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 term “Vetting” comes from the sport of horse racing where the animal is “vetted” by a veterinarian to determine if the animal is in suitable condition to race.  Today, there are many vetting mechanisms acting in society and communities.  Think of it as the referee that keeps the game fair.  This is important because if the game is not fair, people will stop playing.

Where the vetting mechanism fails, the system fails. This has happened in countless instances from the current financial crisis to nearly every product, market, environmental calamity, or political failure in recorded history – the referees who were supposed to keep their eye on the ball, did not. Likewise, where a vetting mechanism is effective, the system is efficient.

Today, we find severe problems in finance and government and people are investing their knowledge assets in social media as the place to “store and exchange” their present and future productivity – instead of deploying money or debt. As such, social vetting is taking many different forms to validate, qualify, and quantify knowledge assets in communities.

While the progression may not be noticeable, there will be a tipping point where the medium has built enough trust that it can support a currency. This new currency needs to be only a little bit more “trustworthy” than the currency it will replace. This is the point where knowledge becomes tangible.

Independence is a state of mind. Americans have always chosen independence – and they will continue to do so. It is often convenient to let ourselves trust elected leaders and the esteemed business titans to do what is in our best interest. Don’t be fooled, this is “trust”, not dependence.

It is likewise unwise to underestimate the independence movement – independence from corrupt currency, independence from fossil fuel, independence from corporate greed, independence from divisive politics, independence from endless war. Just when everyone thinks that Americans are up against the ropes, they come up with an idea so radical, so creative, and so astonishingly consciousness-altering, the rest of the world just shakes their heads in collective disbelief.

That is where we are today. Something extraordinary is about to happen in the way Americans organize themselves. Nothing is sacred, no one is immune. The next economic paradigm will alter the course of civilization.

All stages of human development were derived from the prior stage of human development by integrating the tools of that prior stage. For example, the agrarians integrated the tools of the hunter-gather such as using the chopping rock to till a field for planting – and so forth. Likewise, the industrial revolution integrated the tools of the scientific revolution; mathematics, chemistry, and engineering. Earlier this century, the computer age integrated the tools of the industrial revolution, etc.

The next economic paradigm will be derived from the Knowledge economy by integrating the tools of the knowledge economy; these are The Internet, Social Media, mobile communications technology, etc…

Americans will chose Independence every time.

A Black Market is not so much illegal as it is, extralegal. Extralegal means that a condition exists outside of a legal system. Street vendors in LA, Garage Sales across the US, some family transactions, alternate currencies, and increasingly, social media, are operating in an extralegal sector. It can be argued that most businesses probably started as an extralegal enterprise where extralegal “value” was exchanged in a simple brain-storming session.

This is only a problem depending on what side of the deal you are on. There are few liabilities, high anonymity, no lawyers, contracts, or licenses. You have a certain independence from government currencies, regulations, and oversight … and you don’t pay taxes, etc.

Tax evasion – the scourge of racketeers worldwide

However, if things go wrong, there is no legal recourse. You cannot engage the department of commerce if the garage sale item is defective. You cannot go to a bank to borrow money to finance an extralegal enterprise. You cannot sell an extralegal business in mainstream markets. If your extralegal enterprise infringes on a legal enterprise, you are liable – and vice versa. You also are vulnerable to obscure tax laws that may, or may not, eventually catch up with you anyway.

Modern Black Market

The difference with the modern black market is that social media inherently rewards high integrity and punishes low integrity. This effect makes the need for laws and law enforcement less essential in protecting business interests. If someone does dirty deals in social media, there is a form of community recourse that can take place to punish trolls and crooks. Social media does not always have physical, visible, or involuntary infrastructure to impose on the legal rights of others.

The “Little House on The Prairie” effect

The Last Mile of Social Media is an emerging condition where social media applications act in a community much as they did before all mass media. One example is Craigslist – if you sell me a dodgy lawn mower, well, I know where you live. I can “ask a neighbor” and conduct a social media search on anyone that I encounter. As communities form in close proximity, anonymity goes away and people work with people they know and trust.

Social Engineering

As governments and industries increase their usage of social media applications – this black Market becomes a grey market. Employers check backgrounds. Courts hold employers to public information usage laws in discrimination suits.   Anyone can be financially impacted by TMI on social media networks.

However, as long as it stays in the extra-legal sector Social Media will remain intangible in the eyes of the current financial system. This gives rise to two options: Government should regulate social media OR social media will operate in an alternate financial system.

My bet – and indeed the objective of the Ingenesist Project – is that an alternate financial system will emerge which will fully capitalize and securitize a social currency.   Then, and only then, it will become a relatively simple task to convert social currency to any financial currency much like currency exchanges legally operate around the world.

