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Tag: engineer

Four Reasons Why Engineers and Scientists Need Their Own Blockchain

Image by Pete 😀 from Pixabay

Many blockchains exist for many reasons, but none are built for the purpose of discerning physical fact from digital fiction. Where other industries use blockchain to correct their flaws, a blockchain of engineers and scientists can amplify their superpowers. Our ability to leverage truth may be the most powerful tool available to shift political priorities toward resolving our most pressing Global challenges.

For almost a decade, we have been writing about how four important aspects of blockchain technology could create thousands of times more value if applied to the engineering and scientific professions rather than the financial industry. We have also been amazed by the early ambivalence, reluctance, and often visceral resistance among some professional engineering societies, educational institutions, and engineering enterprise leaders, toward this technology.

Engineers and scientists need to reorganize ourselves fast if we are to have any expectation of pulling out of our flaming planetary tailspin of social, monetary, and ecological unrest.

The Thing That Happened.

Blockchain blew onto the scene with the Bitcoin white paper published in 2008. This technology was coincident with the 2008 financial crisis which had exposed near-fatal structural vulnerabilities in our financial system — going so far as to suggest a new form of currency could be developed. Blockchain introduced the idea of immutability to the financial system where laws had failed, thus code as law became the mantra.

An essential part of this arrangement is that there must be no overarching organization that can act against the consensus of the entire community and alter any transaction after the fact. This is broadly called “decentralization”. This puts many financial transactions at odds with governments who enforce laws (i.e., law is law). That struggle continues.

1. Immutability is our superpower.

Unlike the financial industries, engineers and scientist are abundantly familiar with immutability. You can’t return the lumber to the forest. An airplane can’t be un-crashed. You can’t un-pour concrete. In fact, all scientific processes are irreversible – that is what entropy is all about. In effect, blockchain would be far better suited to represent the immutability of the underlying asset rather than the flimsy paper that represents said asset. This makes more sense.

2. Engineers and Scientists are Already Decentralized.

Earlier, I complained about about resistance by the engineering institutions. What if this flaw is actually a feature? The experience taught us that there is no singular engineering or scientific authority that can sufficiently control or enforce its will on any of the others. Rather, we found engineers and scientists to be sequestered behind a multitude of organizational silos such as corporations, professional societies, ontologies, jurisdiction, national boundaries, academic titles, etc. Even if they wanted to change, they could not find each other to do so. It is no wonder that intellectual capital is called “Intangible” on a corporate balance sheet. In effect, the engineering and scientific professions are already decentralized. All we need to do is measure ourselves into a “tangible” existence.

3. Widespread Consensus Already Exists.

There is likely no greater consensus in human civilization than the laws of Nature. Every Noun on Earth is subject to these laws without exception. The scientific method, considered the greatest innovation in human history, provides us with a means to update, modify, correct, and replace old consensus with renewed consensus. Everything else can be expressed as the probability that a consensus exists. The scientific method is able to defend against failures in a manner not unlike the Byzantine General’s problem upon which much cryptography is based.

4. A Stable and Convertible Token

Money represents productivity as measured by Gross Domestic Product. Dollars represent American productivity, Yen represent Japanese productivity, etc. Yet nearly 80% of all increases in GDP can be attributed to technological change. This is the domain of engineers and scientists. Therefore, a token representing engineering and scientific productivity also directly represents GDP. In other words, we can print money.

Here’s the Good News

Blockchain technology was invented by engineers as a direct analogy of the engineering process – not finance. This is actually very good news because nobody controls a monopoly on intellectual capital which must be fought, beaten, and dismantled in order for engineers and scientists to reorganize. Engineers and scientists can build their own blockchain that represents their work-product and govern the presentation of physical fact over digital fiction. Engineers can exist with out Blockchain but blockchain can’t exist without engineers. This is a game we can easily win.

A Blockchain Of Engineers and Scientists

Financial products are fictitious representations of real things and therefore easily manipulated into many forms while the asset that they represent remains physically unchanged (suitably called “hypothecation”). There exists a powerful technology that is abundant and cheap and that can directly express physical fact as a monetary unit rather than financial fiction.

If we work together, global engineers and scientists can simply walk onto the economic landscape unchallenged to begin altering the development priorities for the World. No kidding. Again, there is nothing standing in our way, except our own unwillingness to change. This may be the most important opportunities that has ever been presented to the Sciences.

Please, let’s not squander it.

Please read this important paper:

The Innovation Bank and the Decentralization of The Engineering and Scientific Professions

Blockchain Is Better for Engineering. Global Engineers and Scientists must adopt Blockchain Technology to directly enforce physical fact over financial fiction.

25

Blockchain and NAFTA May Have a Lot in Common

nafta-crossingAnyone who was around in the early 1990’s may remember the mantra of modern globalization was that centralized markets were bad and decentralized markets were good. Fast forward to 2016 and blockchain technology: centralized ledgers are bad decentralized ledgers are good.  Does this sound familiar?  Blockchain and NAFTA may have a lot in common. The good news is that perhaps this new world is not quite as uncharted as it now appears.

Coinciding with the end of the Cold War, we can now look back at NAFTA as the Big Bang of modern globalization.  The supporting calculus is credited largely to the ‘theory’ of Comparative Advantage;  an economic thesis referring to the ability of any given economic actor to produce goods and services at a lower opportunity cost than other economic actors. The idea first appeared in 1817 in a book by English economist David Ricardo, “Principles of Political Economy and Taxation”  David Recardo’s ideas still serve as the logical basis of international trade. The efficiency of this economic model were at the time, and still are, indisputable.

Further back, the 15th Century concept of Laissez-Faire is an economic system in which transactions between private parties are free from government interference.  Meanwhile, the “invisible hand” was a term first used by Adam Smith to describe the unintended social benefits of individual actions.  These ideas formed the cornerstones of modern Capitalism – the decentralization movement of a prior era.  Indeed, Capitalism solved a great many human problems while arguably ushering into existence new, and possibly more perilous problems such mass political instability, financial crises, and even climate change.  Now, the advent of bitcoin claims to solve many of these problems.  This begs the question, what new problems will be created after 25 years of blockchain technology?

More importantly, perhaps this connection to a large body of precedence (if we are clever) can guide us to a different set of outcomes than prior decentralization technologies.  This is an important and timely question given the blockchain technology, due to the Network Effect, is exponentially more powerful than the relatively linear Law of Comparative Advantage.

