“Technological Change Must precede economic growth. We are going about the process of Globalization as if economic growth can precede technological change – this is not sustainable” – D. Robles

The Ingenesist Project is deploying our blockchain based ancillary innovation solution to important projects and institutions in the US. By representing intangible assets as tangible, and using a novel tokenization strategy, ancillary innovation can be equitably deployed thereby restoring the balance between technological change and economic growth.

Commercializing Innovation

The successful commercialization techniques of novel ideas or research has evolved over the ages into an elaborate techno-legal-fiscal monstrosity of regulations and gatekeepers.  It did not start this way and it may not need to continue this way.    

All innovation stands on the shoulder of some prior innovation – e.g., the wheel, wedge, and lever are still ubiquitous in modern life.  Innovation has always existed, but was greatly accelerated by the creation of the Scientific Method, considered as one of the most important advancements in human thinking.   The Scientific Methods required inventors to determine causation and enforce the discipline of disproving the null hypothesis as a condition of validity.    

The Patent system was created in the 1790 and is largely responsible for the industrial revolution by giving inventors a temporary monopoly so that they can develop their works.  The cotton gin, the steam locomotive, Portland Cement, the electric generator and propeller were patented during these times.  Eli Whitney, Faraday, Edison, The Wright Brothers, Henry Ford all benefited from the patent systems as did society as a whole.  

As secondary inventions were built over primary inventions, the velocity of innovation increased dramatically.  This cause a financial disconnect where the new inventions could not be funded directly from the revenue generated from prior inventions. Things became more complex in the age of computers and internet where all prior patents could be “re-invented” on a computer of over the Internet ushering an era of very rapid innovation across every industry. 

Today, the velocity at which total innovation occurs vastly out-paces the velocity of the mainstream financial means for funding – as was the original intent of the Patent System.  The result was an inversion whereas technological change once preceded economic growth providing a means to fund continued innovation.  Now “economic growth (capitalization)” must precede technological change in order to fund innovation.  This is an unnatural condition that gives rise to various debt related instruments and institutions such as “venture capital” who select winners and losers based on factors that may not be driven by the unity and advancement of society as intended by the patent system. 

Most new ideas are abundant, unable to be restrained, dynamic and interdependent. Most ideas include elements of human nature or intangible value that simply cannot be expressed in the legal terms of a patents.   There is now a very large gap between the patentable invention and the commercialized invention.  Nearly all of the activity in this gap is innovative and intangible in nature, that is; commercializing a novel invention is likewise novel.

Ancillary Innovation:

Where Secondary Innovation is defined as a new or deliberate application or modification of an existing ideas, methods, or device.  Ancillary Innovation refers to the provision of necessary support to the primary activities or operation of an organization, institution, industry, or system.  Ironically, ancillary innovation may be the greatest untapped opportunity for primary innovation since the invention of the Patent system. 

Commercializing Ancillary Innovation differs in many ways than primary or secondary innovation. 

For example, even if a marketing study demonstrates that a primary innovation will fail in a certain demographic, the ancillary innovators were successful regardless of the impact on the primary invention.  Killing a bad idea early is the hallmark of Capitalism.  In fact, the value of the Ancillary innovation staff becomes increasingly honed with each experience being applied to the next market study until the support professional is regarded as having wisdom. 

The nature of statistics is that an experimenter can observe a small sample of normally distributed events, and calculate the probability that the next observation will fall within a prescribed size, condition, performance, etc.  Managers are generally characterized by their experience and thus their wisdom I being able to, say, assign the correct allocation of resources or priorities, etc. 

Many accelerators, incubators, and venture capital firms serve in the capacity of ancillary innovation.  They are run by people whose past experience is sufficiently (statistically) populated with failures and successes such that the probability of success in the ancillary innovation process is increased when given a new set of circumstances. 

It is also worth mentioning that the value of the commercializing ancillary innovation far exceeds the value of the commercializing primary innovation, yet it is possibly the least understood.  Furthermore, an enormous amount of innovation never reaches fruition for lack of ancillary innovation resources.  It seems somewhat odd that so much technological innovation would be allocated to making a mundane passenger vehicle .5 seconds faster on its 0-60 time when the same technology could elevate entire communities from poverty.  The difference is the prioritization of ancillary innovation. 

Primary originators often receive a very small percentage for their contribution to the ancillary enterprise. The value of the commercializing ancillary innovation may be characterized by the quantity and quality of risk removed from commercialization; as compared to a risk-free hypothetical value of the primary investment alone. 

Reasons why most startups fail. 

The primary commercialization risks can be taken from a typical list of top reasons why startups fail.  The following example is from a VC firm Quake Capital https://medium.com/swlh/the-top-10-reasons-startups-fail-ab3196d70568

Each of these failure modes exist due to an absence of ancillary innovation of some kind.  Each requires a deep and highly specialized set of knowledge assets to mitigate.  No single experience set can mitigate all of them, and most inventors are lacking most or all of the skills required to cover the ancillary innovation roles.   

1. Lack of market need (42%): Metaphorically Is your product a vitamin or a Painkiller.   

2. Lack of cash (29%): Many startups run into money problems /short runway.

3. Wrong team (23%): Having a cohesive group of highly motivated, persistent, and diversely skilled people is crucial for startup success

4. Too much competition (19%): A second-mover advantage allows new competitors to quickly capture market share that you helped validate.

5. Pricing issues (18%): Figuring out how to price the product. 

6. Poor product (17%): founders sometimes release products that don’t fully appeal to customers.  

7. Business model (17%): Lacking a monetization strategy. Failing to find ways to scale. 

8. Ineffective marketing (14%): not understanding how to get one’s product into the hands of the target market.

9. Not customer-centric (14%): Many startups fail to obtain customer feedback and act on it.

10. Poor timing (13%): Airbnb’s success can be attributed to its impeccable timing, as it “came out right during the height of the recession when people really needed extra money. 

Conclusion:

The ancillary innovation process satisfies the demand of the scientific method by forcing the inventor to understand causation and disprove the null hypothesis of failure.  These ideals describe the role of the ancillary innovator.

The ability to assemble a specific combination of diverse knowledge assets deployed at the right time and the right place would not only mitigate risk, but if properly measured, would be able to quantify the value of risk mitigation in a tangible form that can be directly monetized.   