Where the vetting mechanism fails, the system fails. This has happened in countless instances from the current financial crisis to nearly every product, market, environmental calamity, or political failure in recorded history – the referees who were supposed to keep their eye on the ball, did not. Likewise, where a vetting mechanism is effective, the system is efficient.

EBay does little more than defend the vetting mechanism (feedback system) and entrepreneurs do the rest. The credit score allows companies and people to capitalize and securitize assets. The US legal system keeps the game of commerce as fair as practical. Police officers and school boards keep our society safe and smart. We often overlook the importance of vetting in our communities.

Today, we find severe problems in finance and government and people are investing their knowledge assets in social media as the place to “store and exchange” their present and future productivity – instead of debt. As such, social vetting is taking many different forms to validate, qualify, and quantify those assets.

While the progression may not be noticeable, there will be a tipping point where the medium has built enough trust that it can support a currency. This new currency needs to be only a little bit more “trustworthy” than the currency it will replace. This is the point where knowledge becomes tangible.

The questions are:

1. What is money? 2. Why is it important? 3. Why is it all so confusing?

The answers are:

1. You are money. 2. You are important. 3. You’re not supposed to know this.

This video provide an easy way to find the truth among the high-fiber ambiguity that has become our political morass. Oh Yeah, they want you to be confused because they don’t want you to act any differently.

Most literature on the subject of Innovation cites diversity as an important component of the innovation enterprise. Unfortunately diversity rides a political narrative rather than practical applications. Polarization is the death of diversity and the political narrative that plagues our country also plagues our ability to innovate.

Process Diversity

Not only does the diversity in innovation matter, the diversity of acceptable outcomes of innovation is also important. In addition, the diversity of attempts at innovation is essential, i.e., failure must be culturally acceptable. Preconception, bias, thresholds, and ideology often spell the end of a economic outcome.

Moving Against the Grain

Unfortunately, the forces acting against diversity are deeply ingrained in each of us whether we’ll admit it or not. For example, if you are in charge of producing diverse groups, processes and outcomes. How does one extract their own personal bias? How does one determine how much diversity is needed? Removing oneself produces randomness. Including oneself produces similitude. Polarization returns.

A Diverse Quagmire

Most companies innovate with existing personnel whose behavior can only be a function of their interaction with the company for their career and retirement prospects. Utilizing external sources does not eliminate this bias and may in fact magnify it.

There may be a way out of this quandary; we must open our observation to include all possible outcomes as worthwhile. Then we must distribute the results broadly. Where diverse people observe the same event, objectivity is achieved.

A striking resemblance to social media

By observing something derived from unobservable events, we can gain a great deal of information. because Social media is experiencing extraordinary growth we can say that a great amount of innovation is occurring. It is our prerogative to capture the innovation and not to expect the innovation to capture us, our government, or our corporations.

Diversity by Proxy

At the Ingenesist Project, we define innovation as outcomes proportional to the rate of change of knowledge with respect to time. As such, all we need to do is look for high rates of change of knowledge and we know that innovation is taking place. We do not know what the innovation is, where it’s directed, or what the market for the innovation may be. However, when we employ diverse observation, these answers begin to emerge.

Social media provides an interesting backdrop to the innovation process. Social Media does not care what you look like, the clothes you wear, or the church you attend. Social media hold no monopoly of opinion on diversity –

Diverse Incentives

If we take a lesson from economics, we know that people will generally act in their own perceived best interest. Then we can apply a set of incentives that modifies the best interests of the people. These incentives may be rewards, access to more incentives, or reduction of risk. Suppose that diversity were in fact a process of self selection or self removal from an objective? That is, people would have enough information regarding the potential outcomes that they could choose to interact with the process or not. In effect, innovating as an economy.

Photo credit

(Editor’s note: The following was initially published on our sister blog conversationalcurrency.com.  The point of this an other articles is to remove one component from an economy and see what happens to the other pieces.  It is s common hypothesis testing technique.  I hope you enjoy it)

A New Economic System of the country of Montenegro is based on complete and unfettered economic freedom; in other words, the elimination of all barriers to conducting business.  Does this, in fact, lead to a new paradigm?

Veselin Vukotić ‘s paper titled Economic Freedom and New Economic Paradigm, offers a case study that enlightens us as to some of the core changes, some easy and some difficult, that any proclaimed ‘new economic paradigm’ would place on people, culture, politics, and the markets.  From this insight, perhaps we’ll see a new paradigm emerge.

