The Human Productivity Chart:

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

Hunter -gatherer:

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

The agrarians

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

City-states

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

Philosophers

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

Scientists

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

Industrialists

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

Information

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

Knowledge

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

Innovation

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

Wisdom

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

]]> http://www.ingenesist.com/general-info/the-inevitable-next-economy.html/feed 4 http://www.ingenesist.com/general-info/an-ode-to-japan.html http://www.ingenesist.com/general-info/an-ode-to-japan.html#comments Sat, 12 Mar 2011 23:31:36 +0000 Dan Robles http://www.ingenesist.com/?p=5535

A Familiar View From a Familiar Land

I was deeply moved by the events in Japan over the last several days.  I have spent many weeks over several years in that country from my work supporting All Nippon Airways with Boeing.  I have also experienced several earthquakes in Japan, obviously nothing like the most recent.

Throughout many of my writings, I talk about the integration of of knowledge assets, the integration of markets, and the integration of communities.  Yet here I reflect that there is likely no country as tightly integrated as Japan.  This is the reason why they are so resilient and will arise successful despite any adversity that they encounter.

Several years ago, I was in downtown Tokyo during a magnitude 5.4 Earthquake.  The central subway loop closed down and the feeder trains kept pouring people into the station – the streets filled to standing room only.

As the account manager for All Nippon Airways, I was amazed at the astonishing reliability that they achieved with the aircraft fleet.  Reliable airplanes are essential because transportation is tightly integrated; if the plane did not leave on time, the trains would keep dropping people off at the airport and it would quickly fill up to, again, standing room only.

I have worked with dozens of Japanese engineers.  They are an amazing group in themselves – they design for two or three levels of fault tolerance in all of their decisions because when things go wrong in Japan, they go very wrong.  Their airplanes are impeccable throughout despite severe service requirement. Airplanes leave on time or they are replaced, but they always deliver on their promise of safety and security. Many of the buildings are sacrificial; meaning that they may may no longer be useful after a big quake, but they will not fall.  The train station may fill up, but the trains won’t crash.

This mindset has permiated into all of their products.  Where Americans may see obsessive compulsive drive to higher degrees of quality for no apparent reason, the Japanese see solutions to problems that don’t yet exist.  They take deep personal responsibility for failures that are two or three levels deep in unlikely probability.

It is not surprising that the casualty numbers so far, while deeply tragic, are not what one would expect given the magnitude of the event – the Earth was knocked off it’s Axis by this temblor, but the Japanese were not.

I extend my deepest condolences to my many friends and colleagues of Japan and stand ready to help in any way that I can.

We call this wisdom

In the old days, the hiring manager was the person to know if you wanted to get a job. They would read your resume and compare it with the “bell curve” in their mind.  This bell curve contains a statistical sample of all similar situations that the manager has witnessed, the variables involved, and a range of outcomes observed across their long and illustrious career…Ohhhmmmmmm

We Call This Simulated Wisdom

Modern HR systems try to simulate this wisdom through a series of innovations such as key word search, structured interviews, personality tests, and employee incentives. Now we can use Google (an information company) to derive sort of a proxy for wisdom as we assess search results in our own image.  Facebook and Linkedin go a step further by providing us with another filter through which to pass judgement upon a future employee or partner.  The problem is that the more we look into these systems, the more they deliver back to us a reflection of ourselves…Ohhhmmmmm

The Data need to be Normalized

The world has become so strange, complex, technological, and interwoven, that no single person can possibly posses such a vast and broad set of experiences as to arrive at an optimized outcome every time.   Innovation favors strategic combination of diverse knowledge unlike the Industrial revolution which favored identical packets of similar knowledge.  The Innovation Economy will require a completely new approach to social value creation.

The Social Credit Score

Not unlike the FICO score, the knowledge inventory is a collection of potential knowledge events where the social network is a reporting agency that has a vested interest in meaningful knowledge events. Unlike FICO however, the variables for knowledge can be infinite (think of the Dewey Decimal System).  Also, a Social Credit Score would respond to positive events rather than a finite set of negative “hits”.

The Percentile Search Engine

Instead of just returning information, this new search engine must return probabilities from which an entrepreneur may test scenarios related to the likelihood of executing a particular business process at a known time, cost, proximity, ROI, etc.

