Month: October 2008

Social Enterprise; Rating Systems

On October 31, 2008

There is an ongoing discussion about the rating system for articles posted to a business oriented social network site that I belong to. While am not part of the discussion, my one and only post to that site had been rated very low despite the fact that I am recognized internationally in the subject matter of that particular article. I stopped posting articles to rated sites because the rating systems are flawed at the core of logic – Frankly, it’s too risky. As the creativity, originality, or controversy of the post increases, the disincentives to sharing it also increases. I don’t want my customers googling me to see this rating without also being able to google my reviewer. No sour grapes – I’d wear a D+ from Stephen Hawking as a badge of honor.

The objective of any business/social network in today’s world should be to make human knowledge more tangible outside the construct of the corporation, such that it emulates a financial instrument – at the end of the day, it’s about the money. Otherwise Social Networking amounts to active recreation – like guitar hero, or tubing; fun but somewhat trivial.

ALL financial instruments, without exception, are described in terms of a quantity and a quality. ALL quantity and quality measures for financial instruments are statistical in nature – that is, they fall on some kind of “bell curve”. This is true for EVERYTHING from a stock valuation to credit score to marketing demographics to health/home/life/car/business insurance, baseball players, GPA, etc. – the bell curve is ubiquitous. Whoever is not minimally familiar with the simplest basic concepts of a Normal Distribution, et al, is at a severe and unfortunate disadvantage in the innovation economy. This is how the world of money is organized, this is what money is, this is what Wall Street does – for better or worse, like it or not….it is what is.

One obvious failure of most Social network rating systems is the linear 1-5 “stars”. If there were 6 stars then at least we could have a leg up on applying the most valuable mathematical tools available from the world of wealth and value creation (hence, Six Sigma). Second – the bell curve is not linear and the reviewer needs to be aware of this. 6 stars would mean that a post falls (in some measure) between 97%-100% of all similar level posts ever read by the reviewer. 5 stars falls in the 85%-97% range; 4 stars, 50%-85%; 3 stars, 35%-50%; 2 stars, 3%-15%; 1 star 0-3%.

If Calculus isn’t your thing, consider this – the bell curve rating system makes the reviewer really think about who they are in the process, the responsibility they hold in the rating of others, and the implications of their ratings – too high, or too low. It would be good to know how many articles the reviewer has read and rated, the average of their ratings, as well as their own rating on articles published (is this staring to sound like EBay? – it should, at 25B market cap, they’re not silly people). Social accountability does wonders for market efficiency and wealth creation.

Social Networks are ideally suited for correctly rating their own knowledge inventories so that when their members go out in the new world trying to make a living, it is known to all that they have been vetted by a respected community. This increases the value of the member and it increases the value of the community in the market. Communities that empower and release great talent to a market actually empower themselves; Harvard, GE, Frank Zappa. This has happened at the local level since the stone ages.

What about our competitive instincts? There can only be one winner and the rest are losers, aren’t all good Capitalists supposed to decimate thy neighbor? Always remember, it is all about the perfect combination of average assets, not necessarily the single excessive asset that makes product most valuable in a market. The market for Toyotas is far greater than the market for Ferraris, yet each are competitive in their respective market. The studies of ‘beauty’ discovered a collection of perfectly average features – in the eye of the beholder, consistent with balance and harmony. So we’ll need to drop the win-lose culture on this one and worry about competing with the real threats that lie before us.

Sure, most people will complain about such a system because it is too complicated, too math-ish, not the easy tweet (OMG CUL8R!). But this is the reality of how money is organized – and disorganized (did I mention Wall Street yet?). There is no exception, there is no rational alternative – the world does not care if people agree with the way things are or if they understand the math.

Fortunately, once people learn to roll over this metaphysical speed bump, the rest is real easy as a vast world of possibility for generating extreme wealth in social networks will unfold before our eyes!! Knowledge tangibility is the Holy Grail of modern finance but Social Networks are at risk of squandering this unique and historical opportunity to paint this empty canvas in their own image. Act now, please – this chance may never happen again.

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Social Enterprise; Innovation Clusters

By Admin

On October 29, 2008

In General Information

Innovation clusters are all the rage in regional economic development circles. Actually, they are “industrial clusters” because several companies in similar industries collocate in the same geographical area. The industrial cluster then attracts supporting industry and often causes the migration of educated and motivated people to the prospect of jobs. I suspect the ‘innovation’ moniker comes from the notion that newer industries locate near centers of venture capital, like planets forming from the dust of the cosmos.