Freedom; A competitive Advantage

Montenegro has achieved a competitive advantage in their Eastern European region by reducing international trade barriers, treating foreign and domestic concerns equally, reducing “contribution” fees and other taxes, reduction of public spending, affirmation of private property, and encouraging entrepreneurship.   Veselin Vukotić  also notes that the concept of economic freedom is a complete theoretical and practical expression of an idea.  He quotes Plato:

The difference between concepts is the difference between starting ideas!

Therefore, he concludes that the idea of economic freedom is freedom of an individual to conduct business (earn money), and that business is the key factor of a society’s development and individual wealth.  While we now know that unfettered capitalism breaks down at some point, he does accomplish something important – the elimination of all government as a defining element of freedom.

The Singularity Solution

We know it is often easier to solve a problem if we can remove certain elements, even temporarily, and analyze components individually.  Suppose we eliminate Government from the equation, corporations would rule.  However, corporations are made up of individuals, so individuals would rule…they would rule whom?  The logic also breaks down.

There is one exception: what if all individuals were corporations and they ruled only themselves? Corporations are keeping government out of their affairs by keeping people off the books.  The solution is for everyone to structure their existence as a corporation contracting to each other for every conceivable business arrangement.  Heck, it only costs 40 dollars to open a business in the the U.S.

Self-regulating Freedom?

Knowledge would be shared freely, people would be paid for their productivity, diversity and strategic combination of knowledge would be rewarded.  Everyone would own their knowledge and would seek to accumulate more.   Trade barriers would be eliminated, taxes would be reduced, private property would be affirmed, and entrepreneurship would be encouraged.  Like a family, no corporation could become wealthy at the expense of another corporation for very long.

Would you be willing to pay the government to leave you alone? Is that Freedom or a new economic paradigm or both?

OK, so what part of: Governments and industries have no intention of fixing things that they broke are we still having trouble with? The climate change summit ended in a draw after Kyoto ended in party pooper. You can count the financial crisis, endless warfare, world hunger, slave labor, forest-to-dump consumerism among the same pile of sun dried bullshit. Does anyone still trust the “leaders”?

There is a way out. People need to organize themselves around their a social media financial system. This is actually a relatively easy thing to do. Social media is like a big cloud – a big gray mass with no beginning, end, center or physical boundaries. The only way to engage the cloud is to talk to it. If you talk to it the right way, it delivers rain. If not, the well stays dry.

Now here is the trick. As social media applications continue to integrate, a correlation between conversation and rain becomes “diversified”, the randomness begins to disappear. Steady, consistent, and sustainable conversations across a wide array of social action will delivers steady, consistent, and sustainable rainfall across a wide area of social landscape.

At some point, someone will notice the similarity between the social media rainfall and the behavior of large diversified cash flows. They will develop a financial instrument to “capitalize” this value because it has become predictable. Predictable value flows can then be “securitized”. Unfortunately, the dollar is a debt backed currency and a productivity backed currency will need to arise in its place.

China accuses the weakness of the US dollar for driving speculation bubbles in anything and everything of “value” that is not a dollar. The problem is that the dollar is the only game in town. If there were an alternate currency with superior representation of human productivity, all dollar denominated assets will be converted to the new currency. The entire 50 Trillion dollar debt pressure on the US dollar will convert to a productivity backed currency forced to drive innovation at a comparatively astonishing magnitude – almost on the scale of the problems that face humanity.

A productivity backed currency means that those who are most productive earn the most money. Think about that for a minute, then go read The Next Economic Paradigm.

Editor’s note: I found this copyrighted piece from all the way back in 1995.  I find such history enlightening.  As a researcher it allows me to eliminate certain variables such as Social Media, 9/11, TARP, GWB, BHO, Global Warming, and a host of other firebrand influences on public opinion and action.  That said, the clarity is remarkable. Take strong note of the intention of fulfilling social priorities.  Today, as our corporations and government (federal, state, and local) continue to cut social programs in order to service interest on debt, the void on social programs will induce an inevitable condition; Community Conversational Currency.

by Paul Glover

Originally published in IN CONTEXT #41, Summer 1995, Page 30
Copyright (c)1995, 1997 by Context Institute

Many communities are giving up waiting on large corporations or government to invest or provide jobs, and are instead building on their own strengths and resources.

The people of Ithaca have done so by issuing their own paper currency, called Ithaca HOURS. Residents list the goods or services they have to offer in a large catalog – and then use the HOURS they earn to purchase goods and services from others. For some, this barter system provides a crucial margin of financial support. For others, it’s a great way to meet people and build a sense of community. All find their spending habits redirected locally.

Here in Ithaca, New York, we’ve begun to gain control of the social and environmental effects of commerce by issuing over $50,000 of our own local paper money, to over 950 participants, since 1991. Thousands of purchases and many new friendships have been made with this cash, and about $500,000 of local trade has been added to the Grassroots National Product.