Lessons Learned

I was involved with developing standards for the mutual recognition of engineering professionals between US, Canada, and Mexico back in 1993-1996.  What made NAFTA different, and hence “modern”, was an inclusion of free trade in services sector.  These included financial services like banking and insurance as well as professional service providers from engineers to librarians.  Essentially NAFTA attempted to treat intangible value directly as a tangible object for international trade.  Still a problem yet to be solved.

At the time however, the mutual recognition of professional engineers was controversial and divisive. The US engineers were fearful that they would lose their high paying jobs to cheap Mexican engineers, whose salaries were about 1/10 the US engineering salary.   A “giant sucking sound” was the popular phrase coined by a billionaire presidential candidate at the time.  The fear was made very real for many people, not unlike the immigration debate that continues to rage today.

I saw something different.

In Mexico, I saw an entire nation – an entire continent – that needed everything that US engineers create. Mexico, Central America, and South America needed roads, bridges, structures, water, energy, and every manner of infrastructure upon which free markets utterly depend.  Since NAFTA also liberalized trade in financial services, that meant that economic development could be financed at low cost of capital.  In my youthful idealism, I felt that the opportunities for engineers from all countries was beyond extraordinary – to me, it was specifically the rising tide of basic infrastructure that would float all boats.  Unfortunately, this opportunity was woefully squandered.   Let me explain.

In the US, and many developed countries, the professional engineering licensure laws assure transparency, consensus, and economic incentives that rewards high integrity rather than low integrity among engineers and contractors who carry such licensure.  When the PE stamp is indelibly attached to the project plans, the asset that is described by those plans is held in suspension on the balance sheet during the design and construction phase. This span of time is when the highest monetary risks and technical risks occurs.  Insurance companies depend heavily on engineers to verify the design, materials, processes, components, chronological order and performance of all components of the systems that they insure.  Where risk can be transferred to insurance, the cost of capital can be minimized.

The problem with the NAFTA Mutual Recognition Standards for engineers was that the three negotiating bodies for the US, Canada, and Mexico failed to reach an agreement over reciprocity of the other member’s licensure model and instead defaulted to the highest common denominator which fell far short of practicality while also failing to meet the conditions of insurability, especially for Mexico.  As such, infrastructure projects could not be financed for lack of licensed engineers in the relevant NAFTA jurisdictions. This was not for lack of money because NAFTA also liberated access to financial services – but for lack of insurance. Without a tip-to-toe insurance presence, Latin American economies continue to experience difficulties in bridging the capitalization gap.  Innocent people suffer.

Many trade agreement that followed NAFTA would go on to include free trade in services, and also inherit this flaw capitalization of infrastructure for lack of Global Engineers.  Unfortunately, mutual recognition of engineers would be stopped cold at the borders for lack of insurance.   Many of the problems associated with globalization today, in my opinion, can be attributed to the failure of the NAFTA Mutual Recognition Document for Professional Engineers.  We have an opportunity to correct this flaw and it is imperative that we do so.

To centralize, decentralize, or re-centralize. 

While the economic theories of decentralization are sound, the intended outcome has been elusive.  Instead of converting from centralized serfdom to the invisible hand of freedom, we keep inventing new forms of re-centralization where one centralized system is traded for another under the auspice of decentralization!  The danger is that blockchain technology will not reach its potential of economic freedom for all, rather, it will simply become another form of mechanization that replaces people with machines.  A decentralized solution will require the integration of machines with people.  That means we need to augment human capacity not “surplus” it.

Blockchain technology replaces some – but not all – of the decisions that a human administrator makes.  It will be important to look at bureaucratic processes and accurately discern what can go to a blockchain and what must remain in human judgement.  The current markers of re-centralization include so-called permissioned ledgers to replace back office workers.  Permissioned by whom? A centralized authority? The running joke in the cryptocurrency space is that any effort to control a decentralized system quickly cancels out the advantages of having one in the first place.  Re-centralization is dangerous.

Instead, the integration of humans and blockchains should take a hybrid approach where humans serve as adjudicators to the blockchain machinery pointing smart contracts toward the intended outcome at specific points of risk transfer.  Eventually, a means to decentralize the human adjudicators will be required so that they cannot be corrupted.  One such solution is proposed by The Ingenesist Project.  It is called Curiosumé and it converts a CV to cryptography so that holders can lock contracts to a blockchain quasi-anonymously.

The consortium between engineering and insurance is a critical development in the current evolution in blockchain technology and is required to break the cycle of recentralization by expanding the insurance capacity of our financial system to a fundamental storage of value – public infrastructure.  We need to learn how to convert existing engineering and construction contracts into blockchain adjudicated smart contracts. We need to figure out how to decentralize the adjudicators in a fault tolerant system that cannot be easily corrupted, thus providing for optimal allocation of public and natural resources.  Then we need to expand the adjudication system to all other service professionals who also serve the needs of our human markets.  The resulting cryptocurrency will have intrinsic properties that people will be willing to trade. In this manner, the cost of capital will be lowest for the most proper allocation of resources required by an increasingly crowded planet.

(Adapted from; Insurance: The Highest and Best Use of Blockchain Technology, D.Robles, July 2016 National Center for Insurance Policy and Research / National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf)

 

Zertify Zillow Zestimates On Blockchain

zertify zillow zestimate on blockchain Big Problem with Zillow Zestimates:

Perhaps the best example of metadata being imposed upon an unwary public is the “Zillow Zestimate”.  Zillow.com is a real estate website that aggregates public information and boldly publishes the value of your personal property while quietly disclaiming that invalidity of their own valuation.  In all fairness, RedFin.com and Trulia.com also provide similarly structured valuations of your most valuable asset with no physical verification. The slightest misrepresentation could cost the homeowner tens of thousands of dollars for which there is absolutely no recourse.

According to Homevisor.com: if your house (or a house you are looking to buy) has a Zestimate of $300,000 – there is almost a 25% chance that the house will sell for less than $240,000 or more than $360,000. That is a pretty wide margin of error. 

There must be a way to Zertify Zilliow Zestimates on blockchain

Implications:

The result is that responsible homeowners who have conscientiously maintained and improved their property at great expense of time and money may be punished in a market while those who neglected their properties may be overly rewarded.  Neither the buyer nor the seller has any way of inspecting comparable homes used by Zillow.  This causes market distortion that affects the buyer, the seller, and the community at large.

Root Cause:

Zillow, Trulia, and RedFin all scan from public data sources.  The problem is that there is no trusted public ledger where owners can register valuable improvements and amenities that may dramatically impact the value – and which lower the risk of owning a particular property.  If such a trusted ledger did exist, it is certain that data scrapers such as Zillow, Trulia, and RedFin would be happy to scrape the data at no marginal cost.