Example

Innovation Economics

An entrepreneur may want to know if her team has enough knowledge to execute a business plan. Perhaps the team has too much knowledge and they should try something more valuable. Maybe the team does not have enough knowledge and they should attempt another opportunity or accumulate training.

Valuation of Knowledge  The search engine can look into a network and identify the supply and demand of a knowledge asset. If it is unavailable or too expensive, the search engine can adjust for price, risk, or options that may emerge at a later date.

Business Intelligence Organizations can scan each other’s knowledge inventory and decide to compete, cooperate, acquire, or evade.

Knowledge management If a key person retires, the entrepreneur would simulate the knowledge that is lost and reassign people strategically.

The Secret Sauce  Companies such as Disney and Boeing both use Engineers, each would have proprietary algorithm of knowledge that represents their “secret sauce” of success. These recipes can be adjusted and improved to reflect and preserve the wisdom of an organization. Over time, these algorithms will become far more valuable then the Patents and Trade Secrets created by them – this will allow technologies to be open sourced much more profitably and shared across more industries.

Eventually, we will learn to manufacture wisdom …OhhhhMmmmmGeeeee

Mathematics Dysfunction Disorder

I am continuously astonished at the reactions I get from people every time I make a reference to mathematics, especially Calculus. Most people politely glaze their eyes over and stare at an inanimate object somewhere behind my head. Others launch into a diatribe of how the linear thinkers destroyed the world in the first place. Others will simply say, “I have [insert Deficit Dysfunction Disorder here]“

Puzzled by Limits?  Perplexed by derivatives?

The truth of the matter is that everyone already knows Calculus, they solve differential equations all day long – they just don’t know that they already know what I’m talking about.  If you take away all the strange terms, squiggly lines, and alphabet soup notation,….

Calculus is astonishingly simple

• The Banker does not care about money, he cares about the rate of change of money.
• The Stock Market does not care about risk, it cares about the rate of change of risk
• The Politician does not care about votes, they care about the rate of change in votes
• The Meteorologist does not care about weather, she cares about the rate of change in weather
• The Pilot does not care about lift, they care about the rate of change of lift
• The Gymnast does not care about motion, she cares about the rate of change of motion
• The Artist does not care about color, he cares about the rate of change of color
• The Doctor does not care about your health, she cares about the rate of change in your health
• The Baker does not care about dough, they care about the rate of change of dough
• The Farmer does not care about crops, he cares about the rate of change of crops
• The Scientists does not care about data, they care about the rate of change of data
• Google does not care about information, it cares about the rate of change of information
• Entrepreneurs do not care about knowledge, they care about the rate of change of knowledge
• Markets do not care about innovation, they care about the rate of change of innovation
• Our children do not care about our wisdom, they care about our rate of change of wisdom

When people can learn how to understand what they are really doing in instead of what they think they are doing, then and only then, will we be able to see, and subsequently, build the next economic paradigm.  That is why I use mathematics and that is when Social Media Becomes a Science

The Capitalist does not care about value, they care about the rate of change of value

Data are the raw material of the next economic paradigm.  Data, information, knowledge, innovation, and wisdom are all related; but it all starts with data.  In order to produce anything valuable in the domain of social capitalism, the creation and formation of data is hypercritical.  The better the data, the better the information, knowledge, innovation, wisdom and culture that will follow.  Each stage of transformation along the chain reaction from “data” to “culture” is an opportunity for both great value creation AND astonishing corruption.

Data are Kings:

Yet data are often collected and processed with very little vetting.  We all know that information is most easily spun from the data collection process.  We know that bad knowledge comes from bad information, and we know that unsuccessful innovation comes from inappropriate knowledge.  Obviously, to be an unwise leader is to be unimaginative leader.  A failed culture creates failed data…and the circle completes itself.

Data are an asset:

On the other hand, the ability to collect data is often the most tangible intellectual property that an organization can hold.  It is easy to copy a patent but difficult to recreate the system that generates patents.  Excellent data results in excellent technology from the moon landings to the Internet. The trick is that all assets must contain two components; a quantity and a quality.  This means that some rigor is needed in the data collection process. When data are produced, the quantity is the “measurement” but the quality is the certainty or uncertainty that what is being measured is actually what is being observed.

