When I use the term “Innovation Bank”, people conjure up the image of a cheery place where anticipation reigns as starry eyed depositors arrange their intellectual property in neat cubby boxes, Patents fly like cash register receipts and companies troll the halls looking for a cure for their bottom line blues.
This is not exactly what we have in mind, nor is it too far off either. An innovation Bank is simply a knowledge inventory that contains knowledge assets that exists in the format of a financial instrument and can be deployed for the purposes of increasing productivity. In the process, it makes 10X more of itself every time it is deployed. It mints its own money.
The Innovation Banker
This is not much different than a financial bank. In fact, in the financial bank, everyone assumes the borrower has the knowledge to execute the business plan and the bank lends the money. Oh, by the way, the money makes more of itself 10X over (fractional reserve system) every time it is deployed.
With the innovation bank, everyone assumes the entrepreneur has the money to execute the plan, and the seek to borrow the knowledge. Other than that, they can be considered identical. The key is in the scope, depth, and format in which the knowledge assets live in a community as well as the ability to track and preserve the creation of new knowledge in a community. An innovation banker is a knowledge banker
A Virtuous Circle
Together with the financial banking, these two system engage in the dance of the virtuous circle of innovation enterprise. Apart, they collapse into the swirling cesspool of eternal debt and infinite interest (pun intended).
I recently received an email from a major on-line publication collecting “Letters To The Gulf”. I wondered, What would the Gulf Say to Us? That question sounded familiar so I dug through some old video tapes looking for that long-lost club gig from my days in the Hollywood Rock Band Circuit back in the Late 1980’s.
This piece is called Song For the Sea and it was written shortly after the Exxon Valdez spill in 1989 and amid controversy over illegal long net fishing practices. Lance McCormick is playing Bass and Keys, I am on Drums, and Phil Felicia is on vox and axe. It is pretty interesting how timeless this theme is.
Phil uses a can of Tuna as a slide to make the sound of expiring whales and sea life. His guitar solo is an enactment of a tuna fish thrashing in it’s final moments of life. I remember that I could barely contain myself, it was so funny to watch – I almost fell off my seat in hysterics every time Phil did the part – but it was powerful imagery especially in later shows after we worked out the shtick a little better. I think we all took stabs at the lyrics. Keep in mind that this was 20+ years ago in Hollywood California – the objective was to be offensive, shocking and controversial so don’t get too riled up over our choice of words. On the other hand, they do contain an interesting historical perspective from a bunch of kids (transcribed below) in the late 80’s. The band was called “Rage In Eden”, affectionately named after Gulf War 1
So here is a blast from the past in loving dedication to BP and the gang ***STRONG LANGUAGE ADVISORY***
Song For The Sea
Welcome to my Universe
Once the mighty sea
Turned dumping ground
for all the pigs to see
Now I’m left here in your waste
drowning in your own disgrace
(let’s do it)
Spilling Toxins in my Sea
My putrid flesh bears the stench
of your rotting soul
So I put it to you
Mr. Politician Man
Whatever Gave you the right
To come and punish my world
With your – (indiscernible) – high and low
All I live for in my life
Is just a paycheck to you
So I put it to you, Mr. Businessman
Whatever gave you the right to Punish my world
Dogs dig in my shores
I need you to taste the decay and waste
we sold you, yeah
So I put it to you, Mr. judgment man
What ever gave you the right
to punish my World.
(Editor: I’ll be speaking at the following event on June 4th. If you are in the area or blogging issues in this genre of ideas, let me know and drop by. Look up the other speakers and you’ll find an extraordinary group of visionaries preparing to make this PM Cluster Summit a truly enlightening event.)
Enterprise Prediction Markets Summit: Leading Enterprise Prediction Markets
Friday, June 4 2010 8:00am – 5:00pm
EVENT LOCATION:The Boeing Company: Integrated Aircraft Systems Lab Building 2-122, Conference Room #102L2 (Conference Center) 7701-14th Avenue South Seattle, Washington 98108 USA
EVENT REGION: US –Pacific Northwest
EVENT PURPOSE: This summit is for executives, directors, mangers, users and practitioners having immediate needs to apply collective intelligence networks and enterprise prediction market mechanisms to advance business outcomes through mastery of collective wisdom.
EVENT NOTES: The conference sessions are focused, practical and conversational. They are for executives, directors, mangers, users and practitioners having immediate needs to apply collective intelligence networks and market mechanisms to advance business outcomes through mastery of collective wisdom.