Solution:

An organization such as the National Society of Professional Engineers has sufficient authority to provide a blockchain based ledger where a licensed professional engineer could physically review major components of a property including structural, plumbing, electrical, envelope, energy efficiency, HVAC, Solar Installations, mold, corrosion, critical slope, tree liabilities, view amenities, etc., and formulate an annual cost of ownership statement (ACOS) over a standard period of time.  The licensed engineer will register the ACOS, along with recent remodeling permits filed with the city, on the NSPE blockchain where it may be accessed by Zillow, Redfin, Trulia, MLS, banks, insurance, and the public, etc.

Value Proposition:

The ACOS and the Professional Engineering condition assessment could be provided to owners for a flat fee or subscription fee with a ROI greater than 10:1. This means that viability threshold for engineering assessment is defined as adding more than 10,000 dollars to the average sales price of the property for every 1000 dollars that the homeowner spends on the engineering report.  Owners that don’t meet this minimum threshold would not benefit from an ACOS and could not be listed on the NSPE Registry.

Size of market:

Assuming that there are about 100 million private homes in the US.  The percentage of under-valued homes that would benefit from a 10:1 PE registry are characterized at over +1 standard deviation on a bell curve distribution and higher.  This is roughly equivalent to 14% of 100 million, or approximately 14 million properties.  If each of those spends a minimum of  $1000 dollars for assessments, the value of the market would exceed $1.4B dollars. According to Homevisor.com estimates, the market would bear an engineering cost of $6000 yielding a $60,000 ROI, or roughly a $10B dollar market.

Conclusion:

Such a blockchain would safeguard the health and welfare of people and property while increasing  the visibility of professional engineers as a public financial institution with real financial impact.  The NSPE data would reduce volatility in banking and insurance ledgers so that pricing becomes more efficient. Real Estate professionals, renovation contractors, and real estate appraisers would also benefit from the registry by delivering the right product to the right client at the right time. It will increase the demand for a retail professional engineering sector to defend the technical best interest of society.  It will signal high integrity rather than low integrity to the preventive maintenance market.  Most importantly, the homeowners who maintain their property and those who will buy those properties benefit from fair market assessment of property values at a far greater utility than the typical point-of-sale home inspection.

Notes:

  • The ideas presented here are the sole creation of the author and not meant to reflect the intentions or interests of the National Society of Professional Engineers, Zillow, or any other referenced entity. 
  • Zertify takes its name from a portmanteau between the word certify and the statistical z-test https://en.wikipedia.org/wiki/Z-test

Bitcoin Protocol Impact on the Engineering Profession

I will be delivering a very serious presentation at the Nation Society of Professional Engineers Annual Conference on July 2015 in Seattle.  My point will be crystal clear. Money must represent human productivity. Period. The base layer of any economy is a nation’s infrastructure.  As such, any new Cryptocurrency MUST be associated with the engineering domain otherwise it is equal to any other financial derivative whose value is also ultimately dependent on the value of engineered infrastructure.

It’s time to stop the poetry and time start building a civilization we can all be proud of.  It is time to build Curiosumé

Bitcoin Protocol Impact on the Engineering Profession

Abstract: 

The Bitcoin Protocol and Future Currency Impact on the Engineering Profession

In a Wall Street Journal essay, two authors wrote, “The digital currency known as bitcoin is only six years old, and many of its critics are already declaring it dead. But such dire predictions miss a far more important point: Whether bitcoin survives or not, the technology underlying it is here to stay.” This session will cover what digital currency means for the engineering profession.

“Decentralization” is a term being applied to platforms that use the Blockchain Protocol pioneered by Satoshi Nakamoto, the inventor of Bitcoin.  As a cryptographic currency, Bitcoin remains problematic.  However, as an algorithmic protocol, blockchain technology will enable society to cheaply perform common business processes that are now controlled by institutions such as banks, insurance companies, corporations, government, etc.  Today, rapidly emerging platforms are under development to bring “smart contracts” (algorithms based on blockchain technology) into the mainstream.  

An important and essential variant of smart contracts is called an “Adjudicated Smart Contract” that requires an independent 3rd party adjudicator that would “flip the switch” on algorithmic agreements in finance, insurance, and decisions of governance.  There is a staggering opportunity ahead for the engineering profession to position itself for the role of the adjudicator in a wide variety of important and high value transactions.  The caveat is that we too must change the way that we organize ourselves.   

This presentation, Decentralizing the Engineering Profession, begins with the failure of the NAFTA MRD followed by an introduction to blockchain technologies, and ending with specifications on how our profession can jump to the top of the value chain in the era of Social Capitalism – if, and only if, [the engineering profession] can choose to change.  

Date:

Thursday, July 16, 2015
Start Time: 3:15 pm
End Time: 4:15 pm
Number of PDHs: 1
Speaker: Dan Robles, P.E.
REF:

Bitcoin Protocol Impact on the Engineering Profession

The Conjuring of Intangible Values

Conjure valueMy prior post “The Tale of Two Cities” demonstrates that the intangible social value conjured into existence by the bridge that connects two fair cities far exceeds the ‘tangible’ value of that bridge.  Yet, only the tangible value of the bridge is accounted for on a balance sheet such as GDP.

The Conjuring of Intangible Values

This may seem trivial until you observe that people are paid for their intangible assets (knowledge, creativity, and engineering calculations) as a percentage of the far lower number while the bankers, government, and corporate interests compensate themselves as a percentage of the far higher number.  The difference appears to be unaccounted for.

The Tail of Two Cities article concludes that the value that is conjured into existence by both the bridge and the fractional reserve system must be equal, by definition; otherwise the metaphorical breezeway that connects the two worlds would fall.

Bitcoin suffers from a similar curse as The Tail of Two Cities.  The prevailing argument against the crypto-currency is that it has no intrinsic value.  I have personally argued that a currency must represent human productivity intrinsically or else no other human would be willing to work (be productive) in exchange for it.  An article by Paul Bohm “The Value Of Bitcoin is Decentralization” makes a good point that the intrinsic value of Bitcoin is based on the value conjured into existence by increased productivity to society by what can be accomplished with Bitcoin that otherwise would be impossible without Bitcoin.

So if the valuation of a bridge crossing the river and the valuation of Bitcoin crossing the broker both suffer the same curse that there is no accounting system for intangibles, wouldn’t it make sense to solve that problem first  – i.e., measure into existence the intangible value of the Ingenesist – and then release those millions of human intentions (bridges and Crypto-currencies, not withstanding), into the system of trade?  This is the problem that Curiosumé proposes to resolve.