It is essential that the time required to deploy ancillary innovation is vastly decreased from current methods, systems, and institutions.  This is necessary in order to restore the natural and equitable intentions of the Patent system so that primary innovation can directly capitalize its own iterations. 

The Ingenesist Project is deploying our Blockchain Based Ancillary Innovation solution to important projects and institutions in the US. By making intangible assets tangible, ancillary innovation can be readily monetized therefore restoring the sustainable balance between technological change and economic growth.


The Game of Zero was developed in order to populate the knowledge inventory. The purpose of GOZ is to introduce a constraint to Curiosumé which produces an equal amount of supply and demand for knowledge assets. The reason for this is to incentivise the formation of a market between and among knowledge asset holders.

(The Game of Zero (GOZ) is a subset of The Value Game (TVG) which may be found by searching this site.)

In order for a player to advance in a Value Game, the claims that they make in forming their Curiosumé must be verified by another game player and registered as a combined transaction record on the Knowledge inventory. 

In order to create a dynamic market of data, information, knowledge, innovation and Wisdom, each player must register as both surplus and deficit knowledge assets (teacher and students).  A score of surplus (what one knows) must be balanced by a score of deficit, (what one wants to learn) in order for the player to create tokens. 

Introduction: As the name suggests, game mechanics are employed to move the production forward.  Incentives consist of a combination of intrinsic motivations as well as financial compensation.  A knowledge inventory is expressed from an ontology that brings context to interactions.  The two-way flow of information is expressed as a simple bell-curve distribution for states of knowledge ranging from teacher (+1,+2,+3 Sigmas) to student (-1,-2,-3 Sigmas).   

The Game of Zero gets its name from the only constraint that is applied:  each participant MUST have a total score of ZERO.

Formation of Knowledge Inventory:

Ontology is a difficult topic to address universally because every company, institution, and every affinity group has their own specific means and methods for defining themselves in terms of ontology. 

Example: the following is the Wikipedia Ontology:

Generalized Knowledge Inventory:

Top Level Wikipedia Categories   -3s -2s -1s +1s +2s +3s
General Reference       X    
Culture and The Arts       X    
Geography and Places     X      
Health and Fitness   X        
History and Events     X      
Human Activity   X        
Mathematics and Logic         X  
Natural and Physical Sciences         X  
People and Self   X        
Philosophy and Thinking       X    
Religion and Belief Systems X          
Society and Social Sciences       X    
Technology and Applied Sciences           X
TOTAL = 0 -3 -6 -2 +4 +4 +3
Absolute Value = 22            

Claim your Intellectual Property:

  • Earn Power by claiming your IP blocks. 
  • Increase your power by having each block validated by another participant.
  • Surplus refers to knowledge that you offer to others
  • Deficit refers to knowledge that you need from others
  • Rank yourself as you fit among the community of your peers
  • Positive and negative must balance at zero
  • Adjustments can be made at any time

Important: Each of the above categories likewise have sub categories for which the same constraint holds.  Below those categories may exist many more for which the constraint likewise holds. 

Absolute Values in each category may be analyzed as well for business intelligence.  The combined knowledge inventory will accumulate substantial value. 

Implications for Merchandizing platform:

The Game of Zero provides a way for the participants to increase their “stake” in the system.  By accumulation of Absolute Value, the participant increases their likelihood of gaining a more valuable position / winning a more valuable prize.

The network of participants can safely contact each other based on mutual interests of validating knowledge and information.  One buyer may want to alert other buyers of a good product or service based on their unique identifiers.

There is no incentive to cheat – If I lie about my knowledge inventory, this is the equivalent of spamming myself. 

There is no incentive to troll because any claims that are not validated by one or more participant of relevant profile can be ignored by the system.

Playing the Game of Zero

Most applications require a user to become familiar with a detailed set of rules that are necessary overhead for security (passwords), Identity (KYC/AML), terms of use, rules of engagements, limits and levers, means and methods, etc.  Each requires a mental investment on the player as well as a resource overhead on the application.

Video games are taught with a simple objective and just allowing the user to play at level 1.  Level 1 teaches the player the skills that they will need to be successful at level 2, which likewise prepares the player for level 3 and so forth.

The Knowledge Inventory: The Game of Zero requires that a player complete a detailed profile in order to accumulate “stake” in the community. The profile is anonymous which allows the player to use an avatar or any name that they choose. They can change their name at any time.  They can delete a profile and start again. They can even maintain more than one profile. Each of these freedoms has consequences at higher states of play, but at the beginning the player is encouraged to experiment to find their place in the community.  The system will allow them to do anything that they want except violate the rule of zero. 

The player will quickly realize that the game interacts with them based on the inputs to their profile.  If they create a frivolous profile, they will get frivolous results.  If they provide meaningful inputs, they will get meaningful results.  Once they realize how it works, they may abandon a profile at this early stage and create a new one.  Penalty for this is that they will need to re-start the clock (like starting on square one).  This is not a big penalty at the early stages, but at the later stages this will become a significant deterrent. 

The more stake that a player holds, the greater the payout will be from the system.  Payout may exist in many forms from prizes to targeted economic opportunities such as gigs, validations, contests, and paid product endorsements.  The value of the economic opportunity increases at higher states of play.

Higher States of Play

The Game of Zero forces that player to maintain a net state of ZERO across the entire spectrum of ontology. At higher States of play the players may also need to validate their claims in order to increase their stake.  If they claim to be a +2 Sigma Computer programmer, they will need to find another +2 programmer to validate their claim.  If they balance their expertise with a -3 sigma desire to learn the game of tennis, they will need to validate their claim with a tennis partner.  Other scenarios are possible depending on market forces.

The process of claims and validations builds social cohesion, community engagement, and value of the system.  Failure to complete transactions or validate claims limits the benefit of game play and may eventually upset the balance of ZERO. 

Each claim and validation becomes a permanent record cast in time and cannot be altered without a corresponding counterclaim, or deletion of the profile.  

Network Effects

The next level of growth will include a transformation from a strict e-commerce site to a networked platform. The following features will be added.

  • Branding
  • Encourage communities to interact with each other
  • Precision matching of “teachers” to “students” drives value creation
  • Targeted incentives
  • Formation of affinity groups and buying pools
  • Managed by algorithm

If the system is trained to behave like a network, then a simple valuation component will be reflected by the square of the number of nodes multiplied by the quality of each interaction set equal to the current linear valuations. 