Data Relationships

Phenomena such as art, politics, emotions, capital markets, and spirituality are difficult to measure because the item being observed exists as a function of the observer’s interaction with it.  Still, the quality of the data includes the certainty that all data were measured the same way AND some disclosure of the uncertainty that remains.  This is an area of great omission and where severe problems arise especially where the most people rely on the data to make decisions.  The term “comparing apples to oranges” is  a real problem and it is particularly elusive at very early and highly incremental stages of ideation.

Mouse goes squeak:

Often the people involved with the intensely small or incremental portion of the data design and collection process are the least powerful people in the supply chain.  Often they have the least say in how the data is analyzed and certainly have no visibility of what happens upstream.   It is tragically amusing that the dominant characteristic of most hierarchies is that each level of management “filters” the data from lower levels and delivers it to the next level where actions are authorized.

The Culture of Data

Social media is entering the human culture at an incredible rate.  Social media has also shown us what happens when the good data becomes the important information, which increases knowledge among the most people leading to increasingly effective innovation and changing the conventional wisdom about an increasing diversity of subjects.  Social Capitalism will replace Market Capitalism simply because the culture is superior.

Hint: Culture Produces The Data.

The forecasting methods that we are developing at the Ingenesist Project have become sufficiently vetted and organized that I have decided to formalize them for review by others. The “WIKiD Tools” method is fairly simple to describe and demonstrate, but be assured, it is a powerful method for predicting futures outcomes.

WIKiD stands for:

Wisdom > Innovation > Knowledge > Information > Data

All five of these elements are related to each other – in fact, each is derived from the prior element by integrating the tools of that medium.  For example information is derived from data by integrating the tools of the data medium. Knowledge is derived from information by integrating the tools of information medium, innovation is derived from knowledge by integrating the tools of the knowledge medium, etc.

Likewise, if I want to predict innovation, I look for high rates of change of knowledge in it’s medium….and so on for all five elements as needed.

The chart below helps demonstrate the WIKiD Tools methodology.

The Hunter-Gatherer

About 50,000 years ago humans sustained themselves in a hunter gather economy. They would wander for food to eat and fuel to stay warm. Eventually they invented tools to trap their game and chop down trees so they no longer needed to expend as much energy and could remain relatively stationary.

The Agrarian

This led to the agrarian economy, the formation of towns, and the division of labor. A leisure class emerged to engage in philosophy and explore nature. New ideas were explored and the “scientific method” of observation and experimentation was invented

The Data Economy

With the invention of interchangeable parts in manufacturing, the industrial revolution became the dominant era of economic activity. The idea of industrialization separated production from assembly of parts. This allowed for greater efficiency and precision.

The Information Economy

The Industrial revolution generated a lot of Data and the invention of the integrated circuit turned these data into information – we now look back at the 60’s and 70s as the information age.

The Knowledge Economy

Widespread use of computers allowed humans to process the information in creative and unique ways – we now call this the knowledge economy.

Since there were many eras prior to this, we can expect that there shall be many eras following this – so we ask the question “what comes after the knowledge economy?

When we apply the WIKiD Tools Methodology:

We can say that each new era was derived from the prior era by integrating the tools developed during the prior era. We have seen the data economy in the industrial revolution, we have seen the information economy with Invention of the Integrated Circuit, We are in the midst of the knowledge economy with the advent of the Internet.

The next economic paradigm:

Now the tools of the Computer, software, and Internet connectivity are integrating around social media. From this we predict that an innovation economy will emerge by integrating the tools of the knowledge economy, specifically social media, mobile devices, software, hardware, and the internet.

The Wisdom Economy

Looking far far into the future, we can predict that the wisdom economy will emerge from an integration of tools developed in the innovation economy. The wisdom economy – with or without the current financial system – will have the greatest likelihood of achieving a sustainable human presence on Earth. Consequently, failure to achieve the wisdom economy presents an equally predictable outcome.

Many arguments rage because of poor definitions to terms. If people cannot agree on a definition, they will not agree on much else. A definition should be definitive – here I will tackle 5 of the most elusive definitions that are at the center of much, if not all, global controversy: Data, Information, knowledge, innovation, wisdom

To state the obvious

It should be obvious that data, information, knowledge, innovation and wisdom are related. The test is simple: if you corrupt one of them, all the others become corrupted. The question becomes; how are they related?

Consider the following definitions

Allow me to provide the following 4 relationships:

1. Information is derived from the productivity of data

2. Knowledge is derived from the productivity of information

3. Innovation is derived from the productivity of knowledge

4. Wisdom is derived from the productivity of innovation

These relationships are very useful.