There are, however, a few drawbacks to industry clusters; they are vulnerable to stagnation, silos, and external shocks. As companies become organized and technologies mature, patents and trade secrets take hold. As they ‘go public’, SEC regulation effectively places a gag order on everyone and sharing slows while stagnation sets in. Soon after, dozens of nimble companies consolidate into a single giant to achieve economies of scale. Finally, silos form under the weight of multiple layers of management. Then, something somewhere happens to shock the cluster; the end of the cold war leveled the So Cal aerospace cluster. 9/11 busted the Seattle Aerospace cluster. The dot.com bomb stunted Seattle, Silicon Valley, and Route 128. Hurricanes hit the petroleum cluster, stem cell and genetic engineering legislation stalled biotechnology, and corruption continues to shock financial institutions. At the end of the cycle, companies divest, people defect and a new planet starts to form someplace else.

While occasional cleansing, in a Schumpeterian sense, is good for industries, the extreme volatility takes a horrendous toll on that invisible turbine of the economic engine – social fabric. Families, friendships, professional networks are strained or collapse and those who dedicate their life to a career path – the pure innovator themselves – can be left marginalized by obsolescence.

The Calculus of Innovation Economics does not oppose industrial clusters; however, it does favor something called “technology clusters” in a business structure called the “tangential innovation” market. For example; composite materials technology is very useful in many applications like aircraft, medical devices, transportation, recreation, and even musical instruments. The airplane company has no intention of building cellos and the automobile company has no intention of building snow boards. As non-competing industries, they can readily share technology and people. The system is naturally diversified and inoculated against stagnation, shocks and silos; if one industry encounters hardship, people and capacity can shift easily to another industry preserving knowledge and expanding social networking benefit while the damaged industry heals or dies off. Corporations may not like this idea, but social networks should.

The science of Innovation Economics goes a step further by modeling the business structure of tangential innovation markets as an integrated financial system. Suppose and Originator Company has a promising new composite technology idea but is unable to meet the ROI requirements of their stockholders. Today, such innovation would be shelved. In an innovation economy, tangential markets are factored into the business case. The Percentile Search Engine can determine what other industries would be most worthy borrowers of your technology, if developed. The Innovation Bank can estimate the return on investment that can be expected through the tangential market as if it were another customer. The additional revenue projection would allow the originator to meet the ROI requirement prior to committing development funds. Intellectual Property can be managed with contracts enforced through social network vetting. The originator can hold an option to see further development conducted by tangential users effectively multiplying their R&D reach and further adding to the expected return.

Then something magical will happen. At some point, the value of the tangential innovation market would exceed the value of the origination market. The originator will begin to specialize in pure innovation as a primary product and airplane applications as the secondary product. As all industries in the technology cluster begin sharing technology among each other, R&D costs and risks are effectively spread across industries. As risk is diversified away, the cost of venture capital approaches single digit rates.

Then, another magical thing will happen. As the mixing of people and ideas accelerates, the definition of corporate boundaries will become more fluid. Ownership will exist in the form of contracts among entrepreneurs now defined by social networks, options, and derivatives in a diverse innovation enterprise.

The knowledge inventory will house the assets rather than office cubicles. The ‘secret sauce’ of knowledge asset allocation becomes more tangible, safer, flexible, and liquid than any patent could ever be. Innovation will always be proportional to the rate of change of knowledge that the more diverse assets yields. The Percentile Search Engine will match surplus “secret sauce” to deficits of “secret sauce” much better than multiple layers of management in the past. The Innovation Bank will account for all transactions, obligations, and participation and distribute dividends (rather than hourly wages) to the owners of knowledge assets. The system will regulate itself through social vetting rather than supporting a cumbersome HR department.

New ideas will get developed in the technology cluster where they would never have been able to meet ROI in the industrial cluster. The innovation economy induces a multiplier effect on innovation by reducing risk, eliminating barriers to sharing ideas, and lowering the cost of capital.

While the boom bust cycle of Industrial Clusters has brought us a great distance in economic development, technology clusters in an Innovation Economy supported by social networks may turn out to be vastly more efficient at economic growth without the vulnerabilities of industry clusters.

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Social Enterprise; Can Innovation Be Manufactured?