Management will then use this relationship to drive policy that concentrates on two things: Increases the number of participants and increasing the depth and breadth of engagement among the members.

Conclusion

How a Value Network Works

In business and commerce, value networks are an example of an economic ecosystem. Each member relies on one another to foster growth and increase value. Value network members can consist of external members (e.g., customers) or internal members, such as research and development teams.

Value networks enhance innovation, social welfare, the environment, as well as many other areas. Weakness in one node can affect the entire network. For example, if a development team is weak, the production team has a harder time creating the product, which can leave a buyer waiting for their shipment.

History: The Game of Zero was first identified by the author in response to requirements for managing the Summer Intern program at The Boeing Company between the years 1998-2002.  Later around 2005-2008 the system was studies for closing the knowledge gap at Boeing as well.  The research showed great promise and some parts of the work have been applied by the company.   Additional research and development was conducted through various companies and start-ups from 2008 until present.  The Game of Zero was generalized from the Boeing Experiments in private follow-on research and development as described in Curiosumé and The Innovation Bank.  Details of this history are outlined in the whitepaper.


Over the years we have identified several features of Curiosumé that every VC and “investor” wants to change – but these are so fundamental to the operation of Curiosumé that to change them would make the application useless. More clinical, the Math falls apart.

On the other hand, this phenomenon serves as a very powerful test of human nature. Violating one or more of the six tenets represents the temptation of control and power over others – people who seek to exploit other people cannot resist this temptation and will shortcut or manipulate one of the tenets, thus guaranteeing failure. Those whose hearts are truly focused on empowering people can easily resist, and even thrive, in this environment, thus guaranteeing success.

That said, the total amount of value that can be released from the system far surpasses any illusion of value gleaned from exploiting the system. When hundreds of millions of entrepreneurs see the format of the data output from Curiosumé, they’ll know exactly what to do next.  The hurdle is to build Curiosumé right while dodging humanities worst instinct to control each other.

The Six Tenets of Curiosumé

You are forewarned, each of these six tenets pass directly against the grain of traditional investment systems to make the application difficult to fund by traditional means:

1. The topmost ontology must belong to the Commons.  We specify Wikipedia, or other public databases for Curiosumé.  There will always be a strong tendency from investors to want to own the database or to define the ontology because there is a legacy ideal that this is where the value is. Private data, such as corporate wiki, can certainly be used to run Curiosumé, but MUST reconcile upward to the commons data base at higher order definitions. There will be a strong desire to own the ontology – we must resist this.

2. Non-competitive ranking system: This will be tough enough for the culture to accept – but we all must change ourselves at least as much as we expect others to change.  Our culture is steeped in tradition of competition; war, sports, even evolution (survival of the fittest), etc – all purport the necessity of competition. It was very difficult to find a suitable rating systems that did not invoke hierarchy and competition.  In reality, Nature exhibits many more examples of collaboration than competition, yet collaboration is not intuitive to the American psychology. We are not saying that competition is bad, it is just inefficient on a crowded planet because it manufactures more uncompensated losers than compensated winners. There is always a strong tendency for investors to rank people on a hierarchy – we must resist this.   There is a legitimate market for everyone.

3. Self-selecting: People must self-identify their participation in a community – a great deal of thinking, intention, and VALUE is created and deposited into the system through this extremely important process of self expression – this is where assurance is mined. The only way for it to work is to eliminate the incentive to cheat. The only way to eliminate the incentive to cheat is to eliminate the component of competition. If we eliminate the incentive to cheat then we can disaggregate hugely expensive vetting mechanisms that too often add crippling friction to a system.  There will be a strong desire by investors to rank other people in their own image and to sit on top of a hierarchy to control people – we must resist this.

4. “Learn-collaborate-teach” scale provides demand- production-supply metric. This is extremely important that the selection criteria provide these components that form factors of production for a proto-economy based on intangibles. Later we can design other non-competitive scales as they arise, likely as a smart contract application.  For now, there is so much baggage associated with competition in society that we should best stick with Learn-collaborate-teach scale for now. There will always be a temptation to create winners by producing losers.

5. Anonymity until the point of transaction (AUPOT): Big Data is valuable to the degree that it allows people to perform scenario testing with the community (commons) data. Anonymity allows for the benefits of big data to occur without any detriment of self-identifiable markers, associated moral hazards, or distort causation of actions (due to dependencies).  Like Craigslist – when two parties choose to interact with each other, they can then expose their identities in a P2P/block environment and communicate directly with each other equitably. There will always be a strong desire from investors to create a one-way communication channel (advertising, propaganda, control, etc) especially because Curiosumé data format will be near-perfect for targeting – we must resist this. However, targeters can interact fairly and visibly on a P2P basis with agents on a mutually agreed basis. This will be the interface to smart contracts as the basis for economic transactions.

6. Formation of the Asset: An asset can only be described as a [quantity] X {Quality} of /something/.  For example: . [100 gallons] X {potable} /water/ is an asset. [2000 likes] X {Pepsi} /Facebook/ is an asset, etc.  Alone, “100 gallons”, “200 likes” are not assets and cannot be traded.  As such, from critical elements above, the ASSET must be defined as [A]X{B}/C/.

This is called a unit asset and represents a node in the network. Throughout history, the primary means of oppressing people has been to take away their identity to make them invisible to themselves and to others. This may be the greatest of all temptations.

Taken together and intact, the Six Tenets allows each persona to be economically valid and visible in a community in a common ontology under their own control. Personas can be combined and all the nodes will remain attached and compared by degrees of separation. Measuring degrees of separation and knowledge anonymous flows will define relevance and VALUE. This formation must be indelible until the agent changes it.

In summary, I have described at least 6 elements of Curiosumé that will always be rejected by traditional investors, yet are absolutely essential to the ability to set ourselves free to form a new economic paradigm.  


The WIKiD Tool algorithm provides a mathematical framework for analyzing dynamic data related to social interactions in a network and memorialized on a Blockchain. This example uses an analogy to the position / velocity / acceleration equations that some people may remember from their school days.

