Month: March 2013

My greatest doubts about The Value Game stem for the evidence that our scarcity based competitive economy is so deeply rooted in our being, that we would be unable to extract ourselves from our self-inflicted wounds.  What if we have crossed some unknown threshold and it is too late to turn back, to learn, to improve our understanding of the impact of social value?  This thought crosses my mind more that I am willing to admit.  I am afraid.    

I have spoken recently about our work deploying The Value Game to the construction industry where we have been contracted to replace the plumbing in an occupied high-rise condominium building.  Here is a recent post discussing the work

Keep in mind that this is only the beginning and I am just probing the environment for pulling together a broad and comprehensive Value Game.  So far, it seems like this will not be easy.  I struggle with deep internal distrust among many of the key players.  Trying to get them to share more information with each other has been very difficult. 

When Players Don’t Trust Each Other – it’s called gambling

The construction management firm that I am using has a deep, almost obsessive, fear of litigation.  They are paralyzed by the possibility of getting sued.  They are very careful to not take on any liability, to distribute liabilities among other people, they keep secrets and seal up their contracts, while also brisk to collect as much money for themselves as possible.  They will not submit themselves to audit by anyone.  In doing so, they create a distrustful environment with me.  

Fully 2/3 of the contractors that I encountered heard the word “Condo” and immediately declined my invitation to bid on the project.  But they did not stop there; many proceeded to tell story after story about failed governance of condos, litigious attorneys, flaky bankers, and years of their lives wasted fighting over pennies.  The emotion in their voices told a story of anguish and resignation that I have never heard.  They don’t trust their fellow citizens.

The back stabbing among contractors is fierce.  Everyone seems to have worked for everyone else at some point in the past.  They know each others’ financial situations and problems and they are willing to throw each other under a bus. I tried to contact the material manufacturer, and the wholesaler stepped in and curtailed my discussion – presumably to protect commissions and territory.  The distributor railed one contractor over an old debt. They don’t trust their collaborators.

The homeowner’s association is very lucky to have a wise and strong leader guiding the project; other than that, there is no great social fabric the community.  Like most HOA’s meetings can often devolve into arguments or chaos and uninformed members feel left out by others who are forceful.   People are certainly cordial, but largely indifferent to the project and the impact it will have on each other.  There is no great urgency to get involved or deep curiosity about this important project.  They don’t trust their shared asset community.

I called several Real estate agents to see if they would like to place their advertisements on the website in exchange for touting the new remodel project; I have not received any calls back.  Vendor interaction has been sparse and stingy. They don’t trust any process other than their own. 

The project is taking the form of a strict and linear monetary transaction.  That means that no social value is inferred or implied by the participants and that value not articulated by money does not exist, or it is intangible.  They Dollar extracts trust form the community.

Reality Check 

We are performing a full re-pipe of the drinking water system of an occupied structure.  Water is a life source. People will be asked to leave their homes for short periods of time, we will be tearing up walls and corridors, and bathrooms in order to replace plumbing.  The entire structure will be completely shut down to water service for several hours at a time many times for almost a year. This project will cost each resident over $10,000 dollars each.  This is serious disruption to happen without trust.

The opportunity to create social value is immeasurable, but nobody sees this.  Nobody sees a huge shared asset.  Nobody sees mutual best interests.  Nobody sees market value responding to social value.  Instead, they see a  collection deeded cubes in the sky sandwiched between hypothetical concrete walls.  They see that they need to go to work everyday to find dollars in order to pay the HOA dues.  They see the day before and the day after the project – but not the process of engagement itself.  

Social value lives in the present – it lives in the moment of discourse and engagement; when people feel a shared emotion, a shared condition, a shared asset. Social value then opens up opportunities to not work so hard, to laugh more, to be treated better, to have friends, to love.  It would be a shame to let this opportunity pass without extracting the social value that these magnificent people owe to themselves.

I would lying to say that I did not consider at many times that our society was beyond saving – that distrust of each other has reached a point of no return.  Mutually assured distrust seems to form a stasis in time when people just endure their life rather than live it; “to take it like a man”. The opportunities to engage each other and to build resilient communities pass us by without a wink – and we let it.  Life is a game – it is fun, why would anyone squander that!

What if the human species was SUPPOSED to evolve to a social organization system where everything that we now call ‘intangibles’, were in fact ‘tangible’; and, everything that we now call ‘tangible’, were in fact, ‘intangible’.  What would that world look like?