1. They include everyone, they exclude no one.

2. They are personal enough to reflect individual value system yet discrete enough to not contradicting the value system of another.

The question now resides in how we define productivity, that is a much simpler, more efficient, and far wiser problem to be arguing about. Besides, a singles solution solves 4 problems.

Obviously data are related to information and information is related to knowledge and knowledge is related to innovation and innovation is related to wisdom (whew!). But how are they related? What few people realize is that if you take out any of these components, the whole relationship falls apart.

data > information > knowledge > innovation > wisdom

For example, if data are corrupted, then everything that follows becomes corrupted; hence the advanced mathematical equation: “garbage in = garbage out”. Few people realize that at the end of the relationship, the wrong wisdom creates the wrong data and therefore “garbage out = garbage in” starts the process all over again.

Going from one component to the next is called transformation. If the transformation fails, no value is created. Google Transforms data into information. Human intellect transforms the information into knowledge. Knowledge is shared among other people and transformed into innovation. The success and failure of innovation is transformed into wisdom. Community wisdom, through the behavior of individuals, is transformed into data.

Entrepreneurs are concerned with transformation – this is where value is created. The entrepreneur identifies assets operating at a lower level and transforms the asset into a higher level. That is what entrepreneurs do.

The key to monetization is not coffee beans, it’s the transformation of $0.20 worth of coffee beans into a $2.00 Latte.

Transformation is where the most value is created, but it is also where the most risk exists. As such, it is the area where most entrepreneurial opportunity exists to manage risk, eliminate risk, diversify risk, and mitigate risk. To control the node of the transaction is to control the entire transaction. This is where the garbage enters. This is where the garbage is eliminated, this is where the garbage moves on. It’s all about the transformation.

Any asset that fails to change fails to remain an asset. Value is derived from the rate at which assets change. If I produce more in less time, I become more valuable. The RATE OF CHANGE in a phenomenon carries the most interesting and valuable information about that phenomenon. This is an important distinction that many people just cannot wrap their heads around – but they must if they hope to prosper in the next economic paradigm.

Transformation of the wisdom of crowds in social media is the next great opportunity, don’t trash it.

]]> http://www.ingenesist.com/general-info/the-wisdom-of-wisdom.html/feed 1 http://www.ingenesist.com/general-info/treating-the-consequences-not-the-symptoms.html http://www.ingenesist.com/general-info/treating-the-consequences-not-the-symptoms.html#comments Wed, 10 Jun 2009 18:17:48 +0000 Dan Robles http://www.ingenesist.com/?p=1340

Problems and opportunities are moving very fast. Problems are often so complex and so integrated across the globe that no single person can accumulate in a lifetime the experience needed to manage effectively.  The “top-down” management structure no longer has a statistically relevant sample of prior experiences from which to make essential decisions. Actions without wisdom have unintended consequences for yet unknown victims.

The Wisdom of Management

Managers manage through experience.  After many years in an industry, they can observe a situation and compare it to prior situations that they have encountered either through experience or formal education.

An effective manager can identify an issue, determine the probability that it will become a problem, and discuss the consequences of action or inaction.  Then they make similarly calculated decisions that either solves or manages the consequences of the problem.  The depth and breadth of a manager’s experience is called wisdom.

Duplicating Wisdom

In order to duplicate wisdom in a laboratory, scientists generate statistical events.  By duplicating a scenario 20-30 times, a range of outcomes becomes statistically relevant for predicting future outcomes and identifying the way things can influence the outcomes.  The idea behind the peer reviewed journals is to display the experiment to everyone for vetting.  If it survives vetting, it becomes part of the human body of knowledge until otherwise challenged.

Managing consequences

The rate of change has become extremely high and problems too complex to manage. Vetting mechanism are breaking down like levies against the dam in industries such as Banking, Insurance, automotive, medicine, education, environment, etc.  We are in a crisis of consequences where we can no longer manage the symptoms, only the consequences – forget about curing the disease.

Social Media: The Operating System of an Innovation Economy

The business plan of the new millennium will be the art and science of making information “less imperfect”.  In a condition of perfect information, everyone associated with an issue has the same information as everyone else.  Perfect information is what makes markets efficient and decisions rational.  Agreement is perfectly mutual, supply and demand are perfectly aligned, all risks are perfectly predictable and cause and effect are perfectly transparent.

