Think Bigger. Aim Higher. Go Further.

Month: June 2010

Social Capitalism and The Culture of Data

Data are the raw material of the next economic paradigm.  Data, information, knowledge, innovation, and wisdom are all related; but it all starts with data.

In order to produce anything valuable in the domain of social capitalism, the creation and formation of data is hypercritical.  The better the data, the better the information, knowledge, innovation, wisdom and culture that will follow.  Each stage of transformation along the chain reaction from “data” to “culture” is an opportunity for both great value creation AND astonishing corruption.

Data is King:

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

Data is an asset:

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

Data Relationships

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

Mouse goes squeak:

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

The Culture of Data

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

Hint: Culture Produces The Data.

Social Capital Trolls

A Troll is a member of a race of fearsome creatures from Norse mythology. Troll mythology is, in fact fairly complex but seems to resolve to common images of Neanderthal type people living under bridges who extort money from passersby, steal babies, and fear God.

In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum, chat room, or blog, with the primary intent of provoking other users into a desired emotional response or of otherwise disrupting normal on-topic discussion [Wikipedia].

In the Intellectual Property world, a troll is an individual or business that holds patent or copyrights with no intention of developing the IP and every intention to enforce against infringement by those who do develop ideas.

Naturally, we seek to anticipate the future usage of the term Troll in a context of Social Capitalism. We can say that someone who was in a position to constrain Social Capitalism has the potential to engage in troll behavior.

The troll does benefit from the eventual success of traveler passing through the constraint; however, they create an unnecessary or non productive friction in a market. This can kill many business plans as troll fees and uncertainties need to be factored into the risks of doing business.

I am reminded of a legal system that facilitates litigation over education, negotiation, and cooperation. Social media has an inherent self-policing aspect that may threaten “regulators” in law and government who seek to hold exclusive vetting privilege over a social market.

I am reminded of advertisers who put lipstick on the pig by pretending to play up the whuffie, trust agent or engagement vibe, but instead lay Astroturf and buy up social media outlets. Spam is spam is spam.

I am reminded of Internet service providers that purposely slow down a connection and charge for speed that costs them less to keep open than to slow down. I am reminded of the demise of unlimited data packages for mobile Internet – now that the user is an addict, pull back the dosing in exchange for compliance.

In short, a social capital troll is any person or organization that seeks to CHANGE the online behavior of an individual and their community rather than EMPOWER the individual and their community to do what they would have done in the absence of the troll.

Fell free to add more for future posts on this subject……..

Black Market Social Capitalism

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

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

Tax evasion – the scourge of racketeers worldwide

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

Modern Black Market

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

The “Little House on The Prairie” effect

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

Social Engineering

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

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

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

Will Social Capitalism Replace Market Capitalism? (Parts 1&2)

This video describes a set of predictions for 2020 based on an entirely new form of capitalism whose velocity and voracity will take the world completely by surprise. Nothing is sacred and nobody is immune, not Facebook, not Google, not Wall Street, not even Governance itself….

Part 1

Part 2:

Knowledge Failure Is Business Failure

The top ten reasons for business failure are due to a lack of knowledge, not a lack of money. In fact, the lack of money is itself a failure of knowledge.

Top 10 reasons why businesses fail

1. Lack of an adequate, viable business plan
.

2. Insufficient sales to sustain business

3. Poor marketing plan: unappealing product, poor customer identification, incorrect pricing and lackluster promotion

4. Inadequate capital, misuse of capital and poor cost control

5. Poor management skills: lack of delegation, leadership and/or control

6. Lack of experience and knowledge

7. Lack of managerial focus/commitment

8. Poor customer service

9. Inadequate human resource management

10. Failure to properly use professional advice: i.e. accounting, legal, financial, etc.

No excuses:

Lack of a viable business plan is an act of negligence where research, scenarios, and assumptions have not been tested. Market ignorance is not an excuse nor is the failure to know one’s customer. Death by poor marketing plan is knowledge deficiency related to product appeal, customer identification, pricing structure, and lackluster promotion. Obviously, one needs to know how to manage a company in order to be focused, let alone correctly estimate capital needs. Lack of customer service knowledge is deadly in the age of social media. Inadequate HR is an oxymoron – if it’s inadequate, it’s not a resource – human or otherwise. Finally, failure to listen to knowledgeable people is ego driven irrationality.

The financial system is not the only problem;

The innovation system (or lack of) is a crucial element. Information, knowledge and innovation, by any definition, are profoundly and inseparably connected. A failure in one kills the other two. So, just because an entrepreneur does not have the knowledge, does not mean the ‘knowledge’ fails to exist – it simply means that entrepreneur failed to find it.

So where is the knowledge?

Unfortunately, there is no public knowledge inventory – people do not know what each other knows. With social media raging all around us, there still is no way that anyone can assemble the knowledge needed to execute a business plan with a known probability of success given the information available. As such, there is no way to finance public innovation.

The emergence of Social Media technology presents an extraordinary opportunity to organize a knowledge inventory outside the construct of a corporation and marry it to the financial system, much like a corporation.

