versus, say, Apple at 16:1 or Google at 20:1

Nothing economic happens until people get together to make something

Charles Munger, CFO of Berkshire Hathaway uttered these deeply foreboding words at a conference at Seattle University in reference to the Enron debacle;

“it’s bad enough when we lose the accounting profession, but dear God help us if we lose the Engineers”.

Suppose a team of 10 engineers designs a bridge that spans a body of water cutting 1 hour off the alternate route for 14,000 people per day (connecting 2 small towns). Over the 75-year life of that bridge, those 10 engineers are responsible for 380 Million hours of increased productivity. At 25 dollars per hour per person whose time is saved, 10 engineers create nearly 10 billion dollars of NEW VALUE. As such, only 100 engineers could create the same amount of New Value as Facebook is worth in an IPO.

You are worth what is measured

We need to ask ourselves what is more efficient; making things that act as a proxy for the things that we are trying to sell, or measuring the real value of things that we make. Perhaps Facebook would be worth 10 Trillion dollars on such a balance sheet. Maybe Facebook would be worth nothing if true value were in fact measurable. Who knows?

Well, that’s exactly the problem – nobody knows.

Facebook acts as a proxy for human productivity, just like money is a proxy for productivity, but with no intrinsic value itself. Perhaps this explains their Wall Street convertibility. However, if we backed Facebook with New Value of human potential, rather than a basket of debt-able goods, perhaps we would not have a financial crisis to deal with, just a value crisis.

I wonder what Charlie Munger would say

The Reality Platform

May 10, 2012

Today, we do not have a financial problem as much as we have a value problem. Whatever happens next, it must start with a Reality Platform.

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In clinical terms, this is called a “Differential Equation”

But, just in case there is any doubt about the pervasiveness of differential equations in our culture and thinking, listen to the experts:

Here are a few more. See if you can spot the differential equation:

Differential Equations are used to describe a vast array of phenomena in our physical universe.

Consumer Value Index

Debt or Human Potential

Nothing economic happens until people get together to make something

You are worth what is measured

I wonder what Charlie Munger would say

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Exoquant.com