# Tag: Calculus

Yesterday’s post “This is what I believe” I make the following 4 statements:

• Information is proportional to the rate of change of data with respect to time
• Knowledge is proportional to the rate of change of information with respect to time
• Innovation is proportional to the rate of change of  knowledge with respect to time
• Wisdom is proportional to the rate of change of innovation with respect to time

#### In clinical terms, this is called a “Differential Equation”

I always get a lot of questions about these.  Most people’s eyes glaze over as their expression goes blank with far off images of high school Calculus class.  Few people realize that these relationships are so common and so intuitive that we are all  performing “Calculus” in many of their thoughts, words, actions, opinions, observations, and conclusions about the world around us.

#### But, just in case there is any doubt about the pervasiveness of differential equations in our culture and thinking, listen to the experts:

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Move fast and break things” – Mark Zuckerberg

The idea here is that it’s OK to fail because this is how learning happens (rate of change of knowledge) but make sure you do it fast (with respect to time) because the objective is to innovate, not to not make mistakes.

honor your creativity and you don’t ever ignore it or go against what that creative image is telling you. – Lady Gaga

Here she is referring to the proportionality component of creativity. The magnitude of the inspiration (rate of change of one’s knowledge of a matter) is greater than all other thinking moments, but it is constrained in time (with respect to time).

“The Googly thing is to launch [products] early on Google Labs and then iterate, – Merissa Mayer, Google VP

Marissa is talking about Wisdom.  While innovation is proportional to the rate of change of knowledge, wisdom is proportional to the rate of change of innovation.  The speed at which Google can innovate is how Google creates wisdom of what to do next.

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#### Here are a few more. See if you can spot the differential equation:

“What Mark worries about the most is the lack of change, the lack of innovation” – Sheryl Sandberg, COO Facebook

“Every new thing creates two new questions and two new opportunities.”– Jeff Bezos, Founder of Amazon.com

“It’s always about timing. If it’s too soon, no one understands. If it’s too late, everyone’s forgotten.’” – Anna Wintour, Editor in Chief, Vogue Magazine

All technology starts as a spark in someone’s brain”. – Nathan Myhrvold, Intellectual Ventures (hint: sparks travel at the speed of light)

“As people innovate and learn faster, they help generate new ways of performance improvements for everyone while progressing toward their own higher goals” – John Hagel, The Big Shift

#### Differential Equations are used to describe a vast array of phenomena in our physical universe.

These include the the forces of particles in motion, diffusion of medicine through cell walls, the decay of radioactive substances, and effects of gravity on bodies, weather, energy, chemical reactions, even the creation of money itself.  It should not be a shock then that bankers, CEOs, politicians, and all “investors” are not actually concerned with money, they are concerned with the rate of change of money with respect to time.

The question now becomes, why would their NOT be an algorithm for human values of knowledge, innovation, and wisdom when there is an algorithm for everything else with respect to time.

Additional information can be fount here: Exoquant; an algorithm for Social Capitalism

Calculus has been called the greatest achievement of the human mind.  Yes, it is a little difficult to understand … until one day it becomes the simplest, most obvious, and glorious form of expression ever imagined.  Like a musical instrument, there is a point where all the symbols and lines can disappear and the artist can express himself or herself in the medium of the art – leading to many more great achievements of human mind.

#### The Science of Change

Calculus is amazing because it can make the invisible visible.  From sub-atomic particles, gravity, silicon circuits, diffusion of medicine through cell walls, to the discovery of new planets in distant solar systems – none of which are directly visible to the observer, yet their existence enables human imagination, innovation, cooperation, and social development at the most fundamental form.

#### Changing Wall Street

Wall Street lives quite comfortably in our homes, political system, our food , and our occupations – without being seen directly. Wall Street is utterly invisible.  Most of their work doesn’t even happen on Wall Street.  How did they accomplish this?  How were they so successful in occupying Main Street without being seen?

#### The Trojan Proxy

Wall Street is a mathematical construct – it exists in the form of symbols and numbers, or, “proxies” for making stuff – but not the actual stuff itself.   That is the vulnerability that we can easily exploit.  If we are smart, we can dismantle Wall Street brick by brick and they will happily walk right through the door because “our door” – the knowledge asset inventory – can be made indistinguishable from any other “proxy” for making stuff.  (I write extensively on this strategy in the prior posts).