ORGANIZATION NOTES: The Prediction Market Clusters, founded in 2004, are the global industry commons and open community for prediction markets and collective intelligence networks worldwide. The open, agnostic network is a focused collaboration of vendors, academia, traders, users, developers, markets, regulators and stakeholders. The goal is to provide awareness, diffusion, adoption and pull-through for enterprise and consumer prediction markets. The Prediction Markets Cluster is the worldwide Next Practices network for collective intelligence networks practices, tools and theories.
Money is a convenient way to store and exchange value. Unless the world enters into a free trade agreement with Martians, Earth is the physical boundary of all existing value.
No matter what a monetary currency is called or how it behaves in the financial system, by definition, it can never represent any more than the value that exists on Earth.
Value is reflected by “Market Capitalization” of corporation, Roads, Bridges, infrastructure, armies, education, food, real estate, and all so-called tangible things. Intangibles such as human resources, public assets, and shared natural resources are only valuable to the extent that people depend on those resources for survival. Not surprisingly, “tangible” means all things that can be controlled and “intangible” means everything else.
However, if you look at how all value is created, it all eventually boils down to human knowledge. All control and influence over human knowledge boils down to the individual. All Value on Earth is stored between our collective ears. In order to fully assess the global financial system, there must be a corresponding global inventory of human knowledge. There is no body of any influence in the world proposing this as a means of defining solvency.
Meanwhile, the social media revolution is slowly introducing a global knowledge inventory to financial markets with effects that are becoming increasingly profound. In case you have not noticed, money no longer represents value, it represents the control of value. Social media is disrupting who, what, when, where, and how all the value can or cannot be controlled.
With every new exotic financial maneuver, the monetary currency becomes increasingly divorced from the value of human productivity. With every new advancement in social media applications, human productivity is becoming less controlled by money. Watch the news – the battle fields are all about who what when where and how someone can control what is between your ears.
Not surprisingly, governments, marketers, advertisers and even academia are the first and most public victims of losing control of their message. Their message is being re-written by forces outside their control.
This is serious – Don’t let anyone try to convince you that the value of social currency is not hedging the value of financial currency.
Today, we are on the cusp of the greatest revolution that the world has ever known. The control of money may go to the banks but the control of value will not. It will happen when people decide it will happen. Perhaps they already have…2012 anyone?
In 1999, Cluetrain Manifesto flipped everything we knew about online behavior on it’s head. The integration of information being published on the Internet reached a tipping point indelibly articulated for all time by Doc Searles: “Markets are Conversations”
In 2003, Cory Doctorow published Down and Out In The Magic Kingdom where he introduced the concept of Whuffie as a form of reputation currency that accounts for social value in a fictional future society. In Cory’s thesis, people who produce things that represent social value were awarded Whuffie. People who produce anti-social value were punished Whuffie. The twist was that everyone has equal say as to who is awarded Whuffie and who is punished Whuffie. In retrospect, the concept of Whuffie, stands today an important metaphor marking the beginning of the social media revolution.
The Whuffie Factor
In her book The Whuffie Factor (2009), Tara Hunt identifies the facts of a reputation backed exchange among real people, communities, companies, and social interactions – with all their associated human complexities. By the gift of wisdom or intuition, Tara’s choice of the modifier “Factor” is an important distinction. In mathematics, a “Factor” is a multiplier against some other quantity.
In Tara’s book, Whuffie is roughly synonymous with ‘new’ social capital – a hugely complex financial instrument that is currently emerging before the eyes of all practitioners of social media. In 2010, everyone still struggles to articulate social capital with a 1999 vocabulary of new conversations living in old financial markets. There simply is no word for the phenomenon of social media daily manifesting in so many new and valuable ways – it’s just too new.
Yes, Tara has critics, but most I believe are short sighted. The term “Whuffie” is as good a word as any, so deal with it. The term “Factor” is what Tara is really talking about, so lets move on.
Love ’em or Hate ’em, Whuffie is a Derivative.
From Wikipedia:a derivative is any agreement or contract that is not based on a real, or true, exchange ie: There is nothing tangible like money, or a product, that is being exchanged. For example, a person goes to the grocery store, exchanges a currency (money) for a commodity (say, an apple). The exchange is complete when both parties have something tangible.
If the purchaser had called the store and asked for the apple to be held for one hour while the purchaser drives to the store, and the seller agrees, then a derivative has been created. The agreement (derivative) is derived from a proposed exchange (trade money for apple in one hour, not now).