These types of relationships are important for measuring things like innovation. Ask any VC for a definition of Innovation and they’ll probably say “I’ll know it when I see it” or “it’s a good idea with an economic outcome”. Neither of these things are measurable until long after the innovation occurs which is not practical. However, if we could measure something that is closely related (correlates) with innovation, perhaps we could use that to measure the thing we can’t see.

A similar thing happens on Wall street – how do you measure consumer confidence? Financial analysts noticed that the price of some commodities track closely with consumer confidence so they use that as a proxy for the thing they cannot measure directly. This is called a derivative – something whose value is derived from the value of something else. Suppose we use the same idea to measure things like Wisdom, Innovation, Knowledge, Information, and Data (WIKiD)?

As engineers interact with each other to form transaction records, the blockchain records the chronological order of every event, so we can now correlate all events with respect to time.  The connections that are made may be analyzed for both quantity and quality (magnitude and direction). We can now use common mathematical tools from finance and physics.

We have established that the blockchain records the time function for all events to an immutable ledger.  In order to represent vector magnitude we’ll follow a well known analogy to the displacement-velocity-acceleration formulas from physics and associated Calculus.

WIKiD stands for:

(W) = Wisdom
(I) = Innovation
(K) = Knowledge
(i) = information
(D) = Data

Data: In general, we can define data as points placed on such a coordinate system. Each point defines a position in space and the time where an event is recorded. The distance between data points can be called “displacement”, because of the relative distance between the points. In the simplest sense, we can see that Data (D1) and Displacement (D2) share an analogy.

Information: When you draw a line connecting two points, or you draw a line approximating a cluster of points, the slope of that line on a graph provided information about the phenomenon under observation. Is it getting larger slowly? Is it getting smaller rapidly? In essence, the slope of the line represents the rate of change in displacement with respect to time and gives the observation its “velocity”.

This may be represented by the relationship simply stated as:

i = dD/dt

Information is proportional to the rate of change in the data with respect to time

It should be clear that we are defining ‘information’ as a derivative of ‘data’.  a derivative in physics is the same as a derivative in finance, that is “something whose value is derived from the value of something else” That said, we now proceed down the latter of derivatives.

Knowledge: The analogy between velocity and knowledge is intuitive. Knowledge is a phenomenon that may be modeled as the derivative of ‘information’. Strictly speaking, the value of knowledge is derived from the value of the information from which knowledge was created. It is intuitive that one accumulates knowledge over a long period of absorbing information and integral data. Education is the process of absorbing information from a printed page or screen, and combining that with other previously accumulated information to form knowledge.

Hence, the following relationship holds and is simply stated as follows:

K = di/dt =d2D1/dt2

Knowledge is proportional to the rate of change of information with respect to time

Innovation: The analogy between acceleration and innovation is also intuitive but a little more difficult to put to words  (that is why we use equations). Consider an child who is knowledgeable in riding a bicycle on pavement. Suppose that the child, for the first time, encounters sand on the pavement while also executing a sharp turn. During the ensuing deceleration, the child experiences a very high increase in knowledge about their environment within an extremely short period of time. In any case, the child is forced to innovate a solution. Likewise, the motocross racer is constantly innovating to adapt to the conditions of the track.  You can read a book about riding bicycles, but none can adequately describe the moment when the child must create the experience anew.

For the fact of innovation, we provide the following relationship simply stated as follows:

I = dk/dt = d2i/dt2 =d3D/dt3

Innovation is proportional to the rate of change of knowledge with respect to time

Innovation Example: One of the gross errors that we make in business is due to the inability to differentiate an economic event from it’s constituent physical parts.  The classic example is innovation; Venture Capitalists often describe innovation as a new idea that has an economic outcome.  This is problematic because innovation is defined with one equation having two unknowns.  This is mathematically impossible to solve, except by laborious and expensive iterations.

The rational (mathematical) approach would be to test and observe high rates of change of knowledge in a community and use that as a proxy to identify the presence of innovation (as defined above). After that, the community may be tested for economic outcomes.  Unfortunately, I=dk/dt is not normally possible to observe in a hierarchical business structure.  However, when formatted and validated correctly, and applied to a network organizational structure, then I=dk/dt can be represented graphically and accurately identified even by a child.

Wisdom: When we think of wisdom, our minds conjure the image of an elderly person with a lifetime of experiences behind them. Somehow, our elders seem to be able to predict the outcome of a series of actions before those actions take place.   This is why we seek wisdom to lead our organizations and institutions.

Consider the manager of a factory floor who has 30 years experience. During those 30 years, they have seen many things succeed and many things fail. In fact, their experience represent a statistically significant sample of representative events that they have experienced in the past.   The wise manager is able to process new information with old information to predict the probability that the new idea will yield the desired results. The propensity for wisdom may be modeled as a time function in a similar manner.

W = dI/dt = dK2/dt2 = d3i/dt3 = d4D/dt4  

 Wisdom is proportional to the rate of change of innovation with respect to time

In general we could say that Wisdom is the second derivative of Knowledge and the fourth derivative of Data. Similarly, Innovation is the first derivative of Knowledge and the second derivative of information, and so on.  In order to identify innovation, we would measure high rates of change of knowledge.  Wisdom would be proportional to high rates of innovation, etc.  The utility of these functions should be apparent.

Conclusion

The WIKiD tools algorithm provides a set of relationships for what are now considered intangible assets that are integrated by a time function.  The Blockchain provides the master schedule for the time function to be recorded, leaving us with a somewhat routine task of identifying rates of change in observable events.  


Modern platforms such as Google, Facebook, AirBnB, and others enjoy astronomical market valuations despite having comparatively less hard assets as legacy firms like Marriot, Boeing, T-Mobile, or Walmart. The difference may have something to do with their organizational structure.

Hierarchy: Since the dawn of the industrial revolution, centralized organizations comprised of multiple levels of management have been the proven means for allocating resources and minimizing risk.  The value of such a construct is expressed in terms of market demand and sensitivity to risk as expressed by the Capital Asset Pricing Model (CAPM).

E(Ri) = Rf + Bi (E(Rm)-Rf)

Where:

E(Ri) = Expected rate of return on capital amount
Rf = Risk free rate of return
Bi = Sensitivity to market volatility
(E(Rm) = Expected market return

The CAPM valuation model for an organization is dominated by market risk multiplied by a firms sensitivity to market risk.  CAPM valuations are limited by market expectations and performance.  CAPM is largely a linear function except in the exclusive state where volatility is very low and market returns are very high, such as monopoly or some duopoly conditions.