Tangibility of Knowledge

Knowledge tangibility must be the most important “innovation” in the pipeline today if we expect to meet the crushing challenges that await us. Just because we cannot predict innovation does not mean it cannot be predicted – it just means that we do not know how… yet.

Tangential Innovation Communities

In an earlier article (Cluster Funk) I argued that Industrial clusters can lead to stagnation, vulnerability to external shocks, and the erosion of social capital. Since I’m not one to complain without also providing an alternative, this article argues that the future will favor technology clusters rather than industrial clusters.

Make it up as you go along

Technology clusters serve what we call the tangential innovation market – or diversity innovation dynamics. Don’t worry if you have not heard of these things, I’m making this up as I go along.

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.

Why compete when you can collude?

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 Ingenesist Project 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.

New applications of social media will identify other industries that 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.

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 perils of Cluster Funk.

Cluster Funk

I recently attended another one of those economic development summits where a bunch of people with long titles gets a chance to speak on a panel touting the mysterious benefits of a mysterious innovation clusters that create mysterious wealth that can only be realized if their mysterious department is funded.

Nearly every speaker concluded with the following paraphrase: “if only government would fund this or that, everything will be fine”, or, “if only corporations would fund this or that, then we’ll all be better off”

Uhmmm…sorry to break the news, it ain’t gunna happen.

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 new ideas will somehow result from similarity of ideals and purpose.

Group Think Tanks

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 while jobs are mechanized or outsourced.

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 and environmental disasters 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.

Remember “scrubbing bubbles”?

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 term “Innovation Clusters” makes for a good soundbite for politicians because it fits on the “Jobs R Us” banner they can stand in front of (thumbs up) for the next election cycle.   The term keeps funds flowing to organizations to publish studies that conclude that more studies are needed. Maybe these summits ought to be renamed to Cluster Funks because that is largely what they actually promote.

Crowdsourcing The New Exploitation

The cadence of modern globalization has been set by the steady drive to lower labor costs across the world. Not surprisingly, the greatest threat to the global economy is social instability. As usual, political boundaries are drawn to keep people isolated from each other. The new twist is that Social Media arises because people are trying to reorganize themselves. Now, Crowdsourcing moves the eternal struggle to a new battle field.

There are two ways that the tools of the knowledge economy can integrate. 1. People are successful at reorganizing so that when the financial system does collapse, they can deploy a social currency to trade among each other. Or, 2. Social Media will become the new substrate of exploitation. Let me explain:

Turking is a phenomenon of crowdsourcing where people perform simple tasks on-line for money.  Highly intellectual tasks are broken down into small components easily managed by a simple human decision. Each of these simple human decisions are sent out to humans to perform. The results are then re-combined to become a high value knowledge economy product.

Even companies that perform this service for major corporations are astonished that people would work for so little money.  Academic studies declare that people are motivated by something other than money. Somehow Turking provides people with hope, self, validation, and all sorts of great personal benefit – otherwise they would not be doing it. This is good, right?

Wrong….people are desperate and turking is the last treadmill on the rat race to the bottom.

The idea that someone would work for free in order to gain “reputation” is built on the assumption that some “brand” is backing the reputation.  Brands don’t exist – they are fictitious.  Brands are what marketers say the are. Turking lets brands monetize their story line with cheap, invisible, and powerless labor force scattered around the world.

All the asset with none of the liability – and they call it a social miracle?

Most “turking” does not pay enough to cover the cost of the education required to complete the task. It costs a society countless thousands of dollars to teach and nurture a child to read and make good decision. Yet, the net payback is under 1.00 dollar per hour for the simplest turking tasks and net  5-10 dollars per hour for higher orders of analysis requiring specific and proficient skills.  If the turk work is rejected or they lose the “contest” they are not paid and their IP is stolen – no recourse, no rebuttal.

Worse yet, turkers from impoverished countries are valued relative to the disfunction of their economy, not their inherent intellect and creativity. This sets up a tragic dynamic where it becomes, again, in the best interest of some enterprise that the poor countries remain poor and dysfunctional. As such, the inherent intellectual and creative value of their people can be efficiently transferred to the shareholders.

There are social media alternatives under development by The Ingenesist Project and others that allow people to organize and sell their own information.  Applications are being devised that allow people to self organize into productive communities and to reward the nurturing and sharing of knowledge assets in community economic system. Dynamic business systems are under development that reward high integrity and punish low integrity.

The great question of our time is: Who will win, financial currency or social currency?

Photo source

WIKiD Tools; A Futures Methodology

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

WIKiD stands for:

Wisdom > Innovation > Knowledge > Information > Data

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

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

The chart below helps demonstrate the WIKiD Tools methodology.

Slide05

The Hunter-Gatherer

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

The Agrarian

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

The Data Economy

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

The Information Economy

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

The Knowledge Economy

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

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

When we apply the WIKiD Tools Methodology:

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

The next economic paradigm:

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

The Wisdom Economy

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

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