There is a bigger message here that I hope does not get lost in the clamor.  There is likewise a very easy way to occupy Wall Street, however, it’s going to take a little mathematical cleverness. How do we make them visible to us and ourselves invisible to them.

The key is that we need to change ourselves. We need to transform, not them.  We don’t need to occupy Wall Street, we simply need to occupy Main Street because that is where they occupy us.  It is not enough to marvel at our numbers, civil disobedience, and cardboard signs.  We need a Science of change so that we can do so.

The first law of Gaming: If you can’t win a game playing by the rules, stop playing the game, or change the rules. It would seem that Egyptians would add a corollary “Change the Rulers”.

#### This is not trivial.

Billions of people are walking the planet Earth with the nagging feeling that they cannot win their game playing by the rules they are given.  If America was once the shining beacon of opportunity where hard work and perseverance were the main ingredients of success, and Americans are feeling that they can’t win playing by the rules, then you can expect two things to happen:  People will stop playing the game, AND the rules will change.

#### Interactive Entertainment

Looking on the sunny side, we see Gaming companies achieving astonishing valuations in Silicon Valley.  What is even more remarkable is that a similar thing is happening concurrently with Travel, Coupons, and Alternate Currencies.  Many people stand back aghast at the sheer size of some of these bets; \$120M for Tripit, \$5B worth Zynga, \$6B for Groupon, \$50B for Facebook.  The Market capitalization of Apple (\$320B) is almost 2 times greater GDP of Egypt (\$188B).

It would be foolish to underestimate the value the gaming component – now called “Interactive Entertainment” – as enabled by the Internet.  Gaming is an extremely mathematical science where designers predict the probabilities that a player will favor one strategy over another.  The better these prediction become, the more interactive and, ostensibly, the more entertaining a game becomes – at least to some people.

#### The Calculus of Gaming

It is no coincidence that the calculus of gaming and the knowledge assets deployed to the gaming industry are functionally identical to financial and marketing industries such as banking, insurance and demography.  Banks set the price of money based on the probability that you can pay it back (credit scores).  Insurance companies set the price on premiums based on the probability that you will experience a loss (actuarial data).  And Demographers predict what you will buy and who you will vote for. After all, a Bank is really just a game that bets that you will win and an insurance company bets that you will lose, and demographics keeps the game, well, unfair.  But together, they all hedge each other’s risk, not yours.

#### Watch The Integration, closely

From prior articles; The Travel industry is a proxy for how and where ideas are spread.  The Coupon Industry influences human behavior to accelerate the disruptive innovation and to create new value simultaneously. The Gaming Industry will define the rules by which the new game will be played and provide the ability to predict when, where, and how to value social capital. When the integrated is complete, the ability to capitalize and securitize a new social currency (next article) will emerge to hedge, and then replace, the dollar.

Game over.

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(Editor’s note: The above post is #4 in a series [1][2][3][4][5] introducing The Value Game to a new class of business methods.  The first real world application is Social Flights; a collaborative production / consumption game being deployed to the market.  If this works, the new business method class will be generalized throughout the economy to catalyze the convertibility of social currency.  Please join us at The Future of Money and Technology Summit in San Francisco on february 28th 2011 where we will unveil the work to the technology community)

### Future of Banking

When I use the term “Innovation Bank”, people conjure up the image of a cheery place where anticipation reigns as starry eyed depositors arrange their intellectual property in neat cubby boxes, Patents fly like cash register receipts and companies troll the halls looking for a cure for their bottom line blues.

This is not exactly what we have in mind, nor is it too far off either. An innovation Bank is simply a knowledge inventory that contains knowledge assets that exists in the format of a financial instrument and can be deployed for the purposes of increasing productivity.  In the process, it makes 10X more of itself every time it is deployed.  It mints its own money.

#### The Innovation Banker

This is not much different than a financial bank. In fact, in the financial bank, everyone assumes the borrower has the knowledge to execute the business plan and the bank lends the money. Oh, by the way, the money makes more of itself  10X over (fractional reserve system) every time it is deployed.