This not so far fetched actually because our species has already created an incentives based economy that rewards people who act in their own best interest.  We also created Calculus – one of the greatest achievements of the human mind – to keep track of all the moving bits of an integrated economy.  So, why is the world falling apart?

In the following video, I am interviewed by Jay Deragon for Smarter Companies Productions where we begin to unravel a new form of capitalism where everyone acting in their own best interest is acting in the best interest of everyone else in a community.  In effect, tangibles and intangibles are swapped.  

 

 

Tangibles and Intangibles

 
Please feel free to contact me with any comments.

 

 

You don’t need to know Calculus to catch an Apple. Not surprisingly, when I tell people that The Value Game is a multi-agent algorithmic game derived from a 5-order differential equation – their eyes immediately glaze over … as if I just hit them over the head with an apple.

In Practice, value games are extremely easy to create and once the observer sees how easy it is to envision value games, a whole landscape of opportunity opens up before their eyes in that proverbial Ah Ha! moment of the entrepreneurial spirit.  

In this post, I will try to explain The Value Game in the simplest words possible, but be forewarned; you can’t read a blog post about riding a bicycle and then hit the tracks on one.  The same is true for The Value Games – practice, iterate, start again, iterate, practice, etc.    

All value games must start by identifying a tangible asset that people share.  This could include a building, a road, a school, a teacher, energy production, food production, etc.  Or it can be a car, bicycle, lawnmower, civil service, or anything that can exist in a modern market.  A value game can also be build for a corporation or a department within a corporation.  If people share it – then it can become the object of The Value Game.

The next step is to identify all of the people for whom it is in the best interest that the asset is preserved rather than consumed.  For example; a fitness trainer could be an asset to a community in a value game.  Obviously, the people seeking fitness would benefit from the asset, however, so would health food markets, clothing stores, health insurance providers, sports equipment vendors, recreation purveyors, employers, and even extended family members. 

Driving Economic Incentives

The local Whole Foods Store spend 20% of their revenue on advertising and can realize a net gain on subsidize the Value Game.  Clothing Stores compete vigorously for customers, insurance companies profit from lowered risks, Ski Slopes, bowling alleys, and sports equipment manufacturers all benefit from the preservation of the healthy and active community.  Most players would be more willing to support the aerobics instructor than pay taxes or jump into bed with Facebook because their taxes would become more relevant and their Facebook exposure would become free as a result of supporting one aerobics instructor.     

The next step is critical:

Today we build websites for people, products, “influencers”, and ideas. Media barons build social networks around advertising, and companies violate people’s privacy to steal their information for direct targeting.  This is oppressive and destroys social value – it does not create social value.  

Instead, we must now build the social network functionality around the shared asset – not the people who share the asset.  This is the critical  missing piece to the next level of value creation. 

Now, as all of these players interact with the shared asset, they will be interacting with each other to preserve and improve the asset because it is in everyone’s best interest to do so.  In this process, they create something called “social value”.  This is a broad term that includes all of the most desirable aspects of social media; influence, resilience, activism, trust, cohesion, co-creation, knowledge, innovation, and wisdom, etc.  These things cannot be bought at any price.  Yet, in The Value Game, social value converts back to financial value as more assets are pulled into the game or as various games begin to merge.  A virtual circle is formed creating “New and Abundant Value” as everyone seeks to maximize their benefit in relation to the shared asset. 

This is the new Capitalism.

There are literally infinite ways to play The Value Game – as there should be. Each person’s unique knowledge inventory qualifies them for their own value game and subsequent prosperity. All of the social media tools exist today.  The art and science of social networks applies directly.  Existing financial and accounting systems can  articulate the Value Game profits at the bottom line.  The Value Games can be deployed by anyone and merged with other value games organically.  Value games can be iterated continuously. 

The Ingenesist Project is a pioneer in the development and creation of value games. We have deployed Value Games in industries as diverse as Aviation, Construction, and Education. Let us show you how to build Value Games in your community, institution, or corporation.  

The Financial System is vulnerable only to human adaptation in creating a replacement. The white paper attached below, Hacking The Financial System, describes how this may happen in the near future.

Money is the medium by which people store and exchange the value of physical objects – we call these object ‘tangibles’.  Money does not articulate ‘intangible’ value very well, except as a proxy for the physical things that people make and exchange for money.   The intangibles community is quick to point out that there is no currency that directly represents intangibles (hence the term ‘intangible’)….and,  that there should be. 