We printed our own money because we watched Federal dollars come to town, shake a few hands, then leave to buy rainforest lumber and to fight wars. Ithaca HOURS, by contrast, stay in our region to help us hire each other. While dollars make us increasingly dependent on multinational corporations and bankers, HOURS reinforce community trade and expand commerce that is more responsive to our concern for ecology and social justice.

Here’s how it works….

The Ithaca HOUR is Ithaca’s $10 bill, because $10 per hour is the average of wages/salaries in Tompkins County. These HOUR notes, in four denominations, buy plumbing, carpentry, electrical work, roofing, nursing, chiropractic care, child care, car and bike repair, food, eyeglasses, firewood, gifts, and thousands of other goods and services. Our credit union accepts them for mortgage and loan fees. People pay rent with HOURS. The best restaurants in town take them, as do movie theaters, bowling alleys, health clubs, two large locally-owned grocery stores, and 30 farmers’ market vendors. Anyone may use HOURS, and hundreds have done so.

Ithaca’s new HOURly minimum wage, enforced by general consent, lifts the lowest pay up without knocking down higher wages. For example, several of Ithaca’s organic farmers are paying the highest farm labor wages in the Western Hemisphere: $10 of spending power per hour. These farmers benefit by the HOUR’s loyalty to local agriculture. On the other hand, dentists, massage therapists and lawyers charging more than the $10 average per hour are permitted to collect several HOURS hourly, although we hear increasingly of professional services provided for our equitable wage.

Everyone who agrees to accept HOURS is paid two HOURS (worth $20) for being listed in our newsletter Ithaca Money. Every eight months they may apply to be paid an additional two HOURS, as reward for continuing participation. This is how we gradually and carefully increase the per capita supply of our money.

Ithaca’s printed currency honors local features we respect, like native flowers, powerful waterfalls, crafts, farms, and our children. The multi-colored HOURS – some printed on locally-made watermarked cattail (marsh reed) paper, all with serial numbers – are harder to counterfeit than US dollars.

We regard Ithaca HOURS as real money, backed by real people, real time, real skills and tools. Dollars, by contrast, are funny money, backed no longer by gold or silver but by less than nothing: $4.8 trillion of national debt.

Ithaca Money’s 1,200 listings, rivaling the Yellow Pages, are a portrait of our community’s capability, bringing into the marketplace time and skills not employed by the conventional market. Residents are proud of income earned by doing work they enjoy.

At the same time Ithaca’s locally-owned stores, which help keep wealth local, make sales and get spending power they otherwise would not have. And over $4,000 of local currency has been donated to 22 community organizations so far by our wide-open governing body.

As we discover new ways to provide for each other, we replace dependence on imports. Yet our greater self-reliance, rather than isolating Ithaca, gives us more potential to reach outward with ecological export industry. We can provide the capital for new businesses with loans of our own cash. HOUR loans are made without interest charges.

We encounter each other as fellow Ithacans, rather than as winners and losers scrambling for dollars. As we do so, we help relieve the social desperation which has led to compulsive shopping, wasted resources, and homelessness and hunger. We’re making a community while making a living.

Paul Glover, who created the HOUR system, is a community economist and ecological urban designer with a degree in city management. For contact information, see Toolbox below.

Community-Based Currency

People use Ithaca HOURS for everything from goat cheese to tax consulting. Here are just a few of their stories.

Thomas found work by calling those who had listed a need for computer help. And when he read that Ithaca Rape Crisis received an HOUR grant, he did computer programming for them. His HOURS were spent for food, credit union membership, and dressmaking for his wife: “Our goal is to have money with value not tied to the dollar and not subject to the whims of the global market.”

Judy has earned many HOURS selling Jim’s hand-painted T-shirts, and spends them right away: “Ithaca has so much expertise in so many areas. … We’re like puzzle pieces that need to be put into a picture.”

Elson, who retired in 1972, earns HOURS doing heating and air conditioning consulting: “This HOUR system takes me back 20 years and makes me feel constructive again. My wife and I spend HOURS at the Farmers’ Market, where we browse and chat with old friends. I was very pleased last winter to hire two girls with HOURS to shovel heavy snow. They used the HOURS for rent.”

Bill, works for The Alternatives Federal Credit Union: “Because Ithaca HOURS can be part of the purchase of a house, they can help people who do not have enough dollars buy a home.”

Marty has earned HOURS from mortgage payments, massage, and hand-painted silk scarves: “”The first thing I ever bought with HOURS was goat cheese. Richard at the Farmers’ Market had never accepted any, and I had never spent any. Since the note says an HOUR, he described an hour of his work. People gathered around as he explained how he made goat cheese.”