I believe that we first need to solve the under-mining problem that there is no accounting system for intangible assets.  Only then can there be intrinsic value in the conservation of those assets

… then maybe none of this would seem so mysterious.

The Mother of All Hedge Funds

Money is supposed to represent human productivity; otherwise nobody would work for it (think about that for a second).

Today, money is created from future productivity in the form of debt;  when you take a loan, money is created out of thin air and posted as an asset on the banks ledger.  Unfortunately, the money required to pay interest is never created at all, which drives eternal scarcity.

What Happens Next:

Through the miracles of the fractional reserve system and high finance; money gets thrown into a blender where it is then divorced from the productivity of those who create it, and is converted to exotic financial instruments that bet for or against the future productivity of the future productivity of the future productivity, etc – in both Calculus and Finance, these are called derivatives.

Why does it still work?

So the question becomes; if money does not represent productivity, then why do people still work for it? Well, there is no other alternative to money as we know it.

Then came … and went … Bitcoin;

Bitcoin is all the rage because it behaved sort of like a currency – it had many of the desirable characteristics for the storage, exchange, and unit of account for value. But something about it didn’t sit right with society in general – most people aren’t willing to work in exchange for it.

Bitcoin has 3 fatal flaws:

  1. Bitcoin does not represent human productivity.
  2. The total available Bitcoins were highly concentrated among a very few people.
  3. Bitcoin are speculative in value.

Many words have been committed to these topics so I’ll leave a deeper understanding to the reader to research on their own.  However, we can now ask the question;

What if a virtual currency could be designed that does represent human productivity, is widely distributed among the users, and empowered by those who interact with it?

 

Consider an Engineering Backed Currency:

Let’s consider an engineering backed currency and the existing institution of the National Society of Professional Engineers (NSPE)

 Condition 1: Engineering works increase human productivity in the form of roads, bridges, machinery, energy, clean water, sanitation, and generalized problem solving.  A currency backed by engineering would invariably be backed by human productivity thereby satisfying condition #1.

Condition 2:  Suppose that upon paying their 300 dollar dues to the National Society of Professional Engineers, the NSPE Knowledge Bank issues 3000 NSPE Bucks, a virtual currency, to the member so that any member can trade with any other member for the purposes of learning, teaching, and collaboration (don’t worry yet about the technical challenges of doing this).

If any member gets stuck on a project, or they need to understand new technologies, or are looking for complementary knowledge, they can compensate another engineer in the NSPE Technical Network using NSPE Bucks.  Young engineers can teach seniors about new tech, social media, hot mobile apps, and seniors can teach young engineers about nuances of engineering practice, etc., all in exchange for NSPE-Bucks.  NSPE bucks will become evenly distributed thereby satisfying condition #2.

 Condition 3: The NSPE Bucks act as a form of insurance.  If an engineer gets stuck on a project or needs a review of their work or intersects another discipline, they can get rapid and effective support across a vast network of knowledge assets in the profession.  An engineer may be empowered to interact with their peers and innovate in their careers knowing that the wisdom and experience of their peers is mutually accessible.  As such, condition number 3 is met.

Hold on to your seat – this last point will blow you away:

Innovation is the domain of engineering – the two words are synonymous.  People innovate today for the purpose of increasing productivity in the future.  Remember, debt is also a currency backed by future productivity.  Therefore, when you have two currencies that are backed by the EXACT same underlying asset, they are fully convertible on an open exchange.  So NSPE bucks can be easily converted back to dollars or simply traded broadly in a market.

The Mother of All Hedge Funds

As the dollar weakens in scarcity, the NSPE Buck will strengthen in abundance, value will be preserved in the works of engineering that are created. In fact, an engineering backed currency would hedge the dollar as it weaken in it’s ability to maintain infrastructure, build schools, solve climate problems, and provide for the safety health and welfare of people and property.

There is no shortage of work to do and there is no shortage of innovation – there is only a shortage of money.  If Banks can print money out of thin air, why can’t engineers?

 

 

 

 

What EVERY Engineer Must Know About Bitcoin

engineering-image-17A bitcoin (lowercase b), as a currency, has several flaws that will continue to limit its ability to replace money as we know it.  There are millions of words published on the subject, so I’ll leave it to the reader to assess arguments on both sides.  However, Bitcoin (upper case B) as a “protocol” for the transfer of value is an extremely important innovation that engineers must not ignore.  

The opportunities for the profession are sweeping and vast, but only if they take action and build this ecosystem their selves – it is so powerful, that others will gladly do it for them.   I will try to explain this opportunity in this short 1125 word article, but please feel free to contact me with in-depth questions.

The Block Chain Protocol

The Bitcoin protocol is a brilliant innovation that cannot be un-invented – it is here to stay and it will appear in many forms long after it sheds the “bitcoin” moniker.   Formally called the Block Chain protocol,  Bitcoin was designed to solve an age old problem of double spending a currency, specifically, a virtual currency.   A currency created on a computer can be easily copied by a computer and thus negates the real productivity that a currency is supposed to represent.   The same is still true for money – paper currency is becoming increasingly complex so that it cannot be easily copied, etc.

Today, there are vast institutions from banks, corporations, a legal system, prison system, and unfathomable volumes of legislation (all imposing respective brokerage fees) acting on the behalf of sanctifying the dollar.  However, volatility in these very institutions is what threatens the value of the dollar and all currencies upon which the World depends for very basic needs.  How well is this working, really?

So, What’s the big deal?

The stakes are high.  To invent a new secure and resilient means to rapidly transmit value can in one fell swoop eliminate the friction of the massive institutions on our economy, while also decreasing the volatility and economic friction imposed on society.   This is the reason behind the media hype, congressional hearings, declarations of nations, billionaire press conferences, etc.  They are all scared to death of the disruptive potential of this little beast.  Unfortunately, bitcoin has fallen victim to many of the same deficiencies that it proposes to correct.  But these will likely be corrected in the next iterations.   

The Train Leaves The Station

The backbone of the Bitcoin protocol is called the Block Chain.  There are now hundreds if not thousands of Block Chains in existence independent of Bitcoin.  Consider the Block Chain like going down to the train station.  At some predetermined time, a train arrives and the doors open.  Everyone piles into the train and after a predetermined amount of time, the doors close.  The corollary is that the doors cannot be opened for a predetermined amount of time and no changes, copies, or corruption can take place within that time stamp, no matter what.  Only when the train reaches the next location, the doors will open. Once the doors close for a second time, they never open again and a new block is formed.  Also, there is no way to retract this process, except by repeating it forward in a reverse transaction.     