Wisdom of Crowds

No single human can accumulate enough experience in a lifetime to manage the totality of human problems.  Perhaps the wisdom of crowds could be used to simulate one person that does.   This cannot, however, be a random collection of people acting in haphazard process.  The challenge is in finding the correct group of people who collectively replicate a condition of “perfect information”.  Then we must transform the perfect information into knowledge.  Finally, we need to transform that knowledge into innovation through entrepreneurial activity.

The Social Imperative

Social Networks need to form complete and detailed inventories of resident knowledge cataloged on a ‘bell curve’.  Social Networks must codify social capital, creative capital, and intellectual capital so that scientific methods can be used to predict and assemble unique collection of knowledge assets that capture statistically relevant collections of experiences. That unique set of knowledge assets must then be deployed precisely in a market.

By all indications, this is the direction that the integration of social media is trying to go.  It is now our social imperative that it gets there.

As we move away from the ROI valuation model for social media and adopt a more dynamic ‘options’ analysis, a different picture emerges.  People are trading options; that is, the right without the obligation to exercise an action.  The next economic paradigm will emerge as a function of people exercising their options.

What are you doing here?

On the surface, there appears to be a lot of ‘feel-gooding’ on linkedin, Facebook, and Twitter, etc.  It is easy to brush them off as trivial, non-productive, and delusional.  I often fall victim spending too much time on these devices and have asked myself, simply: “why?”

Computer Enabled Society

At second glance, however, I have personally developed a few extremely profound, important and valuable relationships through “computer enabled society”.  People who I have never met in person have stepped way out on a limb to help me along.  As a result, I have given these people the option to access my network and they have done the same for me.  Our common purpose makes each relevant and valuable to the other and each are willing to support, mentor, and elevate the other.  We exercise options together.

Impressive Results

The distinction is that what once was a “first impression” – firmness of handshake, fashion, and physical appearance – has become the “second Impression”.

What was once the “second impression” – intellect, wisdom, talent and generosity – has become the “first impression”.

People exercise their options accordingly; first impressions leads us to action.

Evolution or Revolution?

Social media does not care if you are rich, poor, young or old, beautiful or homely.  It does not care about the color of your skin, fat or thin, physical ability or disability.  It does not care what kind of car you drive, clothes you wear, or the size of your home. Or does it?

For every revolution, there is a corresponding evolution.

The objective of this series is to contain what we know about social networks within the construct of the financial system.  The intention is for knowledge to behave, and thereby trade like a financial instrument.  In prior articles, we discovered the currency, the inventory, the institutions, and the entrepreneurs of the next economic paradigm.  This module will construct the business plan:

A business plan is the blue print for the construction of enterprise.

Like the construction of any tangible asset, an inventory of parts is assembled in strategic proportions.  The ability to accomplish this gives the enterprise a strategic and competitive advantage in a market.

Business failures are knowledge failures

Most enterprises will emphasize design, or service, or performance or price in their proprietary secret sauce of market success.  The question becomes, what quantities and qualities of strategic components allow the new enterprise to create a positive economic outcome.

Most business failure are due to knowledge deficits such as the inexperienced management team, a poor assessment of market conditions, under estimating the amount of money needed, under estimating a competitor, loss of a key employee, or the poor understanding of the technology, etc.  These are knowledge problems not financial problems.

Prediction is the quality of knowledge:

To solve the knowledge problems is to decrease the risk of innovating and increase the predictability of innovations. To decrease the risk will decrease the cost, and increase the availability, of venture capital.  To increase the predictability would increase entrepreneurial activity.

The Unit Business Plan:

The business plan of the innovation economy is very simple; it starts with the single transaction between two people.  The lender provides information and the borrower combines the information with their existing knowledge to create more knowledge.  This single transaction has a value of 1 unit of currency and we call it a unit business transaction:

The Parallel Circuit:

Now we will assemble these single transactions in many combinations.  When we combine two unit transactions in a parallel circuit.  This represents a brain storming session between two people.

The Percentile Search Engine matches the person with the most worthy knowledge supply to a person with the most worthy knowledge demand. The transaction is a simple conversation and the outcome is a prototype process, system, method, or iteration.

The Series Circuit:

The next transaction type is modeled as two unit business transactions occurring in a series circuit.  This represents a product development cycle.