Nancy has done tax returns and investment planning for HOURS and trades: “There’s a lot of anger about how work by women is undervalued. An HOUR being an hour’s work is a nice way around that.”

Jim has swapped plumbing for drywalling: “With the Ithaca Money list we can depend on each other as a community, rather than on faceless corporations beyond our control. Trading creates a tremendous feeling of good will and self-esteem amongst all involved.”

Sara grows organic strawberries and knits angora hats. She’s just received a large loan of HOURS from a carpenter friend who has earned a lot of them. Needing money before berry sales begin, she’ll use HOURS for child care and to hire farm labor.

Steve sells notecards and T-shirts for HOURS, most spent for meals and employees: “Local currency makes local self-sufficiency more possible. It helps protect our local environment and resource base so that economic activity doesn’t damage the ecological base of the region.”

Craig & Stephanie sell water filters, biodegradable soaps, and unbleached cotton clothing. Their HOURS have gone to restaurant meals, advertising, and construction of display racks. Craig says: “When we have a community that is cash poor, like Ithaca, barter allows people to spend money and live a better quality of life.”

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

A framework for the future:

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

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

(June 2001)

1: A sociological term.

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

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

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

(November 2001)

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

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

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

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

I can see also other great applications here with biophysics and cybernetics, namely personal pricing, but I think the social currency will take capitalism to the other level. Industrial and information revolutions are nothing compared to this step! ]]> http://www.ingenesist.com/general-info/social-currency-history-matters.html/feed 0 http://www.ingenesist.com/general-info/a-learning-revolution.html http://www.ingenesist.com/general-info/a-learning-revolution.html#comments Wed, 14 Oct 2009 04:14:12 +0000 Dan Robles http://www.ingenesist.com/?p=1840

Trillions of dollars in play:

The Ingenesist Project posits that trillions upon trillions of dollars worth of value that is being transferred to social media from a legacy economy stifled by insurmountable debt.  These numbers are indeed spectacular because they account for the value “lost”, and most importantly, the calculations provides clues on how to “find” it again.

What is a Social Contract worth?

According to Legacy Economics, the term “social contract” describes a broad class of theories that try to explain the ways in which people maintain social order. The notion of the social contract implies that people give up some rights to a government or other authority in order to receive or maintain social order. Otherwise, we would each have unlimited natural freedoms, including the “right to all things” and thus the freedom to harm all who threaten our own self-preservation; there would be an endless “war of all against all”.

Take me to your leader

By contrast, Social Media begs the questions: who or what exactly is that authority?  Isn’t the greatness of the Internet the lack of an all powerful authority? So why aren’t we at a war of all against all?  What keeps social media at peace instead of an endless flame war?  Whatever this alien is, it is capturing and storing trillions upon trillions of dollars of value away from the legacy economy, but where?

Separating facts from fiction

According to the old economy, it is a “fact” that human knowledge is an “intangible asset” of which there are only two types defined:

1. Legal intangibles such as trade secrets, copyrights, patents, and goodwill (brands).

2. Competitive intangibles such as knowledge activities, collaboration activities, leverage activities, and structural activities.

However, when we consider social media;

1.    There is no law governing the phenomenon – so there are no legal intangibles.

2.    Collaboration, leveraging and structural activities are not being conducted in a competitive environment (the context of one “Company” against another).

So, the definition fails to account for knowledge assets in social media. The Ingenesist Project discovers the lost trillions simply by treating the social contract like a legal contract.

Tangible assets are managed by contracts

Technically, any oral agreement between two parties can constitute a binding legal contract. The legacy economy limitation, however, is that only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck.

But social media, email, and blog posts, etc., all constitute vast “written” agreements and material evidence as far as most people are concerned.   So what is missing?  Are we waiting for permission from government, Wall Street, corporations, attorneys, or the Federal Reserve to say it is OK for people to stop competing with each other or to renegotiate the terms of the social contract (and currency of exchange)?

The mystery is no mystery

Guess what, there is nothing there. Absolutely nothing except philosophical barriers carried over from legacy economics built upon political division. The mystery is that there is no mystery except using social media to unite people.  After all, the biggest Brand in the world is a Community Organizer.  Such calculation provides clues on how to “find” value again.

Mentors provide expertise to less experienced individuals to help them advance their careers, enhance their education, and build their networks. In many different arenas people have benefited from being part of a mentoring relationship: Freddie Laker mentored Richard Branson, Bach mentored Mozart, Dr. Dre mentored Eminem, Aristotle mentored Alexander the Great, and Obi-wan Kenobi mentored Anakin Skywalker.