The protocol has a few more features that I’ll leave to the reader to research including a public ledger where all transactions are open for everyone to see; and the train gets infinitely long with each new opening.  The transactions are opened and sealed cryptograpically and incentives are in place that compensates exchanges (the station masters) and well as those who solve a cryptographic puzzle that creates and maintains the integrity of the public ledger (miners).  

Smart Contracts

Everyone knows that money and contracts are intimately related.  In fact, money is a contract.  A contract is defined as a meeting of the minds.  As such, where the Block Chain protocol can efficiently transmit “currency”, so too can it transmit contracts.  In fact, it is so effective for articulating contracts that it’s potential to do so far eclipses its ability to replace the existing fiat currencies.  But again, money and contracts are so closely related that even this becomes a grey area – both can exist within the Block Chain.  This is hugely significant.     

So what’s in it for the Engineering profession? 

There is a special type of contract that engineering societies such as the NSPE, ASME, IEEE, etc., should have a laser focus.  These are called Oracle Contracts; also known as adjudicated contracts, (except subject to scientific judgement rather than necessarily a judgement of law).  For example, a client would retain a contractor to build a structure or machinery.  They would deposit funds into an escrow account managed by “smart contract” in a block chain.  This means that the computer will flip the switches instead of an accountant, banker, or attorney.  At certain points in contract and “oracle” – a third party vetting mechanism – will verify that the conditions or performance of the agreement have been met, then they would flip a switch that releases the funds to the contractor or back to the client (or through a predetermined decision tree), depending on objective observation.  

It’s All About Efficiency

This is efficient for the contractor because they don’t have to worry about getting paid as long as they meet the conditions of the contract. The client does not need to worry about getting ripped off because they are assured that the conditions of their agreement will be met.  The system is efficient because high integrity is rewarded and there is little incentive to cheat which minimizes lawyers,  accountants, social dysfunction, and all manners of corruption in a public ledger that provides extraordinary analytics available for societal learning in the public domain. 

For the vast majority of projects, products, or policies in the United States and the world, a licensed professional engineer and related scientific bodies are the ONLY qualified Oracles that can be deployed to vet an astonishing variety of Smart Contracts.

Smart Contracts can be written for almost any transaction, but it is inherently an intangible transaction since a “meeting of the minds” is the true nature of the value that they articulate.  The implications of an abundant intangible economy vs. a scarce tangible economy are vast.  Silicon Valley is pumping millions of dollars into virtual currency start-ups like Ripple Labs while companies such as Ethereum  promise to make smart contracts on public ledger block chains as easy to build as dragging and dropping puzzle pieces into a web page.  This is here today – it is not a theory.

Banks, insurance companies, and attorneys will be the first to adopt smart contracts because they stand the most to lose by not doing so.  Meanwhile, engineers in the US and indeed the World are relegated to the contractor sweatshops or smothered under the weight of towering hierarchies. Tragedies such as the Oso landslide and global warming remind us of the absence of engineering oracles advocating for society and our planet.  It is imperative, now, that engineers embrace Block Chain Protocol Technologies and the deployment of Smart Contracts to elevate the profession to the top of the proverbial food chain before there someone else does it for them.       

Growth Beats Austerity 100 to 1

Bridge Over Troubled Water - by Cairn

Suppose a team of 10 engineers designs a bridge that spans a body of water connecting two small towns and cutting 1 hour off the alternate route for 14,000 people per day.  Over the 75-year life of that bridge, those 10 engineers are responsible for 380 Million hours of increased productivity.

At 25 dollars per hour per person whose time is saved, 10 engineers create nearly 10 billion dollars of NEW VALUE.  As such, only 100 engineers and a 10 bridges could create the same amount of New Value as Facebook is worth in an IPO.

Now compare the Old Value of the engineers.

Suppose that during the course of those same engineers’ careers, they could each borrow (capitalize) around 1 million dollars in personal debt for cars, homes, credit cards, and family education – debt that they would need in their lifetime.

By the miracles of the fractional reserve system, their 1 million dollars may be multiplied into 10 million dollars of new money available to the financial system for distribution.  As such, those same 100 engineers would be worth approximately 1 billion dollars as economic beings in the Old Value economy.

100:1 Ratio

So in review, 100 engineers are worth 100 billion in New Value versus only 1 Billion dollars in Old Value.  Of course, I purposely picked an example that would make the numbers come out all nice and orderly, but the most important point is that New Value leverages Old Value by several orders of magnitude.

Only two possible outcome of the global debt crisis.

1. The first is for all the countries of the world to get together and lop 3 zeros of the global accounts balance sheet and reboot.  As such; 40 Trillion dollars becomes a quaint and manageable 40 Billion dollars.  If it happens quickly, that’s called hyperinflation.  If it happens slowly, that is called Austerity.

2. The second outcome is currently raging in Europe today with austerity protests toppling governments in France and Greece with the idea of growth vs. austerity.  New candidates are promising to “grow” the economy out of its crisis.  While this may be a bold and populist idea that is sure to spread, nobody knows exactly how it will be implemented without triggering number 1.

The New Value Movement:

By making so called “intangibles” tangible, vast amounts of  New Value can be added to global accounts balances which could stave off wholesale collapse of the financial system.  This will not be without hardship for some people; social priorities must drive Wall Street priorities, not the other way around.

We don’t have a financial crisis, we have a value crisis.  One thing is emerging as a certainty, new value leverages old value by several orders of magnitude  and The Value Game provides the capitalist model to access this astonishing wealth creation  – in case anyone is wondering.

The Facebook Basket of Goods

Facebook does not produce anything.  Facebook sells personal information to advertisers. This is not to say that Facebook is not worth a lot of money, but it certainly deserves a little perspective.  In order for Facebook to be worth anything, people must be doing things, making things, and organizing things – otherwise, there would be no need for the utility that Facebook provides.

Consumer Value Index

In order for people to do things and make things, there needs to be basic infrastructure like energy, clean water, telecommunications, food,  roads, bridges, and airports.  There needs to be housing, education, and health care.  There needs to be an effective and fair legal system, equitable political representation, and civil decency.