With the innovation bank, everyone assumes the entrepreneur has the money to execute the plan, and the seek to borrow the knowledge. Other than that, they can be considered identical. The key is in the scope, depth, and format in which the knowledge assets live in a community as well as the ability to track and preserve the creation of new knowledge in a community.  An innovation banker is a knowledge banker

#### A Virtuous Circle

Together with the financial banking, these two system engage in the dance of the virtuous circle of innovation enterprise. Apart, they collapse into the swirling cesspool of eternal debt and infinite interest (pun intended).

Ingenesist.com

Music by Phil Felicia

### Mathematics Dysfunction Disorder

I am continuously astonished at the reactions I get from people every time I make a reference to mathematics, especially Calculus. Most people politely glaze their eyes over and stare at an inanimate object somewhere behind my head. Others launch into a diatribe of how the linear thinkers destroyed the world in the first place. Others will simply say, “I have [insert Deficit Dysfunction Disorder here]”

### Puzzled by Limits?  Perplexed by derivatives?

The truth of the matter is that everyone already knows Calculus, they solve differential equations all day long – they just don’t know that they already know what I’m talking about.  If you take away all the strange terms, squiggly lines, and alphabet soup notation,….

### Calculus is astonishingly simple

• The Banker does not care about money, he cares about the rate of change of money.
• The Stock Market does not care about risk, it cares about the rate of change of risk
• The Meteorologist does not care about weather, she cares about the rate of change in weather
• The Pilot does not care about lift, they care about the rate of change of lift
• The Gymnast does not care about motion, she cares about the rate of change of motion
• The Artist does not care about color, he cares about the rate of change of color
• The Baker does not care about dough, they care about the rate of change of dough
• The Farmer does not care about crops, he cares about the rate of change of crops
• The Scientists does not care about data, they care about the rate of change of data
• Entrepreneurs do not care about knowledge, they care about the rate of change of knowledge
• Markets do not care about innovation, they care about the rate of change of innovation
• Our children do not care about our wisdom, they care about our rate of change of wisdom

When people can learn how to understand what they are really doing in instead of what they think they are doing, then and only then, will we be able to see, and subsequently, build the next economic paradigm.  That is why I use mathematics and that is when Social Media Becomes a Science

### The Capitalist does not care about value, they care about the rate of change of value

The following question appeared on a Linkedin Forum that I follow:

Complete this sentence: The ONE factor that is MOST important to innovation is… and here’s why…

I have said this in a few blog posts and I’ll say it again here: The current definition for “innovation” may be the single most disastrous eliminator of innovation.

Innovation Suicide:

Yeah, it kills itself. Really, look it up – it’s a horrible cacophony of buzz bits and weasel speak that amount to nothing more than “Ya know it when ya see it”.

Any definition is supposed to give the reader enough information to duplicate, recognize, and identify instances of the subject – Preferably before the event has ended. Think about it – if the definition for Innovation were clear, nobody would be asking this question.

I am always amazed at how simple the answers to complex questions – and how complex the answer to simple questions – can often be.

Question: THE ONE: Complete this sentence: The ONE factor that is MOST important to innovation is… and here’s why…

My Answer: The Definition of Innovation

Here is why:

Information, knowledge, and innovation are obviously related to each other.

1. You can’t have one without the other two.
2. If you cannot measure one, you cannot measure the other two.
3. where all three are integrated, the system becomes efficient.

Yet, the definitions of each term do not include the other two. Therefore, the current definition of innovation is insufficient to describe the condition. That is why this is the ONE most important factor.

Let me prescribe the following analogy; distance, velocity, and acceleration are obviously related.

1. You cannot have one without the other two.
2. If you cannot measure one, you cannot measure the other two.
3. where all three are integrated, the system is efficient.

This is because distance is the point between two facts, velocity is the rate at which the distance between two points changes. Acceleration is the rate at which the velocity of travel between two points changes.

Therefore let’s re-define innovation as follows:

Information are facts and data. Knowledge is defined by rate of change of information. Finally, innovation is defined by the rate of change of knowledge in a community.

If we can accept this definition, everything changes. Seriously, everything changes.

Now, that’s Innovation!!!

* note: If you are familiar with differential Calculus you may see how a new economic paradigm may arise from this algorithm.

Yes, we know that social media is humongous. Yeah, we’ve all heard the 10 amazing ways to “fill-in-the-blank”. Nope, you are still not allowed to shove your products down the consumer’s throat until you have earned their trust.