Networks: A network is characterized by a collection of nodes (which may represent a switch, a computer, a sensor, or a person) and branches (wires, signals, instructions, or communications) connecting the nodes.  The value of networks is a function of the total number of nodes and the total number of possible connections that can be completed between them multiplied by some coefficient of value for the quality of those connections. 

Metcalfe’s law for Networks suggests that the theoretical value of a network will be proportional to the square of the number of nodes according to the following relationship.

Theoretical value is proportional to: n(n-1)/2

The Actual value would be related to the quality of the nodes, the actual number of existing branches, and the net quality for the transactions that transpire over the network. For example, the Value of Facebook is estimated at:

VFacebook = (5.70 x 10-9) x n2

Where (n2) is the total number of users and (5.70 x 10-9), is an incredibly small number represents the average quantity and quality of nodes and branches between them. The Facebook platform objective is to maximize total number of connects AND maximize quantity AND quality of the interactions.  For reference; MySpace still has 500M registered users giving it a valuable network, however, a low coefficient of interaction has eroded value of the platform substantially.

Self-regulation, fault-tolerance, and Management Autonomy

The network can make independent decisions: An engineer that is mis-allocated can quickly move closer to their area of interest and competence.  Overlap between civil, mechanical, and electrical engineers can be managed appropriately.   A corrupt engineer would have a very difficult time gaining access to a target without enduring a long and difficult road to establishing a transaction record that would permit sufficient isolation to the target to actually profit from the crime. It would be difficult to corrupt an engineer without knowing if they will be assigned to a target.  It would be difficult to which engineer will be assigned to a potential target in advance of the attack.  If an attack was attempted, it would be easy to identify who committed the crime.  High impact targets may be covered with redundancy or a Byzantine proof.  Obviously, Bots would be quickly and easily dispatched to the null condition.

Network Learning

Interactions between nodes will tend to optimize claims such that the value of the compensation received is proportional to the effort required to establish and verify a claim.   This is a common practice in professional societies and certification bodies today.  Further, strong professional communities with sufficient diversity, create conditions for rapidly and iterative teaching, learning, and collaboration leading to a high rates of innovation.  Finally, professionals may reflect artistic or literary expertise or cite membership in multiple networks on their own valuation and the valuation of their team.  Reflecting diverse interests from professional, recreational, and social opportunities will increase the individuals stake in the network and everyone’s stake in a team.

The Value of the Quantchain Network:

Economist Robert Solow received a nobel prize for his work in estimating that 80% of economic growth can be attributed to technological change. Said another way, for every 2 dollars spent on engineering, society can expect 8 dollars returned to the economy.  This conveniently provided an average nodal value for engineers.

It is easy to count the number of engineers on the Quantchain, therefore the only variable left is the ability to assess the value and diversity of the interactions. Quantchain accomplishes this precise objective in several ways:

  • The decentralization of engineers diversifies interactions
  • Dominant game strategy = cultivate a diverse community of claimants and validators approaching Dunbar Number.
  • The Percentile Search Engine assigns optimum probability vs. cost to all transactions. 
  • Individual transactions and collective transactions are readily analyzed.    

Engineering networks can be assembled and subdivided in any number of ways and theoretical values may be assigned to them making the valuation of teams, mergers of teams, divestiture of teams, or scenario testing of any imaginable combination of teams, a quick and accurate projection of network value.


A New Class of Business Methods

The Value Game (TVG) is a new class of business methods where value is extracted from an asset, not by consuming the asset, rather, by preserving the asset.  The process of preservation and maintenance is the substrate for the creation of social, creative, and intellectual capital in a community.  TVG is a difficult thing to sustain in a legacy economic model, but may be quite efficient and profitable in the modern networked organizational structures enabled by decentralized adjudication, a decentralized ledger. and simple game mechanics.

To illustrate, we cite examples from on-line games collectively referred to a Fantasy Sports.   Fantasy baseball for example is a game played by adapting real life game statistics to create hypothetical game scenarios using some randomization system such as a set of dice.  Over time these games have become more sophisticated, computerized, and have spread to other sports, and now they are on-line.  Today, fantasy sports are estimated to be a 2 billion dollar industry involving over 56 million people.

What if a “fantasy play” could be replicated given a set of validated statistics, in real life? How would the real world game actually turn out?  This is not an uncommon thought. Many HR directors, corporate recruiters, and entrepreneurs dwell on this topic extensively: “How could we identify social capital, creative capital, and intellectual capital of people, given a set of market measures, and allocate them into a self-optimizing game to yield production and profit?”.

Building A Value Game

  • The Value Game starts by identifying any asset that a group of people may share.
  • The next step is to find 3 or more diverse communities that have a vested interest in preserving the asset rather than consuming the asset.
  • Each player acting in their own best interest will seek to play their expertise among the others as best as possible.
  • Any threats to the shared asset will be neutralized by the majority of players in a network.
  • The transactions between the diverse communities of people will “mine” social capital, creative capital, and intellectual capital into existence generating tokens in the process.
  • Individual transaction records will be memorialized on a blockchain under the control of the individual.
  • Validated transaction records may be transferable to other Value Games, blockchains, or tokens.

Example:  A condominium is an arrangement of several individual owners (of living units) who all have individual talents.  It is in the best interest of each that the building is well maintained, but none are necessarily qualified to manage and maintain a complex structure.  Another community of nearby vendors such as restaurants, accountants, engineers, physicians, and employers have in their best interest that the condominium is maintained because the value of the units impacts the value of commerce – and the productivity of the residents is the primary source of revenue for vendors.  It is also in the best interest of neighboring buildings, the school district, and the city tax pool, civil servants, etc., that the shared asset is maintained to optimize it’s value.  Each player is aware of the impacts in the network based on the analysis of similar networks.

While malicious actors may be a symptom of illness, by actual attack vector is apathy and neglect. Gravity, weather, and deferred maintenance are constantly trying to reduce that condominium structure to lower state of value.  Maintaining an asset creates value equal to the entropy of the system plus asset appreciation due to the creation of social, creative, and intellectual capital.