Debt or Human Potential

Facebook adds value to the human productivity potential that already exists.  It is precisely that invisible human potential that seems to be worth most of the money that Facebook commands.  When we estimate a value of 100 Billion dollars for Facebook –  an astonishing 99 times their advertising revenue – we estimate that the market believes that intangible value exceeds tangible value by a factor of 100:1; versus, say, Apple at 16:1 or Google at 20:1

Nothing economic happens until people get together to make something

Charles Munger, CFO of Berkshire Hathaway uttered these deeply foreboding words at a conference at Seattle University in reference to the Enron debacle;

“it’s bad enough when we lose the accounting profession, but dear God help us if we lose the Engineers”.

Suppose a team of 10 engineers designs a bridge that spans a body of water cutting 1 hour off the alternate route for 14,000 people per day (connecting 2 small towns).  Over the 75-year life of that bridge, those 10 engineers are responsible for 380 Million hours of increased productivity. At 25 dollars per hour per person whose time is saved, 10 engineers create nearly 10 billion dollars of NEW VALUE.  As such, only 100 engineers could create the same amount of New Value as Facebook is worth in an IPO.

You are worth what is measured

We need to ask ourselves what is more efficient; making things that act as a proxy for the things that we are trying to sell, or measuring the real value of things that we make.  Perhaps Facebook would be worth 10 Trillion dollars on such a balance sheet.  Maybe Facebook would be worth nothing if true value were in fact measurable. Who knows?

Well, that’s exactly the problem – nobody knows.

Facebook acts as a proxy for human productivity, just like money is a proxy for productivity, but with no intrinsic value itself.  Perhaps this explains their Wall Street convertibility.  However, if we backed Facebook with New Value of human potential, rather than a basket of debt-able goods, perhaps we would not have a financial crisis to deal with, just a value crisis.

I wonder what Charlie Munger would say

Who is Awarding The Disruption Badge?

There are some big names getting involved with “badges”.  Modern ideas about badges arise from incentive used by the gaming community to indicate achievement.  Historically, however, badges are older than money itself. Recently, badges are gaining attention in the area of education as a means of indicating achievement.

Badges are steeped deep in our economy and culture

When people write their resume, they “badge” themselves with the names of the companies that they worked for and the schools they attended.  They badge themselves with the market brands of the products that they worked on.  They badge themselves with the trademarks of the technologies that they applied.

People even badge themselves with corporate ideals such that “chronology”, “reasons for leaving” and “no blank spaces” are somehow rational proxies for intellect, creativity, and team working skills. We need a behavior platform, kids. Passion, family, and purpose are merely business disruptions.

There are several directions that this can go

The first is the inevitable collusion between badges and branding.  I am still scratching my head over AMEX hijacking the “Social Currency” badge.  Other badges (or logos) are considered among the most valuable assets that a company can own from Microsoft certifications to the Chuck E Cheese Rat … badges have value – with their own branch of the legal profession to prove it.

The second direction can be quite disruptive to branding.  For example it can cost well over $100K to wear the Harvard “Badge”.  Meanwhile Steve Jobs literally ridiculed Stanford to their collective face(s) with the idea that diverse combinations of knowledge assets are what set the innovation enterprise apart from the old guard.

What if the college degree badge is irrelevant? 

Who is to say and engineer in not an engineer until they take on $2000 more debt for a course in Western Civ.  And, if not Western Civ., then what course denotes the ascension into engineerhood?   A physics major that rules video games, kite surfs, plays in a punk band, and writes decent code is equally, if not more likely, to create a new industry than someone with a CS degree from MIT. Where is that badge?

Badges should be disruptive

What happens when it is no longer important to have “Google” on your resume? Why is it so now? What happens when being a Princeton drop-out is no better or worse than being a drop out from State U?  What happens when people are recognized for their passions and the things that they are naturally good at?  How can a credit score extrapolate success from measuring failure? What happens when there is no badge for the color of one’s skin, physical appearance, or family connections.  What happens when Brands are accountable for the people who wear their badge instead of the other way around?

Badging already exists and in order to improve anything, badges must be disruptive.

So, who is awarding the disruption badges?   

 

Plenty of Work But Where Is The Knowledge?

Millions of people are looking for Jobs.  Meanwhile, employers complain of a chronic “skills mismatch” that prevents them from hiring people or initiating new innovations.

When an engineer is laid off from an airplane manufacturer, a company like Starbucks has no idea what that person knows even though aircraft and milk steamers have a great deal in common from the perspective of the Engineer (both are pressure vessels subject to extreme environmental conditions).

The same is true for a marine engineer, and HVAC engineer, or an electrostatic coating machinery engineer.  Each of these disciplines has far more in common than they have differences.  However, if you compare the descriptions for any of these jobs, they sound like they all happen on different planets.

God forbid you are not an expert on MS Excel, which only takes a few hours for almost anyone to learn – yet not tagging that radio button can negate 20 years of experience that only 1% of people have the desire, discipline, and intellect to achieve.

The same holds true for many talents and professions. There are serious problems with the way that we discern the supply and demand for knowledge assets.

What is needed is an intermediate knowledge inventory in the commons that everyone can index to.  So when an engineer tags “pressure vessels” the term registers into the resident ontology of all observers.

Why is this better?

Of course companies are trying to eliminate variance and risk by hiring a person who has been trained by someone else – preferable a direct competitor.  On the other hand, the mantra of modern business is to innovate.  Innovation does not happen by duplicating yesterday’s ideas. Mixing diverse combinations of knowledge assets, and not all common knowledge assets, accelerates the process of Innovation.  Think of all the music that is yet to be created for lack of musicians to play the different instruments.

An intermediate knowledge inventory solves both problems by allowing companies to introduce diverse knowledge assets without introducing irrelevant knowledge assets.  It also gives people far more mobility to pursue specialties that they are most talented and interested in.  As such, the allocation of knowledge assets would improve to match supply of knowledge with the demand for knowledge in an innovation economy.

There is not a shortage or work, only a shortage of knowledge about knowledge.  

The Geek Shall Inherit The Earth

Engineers are notoriously bad at organizing themselves – or maybe not. 

Engineers tend to stay to themselves and are rarely mentioned in the domains of media, politics, Hollywood, banking, medicine, or law.  Traditional engineering societies are weak and sparse.  Nobody even thinks about paying them royalties for the satellites that carry our smart phone signals.

Some say that Engineers can’t see the forest through the trees.  Others say that Engineers have little tolerance for banter, conjecture, diatribe and all the triviality of mixing with the rest of the world.  Yet, few can argue that Engineers are the ones we all need to show up every day to keep the water clean, the airplanes safe, the code logical, and the law enforceable.