Now, all of a sudden, a new idea is emerging…it’s barely an audible chirp, but it will become a tectonic rumble before long:

Social Media is beginning to take on the characteristics of a Financial Instrument.

This is a stunning development with vast implications. Allow me to interpret this excellent article by the respected visionary, Brian Solis, as a basis for my argument.

One thing that everyone can agree on is that “information”, “knowledge”, and “innovation” are related somehow. The problem is that nobody can agree about exactly how they are related. None of the definitions for these terms include the adjacent terms and no algorithm exists which performs the conversions, until now.

Now comes the interesting observation:

They say that Google ranking represents a proxy for knowledge in a knowledge economy. What they mean to say is that the rate of change of information with respect to time can be used as a proxy for real-time knowledge. This is a valid idea because Google organizes the World’s information based on time rates of change of the Information.

Yet “knowledge” can only exist between the ears of breathing, thinking, creating, and acting human beings – one important component for which Brian expands the term “Social Capital”. If we carry his observation one step upstream, we should be able to also say that the rate of change of Social Capital (a component of “knowledge”) with respect to time is a proxy for real-time innovation.

Now this idea should be pegging seismographs and flooding the Valley with the ensuing tidal wave of glee. The implication is that we can now identify and organize innovation by simply measuring the rate of change of knowledge with respect to time that an enterprise induces among social networks in a market. Alas, we can now see the direct Integration of Social Media into the business plan.

Calculus is the science of change.

Definitions are fluid, they must change. Brian Solis has, in fact, introduced the construction of what scientists call a “differential equation”. Much like “distance, velocity, and acceleration” are all defined as a rate change of their adjacent term, so too will “information, knowledge and innovation” become defined.

Economics is the science of incentives

It should not go unnoticed that Bankers are scientists too and “money, interest rate, and market capitalization” are also related by the same calculus. This makes possible the miracles of capitalization, securitization, insurance, diversification of risk, options, hedge funds, etc… For better or for worse, Wall Street lives and dies by this algorithm and so do we.

Let me repeat; social media is taking on the characteristics of financial instruments.

Please, I hope that I am not alone in celebrating this historic moment. Few people may recognize this now, but mankind has just experienced an evolutionary leap in it’s understanding of it’s own nature. Bravo Brian, Bravo.

image credit

The knowledge economy is a completely different asset than the industrial revolution’s Land, labor, Capital economy. Yet, our modern accounting systems and even our definitions of terms such as innovation, work, employment, education, are built from industrial era or military logistic roots.

Modern Globalization is a system – it must be analyzed like a system. Data, Information, knowledge, and Innovation are profoundly related in a system. If you take away one of the components, the others become worthless.

When we outsource our knowledge economy, the innovation economy is exterminated. The Ingenesist project specifies an Innovation Economy built on social media which will capture the knowledge inventory of communities – let’s hope that we have not forgotten how to build an ….

The Earth changes – it always has and it always will.  The most interesting thing about Earth is not rock, it is rate of change of rock. Yet it is this rate of change in rock that created oceans, continents and geographical features.  The rate of change in the landscape is what created and affects all humanity; global warming not withstanding.

In fact, the rate at which things change is the root of all financial deals, social interactions, creative discovery, intellectual pursuit, even criminal activity.  All value is created and destroyed in response to the rate at which something changes.  Since change is relative to time, the rate of change is something, like death, and taxes, that you can bank on.

Money, Knowledge, and Power

As a corollary; the ability to measure rates of change in things is the ability to measure value.  The ability to cause rates of change is the ability to create or destroy value.  It is therefore in our interest to try and express our world in terms of rates of change.  For example:

1    Money, interest, and stock price are deeply related.  Therefore, the rate of change of money is related to interest.  The rate of change of interest is related to growth rate.  The change in growth is monetized through a public market for its stock.  Stock price affects money and the cycle continues.

2    Information, knowledge and innovation are deeply related.  Therefore, the rate of change of information is related to knowledge.  The rate of change of knowledge is related to innovation.  Innovation creates new information.  And, the cycle continues

3    Attention, attraction, affinity, audience, and action are deeply related to each other.  Therefore the rate of change of attention is related to attraction.  The rate of change of attraction is related to affinity, etc., until finally, the rate of change in action gets everyone’s attention.  And the cycle continues.