Mentorship: a Valuable 2-way Conversation

Suppose that mentorship could be monetized like financial instruments.  Within the structure of an innovation economy specified by The Ingenesist Project; a knowledge inventory, a percentile search engine, and an innovation bank will match the most worthy student to the most worthy mentor in the respective market structure.  The mentor would take an equity position in the protégé, not unlike taking a stock in a corporation.

For example:  A single mid-career mentor could take on 10 protégés with an option to exercise, say, 1% of the students future salary for every year mentoring upon predetermined retirement date. Say that the average mentorship lasts 10 years.  Likewise, each of the protégés also becomes a mentor taking on 10 protégés of their own.  The Master mentor will collect 1% of the revenue that each of the 100 sub-protégés provide to their middle mentors per year.

The Educational Pyramid Scheme

If each protégé becomes at least as successful on average as the mentor, the master mentor can collect the equivalent of their average salary for the duration of their retirement.  If each of the protégés become equally effective mentors, then the master mentor can double their average salary for the duration of their retirement.   A third tier adds another salary to the master mentor.

This is what actually happens in an informal way within companies, government, and Jedi Knighthood; the exception is that social media will enable this to occur outside the construct of a corporation – and such.

Game Theory for the Rest of Us

An interesting social game emerges:  It becomes the best interest of the mentor that each of their protégés is successful in their field and practice high integrity.  It is in the best interest of the mentee to learn as much as they can and become as proficient as they can. It is the best interest for mentees to pick appropriate mentors and it is in the best interest for mentors to take on appropriate mentees.  It is efficient for mentees to form a social network among themselves and for Master Mentors to form a network among themselves. A multiplier effect surges with cross-mentoring.

In aggregate, it is in the best interest for the membership in the social network to cooperate rather than compete because their income would ultimately benefit less from competition than from cooperation.

2.3 Trillion Dollars Market

The American Public education system is in disarray.  Standardized education defies the diversity of the country.  Teacher’s pay has been stagnant. Curriculum takes years to respond to new knowledge. Recent McKinsey research finds that a persistent gap in academic achievement between children in the United States and their counterparts in other countries deprived the US economy of as much as $2.3 trillion in economic output in 2008

None of this has anything to do with the dreams of our children.  None of this has anything to do with the intellect, motivation, and perseverance of our kids.  It has everything to do with Political stalemate and failure of the economic system.  All children can achieve their dreams, and ours, if there were a market for mentors.

The New Game in Town:

We have specified a structure for a new economic paradigm by simply integrating the the knowledge economy into the same structure as the financial system.  The result is a completely new way for entrepreneurs to create wealth.

Primordial soup:

A. We specified that Information is the currency that is convertible to knowledge assets and innovation assets through a mathematical relationship.

B. The decimal classification and logic system provides a machine-enabled accounting and inventory system for knowledge assets.

C. The factors of production for the new economy are: social capital, creative capital, and intellectual capital.

D. Social Networks provide vetting, perfect information, and self-regulation.

These ingredients allow the spark of entrepreneurship to illuminate the supply and the demand for knowledge assets outside the construct of traditional corporations, government, or academia; instead catalyzing innovation enterprise within and among social networks.

An economy is born:

Entrepreneurs now have all the information that they need for matching surplus knowledge assets to deficit knowledge assets as a means of increasing productivity of these assets in a highly predictable manner.  Advances in Social Media will keep the game organized, localized, transparent, self-regulating, and fair.  The Unit Business transaction can be assembled in infinite combinations to support countless ‘new-to-this-world’ innovation enterprise.

Show me the money.

Monetization is the process transforming a product or service into a universal tangible currency; specifically, a Dollar, a Euro, Yen, etc.  Very few people fully understand how money is created in the first place. The following video series gives an excellent overview of this process. It is highly advised that the reader invest 40 minutes in viewing this documentary:

Money represents future productivity:

In short, money is created from debt.  Banks are given the authority by a government through the fractional reserve system to literally scribe money into existence.  This money is not backed by gold or silver, rather, money is backed by the promise of the borrower to pay it back in the future.

Ultimately, the value of money is a social agreement; a promise based on an estimation of future productivity.  When those promises cannot be kept, the value of economy diminishes. When the promise is exceeded, the value of economy appreciates.

Blood brothers or distant cousins?

Debt and innovation have one very important feature in common; both are a proxy for future productivity. Therefore if debt can be used as a basis for a national currency, so can innovation.  Everyone should be willing to honor the social agreement because the currency would not change, only the basis of the currency.

The only way to sustainably create more money is to increase human productivity.  The only way to increase human productivity is to innovate.