Each cycle of these transactions is an improvement to the business objective. Each time the transaction occurs there is a net increase of new knowledge and therefore an increase in value.  New options are created.  The conversation stops when the product is ready for the market, cancellation, or next physical iteration.

The transaction is recorded as an event between two known persons of known knowledge inventories.  The transaction is stored in the intellect of the participants and becomes their property in the form of a knowledge asset represented by the things they create with their knowledge.

The Social Network:

Now if we combine the parallel transaction with the series transaction we have what now looks like a network.  In practice, we know that strong networks of people freely exchanging ideas make organizations better, smarter, and more efficient.  Networks are where knowledge and community wisdom is stored. A network is fault tolerant, if one person leaves, the network survives. For a relatively small input into a network, we can produce a large output of new knowledge – we have a learning organization.

However, in society, these interactions are largely accidental; people meet at Church, Starbucks, and Social Events or by word of mouth. Other times, these interactions are concentrated inside a single community of very similar people such as a technical conference, group meeting, or lunch buddies and are often not well diversified.  More recently, interaction is self selecting through social media devices such as Twitter, Linkedin, Craigslist, Biznik, and Meetup, etc.

What if the social interactions could be made less random and more intentional?

Suppose interactions be designed with a specific purpose by the entrepreneur as a means toward producing a unique outcome. The Innovation Bank will combine people of complementary knowledge assets in a calculated manner in order to arrive at specific business approaches and applications.

What if Innovation could be made less random and more intentional?

The Multiplier Effect:

A special case business plan is called the Multiplier Effect. In effect, building a network of applications from a network of knowledge assets.

Suppose that a company owns composite material technology for use on aircraft.  Since the company specializes in airplanes, they have no intention of pursuing other applications such as recreational equipment, energy production, or health care products.

The Innovation Bank:

Suppose that the company could deposit this asset in a bank and collect interest.  The Search Engine can scan the business landscape to find persons or organizations with a worthy knowledge deficit in the area of your technology. The originator holds the option to see what those other companies invent and hold the right to use their new ideas in an aircraft application. 

Contracts manage those options.  Those contracts are social contracts and they can be traded.  They are a form of currency – or stored value.

In the event of a cyclic downturn, instead of “laying off” knowledge assets, people can work in tangential industries where they will continue developing – literally putting “Knowledge in the Bank” – to be called back to their original company when market conditions improve.  A mobile knowledge asset increases in value and continually becomes smarter and more productive over time. This is not socialism, this is not capitalism, this is Ingenesism - from the root word: Ingenuity.

Market Efficiencies:

With an innovation Bank, a company can reduce their Research and Development costs and create additional revenue in a tangential innovation market.  Millions of people are being layed off work from corporations – billions upon billions of dollars of innovation potential is being squandered.  With reduced cost and risk of innovation, The new American corporations will specialize in inventing, networking, and applying new ideas as their primary revenue source.

The epiphany:

Something very interesting happened when Facebook changed their terms of service.   People who use the Facebook platform (for free) organized themselves using the (free) platform to threaten the core validity of the same (free) platform.  This could not happen in any other industry.

Saving face?

Ownership is largely characterized by the ability of one party to restrict the access of another party.  Judging by the results of this uprising, it seems that for all practical purposes, the users own their content and their impressions no matter what the TOS says.  This is a very strong argument for the tangibility of social, creative, and intellectual capital.

Ownership Economics:

The fact that people own and care for their content is what makes Facebook work.  Ownership is an extremely powerful force that drives intense participation and  innovation.  People will attend to their property, improve it, make it valuable, and create value for themselves and those around them.  Really, when was the last time you washed a rented car?

Historical perspective:

Most history books present the Homestead Act of 1862 as the product of a wise and benevolent government seeking to reward worthy citizens of a great young nation for populating the vast Western territories.  But that is not really true. Most of the land was already occupied by squatters who arrived disheveled, found a nice spot, built their small cabin, and farmed or hunted to sustain themselves.   They could not be evicted or charged with trespassing because a “jury of their peers” was also composed of squatters.

Problems arose when squatters could not borrow money to improve the land because they did not hold a title to it.  Legitimate landowners could not value their property if the land next door was untitled.  Border disputes resulted in gun battles.  Stealing was rampant. The children of squatters could not inherit the land without proper title. There was little incentive to produce anything beyond sustenance. When services and capital projects were required to support the increasing population, there was no tax base.  Not unlike Facebook, this new frontier could not be monetized.