Money is backed by productivity, otherwise, nobody would work for it – think about that for a moment. 

Why would anyone work for something that does not represent what he or she creates?   However, few people notice that productivity is the domain of engineering.  The machines that they create, the bridges that they build, the code they write, and the infrastructure they lay exists for the sole purpose of supporting human productivity.

Whose money is it?

So why are most engineers strangely silent in the emerging discussion about new economies, alternate currencies, and the New Value Movement?  Who are these people and why should we care about them?  I attended a lecture with Charlie Munger, CFO of Berkshire Hathaway who stated in reference to the Enron collapse “it’s bad enough when we lose the accounting profession, but dear God help us if we lose the Engineers”. Charlie cares.

We call them Geeks – but what is really going through their minds?   What would happen if they did organize – or are they already?  Where will they hide all the Value that bankers can’t find anymore? Or has the game already changed? Remember who inherited the hamlet of Hamelin.

An Ode To Japan

A Familiar View From a Familiar Land

I was deeply moved by the events in Japan over the last several days.  I have spent many weeks over several years in that country from my work supporting All Nippon Airways with Boeing.  I have also experienced several earthquakes in Japan, obviously nothing like the most recent.

Throughout many of my writings, I talk about the integration of of knowledge assets, the integration of markets, and the integration of communities.  Yet here I reflect that there is likely no country as tightly integrated as Japan.  This is the reason why they are so resilient and will arise successful despite any adversity that they encounter.

Several years ago, I was in downtown Tokyo during a magnitude 5.4 Earthquake.  The central subway loop closed down and the feeder trains kept pouring people into the station – the streets filled to standing room only.

As the account manager for All Nippon Airways, I was amazed at the astonishing reliability that they achieved with the aircraft fleet.  Reliable airplanes are essential because transportation is tightly integrated; if the plane did not leave on time, the trains would keep dropping people off at the airport and it would quickly fill up to, again, standing room only.

I have worked with dozens of Japanese engineers.  They are an amazing group in themselves – they design for two or three levels of fault tolerance in all of their decisions because when things go wrong in Japan, they go very wrong.  Their airplanes are impeccable throughout despite severe service requirement. Airplanes leave on time or they are replaced, but they always deliver on their promise of safety and security. Many of the buildings are sacrificial; meaning that they may may no longer be useful after a big quake, but they will not fall.  The train station may fill up, but the trains won’t crash.

This mindset has permiated into all of their products.  Where Americans may see obsessive compulsive drive to higher degrees of quality for no apparent reason, the Japanese see solutions to problems that don’t yet exist.  They take deep personal responsibility for failures that are two or three levels deep in unlikely probability.

It is not surprising that the casualty numbers so far, while deeply tragic, are not what one would expect given the magnitude of the event – the Earth was knocked off it’s Axis by this temblor, but the Japanese were not.

I extend my deepest condolences to my many friends and colleagues of Japan and stand ready to help in any way that I can.

Model For The Mobility of Engineering Professionals Under NAFTA

I published the following paper in 1996 as part of my participation in the negotiations for mutual recognition of Engineering Professionals under NAFTA.  We had just completed a program that ultimately sent close to 200 Mexican Engineers to the U.S. NCEES Engineering Board Exams with the support of CETYS Universidad and The State of California BOPELS.  In short, the performance of Mexican Engineers on this exam was extraordinary.  Their pass ratio was comparable in every way (especially when language disparity was removed), to US engineers who took the same exams.

Model For The Mobility of Engineering Professionals Under NAFTA – Please follow this link for PDF: INCNE596

This work is highly significant because it represents original research toward what was likely one of the first modern attempts to trade ‘human knowledge’ like a financial instrument.  The idea was that Mexican, American, and Canadian Engineers would be allowed to practice engineering in the exchange of services across all three borders.  The hope was that the financial structure that supported the American and Canadian engineering profession as a vetting mechanism [for the technical risks details associated with major infrastructure projects] would transfer into Mexico.

Comparative Education

It is also significant because this may be one of the largest comparative education projects between the Mexican Education system in Engineering and the US engineering education system as measured by an established standard examination.  For example, data clearly showed an advantage in Mathematics for the Mexican engineers but a disadvantage in physics and chemistry – likely correlating to the cost of producing such education (labs and equipment) between the two systems.

Relative States of Development

It is abundantly conclusive that Mexican Engineers, and therefore the Country of Mexico, is highly capable of development and technology enterprise based on the education criteria in which America measures itself.    So when looking at the relative states of development between the two countries, the question arises; if the difference is not in the quality of engineers, then where is it? Of course, the answer does not surprise us when we see political turmoil as the source of most wealth disparity metrics.

Language Disparity

Finally, on a relatively minor discovery, this research measured a language disparity of approximately 15% in the speed that the engineer from Northern Mexico can accurately interpret an engineering problem expressed in technical English.  This is useful when planning timed exercises such as examinations where language differences are difficult to remove from the sample set.

Epic Value Game FAIL

As it turned out, the Mexican Negotiators did not accept the author’s recommendations presented here in stead adopting an MRD strategy that was highly restrictive to both the mobility of engineers and the vetting requirements of financial institutions. America literally handed Mexico the Knowledge Economy on a silver platter and Mexico refused.

This author argued in 1996 that Mexico would compete in the future with emerging economies such as China and Vietnam in the the low-value labor market rather than competing with, say, India for the highly valued knowledge market.   It is unfortunate that they chose the former.  I’ll leave my opinions as to why, for a future post.

Model For The Mobility of Engineering Professionals Under NAFTA

My Christmas Gift

This year, I send my Christmas greetings from Mexicali, Baja California, Mexico.

Besides seeing all of my wonderful in-laws and cousins, I had the opportunity to meet with a couple of my students from many years ago.  They are now entrepreneurs, business owners, and influential leaders in the complex web of Mexican and International society.

I knew them when they were just kids struggling through engineering school – I saw them as gems in the rough, now I get to marvel at the diamonds.  Wow, what an incredible experience.   Of course, they can’t see how I view them nor can I see how they view me.  One thing is certain, these are very special relationships.  I managed to hold back tears of joy.

The trust is instantaneous and profound.  We hang on each other’s words as incalculable truths pour from our experiences.  We cite each other’s nuances and we recall quotes long ago lost.  I remember the extraordinary challenges of getting 250 of them through the US Engineering Board exams.  We spoke of the early days of NAFTA and the oppression of the Maquiladora Industry.  We spoke with the wisdom that we wished we had 17 long years ago.

