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 (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.

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.

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

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.


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
Please review Articles in Sequence (18 short articles explain the concept)
Please review Patent Pending

<a href=”” rel=”me”>Technorati Profile</a>

Somewhere it occured to me,
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

INGENESIST PROJECT: Submission to the 10^100 Innovation Contest;

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.

Now, the machine readable resume is complete using numbers, symbols, and probabilities; we can quantify and qualify knowledge in the exact same format as a financial instrument. Now the knowledge looks like money. This individual is obviously a:


Specialist in Social Interaction, communities of practice, and economics at the 70th percentile related to educational research at the 80th percentile. They have Background in applied mathematic and physics at the 90th percentile. They are a trained ethicist at the 75th percentile. English is 90th percentile and Spanish is 60th percentile.

Each person’s resume can now be combined to represent the collective intelligence of a team. This is not unlike an investment portfolio, baseball team, or insurance policies. This expression carries all of the information that an entrepreneur needs in order to estimate the probability that the team can execute a business plan.

The inventory can be used in many ways such as finding supply and demand in a certain geographic area, securing business loans or venture capital, buying insurance, or place a financial value on the venture. As the organization learns, the new knowledge is retained in the equation through weighted averages – like the secret sauce of success – and can be used again in another venture. If one person leaves the project, they can be simulated by others.

Later, we will see how an uncountable number of applications and new-to-the-world businesses may emerge.

The fun is just beginning…..

Here are a A Few Predictions for the Innovation Economy

Social Network will become the corporate structure of the future. They will spit out start-ups at an astonishing rate.

The “resume system” will be banished forever possibly earning the title of the cruelest human invention since the lobotomy.

The University System will be challenged – the relevance of the college degree will be questioned in an economy that favors unique combination of knowledge assets rather than everyone having the same “degree”.

Everyone will have visibility of supply and demand for knowledge assets meaning that employers and employees will have equal information about cost, availability, and demand.

Creative knowledge workers will earn micro-royalties for their participation in thousands of brainstorming sessions and product development discussions. Earnings will be shared openly and the percentile Search Engine.

The new Patent will be the “Secret Sauces” – the algorithm that entrepreneurs will develop to select their knowledge assets when producing specific innovation.

Teachers will forego salary in favor of an equity position in their students. The best teachers will make the most money. Universities will forego tuition in favor of an equity position in students; the best students attract the best mentors and universities. Apprenticeship will become commonplace.

The knowledge inventory and Percentile Search Engine system rewards people for doing what they are most passionate about. The dominant strategy for all players in an Innovation Economy (that which produces the most revenue) is for participants to pursue what they are naturally good at and passionate for – as long as there is a market for it.

Innovation bonds will return 80% interest or more with near-zero risk. Institutional investors, insurance reserves, and foreign investors will flood the market with venture capital.

Knowledge workers will outsource management.

The Fed will peg the dollar to productivity, not gold or silver – interest on deposits will track productivity increases due to innovation.

Social priorities will impact what gets invented or what stays on the shelf; Global Warming, Alternative Energy, Sustainable environments will have net positive business cases.

The flaw in market economics will be reversed. Technological change will precede economic growth eliminating the economics of debt (ref video). The financial system will be restored to a sustainable condition.

We know that innovation is the engine of all wealth creation and it will live in an integrated system. Knowledge will be reformatted to emulate a financial instrument.

A good article from business week

A great Blog: Jay Deragon and the relationship economy

With a computer readable knowledge inventory, local communities of practice, a percentile search engine algorithm, and the virtuous circle of finance, then future innovation cash flows can be predicted much more accurately and with far lower risk than with, say, the venture capitalists acting alone.

Were risk is predictable, cash flows are predictable and the portfolio of innovations can be diversified so if one business fails there is an equal chance that another will succeed and the risks cancel each other out. The cash flow of all the innovation enterprises can be combined into a single large steady cash flow. Just like companies do to raise money for expansion, the innovation bank can issue innovation bonds on the open market. The revenue from selling Innovation Bonds can return to the community to finance innovation and fund wealth creation at very low interest rates compared with venture capital today.

With a lower cost of venture capital and a system that supports open source innovation an astonishing amount of innovation will be unleashed in society.

We have set up a new game for entrepreneurs to play called Innovation Economics. We have defined a currency and an inventory where knowledge is visible outside the construct of the corporation – and resident in social networks. We have also described a way for entrepreneurs to visualize the knowledge asset and the supply and the demand for knowledge assets. We have given them a tool for matching assets for profit. We have described how social networks will keep the game fair. We have outlined the structure of new business plans; the brain storming session, product development cycle, the neural network, and the multiplier effect. Future businesses will be built upon combination of these four structures and whatever else entrepreneurs can dream up.

We have described all of the pieces needed to form a new economy. Now we need to connect with the financial markets so that knowledge is readily convertible to other currencies.

For review;

With the financial bank, the entrepreneur assumes that they have the knowledge to execute a business plan and then they look for the money. The risk is that the entrepreneur does not in fact have enough knowledge.

With the Innovation Bank, we assume that we have the money, and we go to the bank to search for the knowledge. The risk is not having enough money to purchase sufficient expertise.

With both banks acting together – the risks cancel each other out and the innovation economy tends toward a ‘risk free’ cycle; the more knowledge you can assemble, the more money you can borrow. The more money you can assemble, the more knowledge you can assemble.

Now we have a virtuous circle. The more knowledge you have, the more money you can borrow; and the more money you have, the more knowledge you can borrow.

There is no shortage of money circling the globe – only a shortage of risk free places to put the money. The innovation economy is an environment of very high return for a very low risk and will attract a great deal of money to fund innovation enterprise.

Earlier we demonstrated that money represents human productivity. It follows that the places that have the greatest potential for increasing human productivity can create the greatest amount of wealth. Therefore, poor areas and marginalized economies with under utilized knowledge inventories or the injection of specific knowledge inventories, become the highest ROI centers in a risk-free system; a condition the explicitly favors the wealth equalization rather than wealth disparity.