Wisdom in Government; not always an oxymoron:

Perhaps the greatest moment in government came with the realization that it is impossible to change the behavior of people, rather, the best strategy would be to accommodate what they are going to do anyway.  So they legalized the squatters and gave them deed to their land. The occupants could sell or capitalize as they wished.  Investment capital flooded the region and entrepreneurs improved the land and created enterprises.  The government could then collect taxes proportional to the productivity of the citizens. The result was the development of the Western States as economic powerhouse that we know today.

Use it or lose it:

A very similar opportunity is presenting itself to Facebook and now the road to monetization should be crystal clear.  They should go out of their way to create terms of service that protects the rights of each and every member to own and control their content in its entirety, forever.

Next, Facebook should develop applications that allow advertisers to bid for impressions directly with the users compensating them for their time.  Users will build profiles that attract those seeking opinion, knowledge, feedback, wisdom AND SALES related to their products.  Users should be able to control every aspect of their content including any means that they can dream up to legally create revenue from their social capital, creative capital, and intellectual capital.  Facebook should develop a knowledge inventory of what users know and make it available to others like a “Public Library or knowledge assets”.  Then they should develop applications to match knowledge surplus to knowledge deficit, etc. Let the trading begin.

The answer in their face:

If smart people can make money using Facebook just by doing what they are going to do anyway, they will flood the system with the most tangible forces in nature; social capital, creative capital, and intellectual capital. If Facebook can’t figure out how to monetize the asset staring them in their face, they will soon encounter a more powerful competitor – their own users.

The opportunity for America reminds me of the elephant that is convinced since birth that the slender rope tying him to the fence post is stronger than he.  When the elephant grows up, he still believes the rope is stronger even though the elephant now has gained the strength to pull the whole building down.  Americans are the 8000 pound elephant in the middle of the room.  The question on everyone’s mind is: what will the elephant do next?

Throughout history, economists have determined the structure of business, enterprise, and commerce and wisely the government complies.  With remarkable success over the last 150 years,  corporations had been the source of most innovation sufficient to support the value of a currency.  Fortunately, the corporation had become the center of economic policy while the knowledge inventory within them have been fenced inside the accounting term: “intangible assets”.  Unfortunately, our corporations can no longer innovate efficiently enough to support the debt. Witnessing GM facing up to this very question, while the government manufactures money like taffy, seems a lot like feeding sugar calories to an elephant that is too big to fit out the door, dead or alive.

What the economists and many of the great visionaries of out time do not anticipate is the emergence of computer enabled society and the tangibility of knowledge outside the corporate structure through developments of social media.  Web 3.0 is supposed to bring us a semantic web – a computer program will be able to read the elephant story above and determine whether it is about education, zoology, macramé, Interior decorating, taxidermy, building demolition, or cliché old business metaphors.   Perhaps this is our little rope tied to the post as we wait for Mother Corpora to provide solutions.  Get a grip, the only computer that can read, classify, and extract a thousand words for any photograph is between our collective big floppy ears.  Web 3.0 will be semantic alright, except by the integration and capitalization of human knowledge through social media.

We spend billions on a human genome project to inventory our DNA, but nothing to inventory the knowledge as it exists naturally in society.  We will build statistical models to forecast weather, elections, click-throughs, insurance, demographics, and mortgage risk; but nothing to predict the value of various combination of social capital, creative capital, and intellectual capital in society.  We have search engines that match most worthy blog to most worthy keyword, but little to match most worthy mentor to most worthy apprentice.  The top reasons why start-ups, businesses, innovations, and markets fail are due to the wrong knowledge in the wrong place at the wrong time. It seems that if we solve the knowledge inventory problem, then we can solve the innovation risk problem.  That, in turn, will solve the money problem which solves the elephant problem.  We need to release the great “intangible asset” into the wild world of tangibility and trust that it knows where to go.

Sometimes it just takes someone to give us permission to do things differently.  So here I go: human knowledge is the most perfect, predictable, flexible, and valuable capital asset in our world.  Knowledge can become far more tangible than anyone could have ever imagined. Information, knowledge, and innovation are profoundly related – separated they are useless, integrated they are wisdom.  Everyone on earth innovates every day, period. The vast majority of people will do the right thing given the right incentives.  With the next development of the Internet, we will have the tools to organize ourselves in a far more efficient manner than the command and control structure of a traditional corporation.  Management can be outsourced too. Corporations respond to corporate priorities, social networks respond to social priorities.  Which one sounds like a business case to curb global warming?