In short, the current value of the relationship is backed by the past and future value of the many other relationship(s) formed. The twist is that social media has vastly equalized people’s impact on the true value of relationships – this remains consistent with Doctorow’s thesis. Tara takes us a step further where the underlying asset can be generalized as simply “value” where the Whuffie Factor is a derivative against this value. This is consistent with Searles’ thesis.
In my opinion, The Whuffie Factor will become one of the seminal books of its time period. Indeed there are many excellent books in the genre of collecting, building, engaging, storing and exchanging trust, reputation, or influence in Social Media. What sets Tara’s book apart is that, like Doc and Cory, she had the guts to call it something real.
Elevate the conversation or get out of the way
Tara Hunt effectively nails this profound abstraction to the floor so that the rest of us can now walk through to define and articulate the Holy Grail of our generation; a true Social Currency. Bravo Tara, Bravo
To Accelerate Serendipity, that’s the Whuffie Factor.
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.
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.
The above video playlist consists of the full 6 parts of the expert panel discussing non-quantifiable exchanges as recorded on April 26 2010 at the Future of Money and Technology Summit in San Francisco. The complete video is about 55 minutes. I encourage you to watch it because very few discussions about the future of money approach the subject with as much experience, introspection, and clarity as this historic panel has.
This is not another doom-gloom room – but a truly optimistic model of a future financial system built on a platform of social media. These panelists represent some of the top thought leaders, visionaries, and practitioners in the area of “Local Social” – where nothing happens until the rubber meets the road. It was a great privilege for me to be a part of this esteemed group.
The future of Money and Technology Summit is one of the most important conferences to emerge as a result of the accelerated innovation and organizational re-structuring forming as a result of increasing constraints on the global financial system. We all look forward to another excellent conference next year!
There are two sides to the Social Value Equation – the creation of social value and the destruction of social value. There are countless examples where innovation destroys the value of prior technologies. There are also many instances where “progress”, perhaps in the form of a freeway or public structure, divides a community where strong social bonds once acted.
In the presentations that I give, I often cite the value of a bridge over a waterway. The bridge may cost 50 million dollars to build and maintain, but it increases human productivity by 50 billion in the life span of the bridge. We often cite a factor of 1:1000 for the valuation of the dollar to social currency.
Contrary to that, Jane Jacobs (renowned urban theorist and community activist) may argue, the bridge (and roadway) may divide a community or neighborhood. Where the community may once have been scaled for foot traffic, the new boundary may require a car to circumvent. The new road may divert old commercial traffic in many ways that are bad for a community. In such a case, the social capital destroyed by the bridge is in fact the dominant financial outcome.
So here I am, I just destroyed my own best analogy to demonstrate a point. Without vetting the complete transaction in the form of social currency, net “progress” of any kind is as easy to leverage backwards as well as forward at a rate of 1000:1.
Communities that seek to stop a disruptive development program will often organize to protest urban development decisions. Unfortunately, they are usually up against a calculation of economic impact that is dominated by dollar denominated currency. Without a “Social Currency” of their own, quantified and convertible to dollars, communities are doomed. Law suits will play out in the same manner where damages are non-quantifiable, and therefore non-existent.
Jane Jacobs also writes that a community that can place a value on their social currency – although I do not think she explicitly called it that – and can act to preserve value or increase value by their actions. Many communities from Greenwich Village to Boston have thrived under a social currency diverting projects away from sensitive communities. The Big Dig went underground in Boston much like the The viaduct replacement project will do the same Seattle. Granted, the Seattle project mainly preserves water and mountain views for million dollar condos, this concept, in fact, would be more critical to poorer communities than wealthy ones.
Obviously there is no way to impede progress. All innovations destroy prior value in the creation of greater value. The danger is when Wall Street priorities can dominate Social Priorities. Capitalism, for all the greatness it creates, is amoral. Capitalism is committed to dollar currency, and devoid of social obligation except to the degree that obligation is profitable – that is where social currency converts to capital currency.
Through the magic of the fractional reserve system, Banks create money backed by debt vs. deposits at a factor of 1:1000. Therefore, the convertibility of social currency with a capital currency at a similar factor of 1000:1 is essentially the only effective way to convert Social Priorities into Wall Street Priorities.
It seems ironic that people are using Facebook to urge others to quit Facebook. If they take their own advice, they would no longer be able to give their golden advice to others. If we took their advice, we would not be able to heed the advice of others in this matter.
Is Facebook too big to fail?