By Admin

On October 28, 2008

In General Information

Manufacturing is the use of tools and labor to make things for use or for sale. When I think of manufacturing, I see images of machines spinning out high precision components into colored inventory buckets that are transported to clean areas to be precisely combined with other precious components creating some magnificent device such as an aircraft, computer, or medical CAT scan machine. Each device is a product of countless human interactions.

Each little piece is designed, discussed, and depicted with great care and precision so that it fits perfectly with the next piece. Everything about each part is planned long in advance; the composition of the material, the tolerances of all dimensions, and the strength/weight/wear characteristics. However, each piece alone has little value without the other pieces. Yet, if one piece fails the whole machine can fail. When the machine has completed its service life – those beautiful, intricate, and worthy creations of human interactions are simply discarded.

Since the invention of the cotton gin, the economic growth resulting from the human interaction involved in precision component making (literally and figuratively) is undeniable. Until the era of Social Networking, however, few could envision that human interactions are themselves components of an invisible inventory. Each element of human interaction is precisely honed from some invisible raw material by social machinery and deposited into colorful garments and transported to clean areas where they combine with other precious components creating some magnificent device such as an airplane, computer, or medical CAT scan machine. When the machine is scrapped, the product of those human interactions lives on…but where and how?

The greatest constraint to the emergence of an innovation economy is the invisibility of knowledge assets; social capital, creative capital, and intellectual capital. We have an inventory of every nut, rivet, and panel on an airplane, but not the knowledge asset that created things. It is like society is keeping a big secret from itself. This is the great opportunity for Social Media.

People are still asking “where is the money in all of this social media stuff?” The answer is “everywhere – the door is unlocked, but the lights are off”. The irony regarding the visibility of knowledge assets is that they lay right in front of us but we refuse to see the obvious. All we need to do is switch on the lights. Until we can inventory knowledge assets outside the construct of a corporation, social networks cannot themselves become the corporations of the future.

Can innovation be manufactured? Of course, with the right tools, innovation can do whatever it wants.

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Social Enterprise; Show Me The Money

By Admin

On October 27, 2008

In General Information

The term social capital is thrown around with great ease without really understanding what the word “capital” implies. Capital is money used to earn more money; that means that social capital must somehow be related to, or derived from money. There is no shortage of blog posts asking the timeless question “Where’s the money in all this social stuff?”

If social capital is money, it needs to behave like money. So for our litmus test today, let’s talk about financial derivatives – the same ones that got us into the mortgage crisis mess. A derivative is something whose value is derived from something else. The price of an SUV is often derived from the current price of fuel. Not so obvious are collateralized debt obligations – but they are kind of similar.

So where is the money in all this social network stuff, what on Earth is a social capital derivative, and how can it be “capitalized”?

Suppose I start a social network for my neighborhood. The objective of this social network is to make certain all of the data collected by, and posted on Zillow.com (a real estate valuation site) is accurate. After all, it is not in anyone’s best interest for an overpriced house to stay on the market too long because it raises questions about the value of the other houses. Nor it is in the best interest for a house to be undervalued – that too brings down the value of the other houses. It is in everyone’s best interest that all the houses are correctly priced. If this could be accomplished, then a discount real estate broker can be used saving 2-6 percent on the transaction. That sounds like real money to me.

Meanwhile, it is in the best interest of all of the neighbors to help all of the other neighbors to improve those things on everyone’s homes that increase correct market value by the most; kitchen, bath remodels and a little landscaping, etc. Again, this supports the value of everyone’s house and improves people’s decisions on how to invest their home improvement money. Wow, that sounds like real money too.

A sample of persons living in a community would surely reveal a whole range of specialized knowledge useful to others in the neighborhood. Neighborhood watch organizations are better crime deterrents than police patrols. Further, local contractors, banks, stores, and businesses would love to target such an organized and focused group of people. They may even pay the community for advertising on the site… cha ching! Nobody would dare provide poor service since reputations would be quickly damaged on the community forum; likewise, disputes are handled quickly and equitably since it is everyone’s best interest to do so…

Now for the derivative:

The number one attribute for increasing the value of a home is a good neighborhood.

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Social Enterprise; The Vetting Mechanism; #1

By Admin

On October 26, 2008

In General Information

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.