The Ingenesist Project specifies three web applications which if developed and deployed to social media will allow social capital, creative capital, and intellectual capital to become tangible outside the construct of the traditional corporation and inside social networks.  Just because people have never organized themselves in an open sourced innovation economy before, does not mean that they never will.  But once they do, well, let’s just say that an elephant never forgets.

I read many articles with rants like “all this social network stuff is cool – but show us the money”.  Innovation Economics offers a way to see new markets and new businesses that are currently hidden by “the old way” of doing things.   This article is part of a series called ‘Business Plans of the Innovation Economy” which will identify ways that Social Networks can command huge markets and drive vast revenues – if, and only if, they align themselves in a specific way….

Managers manage through experience. They observe a situation and compare it to prior situations they have encountered. Through a process of intuitive (statistical) analysis, they calculate the probability of success based on the success or failure of prior experience. This is the reason why managers are often older and also why youth correlates with inability to manage.  The depth and breadth of one’s experience is often called wisdom.

Today’s problems, business opportunities, technological change, and competitive strategies are so complex and so integrated across the globe that no single person can accumulate in a lifetime the experience needed to manage at what is called a Pareto Efficiency. A Pareto Efficiency, named after Italian economist Vilfredo Pareto, is an economic condition where a one’s actions benefits at least one person while leaving no other person less better off.

The problem with the “top-down” management structure is that the “top” no longer has a statistically relevant sample of prior experiences from which to fully understand the probable future outcome of their actions – the consequence is that someone always gets screwed (Pareto Inefficient).

The concept of Pareto Efficiency may be what people are today inadvertently calling “sustainability”.  I recently saw the movie Syriana with George Clooney about the petroleum industry in the Middle East.  It was a convoluted mix of 5 different stories.  Each story had its hero doing what they thought was in the best interest of those they represent – “the common people”.   Yet the combination of actions carried out by these heroes was absolutely disastrous for all of them.  So no matter how benevolent one’s intentions are – and I believe that most corporate managers are acting in the highest integrity that they know – this systemic failure of knowledge will always hurt someone, continually adding to those already at the fringes.

The world of imperfect information is therefore the enemy of sustainability.   Perfect information is when everyone associated with a business transaction has the exact same information as everyone else.  Perfect information is what makes markets efficient and decisions rational.  Agreement is perfectly mutual, supply and demand are perfectly aligned, all risks are perfectly predictable and cause and effect are perfectly transparent.

It follows that any business plan that simply improves information in a market can command revenues proportional to the degree at which market efficient is improved.  For example; Ebay owes its 50 Billion dollar market capitalization to the feedback system which supplies improved information in a market.  Carfax, The FAA, Craigslist, Democratic Government – all have vetting mechanisms that make their prospective markets more efficient.

Likewise, when the vetting mechanisms fail, the market fails.  I attended a lecture once with Charlie Munger, CFO of Berkshire Hathaway.  Regarding Enron, he said (paraphrase) “It’s tragic enough when the accounting profession goes bad, but God help us if we lose the engineers”.

This brings us back to management.  The business plan of the millennium will be the art and science of perfect information.  We know that no single human can accumulate enough experience, however, we also know that perfect information can reside in many people – it is simply a matter of finding the perfect group of people who collectively possess perfect information.

This relatively simple task is entirely and irrevocably the domain of Social Networks. Social Networks are sufficiently enabled by current technology to perform this essential and highly lucrative task – if and only if they align themselves accordingly.  Social Networks need to hold a complete and detailed inventory of resident knowledge.  Social Networks must cooperate to codify social capital, creative capital, and intellectual capital so that computational methods can be used to assemble unique collection of persons holding unique collections of experiences. That unique set of knowledge assets must then be deployed precisely in the market, ideally targeting specific transactions.

If Real Estate Agents can command 6% of a gazillion dollar housing market and bankers can take another huge chunk – and not even do a very good job at providing perfect information – only to get bailed those at the fringes.  Social Networking have a moral, ethical, and entrepreneurial obligation to compete in the sustainability game.