The Value Game would form a cryptographic token that may be exchanged among the parties in whose best interest it is to preserve an asset rather than to consume the asset.  This is done in many forms today – a restaurant may offer a coupon to residents for a lunch special.  A physician may locate close and rely on referral instead of advertising.  An trades person saving time and travel expenses may pass that on to local community.  When a drug dealer comes to town, they are quickly identified and excised from the community by the community.

Almost any shared asset may be used to form a value game. 

  • A residential or commercial building
  • A Corporation
  • A car, airplane, or other transportation asset
  • Land for farming, mining, or urban forest
  • Water, food, and energy
  • Engineers, Doctors, Civil Servants
  • Educators, mentors, apprentices
  • Laborers, Maintainers, cleaners
  • Planet Earth

New Value Entrepreneur 

The objective of the New Value Entrepreneur will be to organize three or more communities to interact around a shared asset where the interactions among these communities act to preserve the asset rather than consume the asset.  As people interact with each other, they teach, learn, and iterate with each other.  This activity manufactures social capital, creative capital, and intellectual capital memorialized by transaction records represented by the community token.

In general, once a value game is started, it will improve itself.   All players will eventually find and play roles in Value Games that correspond most closely to their natural interest and passions and therefore maximize their personal value.


After about 4 years of not posting to this site, I have decided to return to the original ideas that resulted in so much innovation in this space. For a quick review, the term “Ingenesist” is derived from the Latin word for Engineer – A Maker of Useful Things.

The TIP archives found here include almost 600 blog posts (site map) approaching 1/2 million words. You’ll find the original thesis for the international mobility of engineers under NAFTA between US, Canada, and Mexico. That project involved 6 universities, the California Board of Professional Engineers, The National Council of Examiners for Engineers and Surveyors, and the National Society of Professional Engineers – and with the cooperation and support of CETYS University, the Baja California State Government, and over 250 Engineers from Mexico who presented the US Engineering Board exams.

That work was further developed at the Boeing Commercial Aircraft Company and published at the Boeing Technical Excellence series of conferences by their Technical Fellowship. From this effort, TIP developed The Innovation Bank that would match most worthy knowledge surplus to most worthy knowledge deficit to form an internal market (network) for knowledge transfer. That work is memorialized in an old 2007 Patent Application

Later, TIP co-founded Social Flights – a ride sharing service for private jets. The innovation was our ability to predict most likely passengers and match them with most likely seats available on private aircraft. Supply and demand were both dynamic. Keep in mind that this was before Uber and we were acting within a highly regulated industry. Ultimately Social Flights was acquired.

TIP developed three key innovations:

The Value Game: An economic game where multiple self-interested agents must share a common asset. Their motivation and incentive would be to preserve the asset rather than consume the asset. This was supposed to simulate a sustainable economy such as what is desperately needed for our planet. The Value Game originated at Boeing and was tested with Social Flights and successfully deployed in several remodeling projects for condominium associations (shares asset communities)

The WIKiD Tools Algorithm. WIKiD Tools creates a mathematical relationship between (viewed backwards) Data, information, Knowledge, Innovation, and Wisdom. WIKiD tools is useful when you can’t measure something like innovation directly, you could measure a derivative such as the “rate of change in knowledge” as a proxy. In this way,the richness of Wisdom, Information, Knowledge, information, and Data can be more predictable.

Curiosumé is a combination of the words Curate and Resumé. The idea behind curiosumé is to convert the CV or Resumé to a form of code that can be overlaid on other information databases such as Wikipedia, Amazon ontology, even the Library of Congress. This allows us to measure intangible assets as they act in a community.

Then Came Blockchain:

We stopped publishing to The Ingenesist Project in 2016 in order to apply TIP innovations to emerging technologies such as Social Media, Blockchain, AI, etc. It appeared that the decentralization of the engineering profession would be an important step in achieving the original goals of sustainable global enterprise. During this time, I also started a small engineering consulting firm called CoEngineers, PLLC that served a traditional local market bringing engineering services to a retail clientele. CoEngineers, PLLC helped pay the bills while also serving as a sandbox for testing and developing TIP Innovations. Our first entry into blockchain was the creation of a token called Quant on the BitShares Blockchain.

SIBOS, NSPE Task Force, and National Association of Insurance Commisioners: Collectively each of these organizations represent the Banking Industry, The Insurance Industry, and the Engineering Profession. TIP published 3 whitepapers that became the basis for the next iteration. It was noted that each of these industries trade an invisible currency called Risk. It was found that TIP methodologies were better described by actuarial math (probabilities) rather than interest laden monetary metrics. This 3-way association became the genesis of the Insurance / Engineering Blockchain Consortium. This was later changed to the Integrated Engineering Blockchain Consortium or IEBC.

IEBC: Over the course of several years, IEBC was the umbrella organization for 150 engineers, scientists, and business persons who advanced the idea of a decentralized engineering network to mesh with the banking and insurance environments. IEBC published numerous seminal documents and spoke at dozens of industry conferences. The two main achievements were to publish a whitepaper with detailed specifications for a blockchain strategy that would accommodate all prior TIP innovations. The IEBC team built a prototype blockchain by cloning an existing successful chain and modifying it to suit MVP demonstration. IEBC ultimately ramped down for lack of funding. But everything we learned is now open for iteration.

Where to re-Start? TIP has always been a place where ideas are formed and implemented either by ourselves or by others. Many TIP Ideas survive to this day in the many hundreds of engineers and scientists who have participated in the conversations, the start-ups, the publications, lectures, and webinars over the last 15-20 years. We can see many past TIP contributors advancing in their careers, businesses, and leadership roles.

There is something that binds people to this network – it has to do with the underlying belief that Makers Of Useful Things are the cause, not the effect, of sound and sustainable economic activity. The flaw of market capitalism has the world operating in a mirror image of the economy that was supposed to happen. The solution is more about perception than it is about revolution.


5734783736_66d18531f1_oThe value of engineering is perhaps the greatest arbitrage opportunity in history. After 100 years of regulated professional engineering practice, engineering is still valued on a linear time and materials basis. In the Internet age, where everything and everyone is connected by engineering, I argue that the value of engineering may be accounted by the exponential Network Effect.

