Month: May 2021

What single problem must all engineers solve? Hint, the answer so simple, you can’t even see it.

A firefighter may be worth a million dollars per hour when there is a fire and they courageously save lives and salvage property. The value of the firefighter is derived from the severity of the fire. On the other hand, a fire protection engineer can design a thousand buildings that cannot burn. But the true economic value of the engineer cannot be measured in the absence of a fire. The same can be said of aircraft that do not crash, bridges that do not collapse, and pandemics that do not spread, etc.

What single problem must all engineers solve?

Answer: engineers remove risk from complex systems. This is true for every single engineer and may even serve as an adequate definition for engineering at large. Engineers increase human productivity by reducing the risk to human life and property when confronted with the natural constraints such as gravity, temperature, impact, etc. The value of engineering is literally immeasurable.

But wait, risk can be measured. Insurance companies and financial institutions do it all the time. The method is a little bit counterintuitive, but actually quite simple and well suited for computational analysis. A simple example is presented below to lay out the data process which may be scaled by machine learning and instrumentation. All data must be true and validated in order for the math to work out. Here goes:

A Simple Example:

Consider 10 identical cabins in the forest. Each has a replacement cost of \$10,000 dollars. It is well documented that one will burn down every year but nobody knows which one is next. So each owner needs to hold \$10,000 dollars in the bank in case their cabin burns down. Because all of the cabins have the same replacement value and all have the same likelihood of burning, the cabin owners determine that they can each throw \$1000 into a pooled savings account every year and whosever cabin burns can use the money to rebuild. So instead of tying up \$10K each, cabin owners must only hold \$1K each. The remaining \$90K total can be released for investments and economic growth. This is called a “mutual”and it is the foundation of the insurance industry.

Engineers solve risk in 3 ways:

Engineers follow a similar thought pattern when addressing problems – this is so natural that they often don’t realize they are doing it.

1. They first invent ways to identify the existence of a peril.
2. Then they invent ways to reduce the probability that the peril will happen.
3. Finally, they invent ways to reduce the severity of consequences if the peril does happen.

Each of these actions are identifiable, verifiable, and measurable.

The Innovation Bank:

The Innovation Bank would serve as a data logger to curate the validated claims of all fire protection engineers which can be analyzed to estimate how much risk has been removed from the “fire economy”. This value can be represented as a cryptographic token (on a dedicated blockchain) that may be purchased by banks, insurance companies, municipalities, corporations and property owners to access the database to better understand their specific risk exposures across a wider spectrum of ignition sources.

The value of the tokens compensates the engineers to perform more comprehensive fire safety surveys and mitigation strategies. This positive feedback loop eventually reducing total risk the near zero.

This same token can be applied to all engineers and scientist for all applicable physical and environmental risk reduction.

The World is on fire

The example above describes only one example of one peril related to one engineering discipline. The reality that confronts civilization today include multiple complex global systemic risks impacting nearly every facet of life on Earth. These include, but are not limited to, climate change, pandemics, political instability, grinding debt, wealth inequality, and more.

The only way to untangle every contributing risk exposure and replace it with comprehensive solutions that do not break the bank is to introduce a parallel financial system that hedges the one currently being stretched to the limits. A digital token that represents Engineering and Scientific risk mitigation would be mutually convertible with national currencies and therefore taxable and transparent to regulatory standards. The two currencies would hedge each other. This is what a balanced budget could look like.

Thank you for your time reading this article. please continue reading articles from this blog. Our juried paper published by the American Society of Professional Engineers called: The Innovation Bank; Blockchain Technology and the Decentralization of the Engineering Professions. Also, please see our other publications at: Select Publications and Lectures .

What is an Innovation Bank? At first blush, an Innovation Bank sounds like a place where innovators can make money for developing their ideas. Sort of like venture capital.  But if we drill down a little further and look at how a traditional bank actually functions, we find a far more interesting opportunity.

People go to a bank and borrow money to, say, buy a house.  Most people think that the bank is sitting on a bunch of cash in some savings account waiting to buy your house for you until you can pay them back. This is not entirely true.

Money is measured into existence.

When you sign the loan papers, you are committing your future productivity as collateral for the loan.  From the simple act of signing a document, you create an asset called “my future productivity”. Through the miracle of fractional reserves banking, the bank can then conjure into existence the net present value of your future productivity to settle the note on your house.  Money is literally measured into existence where your promise to pay is the underlying asset. The house is the game incentive that motivates you to go to work. Your productivity combined with everyone else’s forms the basis of your national currency.