Actually, there is a currency of intangibles – it’s called “everything that happens inside a corporation”.  The corporation converts intangibles into tangibles, which are then exchanged for money.  As constraints in the global monetary system amplify – it is not surprising to see so much political reverence paid toward corporations for performing this essential conversion. 

What if so-called ‘intangibles’ could be articulated in its own currency, without the over-reaching construct of a corporation?  What if this new currency were fully convertible with the dollar, not unlike gold, oil, or Yen?  Could markets become more efficient?  How would such a currency impact financial institutions? 

It’s a very simple idea, but with profound consequences.   The following white paper begins to form a construct for a social currency based on how all currencies are formed.  After reviewing this white paper, it is not a huge leap to argue that the next generations of Social Media tools may be forming the infrastructure upon which a fully convertible social currency could be established.

In addition, the reader may notice that it is not hard to see that fluctuations in the “tangibles” currency would have inversely proportional reaction in an “intangibles” social currency.  In other words, they hedge each other.  Whoever figures out how to introduce a fully convertible social currency to global production markets will undoubtedly release extraordinary wealth by any measure.  

White Paper:  Hacking the financial system with Intangibles

(The Value Game is a powerful tool for deploying Intangible Capital to distorted, corrupt, or dysfunctional markets.  The following case study describes a current project that our team has won against substantial mainstream competition.  This case study is about real money, real projects, real people and real markets where the Value Game converts social capital directly into financial capital and converts financial capital into social capital – without the construct of an over reaching corporation.)     

Application Of The Value Game to the Building Reconstruction Industry

For many condominium associations, the maintenance, repair, and reconstruction industry has devolved into a minefield of distrust and dysfunction.  Countless lawsuits have taken the industry to the point where many contractors simply walk away from condominium projects for fear of litigation.  The worst form of “capitalism” ensues where everyone acting in their own best interest is in fact acting in the counter-interest of their community.  The Value Game promises to upset this negative incentives condition while enhancing community resilience.

Here’s How The Problems Start:

The board of directors of a homeowner’s association is entrusted by the residents to hire a contractor to perform a complicated reconstruction project.  Unfortunately, condominium board members are not very good at writing contracts or issuing requests for proposal or collecting bids.  When a contractor is selected, the scope of work is often poorly established.  The expectations between the community and the contractor begin to diverge.  Soon, a law firm is engaged by some residents to sue the contractor for damages.  After a long battle, a settlement is awarded, but it is not enough to fix the problem after paying the law firm. 

A chain reaction:

Fortunately, the contractor in the suit was insured, but this does not cover the personal, professional, and opportunity hardship of defending against the suit – “it’s just not worth the trouble”.  The insurance company then jacks up the premium for condo projects.  As the pool of available contractors dries up, and the price for reconstruction increases, many condos are forced into deferring maintenance in a distorted market. 

Cascading failures:

After a while, a condominium springs a few leaks in their piping system.  Each leak results in relatively small water damage claim.  When the insurance company notices several claims in the same building, they begin to fear that a mainline is about to rupture next and threaten the condominium with cancelation of their policy unless they replace the entire system immediately.  Now the insurance industry is in a double jeopardy: they force the contractor out of the market and they force the condo out of the market to basically avoid suing their self. 

The dysfunction deepens:

Banks will not make construction loans to condominiums that are not insured.  Likewise, they will not make mortgage loans to buildings that are not insured.  The property values plummet and the owners are sent under water.  Soon they begin to default on the mortgages that the banks already hold.  More maintenance is deferred as buildings fall apart and become unsafe.  Banks pull out of the market to avoid defaulting on their selves.

The wider community suffers.

The Value Game   

The Ingenesist Project is currently deploying a Value Game to the condominium reconstruction market with remarkable success. The Value Game is a new class of business methods that alters the incentive structure of a distorted market such that everyone acting in their own best interest is, in fact, acting in the best interest of the community. We are currently at about 30% game time and about 50% implementation in the case study described below.  

Here is how the Value Game is formed:

The first thing is to identify the shared asset.  This is the single thing in which it is everyone’s best interest to preserve.   In this case, the shared asset is the physical condominium building. 

If we look at each of the players individually, we see that it is obviously in the best interest of the residents to have a safe and well-maintained home.  It is also in the best interest of the contractors to have a successful and profitable interaction with the building.  It is in the best interest for the Insurance industry to reduce the risks that they underwrite.  The banks also benefit from a viable, organized, and disciplined community with strong real estate valuation and complete insurability of assets.  Finally, the broader neighborhood benefits from the presence of a viable condominium community.   It is in everyone’s best interest that the others are successful. 