For example, many social networks such as Facebook or Google enjoy corporate valuation in accordance with Metcalfe’s law which states that the value of a network is proportional to the square of the number of nodes in the network.  Facebook, Linkedin, Google, etc., are simply a platform upon which participants reflect value through their interaction with each other.  The real physical value of those interactions is projected upon the virtual value of the platform.  This is significant.

This condition may be mirrored with engineering infrastructure, such as a bridge or a building.  The physical value of the bridge is accounted for in a linear time and materials, but the network value of the bridge is proportional to the exponential number of connections that people make in using the bridge.  The difference between the two quantities represents an arbitrage opportunity whose value would be easily measured into existence by a clever cryptocurrency.

This analysis can be extended to nearly all works of engineering from renewable energy facilities, clean water installation, transportation systems, and all buildings, etc.  The Network Effect also applies to the security, fault tolerance, transparency, and reliability of a network as well – each reflect additional layers of engineering proof of work.

Today, the value associated with the network effect of infrastructure engineering is unaccounted for – it does not exist on any balance sheet yet it is widely distributed in society.  For example, doctors have hospitals, manufacturers have machinery, bankers have assets to finance, insurers have accidents to underwrite – none could exist without the network effect of engineering.

The World’s First Intrinsic Cryptocurrency

The purpose of Quant is to measure the network value of engineering into existence with a digital currency. Such a currency would represent the intrinsic value of all people who interact with works of engineering.  A currency that accounts for intrinsic value will quickly achieve a generalized reciprocity among a community of beneficiaries who will then readily trade in that currency.

Much like Amazon.com started as a bookseller, Quant will start with infrastructure engineering. This initial transition step is essential to achieve initial reciprocity of the digital currency. The interface will be at the adjudication of smart construction contracts upon which banking and insurance depend to capitalize and underwrite the works.  Once this point of entry is established, additional layers of infrastructure can be added eventually capturing the true value of every human being that contributes their productivity to the network.

The consortia being promoted by The Ingenesist Project between engineering and insurance will be a critical component in establishing this base layer of intrinsics.  We have compiled a group of founders and visionaries that can bring this idea into a practical blockchain protocol.  Would you consider joining us?


nafta-crossingAnyone who was around in the early 1990’s may remember the mantra of modern globalization was that centralized markets were bad and decentralized markets were good. Fast forward to 2016 and blockchain technology: centralized ledgers are bad decentralized ledgers are good.  Does this sound familiar?  Blockchain and NAFTA may have a lot in common. The good news is that perhaps this new world is not quite as uncharted as it now appears.

Coinciding with the end of the Cold War, we can now look back at NAFTA as the Big Bang of modern globalization.  The supporting calculus is credited largely to the ‘theory’ of Comparative Advantage;  an economic thesis referring to the ability of any given economic actor to produce goods and services at a lower opportunity cost than other economic actors. The idea first appeared in 1817 in a book by English economist David Ricardo, “Principles of Political Economy and Taxation”  David Recardo’s ideas still serve as the logical basis of international trade. The efficiency of this economic model were at the time, and still are, indisputable.

Further back, the 15th Century concept of Laissez-Faire is an economic system in which transactions between private parties are free from government interference.  Meanwhile, the “invisible hand” was a term first used by Adam Smith to describe the unintended social benefits of individual actions.  These ideas formed the cornerstones of modern Capitalism – the decentralization movement of a prior era.  Indeed, Capitalism solved a great many human problems while arguably ushering into existence new, and possibly more perilous problems such mass political instability, financial crises, and even climate change.  Now, the advent of bitcoin claims to solve many of these problems.  This begs the question, what new problems will be created after 25 years of blockchain technology?

More importantly, perhaps this connection to a large body of precedence (if we are clever) can guide us to a different set of outcomes than prior decentralization technologies.  This is an important and timely question given the blockchain technology, due to the Network Effect, is exponentially more powerful than the relatively linear Law of Comparative Advantage.

Lessons Learned

I was involved with developing standards for the mutual recognition of engineering professionals between US, Canada, and Mexico back in 1993-1996.  What made NAFTA different, and hence “modern”, was an inclusion of free trade in services sector.  These included financial services like banking and insurance as well as professional service providers from engineers to librarians.  Essentially NAFTA attempted to treat intangible value directly as a tangible object for international trade.  Still a problem yet to be solved.

At the time however, the mutual recognition of professional engineers was controversial and divisive. The US engineers were fearful that they would lose their high paying jobs to cheap Mexican engineers, whose salaries were about 1/10 the US engineering salary.   A “giant sucking sound” was the popular phrase coined by a billionaire presidential candidate at the time.  The fear was made very real for many people, not unlike the immigration debate that continues to rage today.

I saw something different.

In Mexico, I saw an entire nation – an entire continent – that needed everything that US engineers create. Mexico, Central America, and South America needed roads, bridges, structures, water, energy, and every manner of infrastructure upon which free markets utterly depend.  Since NAFTA also liberalized trade in financial services, that meant that economic development could be financed at low cost of capital.  In my youthful idealism, I felt that the opportunities for engineers from all countries was beyond extraordinary – to me, it was specifically the rising tide of basic infrastructure that would float all boats.  Unfortunately, this opportunity was woefully squandered.   Let me explain.

In the US, and many developed countries, the professional engineering licensure laws assure transparency, consensus, and economic incentives that rewards high integrity rather than low integrity among engineers and contractors who carry such licensure.  When the PE stamp is indelibly attached to the project plans, the asset that is described by those plans is held in suspension on the balance sheet during the design and construction phase. This span of time is when the highest monetary risks and technical risks occurs.  Insurance companies depend heavily on engineers to verify the design, materials, processes, components, chronological order and performance of all components of the systems that they insure.  Where risk can be transferred to insurance, the cost of capital can be minimized.

The problem with the NAFTA Mutual Recognition Standards for engineers was that the three negotiating bodies for the US, Canada, and Mexico failed to reach an agreement over reciprocity of the other member’s licensure model and instead defaulted to the highest common denominator which fell far short of practicality while also failing to meet the conditions of insurability, especially for Mexico.  As such, infrastructure projects could not be financed for lack of licensed engineers in the relevant NAFTA jurisdictions. This was not for lack of money because NAFTA also liberated access to financial services – but for lack of insurance. Without a tip-to-toe insurance presence, Latin American economies continue to experience difficulties in bridging the capitalization gap.  Innocent people suffer.