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The Ingenesist Project – press release

By Admin

On October 21, 2008

In General Information

We have launched The Ingenesist Project. The Innovation Economy is an absolutely huge and necessary step forward for all of us. The current financial system is unstable and it will fail. At best, the innovation economy can increase human productivity sufficiently to support the debt load. At worst, there needs to be a system of trade in place for society in the event of a crash or devaluation so that people can purchase the necessities until the recovery can take hold. So yes, this is serious business.

Anyone following this blog please spread the word. I need to get people to the point where they will read the 18 articles – after which, hopefully, their outlook on the tangibility of knowledge in social networks will be permanently altered.

My challenge, of course, is to make a very difficult subject matter easy to explain and compelling enough to call people to action. Those 18 articles condense 400 years of financial industry development and history into a few pages. Yes, the analogy between social networks and finance holds well. This is not easy to explain, but the solution to the financial mess is right under our noses. It’s almost too simple to see.

The forum has been added to solicit threaded comments to the 18 articles. This is the backbone to the open source development. I hope to build future posts on the comments that arise – a feedback loop. We will identify the sub components, partners, strategies, and action items together. Participants will pay each other in a new currency.

I will soon simplify and interpret the preferred embodiments from the patent which will illuminate the countless new-to-this-world business opportunities that will become available to entrepreneurs in this environment.

As a demonstration; vetting mechanisms make markets more efficient. Ebay has the feedback score, Craigslist has the flagging feature – this is fact. Social networks are perfectly suited to act in this manner across the entire spectrum of commerce. This is a multi-billion dollar industry that can be very easily monetized in the innovation economy. I hope that others can see this too. There is a great deal of wealth to be generated for each other.

I would like to thank all of the people who advise this program. I soon hope to invite a Board of Directors and formalize the growing concern that is The Ingenesist Project. Anyone reding this, I am an open networker on Linked in – sent me a invite and I’ll respond.

*************************************************

For immediate release:

The Ingenesist Project; Putting an End to Debt Economics

(Seattle) The Ingenesist Project is an open source economic development program that will challenge America’s financial meltdown head-on by creating an innovation economy trading rallods (dollar spelled backwards) backed by innovation instead of dollars that are backed by debt.

“Deficit spending is unsustainable. When the dollar crashes, People will need an alternate economy to trade in – one whose currency is backed by something tangible; and there is there is nothing more tangible than the human imagination, including gold”, says originator, Dan Robles. “Capitalism likes competition; well today, Social Networks are the ultimate competitor”

The Ingenesist Project has identified three relatively simple web applications which, when applied to Social Networks, will allow human intellect, social capital, and creativity to become tangible outside the construct of Wall Street and Corporations.

By definition, the rallod is pegged to the national debt, as such, The Ingenesist Project has 10 trillion rallods (and counting) to distribute. Participants in the Ingenesist Project Development Forum will award these rallods to each other on a reputation scale for their work in design, development, and improvement of the three web application that will release society from the shackles of debt economics.

The forum is open to anyone and participants can earn millions of rallods for their work in developing these applications.

The New ‘Stock’ Market

The Ingenesist Project has a patent pending for an Innovation Banking System to finance social innovation and will release all rights to the public domain.

“This is one of the most important patents applications published in our time. Countless ‘new-to-the-world’ business plans and patentable methods, systems, and devices will result from the The Ingenesist Project”, says Robles “Everything changes from the University System to the prioritization of global resources. Wall Street will be come the steward instead of the master”

Entrepreneurs are encouraged to patent, protect, or contain all intellectual property that they develop in the new economy and become as wealthy as they possibly can under the condition that they pay royalties, equity, or options to their knowledge inventory.

The entrepreneur’s “Secret-Sauce”, however, must be shared with The Ingenesist Project in order to improve the Percentile Search Engine Algorithm for the benefit of the public domain.

The Rallod

The U.S. National Debt is over 10 trillion dollars. Assuming deficit spending stops today, every man, woman, and child in the US is responsible for $33,500.00.

This means that $33,500.00 of every person’s productivity has already been spent. Obviously, the only way to pay the debt is to increase every person’s productivity by exactly $33,500.00.

The only sustainably way to increase human productivity is innovation. If the dollars crashes and pegs to the Rallod – the innovation economy will replace the debt economy and those who build it will become the bankers of tomorrow.