The Risk Factor:

Our financial system has developed over 400 years a variety of systems, methods and analysis tools to manage risk in monetary transactions.  Innovation economics has applied the same system to the  management of risk for transactions of knowledge assets. The correlation is as follows:

The Financial Bank: the entrepreneur assumes that they have the knowledge to execute a business plan and then they go to the financial bank to borrow the money.  The remaining risks are knowledge related.

The Innovation Bank: the entrepreneur assumes that they have the money to execute a business plan and they go to the innovation bank to search for the knowledge. The remaining risk is finance related.

They hedge each other.

The Virtuous Circle:

The more knowledge you can assemble, the more money you can borrow.  The more money you can assemble, the more knowledge you can borrow. With both banks acting together – the risks cancel each other out and an economy of risk free innovation emerges.

Amalgamation of predicted cash flows:

With a computer readable knowledge inventory, diverse communities of practice, a percentile search engine, and the virtuous circle of finance; cash flows associated with innovation enterprise can be predicted much more accurately and with far lower risk than any current innovation system.

Were risk is predictable, a portfolio of innovations can be diversifies so if one innovation fails there is an equal chance that another will succeed and the risks cancel each other out.  The predicted combined cash flow of all the innovation enterprises can be depicted as a single large steady cash flow with low volatility.

Call Street:

Much like today’s companies do to raise money for expansion, the innovation bank can issue bonds on the open market.  A bond is a debt based on future innovation and will act as the transitional instrument to monetize innovation economy. Options can be sold on futures of innovation enterprise.

For example: a bond can issued by a bank or a government with coupon price of 1000 dollars paying a risk adjusted interest rate and redeemable in 8 years.  The proceeds can now be used to fund innovation enterprise which, by definition, are qualified and quantified on the basis of increased human productivity. Investors can buy options on promising algorithms for knowledge assets.

This system is exactly how mortgages are financed through global networks of bonds, options, and hedge funds. The current economic crisis happened because estimations of future human productivity failed to support the estimated value of the assets being represented.

The Innovation Economy is the hedge against financial crisis and consumption capitalism -  now and in the future.

The New Gold Rush:

Innovation Enterprise can easily exceed the 7-12% return that is normally expected on Wall Street.  Venture Capitalists only entertain innovation expected to return 1000%-5000% return.  There is a huge market of innovation enterprise in the regime between 12%-1000% that is currently uncapitalized.  If innovation bonds and associated options return only 25% consistently, the flow of global capital will be intense and our nation will be transformed far beyond any current expectation.  The opportunity is, however, even much greater than that; Innovation will reflect social priorities rather than Wall Street priorities.

The epiphany.

The epiphany of innovation economics is that technological change must always precede economic growth.  Humanity has been going about the process of globalization as if economic growth can precede technological change.  This has been the singular flaw in modern market economics that has created the unsustainable system that we have today.  The financial instrument of the innovation bond reverses this flaw and will open the next economic paradigm to extraordinary human progress.

Future modules in this series will discuss the implication and specific embodiments of an innovation economy.

Technological change must always precede economic growth. We are going about the process of Globalization as if economic growth can precede technological change. This is the singular flaw of market capitalism that needs to be reversed.

The Innovation Economy will not be delivered by corporations, Government or Academia. There no single person, country, ideology, or philosophy that can meet the challenges of the future alone – everyone will be required to participate because everyone has a stake in the outcome.

The Ingenesist Project outlines a very optimistic future. The problems ahead have a relatively simple solution that can be implemented today using existing tools and infrastructure. These tools acting in the right system can have profound impact on future economic growth and the sustainability of our resources.

The Ingenesist Project identifies a core problem:

This is the human productivity chart. Every time humans invent better ways of doing things, they become more productive. Where more people are more productive, the economy gets bigger. This is a fact.

About 50,000 years ago, humans began to make tools using tools and innovation increasing exponentially. Tools made hunting and gathering easier. As farming developed so did the emergence of cities. When people could produce more than they needed, they had time to think about things like philosophy, art, astronomy, written language. This led to a scientific revolution that continued to make new observations about the world. These observations were applied to systems that made people still more productive. The industrial revolution followed. Industry produced a lot of information. The ability to process that information using computers led to the information revolution. Soon people began seeing new trends among the information, facts, and data. This ability largely defines the knowledge economy that we see today.

Obviously, There were economic “eras” in the past and there will be more in the future; of this is not the end of human economic development. Something else will happen after the knowledge economy. This next economic paradigm is not easy to see.  Many people have a sense that civilization is changing – it must change.

Looking at the productivity chart, we notice a few interesting trends.

• Every level of economic development was derived from the prior level of economic development.
• That transformation was achieved by integrating the tools that were developed during the prior economy.