Many trade agreement that followed NAFTA would go on to include free trade in services, and also inherit this flaw capitalization of infrastructure for lack of Global Engineers.  Unfortunately, mutual recognition of engineers would be stopped cold at the borders for lack of insurance.   Many of the problems associated with globalization today, in my opinion, can be attributed to the failure of the NAFTA Mutual Recognition Document for Professional Engineers.  We have an opportunity to correct this flaw and it is imperative that we do so.

To centralize, decentralize, or re-centralize. 

While the economic theories of decentralization are sound, the intended outcome has been elusive.  Instead of converting from centralized serfdom to the invisible hand of freedom, we keep inventing new forms of re-centralization where one centralized system is traded for another under the auspice of decentralization!  The danger is that blockchain technology will not reach its potential of economic freedom for all, rather, it will simply become another form of mechanization that replaces people with machines.  A decentralized solution will require the integration of machines with people.  That means we need to augment human capacity not “surplus” it.

Blockchain technology replaces some – but not all – of the decisions that a human administrator makes.  It will be important to look at bureaucratic processes and accurately discern what can go to a blockchain and what must remain in human judgement.  The current markers of re-centralization include so-called permissioned ledgers to replace back office workers.  Permissioned by whom? A centralized authority? The running joke in the cryptocurrency space is that any effort to control a decentralized system quickly cancels out the advantages of having one in the first place.  Re-centralization is dangerous.

Instead, the integration of humans and blockchains should take a hybrid approach where humans serve as adjudicators to the blockchain machinery pointing smart contracts toward the intended outcome at specific points of risk transfer.  Eventually, a means to decentralize the human adjudicators will be required so that they cannot be corrupted.  One such solution is proposed by The Ingenesist Project.  It is called Curiosumé and it converts a CV to cryptography so that holders can lock contracts to a blockchain quasi-anonymously.

The consortium between engineering and insurance is a critical development in the current evolution in blockchain technology and is required to break the cycle of recentralization by expanding the insurance capacity of our financial system to a fundamental storage of value – public infrastructure.  We need to learn how to convert existing engineering and construction contracts into blockchain adjudicated smart contracts. We need to figure out how to decentralize the adjudicators in a fault tolerant system that cannot be easily corrupted, thus providing for optimal allocation of public and natural resources.  Then we need to expand the adjudication system to all other service professionals who also serve the needs of our human markets.  The resulting cryptocurrency will have intrinsic properties that people will be willing to trade. In this manner, the cost of capital will be lowest for the most proper allocation of resources required by an increasingly crowded planet.

(Adapted from; Insurance: The Highest and Best Use of Blockchain Technology, D.Robles, July 2016 National Center for Insurance Policy and Research / National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf)

 


pic-what-problem

A great deal is being said about Blockchain Technology.  But what exactly is the problem does blockchain solve?

The main problem that blockchain solves results from the fact that computer databases simply cannot talk to each other without a layer of expensive fault-prone human administration or bureaucratic central authority controlling every node. Blockchain technology, on the other hand, is a single, decentralized database managed by software and shared by multiple users, without any third party authority. This makes processing transactions less costly and less error-prone. This software enables process efficiency because new links can form as needed, and improves organizational efficiency because no management gatekeepers are needed.

The applicability of blockchains may include everywhere that many people may want to interact with a computer database. It is easy to imagine a tremendous breadth and depth of potential applications and markets.

Centralization

The traditional way to enable databases to communicate with each other is to consolidate and combine them into a single database, hoping that enough commonality would exist to patch them together. This approach is typical of mergers and acquisitions of corporations where two somewhat similar entities combine their data under a central authority. Efficiencies are gained in scale and elimination of redundancy. Unfortunately, centralization can also lead to inefficiencies such as top-heavy hierarchy, monopoly, obfuscation, stagnation and vulnerability to external shocks. Failures would often trigger blanket legislation and government regulations. Meanwhile, the original problem remains; how do these new mega databases communicate with other mega databases?

See also: How Blockchain Will Reorganize Society  

Decentralization

The other way to eliminate intermediaries and enable data to be shared between organizations is for everyone to share the same database. Multiple writers can retrieve and populate data simultaneously with no controls, consensus or centralized authority. Natural organic links would form, and operations would become faster, cheaper and easier to perform and maintain. The network effect can take hold where the value of the network would grow exponentially. Unfortunately, there would be no way to stop a person from cheating another person, or going back to change the conditions of a contract, or giving himself a raise, or double spending a unit of account, etc. For decentralized databases, these are precisely the problems that blockchain solves.

Before Bitcoin, if a person sent a contract over email, each party would hold an identical copy that could be easily manipulated. After Bitcoin, a person can send a contract electronically, and the receiving party would hold the only valid copy. While this may sound trivial at first, it is extraordinarily difficult for a computer to do. But it would allow computers to perform some of the functions that administrators routinely perform today at nearly every interaction with a computer.

Not unlike what happened with mechanization in the last century, once achieved, the software-managed architecture will be faster, more reliable and cheaper while the marginal cost of adding additional capacity approaches zero. Centralized databases scale at the speed of bureaucracy. Blockchain may scale up to handle large and complex transactions or scale down to accommodate billions of micro-transaction with little difference in operations cost. Also like what happened with mechanization, society will certainly reorganize around these new forms of value creation and exchange. This is already evident with the extraordinary amount of venture and investment capital and creative new decentralized autonomous organizations (DAOs) pouring into blockchain space.

Blockchain technology makes business cases that may never have been viable become brilliantly viable today. To use an engineering example, the invention of the hydrostatic wheel bearing eliminated enough mechanical friction from a steam locomotive that it could become a viable engine of economic growth. Likewise, blockchain technology holds the potential to eliminate a tremendous amount of friction from everyday transactions and agreements. For anyone reading this article while standing in line at the DMV, that is a problem that deserves to be solved.

The innovation has just begun.

Adapted from:

Insurance: The Highest and Best Use of Blockchain technology, July 2016 National Center for Insurance Policy and Research / National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

Blockchains, databases, reification: are bottom up standards possible? Vinay Gupta 2015 https://youtu.be/AbacROAa4xY