More Information:

Please review www.Ingenesist.com

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The Ingenesist Project

By Admin

On October 17, 2008

In General Information

The Ingenesist Project; Putting an End to Debt Economics

The U.S. National Debt is over 10 trillion dollars. Assuming deficit spending stops today, every man, woman, and child in the US is responsible for $33,500.00.

This means that $33,500.00 of every person’s productivity has already been spent. Obviously, the only way to pay the debt is to increase every person’s productivity by exactly $33,500.00.

The only sustainably way to increase human productivity is innovation. The Ingenesist Project is an open source economic development program that will meet this challenge head-on by inducing an Innovation Economy.

The Innovation Economy:

The Ingenesist Project has identified three relatively simple web applications which, when applied to Social Networks, will allow human intellect, social capital, and creativity to become tangible outside the construct of Wall Street, Corporations, and Government.

The Ingenesist Project will build a mirror economy trading rallods (‘dollar’ spelled backwards) in an innovation economy. Rallods will be backed by “innovation” whereas dollars are backed by “debt”, hence, a mirror economy.

The Ingenesist Project has a Patent Pending for an Innovation Banking System and will release all rights to the public domain. By definition, The Ingenesist Project holds 10 Trillion rallods – and counting – to spend on development.

The Ingenesist Project will generously award rallods on a reputation scale for posts to The Ingenesist Project public forum toward the design, development, and improvement of the three web application (did I mention TIP has 10 million million rallods to blow?).

The New ‘Stock’ Market

Countless “new-to-the-world” business plans and patentable methods, systems, and devices will result from the The Ingenesist Project.

Entrepreneurs are encouraged to patent, protect, or contain all intellectual property that they develop and become as wealthy as they possibly can under the condition that they pay royalties, equity, or options to their knowledge inventory.

The entrepreneur’s “Secret-Sauce”, however, must be shared with The Ingenesist Project in order to improve the Percentile Search Engine Algorithm for the benefit of the public domain.

Participants eventually be able to trade services among each other in Rallods.

Objective:

Deficit spending is unsustainable. The existing financial system has exceeded its ability to pay back the debt and is being consumed by the interest on this debt.

As the dollar crashes, society will need an alternate economy to trade upon – one whose currency is backed by something tangible – our own productivity!

The dollar may eventually peg at some exchange rate to the Rallod.

More Information:

Please review www.Ingenesist.com
Please review Articles in Sequence (18 short articles explain the concept)
Please review Patent Pending

<a href=”http://technorati.com/claim/qy3cxbstqg” rel=”me”>Technorati Profile</a>

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Paradox Farm

By Admin

On October 16, 2008

In General Information

Somewhere it occured to me,
extra-ordinarily,
purveyors of myth, rhyme, and charm
cultivate a Paradox Farm.

Everything seen, heard, or said
takes a trip on through the head,
Market value is disturbed
and livestock is a dirty word.

Paradox Farm, Paradox Farm,
don’t be alarmed, it’s only Paradox Farm.

Give an answer then find the clue,
the test of time is nothing new.
We’re petrified by what’s in store,
We’ll pay to shortcut love and war.

But count the money that’s been paid.
Count the difference that’s been made!
Should I try to turn and run,
or is it time to have some fun…

on Paradox Farm, Paradox Farm
Don’t do it any harm, it’s only Paradox Farm.

If I could only have my way.
That’s the dream we all had today.
Resistance on collision course,
we’ll burn the bridge of equal choice.

That seems to be the easy out,
Perhaps the thing we’re all about.
There’s a lesson to be learned
Live, Die, and don’t return

To Paradox, Farm Paradox Farm
Don’t do it any harm it’s only Paradox Farm.

Paradox Farm, Paradox Farm
Don’t be alarmed it’s only Paradox Farm

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INGENESIST PROJECT: Submission to the 10^100

By Admin

On October 8, 2008

In General Information

INGENESIST PROJECT: Submission to the 10^100 Innovation Contest; www.project10tothe100.com

Single sentence:
The Ingenesist Project is an open source economic development program to induce the Innovation Economy utilizing Social Networks.

Tell us more (300 words)
The current financial system has reached the limits of its effectiveness. Interest on debt has exceeded the system’s ability to pay it off. But debt is simply a promissory note on future productivity – any caveman can tell us that the only way to increase productivity today is to innovate yesterday, not tomorrow.

In modern times, this means that the only way to sustainably create more money tomorrow is to innovate today. This is the flaw on Wall Street that Innovation Economics will correct.

