The Next Economic Paradigm

Tag: adapt

Hacking the Financial System

Hacking The Financial System is not about some doomsday scenario for the end times, it represents the natural ability for humans to adapt to constraints in their environment.  Right now, the financial system is vulnerable to many new systems and technologies that are reorganizing society. This series hopes to describe the meta dynamics behind these trends and offer ways for all people and institutions to adapt.

The financial System is made up of 5 components; they act as a system.  If any of these components falters or is corrupted, the whole system becomes unstable.

These 5 components are:

  • Markets (demand)
  • Entrepreneurs (supply)
  • Accounting System (inventory)
  • Institutions (to keep the game fair)
  • Currency (storage and exchange of value)

For example:

The dot.com crash was a problem with the accounting system failure. The 2008 crisis was a vetting mechanism failure. Devaluations across the globe are currency failures. Poverty is a market failure.  Corruption is an entrepreneurial failure.   All of these forces are interrelated and any one will have an impact on all of the others.

Curiosumé, The Value Game, and The WIKiD Tools Algorithm are specifically designed to replicate major functions of these 5 components – but in a different way.  Since Finance and Economics are mathematical, and natural systems are also mathematical, we cannot escape the math – our hack needs to be true to the math. For this reason, the work may seem fairly technical.

On the other hand, we have an incredible opportunity to correct many flaws of the old economy.  Anything that has no direct impact on the math also has no impact on performance and function of the 5 components – and can be easily designed OUT of the system.

For example:

  • We have an opportunity to swap out competition for collaboration
  • We have an opportunity to swap out scarcity for abundance
  • We have an opportunity to swap out mass consumption for mass sustainability
  • We also have the opportunity to eliminate a wide range of biases such as gender bias, racial bias, physical bias, social class bias, political bias, and many many more factors that may be irrelevant.

Where’s the Hack?

Every time there is an economic instability of any magnitude, black market currencies tend to form.  We have all heard stories of Levis, cigarettes, or even tulip bulbs being used as currency.  Black market currencies can also be quite subtle, yet no less tradable.

With 21st Century technology and social media, we are witnessing the emergence of what we can only now call “social currency”; such as reputation, referrals, vouches, influence, SEO, community, groups, and various other domains.  These are all black market currencies because they are used for the storage and exchange of the value that people create…what they lack is the rest of the “system”.

The difference now – and perhaps this is the first time in human history – should the so-called black market currency become systemized to the same extent and actually perform better than the currency that it hedges,  “a flip” will occur and the old system will fail to re-boot back to it’s current form as it has after every preceding economic crisis.

That’s the hack.

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What is Social Capitalism?

July 8, 2014 Update:

Wikipedia defines Capitalism as an “economic and social system in which the means of production are privately controlled”. 

 Factors of Production (from classical economics) are presumed to be some proxy for land, labor, and capital.  Suppose, however, the factors of production for modern society were something like “Social Capital, Intellectual Capital, and Creative Capital” of people and their relationships?  After all, these are the assets that are deployed in order to produce the proverbial basket of goods upon which most currencies are compared. 

Since these factors of production exist between the ears of each individual person, they are, by definition “privately controlled” and readily exchanged among other people in social networks.   If the US Supreme Court can rule that Corporations are people, then it is equally valid that people are corporations. Therefore, Social Capitalism refers to the economic and social system in which the means of production are social, creative, and intellectual assets.  

In order for Social Capitalism to become the dominant form of social organization, quite literally, society must reorganize itself to trade “abundant intangibles instead of scarce tangibles”. Then, all the decentralized innovations can integrate. The following video describes a system for reorganizing society so that the new economic paradigm; called Social Capitalism, may emerge.

Reorganizing For The Era Of Social Capitalism

Social Capitalism is similar to Material Capitalism with the exception that society would trade in abundant intangibles instead of scarce tangibles….and, everything changes.

***

The Article below is from 2010 – more than 4 years ago – when Social Capitalism was just beginning to enter the lexicon of the social media practitioners.  This article below quotes the Wikipedia Article on “Social Capitalism”.  That article has since been removed by Wikipedia for failure to be a real -ism; I suppose.  That is, Wikipedia does not yet recognize the movement as a real form of Social Organization.  It is interesting, if not historic, to watch the progress of a social movement from its tenuous inception:

The Adaptive Cycle: Holling, C. S. 1986. Resilience of ecosystems;

Social capitalism is an old idea taking on an new form in the age of social media where social capital, creative capital, and intellectual capital are deployed outside the construct of the prevailing corporations or governments.

Throughout human history, societies have reorganized themselves in response to tyranny, innovation, environment, new wisdom, etc.   I believe this to be the root of what Social Capitalism is, and therefore, how it should be defined.

In The Shadows:

The dominant definition of  “Social Capitalism” from Wikipedia reflects a social cause cast against the backdrop of market capitalism.  This definition acknowledges that economies work better when everyone participates; specifically, the so-called tier 1 and tier 2 people.  Tier 1 individuals have steady financial incomes that allow them to function without private or government support. Tier 2 individuals cannot meet the prevailing standard of living and rely on private or government support. Therefore the prevailing definition of Social Capitalism often refers to efforts to bolster tier 2 persons as a means of reinforcing the economy for everyone.

Conflict:

There is an inherent conflict where tier 1 is held responsible to support tier 2 as a means of protecting their tier 1 status. Traditionally tier 2 included poor families dependent on food stamps; children who depend on public education; elderly people who are no longer able to work, and low-income criminals who require police intervention, etc.

Ideally, getting more people from tier 2 into tier 1 is the desirable objective.  Indeed political division is marked by the theories and practices on how exactly that objective would best be accomplished.

A worst case:

What happens when tier 2 is simply forgotten; they are simply allowed to fail in the mainstream economy?  What if the government becomes too weak to bolster their economic prospects?  What happens when a critical mass of tier 1 people involuntarily enter the tier 2 environment bringing along their substantial knowledge inventory.  They are otherwise very productive people that had been laid-off, outsourced, underemployed, or otherwise marginalized.

The Special Case:

What happens when Tier 2 deploy new technologies that responding to their priorities, not necessarily Wall Street priorities.  What happens when tier 2 people trade a social “currency” among themselves? What happens when tier 2 swells to a size and scope that they are able to bear broad political and economic influence.  Many great human struggles emerged from under the hand of a Tier 1 constraint using their own manner to store and exchange value  (currency) represented by their own knowledge inventory and productivity.  Why would that not happen internally in American Society?

Structural Capitalism:

Social Capitalism is where factors of production in an economy are purely human and technological and less structural:. Specifically, social capital, creative capital, and intellectual capital deployed outside the construct of the prevailing corporations or governments.  Maybe it should be called “structural capitalism” because that is what is actually changing. We are at an extraordinary time in history where an extraordinary structural reorganization is taking place.

That’s Social Capitalism as it’s always been.

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