About the game board

The first rendition of the Internet was populated by static websites built for a person, or to sell a product, or to deliver entertainment, or to provide information.  The next level of the Internet included social media where users actually create the content that populates a website such as Facebook and Twitter, etc.  The third level of the Internet is a Value game where a social network is built ABOUT an asset that communities share.  For this project, we set up a website for the physical building with its own social network where all of different players interact with each other to preserve their best interests.         

Case Study; The Value Game. 

The current case study is a condominium re-piping project in the Pacific Northwestern US.  The community consists of about 200 units (400 residents) who occupy a single high-rise tower that must undergo a major reconstruction project that will impact everyone.  The total value of the project is about 3 million dollars.  This is real money in a real Value game.

The first thing is to reduce the likelihood of diverting incentives that can result in litigation. This may be accomplished by introducing strong community building management. In this particular case, a professional engineering firm was hired to represent the best interest of the asset. Together with The Ingenesist Project, they represent the needs of the HOA, they select construction technologies, define project scope, write the RFP, write the contracts, select the contractors, and manage the project.

The Social Network Dynamics

The website used in this case study is a common open-source Word Press platform with a Buddy Press backend to provide “Facebook-like” features – except private.   The engineering firm submits all reports, surveys, test results, assessments, photographs, schedule, pipe products, accessories, and plans onto the website for all members to see equally (there are some exceptions to protect financial data).  Very few secrets are hidden from view and everyone is encouraged to discuss the project among each other.

Individual residents are invited to form “groups” and start “threads” in topics for which they have an interest or a concern.  People naturally migrate toward other people with similar interests and they build relationships. 

Contractors are able to see all of the assessments, conditions, and work scopes directly from the website instead of paper submittals.  They can ask questions and post ideas of their own for community review.

The engineering firm can monitor discussions and collect ‘frequently asked questions’, which are posted in an FAQ.  Everyone gets the same correct answer to their questions without rumors or speculation. 

When community meetings are held, there is no bickering or infighting because everyone is educated and prepared to ask unique and relevant questions of the presenters.  When a community is unified, they can easily come together to make important decisions that impact the quality, cost, and schedule of the project. 

The insurance company is given limited access to the website which demonstrates that the community is acting to mitigate the risks that the insurance company underwrites – this keeps the policy in force. 

With website access, the insurance industry can also see that licensed engineers professionally manage the project in a vibrant community.  This greatly reduces the likelihood of litigation.  The insurance industry can now classify this project among “commercial” insurance pool instead of the litigious condominium insurance pool. 

Contractors feel comfortable with this professional engineering management and insurability, which brings more contractors to market thereby increasing the talent pool and reducing costs.  At the end of the project they get 400 likes on Facebook, YELP!, and Angie’s List

The bankers will have access to the website to monitor progress.  With insurance policies fully enforced, banks will lend favorably to the HOA who needs to fund a major reconstruction project.  Banks will also lend favorably to mortgages in this structure because it is well maintained.   

It is in the best interest of the community to be civil and thoughtful in their discussions knowing that they are being observed by some of the other stakeholders.  This eliminates the incentive to be disruptive and increases the incentive to be engaged and productive in the project. 

Over time, the website becomes a forensic record of all matters associated with the project.  Everyone knows who said what, when, where, and why with an electronic time stamp.  There is little to be disputed. 

Interaction with the Wider Community:

Real estate agents always describe property in poetic hyperbole.  The RE market rarely tout the improvements that a community works so hard for.  The website could be a place where a real estate agent can advertise their services in exchange for a promise to mention the re-piping project and intangible values of the community.  The market will respond to a well-maintained building and an engaged community (ref: Jane Jacobs externality), which will drive real estate valuations up. 

Hotels, restaurants, theaters, art galleries, service groups and civic organizations all benefit from prosperity and resilience in their community.

In the end, the shared asset is preserved and everyone is profitable. 

The Ingenesist Project is currently in the middle of this above case study / scenario.  Real money is being exchanged in a real project with real players.  It is a significant fact that our team won this contract and is being well compensated.  We are deeply confident that The Value Game can be easily built and deployed throughout a 200 billion dollar condominium reconstruction and maintenance industry at great benefit to communities, insurers, bankers, contractors, and homeowners using existing technology and community sourced intangibles values.