Ingenesist has specified three simple web applications when applied to Social Networks, will allow Knowledge to become tangible outside of the organizational construct of a corporation, government, or academia. To develop these applications would unleash substantial innovation and wealth in society.

*The Knowledge Inventory
*The Percentile Search engine
*The Innovation Bank

Knowledge is an excellent tangible asset upon which to peg a currency – better than Gold, Silver, or Debt.

The factors of production for an Innovation Economy are Social Capital, Creative Capital, and Intellectual Capital. The knowledge Inventory classifies knowledge assets in social networks. The Percentile Search Engine assembles unique knowledge asset combinations and returns their probability of executing a given business objective. The Innovation Bank matches most worthy knowledge surplus to most worthy knowledge deficit. Finally, entrepreneurs elevate knowledge assets from lower states to higher states of productivity thereby creating wealth in communities.

By analogy; in the early 1800’s Eli Whitney performed a demonstration for members of Congress by disassembling 10 working muskets, scrambling the pieces and reassembled 10 working muskets. It may seem trivial to us today, but that simple feat astonished the world; it led to the industrial revolution, and unlocked a vast amount of innovation and wealth creation. Innovation Economics is the modern day equivalent.
What Problem does it solve (150 words)?

Technological change must always precede economy growth. We are going about the process of globalization as if economic growth can precede technological change. This simple reversal is the cause for much of what is unsustainable in the world today. Innovation Economics corrects this flaw.

To make knowledge assets tangible is the Holy Grail of financial accounting. The Ingenesist Project asserts that knowledge assets are not intangible, they are simply invisible – this is a much easier problem to solve. Innovation economics solves this problem.

True valuation of knowledge assets allows for direct capitalization of people and their social, creative, and intellectual capital. Networks of knowledge assets form a new type of corporation that is fault tolerant, self regulating, risk diversified, and responsive to social priorities. Wall Street becomes the steward instead of the master. The whole game changes.

If it becomes a reality, what happens (150 words)?
If Innovation Economics becomes a reality, Social Networks will become the driving force of economic growth because human knowledge (as social capital, creative capital, and intellectual capital) can be capitalized directly. Creative knowledge workers would benefit most initially.

Eventually, publically traded Innovation Bonds backed by productivity gains will replace venture capital at vastly reduced risk and cost thereby unleashing an extraordinary amount of primary and tangential innovation creating a virtuous circle.

Areas of low productivity, such as poor communities and under-privileged populations will become targets for highest returns on innovation applications. Millions of new-to-the-world businesses will emerge and nearly all existing businesses will become more efficient where human knowledge is tangible and free to assemble itself in infinite, diverse, and strategic combinations.

If done correctly, eventually most people on Earth would benefit by freedom from the shackles of debt economics.

What are the initial steps to make it happen (150 words)?

Phase 1: The initial steps are: publish our research to a wider audience, prosecute our patent application (USPTO: 20070226361), release it to public property, and begin receiving public input.

Phase 2: Publish several animated videos which describe step-by-step the role that Social Networks must play to induce the Innovation Economy. Collect more input.

Phase 3: Create an open source development platform where ideas can be collected from the global community on how to develop the three web applications specified herein.

Phase 4: Develop and release common architecture web applications for The Knowledge Inventory, The Percentile Search Engine, and The Innovation Bank.

Phase 5: Exist indefinitely as an NGO to keep the game fair and build out emerging opportunities as needed.

What is the optimal Outcome and how is it measured (150 words)?
The intended outcome is for the innovation economy to arise from the knowledge economy as the next level of economic development. The optimal result would be an improved wider distribution of wealth and the transfer of corporate prioritization to communities regarding what gets innovated and what does not. Or likewise, which existing markets dynamics are disrupted and which are not. The optimal outcome would be the emergence of sustainable enterprise over forest-to-dump consumerism.

Metrics are inherent to the algorithm of the Percentile Search Engine as follows: innovation is proportional to the rate of change of knowledge with respect to time and knowledge is proportional to the rate of change of information with respect to time. Differential Calculus is the mathematical tool used to monitor all performance indicators of this system. In fact, all of the analytical methods of finance similarly apply to knowledge assets, by design.

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The Next Economic Paradigm

Month: October 2008

Paradox Farm

Support the Ingenesist Project