Most people are shocked when they see how simple this process is. Money must represents human productivity – otherwise nobody would work in exchange for it.  Debt is just a fancy name for future productivity, which is productivity nonetheless. The bank is the place where this accounting ledger is secured, not so much the money.

The image in the mirror.

Innovation and debt have a lot in common – for better or worse, they both represent future productivity. If debt can be used to measure money into existence, then innovation can be used to measure money into existence as well.  The difference is that the consumption of objects that you make is easier to measure than the innovations required to create them. In a way, venture capital is an aberration – the thing that should not need to exist if we could measure innovation in any other way.  The Innovation Bank was developed to solve the innovation paradox.

The invention of the wheel, wedge, and pulley came long before the invention of international trade agreements. Technological change must always precede economic growth, yet innovators still need money (economic growth) before they can afford to create technological change. This is the innovation paradox.   We are living in the mirror image of the economy that was supposed to happen — and we think this is reality. The financial system has gotten it backwards.  Corporations and VC can select and prioritize what gets engineered and what does not, but there is little regard for the wholistic nature of innovation – to preserve scarce resources rather than consume them. As a result, the true potential for value creation by the innovators of the world goes fallow.

The Innovation Bank resolves the innovation paradox by issuing a digital token on a native blockchain that represents the intrinsic future productivity of engineers and scientists. Not unlike a traditional bank, the Innovation Bank also employs a ledger, a value game, and actuarial math. Also like a traditional bank, a claim and the validation process represent the act of committing an asset that represents future productivity.  The interconnections of these assets provides important data driven business intelligence to a market.  The market responds by placing a value on the token to incentivizes production of more innovation.

Taken together, The Innovation Bank prints money in the exact same way using the same systems, methods, and institutions as traditional banking. The difference is that The Innovation Bank increases human productivity whereas a traditional bank consumes it.

Thank you for your time reading this article. please continue reading articles from this blog. Our juried paper published by the American Society of Professional Engineers called: The Innovation Bank; Blockchain Technology and the Decentralization of the Engineering Professions. Also, please see our other publications at: Select Publications and Lectures .

Image by Gerd Altmann from Pixabay

The Innovation Bank is an autonomous network platform applicable to all branches of technical services enterprise. The platform is governed by game theory, actuarial math, and blockchain technology. The purpose is to capitalizing the STEM professions.

The Innovation Bank Project Overview

The objective is to reward individual practitioners to establish physical facts in collaboration with other practitioners. Knowledge, innovation, and wisdom may be discerned from these interactions. Where such metrics exist, intangible “in-situ” knowledge assets may then be capitalized in a manner analogous to how tangible assets are capitalized in the existing economic system.

Past research has demonstrated individual components of the Innovation Bank within various for-profit enterprise settings. This current effort is unique in its attempt to integrate these components in an autonomous public network.

Several factors need to be taken into consideration:

Engineering is an essential industry – it is essential that the Innovation Bank is complementary rather than disruptive to existing institutions and operations.

All STEM professionals and practitioners are unified and enabled for cross-discipline interaction.

Practitioners are economically compensated within the platform for their contributions to the Innovation Bank. Compensation is proportional to the value of the contribution.

Practitioners own, control and hold title to their identification, and thus, their specific transaction records.

Specific Outcomes:

The initial funding for The Innovation Bank will result in the production of a minimum viable product comprised of an operational native blockchain with decentralized governance, algorithmic token allocation, and database auditing system (block explorer). These outcomes will be suitable for research, analysis, development and future growth within the professional and academic STEM communities. This test bed will allow us to develop means, methods, and metrics for advancing the above considerations.

Intellectual Merit:

The purpose of the Innovation bank is to unify the STEM professionals in society at large. Typically, STEM professionals are segmented by institutions with mismatched ontologies, competitive restraints, or regulatory limitations. While such hierarchical arrangements were well-serving in earlier times, new tools exist allowing network platforms to efficiently deliver value at speed, and at scale.

The core activity of the Innovation Bank is to develop worthy claims such that a qualified validator would be willing to be permanently and immutably associated with the claimant. This union forms a node with two branches for which each would be compensated in proportion to their total stake in the system. A network graph is thus formed from the interconnectivity of aggregate nodes and branches.

The dominant game strategy for each individual would be to allocate knowledge resources to where they are needed most rather than where profits are most assured. Financial value is derived from the dynamic metadata embedded in the aggregate network yielding business intelligence which would command a premium over static non-validated data.