The human race is becoming a super-organism of connectivity. Companies like Facebook are duplicating the functions that governments have performed – by various methods with diverse consequences – since the dawn of civilization. There is nothing new about Government organizing society and pandering to corporations. There is nothing new with people protesting governance. There is also nothing new with forms of governance being replaced by an evolution of human consciousness.
The Next Wave of Innovation in Social Media?
First; Facebook itself has no value other than the value of the people and their networks. As such, Facebook behaves like a financial derivative – it is not the actual item of value, it is simply a utility contract representing value.
Second; Facebook can only deal in information – it cannot deal in “knowledge”. Your information is a derivative of your “knowledge”, not the knowledge itself. The real value of a social network is in what lies between the ears of the members. Therefore, one way to encrypt the information is to encrypt the knowledge.
Third; Suppose that your “resume” were coded as a list of numbers and operations representing the quality and quantity of the things you know. Suppose the people in your network were also coded in a similar fashion. As such, your network, would be a combination of these codes. If you really “know” someone, it would be easy to find them. If you don’t know someone, it would be impossible to find them.
Fourth: The game changes because the incentive now is to “Mind Meld” with real people. Marketers can only then profit by telling the absolute truth about what the product is and the affinity that the product serves – anything else defaults to a “no-sale”. The person can then set filters to be notified of products and services that can make them more productive in pursuing the things that they love and care about – their community.
An Emerging Evolution
Many People cite Cluetrain Manifesto (1999) as the start of this higher consciousness. Cory Doctorow introduced a concept currency called the Whuffie (2003). Tara Hunt, Chris Brogan, Brian Solis, Seth Godin, Clay Shirky, Jay Deragon, and many others expanded the idea of trust and reputation in the formation of social capital and associated social reorganization. As these ideas are reconstructed, especially in a form that is independent of the construct of the Corporation, Social Capital is emerging as a highly complex instrument – not unlike a derivative.
If not human knowledge, then what?
Now we notice that Facebook, Whuffie, and Wall Street Dollars are all built on derivatives where the underlying value is human knowledge. That is where all the man-made value on Earth is stored, period. The value stored by Human Knowledge hedges all bets. Nobody has a monopoly on it, but everyone is trying to figure out how. To do so would be to destroy it.
Code knowledge to set it free.
Despite all of the grumbling about Facebook, Wall Street, and all issues Political, there is a clear path toward a higher purpose in all of this. We should ponder this and be quite grateful.
If necessity is the mother of invention, then the Future of Money and Technology Summit 2010 was Paul Revere. There were many innovations that seek to change banking as we know it using a new denomination called social currency. This article (and more to follow) will identify the difference between two business methods – one that squanders social currency, and one that liberates social currency.
m-Via, is a money remittance company focused on allowing consumers to use any mobile phone to make international money transfers. m-Via focuses on the huge flow of remittances from the US to Mexico. I am personally directly aware of the challenges related to money transfers across international borders specifically Mexico; bank fees, extra ID, teller costs, time, risk, conversion fees, etc.
It is obvious to me that M-Via is looking very closely at how, why, and when people interact with a the banking system. The Banks are doing the same thing. The difference is that Banks seek activity thresholds and then design limits that seem to trigger artificial and exorbitant fees. Instead, m-Via seeks to reduce the friction in the transaction to meet the lives, schedule, priorities and concerns of the customer.
m-Via is trading in social currency
Banks are squeezing the least deserving by charging hidden fees for services that cost them nothing. For example; most people transfer small amounts of money on a steady cash flow schedule. Most people can’t spend the time to travel to a western Union on one side on each side of the transaction where travel expenses and security issues may be a constraint. Money is often redistributed among family members once in the target country. This is the reality of people, not an opportunity to set artificial thresholds to drive profit.
Paying money to a bank for the privilege of paying money to the bank…what?
m-Via drives a social currency by reducing risk, increasing yield, and helping people organize in the manner that suits their reality – not that of the banking industry. Most people who need money, don’t necessarily have the ‘money’ to absorb high transaction costs of time, risk, and inflexibility. Current banking practices extol a high social currency cost that amounts to “negative” interest rate against the consumer – in other words, people need to pay the bank in order to pay the bank to use the bank.
m-Via is already seeing a week over week growth of 15% in participation. I expect this growth to continue especially as many other technologies arrive to build out the infrastructure of transactions and business methods that are supported by a social currency.
Disclosure; m-Via was a sponsor to the Future of Money Summit and Technology but has no formal relationship or position in the Conversational Currency Blog.