The two greatest tools in the knowledge economy are the Internet and Social Media. The Innovation Economy must integrate these tools.

Now, this is the Human Gross Domestic Product Chart. This is obviously very similar to the productivity chart except that the bottom axis is labeled with Global Gross Domestic Product over the same time period. The global GDP of 50,000 years ago was about 200 Million in current dollars.

Today, the Global GDP is about 65 Trillion Dollars.

If this curve was to continue, and it can, the next level of economic development could easily value in the Quadrillions. However, this cannot happen without some adjustments to the current system:

The only way to create more money is to increase human productivity and the only way to increase human productivity is to Innovate. This is the guiding principle of an Innovation Economist.

The problem is that the financial system is highly organized while the “Innovation system” is nearly random.

Economic growth with “money” as the scorecard lives in a complex, global and highly integrated system where billions of dollars circle the globe daily at the click of a mouse.

By contrast, human innovation lives in the patent system which is extremely slow, static, and prohibitively expensive. Of course, innovation certainly happens in places like Silicon Valley, Government Laboratories, Universities, and let’s not forget the proverbial “Steve’s Garage”; but these sources are not integrated and they do not behave like a system – except at the mercy of the financial system.

Innovation is market driven, markets should be innovation driven.

It is clear; there is no Innovation system to match the financial system in speed, efficiency, and integration. The objective of the Ingenesist Project is to specify an innovation system that integrates the tools of the knowledge economy into a structure that mimics the financial system. If it looks like money, it will behave like money and people will trade it.

The Financial system has 5 essential components that interact with each other as a system.

The 5 Essential Components of an Economy

1. A Currency to store value

2. An Inventory to account for the storage and exchange of value

3. Institutions that are supposed to keep the game fair

4. Entrepreneurs to do the “fuzzy math”

5. Business Plan or philosophy such as “Capitalism”

If any of these pieces are missing or corrupted, the market will fail. All 5 of these elements must be operational and integrated in order for a market to be efficient.

In the next several articles, we will go through each of the 5 elements and develop the corresponding knowledge system that will be integrated as we create the structure of the Innovation Economy.

If you give people a game they can win, they will play it all day long. In this regard, human behavior is highly predictable.

We can measure the time in minutes, we can measure distance in miles, and we can measure mass in grams – so how do we measure Innovation?  Am I missing something or is this possibly the most stunning omission in the history of civilization?  Who is keeping score? Where’s the referee? This is serious business, folks – the fact, factors, and factories of innovation should be in laser sharp focus to everyone right now, here is why:

The total US liability is estimated at 53 trillion dollars. Every US citizen must become more productive by $175,000 each to cover the invisible mortgage.   Government and corporations are not going to fix this problem – they will leave it to the kids to figure out how to make, mix, and measure innovation.

It is official; the United States has run out of bandwidth and we need to create more. The only way to accomplish this is an extraordinary expansion in the breadth, depth, and scale of innovation. This is a situation that cannot be rationalized by any conventional school of thought – starting with our definition for innovation.

The accepted definition for innovation is “something novel and useful”. I hope that I am not insulting any B-school professors or innovation guru’s but “something novel and useful” is already bankrupt as a definition for the only thing that can pull us out of this flaming tailspin of debt economics.

So let’s try something that the kids can do well (because they get to pick up the tab):

Innovation = Bandwidth Created / Bandwidth Expended

So there it is: a simple, clean, and effective:  If the number is greater than 1 we have a creation of wealth. If the number is equal to 1 we have a transfer of wealth, if the number is less than 1 we have the creation of more debt.

It should not matter how one defines bandwidth as long as the top number and the bottom number are measured the same way. If the kids can increase the top number, or lower the bottom number for anything anywhere by using their social, creative, or intellectual ability, alone or in groups, then they can become successful innovators.

There is a clear and rational business case for bandwidth – people will pay for it at a price relative to their own available bandwidth. Let’s give the kids a game they can win.  Let’s give them a score that they can keep. Let’s show them how entrepreneurs work, think, and play.

For the same amount of bandwidth expended, they can create more bandwidth for 10 rich people or more bandwidth for 1000 poor people. Let the kids decide. If they give some people more bandwidth at the expense of the bandwidth of others, they lose.  If they find synergies that act as a bandwidth multiplier, they win. Let the kids figure it out.

All we need to do is help develop standards to measure bandwidth.  It’s the least that our old people can do and a much simpler problem for our feeble minds to solve.  The Ingenesist Project specifies 3 web applications which if deployed to social media will allow social capital, creative capital, and intellectual capital to become tangible outside the construct of the traditional corporation – we believe that this may do the trick.  There may be others working on the problem too, we don’t care – at the end of the day, we all work for bandwidth.