Achilles’ Octopus

There are a few problems however.  If you remove, corrupt, or disengage any of the components, the cycle fails.  To complicate matters further, our three examples are also related: money, knowledge, and audience; stock price, information, and action; etc.

Points of failure can occur at any part of the cycle and it is often difficult to identify which failure caused what effect.   Does a stock price fail because the public lost affinity or because information was corrupted?  Does an economy fail because there is no money to invest in innovation or because our society outsources its knowledge economy?  Does a school system fail to deliver the right knowledge to society because the stock market failed or because there is no public action?

Social Media and the next paradigm of economic development

Social media allows us to express the dynamics of our world in real time and at great speed.  Feedback loops are shorter and cause and effect can be more easily differentiated.  The data that will be generated through the integration of social media will allow entrepreneurs to identify rates of change of the rates of change! Armed with computer enabled search and analysis algorithms, they can mange these complex new relationships to create value for themselves and their community in a new era of social capitalism.  Social media is a higher order calculus.

It will take everyone to accomplish this together but we can create a new landscape for our Earth, ourselves, and our children’s future.   This is change we must bank on.

The Ingenesist Project was featured in this video for Social Media Connection Broadcast Network produced by Jay Deragon. This is the first of many videos that we will be producing in order to explain what the Ingenesist Project is and why it is so important.

The Innovation Economy is the next level of economic development following the knowledge economy.  It will not be induced by corporations, Wall Street, or even the Federal Government.  This is something that we must create for ourselves as a social movement.  Social Media will play a pivotal role in this next economic paradigm.

I would like to thank all of our contributors for their endless support.

The Office of the Relationship Economist of the United States:

President Obama said in his inaugural address;

“Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished”

This is true; so what changed?

Mr. Obama’s statement is profound; in a single stroke, he divorced human knowledge, talent, creativity, and intellect from dependency on the financial markets.  In one short statement, he reversed the old world order where economic growth drives relationships rather than relationships driving economic growth. Mr. Obama has made people tangible as financial instruments in their own right.  The language needed to change, only then could the relationships change and therefore, the economics.

Calculus: The Science of Change.

Change is everywhere.  The only thing certain is change itself. We vote for change we can believe in, we are aware of climate change, and we see the world constantly changing all around us. Each of these sentiments is an expression of the mathematical discipline of Calculus

Calculus got a bad rap with most of us in High School. Calculus has boring charts, funny symbols, strange sentences, and objects flying around in a frictionless space – nothing could be further from reality, so it seemed.  In reality, however, nothing could be simpler.  Early civilization noticed that seasons change over time. Farmers noticed that plants changed over time. Isaac Newton noticed that the speed of the apple changed over time as it fell.  Copernicus noticed that the location of the planets changed over time, etc.  We all notice and respond to change.

Economics: The science of Incentives:

Bankers noticed that the value of money could also change.  To lend money out for future repayment, there is a likelihood that something will change; good change, bad change, or no change. So, in order to avoid bad change and to keep good change, the lender charges “interest” on the money.  Interest represents the change of money over time – but not the reality of the change itself. Consequently, the change of money induced incentives for people to behave differently and this changed reality. For better and worse, reality reflected the incentives rather than the incentives reflecting reality.

The Language of Change:

Today our language is changing at an incredible speed – most words associated with the human condition have changed in definition over only a few decades ago. The words “relationship”, “society”, “marketing”, “innovation”, “media”, “democracy”, “productivity”, and many others, all have expanded meanings.  Now we need to create new words to describe new realities; Computer enabled society, Social Capitalism, Web 3.0, relationship economy, innovation economy.  What is the incentive?

Relationship: The Science of Communication

Now here is where Calculus gets complicated: If words are changing and communication is connected to the words, then communication is changing too.  If communication is changing, and productivity is connected to communication, then productivity is changing too. If productivity is changing, and the economy is connected to productivity, then the economy is changing too.

The Relationship Economy:

Just like money, the change in our relationships induces an incentive or disincentive to behave a certain way.  For better or worse, incentives will reflect reality rather than reality reflecting the incentibes.  That’s a game changer.