I wonder what happened to the others.  I know a few that have also become quite successful.  The only thing I gave them was proof that they were equal in every way to any engineer on earth.  As such, they managed their careers with that single data point lodged in the back of their mind.  Now they are proving to me what I had only suspected then.

In return, they gave me everything that I am thankful for today as I celebrate Christmas with my wonderful family.  I met my wife while working with these kids.  I found my own ethnic identity working with these kids.  I learned Spanish working with these kids.  I earned the wisdom to represent a fortune 100 company around the World after working with my kids. In fact, my blog and all supporting research is a direct result of a flaw I observed in market capitalism while working with my kids and their interaction with NAFTA. The courage to leave corporate life and take a leadership role in an hugely disruptive start-up company is a direct result of working with these kids.

These kids (men and woman) are among the greatest gift I could have ever imagined receiving.  My advice to others is to always have students.  Always teach people what you know.  Always elevate others and you will find yourself elevated to astonishing heights. Be a student and provide this joy to those who wish share themselves deeply with you.  This is where true happiness is found.  This is the gift that Christmas celebrates – be a teacher

Merry Christmas.

Please Support The Symbionomics Project on Kickstarter

What Is An Ingenesist?

Eric Rosenblith 1920-2010

I have been putting off writing this blog post until I could find a simple answer to the question “What is an Ingenesist?”.  I invented the term “Ingenesist” to capture the creative, intellectual and social nature of human ingenuity without falling back on current definitions and the silos that perpetuate them. Something has gone wrong with the world and the solution could not be found in the current world view – I needed a new word for my work.

Ingenesist comes from the Latin (ingeniare), French (ingénieur), and Spanish (ingeniero) word for Engineer.  These words, of course, were created long before an engineer was defined by such alphabet soup as BSME. MSCE, IEEE, ABET, NCEES, EIT, PE, etc…  The term ‘Ingenesist’ was meant to represent people whose ideas and actions increase the productivity of other people.

A friend of mine lost his dad yesterday.  I read the obituary and could not help but realize that this person lived through what were likely the darkest and the brightest hours of modern human civilization.  He was an artist and a teacher.

Then I hit the quote in Mr. Rosenblith’s obituary:

“We truly need to be thinkers, poets, painters, engineers, and philosophers.’’ – Eric Rosenblith

And that is how I found my simple answer.  With humility and simplicity, he captured the creative, intellectual and social nature of human ingenuity. The least I could do was finally write this blog post.

My sincere condolences to Alan and his family.  Please support the Symbionomics Project on Kickstarter

Engineers Are Money

angry-engineerEngineers are money.

China and India are producing millions of engineers as part of their global economic dominance strategy. Engineers increase productivity and productivity creates wealth. Why? Because money is only a means for storage and exchange of value and engineers create the value.

America has no idea who the engineers are

I heard an interesting comment on a group discussion board recently; “there are so many engineers on the streets that employers have their pick of the crop”.

First, I find the reference to “crops” ironic. Second, why should engineers need to fit every nuance of a job description? Engineers tell us the things that we don’t already know – who exactly writes those job descriptions if they know what they don’t know? Or in practical terms, why isn’t an Aerospace Engineer immediately qualified to be an Energy Engineer?

The Ingenesist Project identifies 3 types of knowledge assets: Social Capital refers to one’s ability to organize, perform, and manage themselves in teams of other people. Creative Capital refers to the ability to relate seemingly unrelated concepts, objects, and perceptions into new and innovative ideas. Intellectual capital refers to the ability to deploy book learning, objective reasoning, and tactical experience toward specific objectives.

Everyone has ALL of the above asset categories, however, we each posses them in different proportions. People like Steve Jobs have all of these in very high quantities, but the rest of us are somewhere in the middle. Most have a surplus in one or two at the expense of the remaining asset categories. Engineers typically enjoy a surplus of intellectual and creative capital at the expense of social capital.

Social Capital

Should we, as a society, expect engineers to meet meet the same social standards as say, Baristas? The job market favors the young, socially adept, and politically wired people. But engineers are a different – we all need them to be exactly the way they are in order for the rest of us to be who we are. If engineers were “marketers” they would either cease to be engineers or marketing would cease to be manipulative.

Who’s your money maker?

Engineers are responsible for nearly every penny of value stored and exchanged in a modern economy. Roads, infrastructure, medical devices, food production, software, hardware, housing, transportation – anything worth anything is in some way touched by God and an engineer. Engineers are responsible for creating the tangible value we enjoy so dearly but is also so easily corrupted by others.

Who is squandering whom?

So when I hear comments like; “there are so many engineers on the streets that employers have their pick of the crop”. I ask myself, “how exactly did that employer become an employer without engineers”? How does any employer expect to remain an employer without the direct, strategic, and honorable deployment of engineering assets? How does a country expect to arise from financial crisis and insurmountable debt obligation without elevating their engineers to “First-Responder” status?

I heard a story that Haiti is so poor, they would chop down a fruit tree for charcoal. Squandering engineers is like killing the golden goose. Every single engineer in America should be cherished. Every single engineer should have their pick of most qualified employers, not the other way around. Every single engineer should have a job waiting for them as soon as the prior one is finished. Engineers should be paid money, real money – not some “proxy” for money.

Video: Intellectual Property in the Social Media Cloud

social_media_cloudThe Patent system is slow, static, and expensive. Sure it’s great for corporations and wealthy institutions, but what about the rest of us? How do we get paid for our intellectual property? We make rapid fire decisions every day that can make or break markets – who’s got time to patent?

Or maybe the last thing that Wall Street wants is for Engineers, Architects, designers, and creative people to get “royalties” on their work. That is What Wall Street does, they collect the royalties of the creative people in America….until now. Social media is a social contract, IP is our currency.

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The Fundamental Flaw of NAFTA

Leading into 2010, The Ingenesist Project will release a series of videos that specify the construct of the Next Economic Paradigm.  We begin at the beginning.

The following video discusses the flaw in modern globalization market economics that started with the failure of an obscure sub section of NAFTA – the free trade of services. The objective of the Ingenesist Project is to correct a tiny little flaw in market economics. This simple adjustment will result in dramatic change.

The Power of Social Taxonomy

Revolutionary:

Ask the French about linguistic purity and you get the feeling that an attack on the language is an attack on the culture.  Likewise, corporations arising from the industrial revolution communicate internal structure and processes through the use of a well protected internal taxonomy.  This serves as both a means of storing knowledge across generations of workers, and as a means of encrypting the knowledge from those who would pillage the enterprise.

For example, some people who leave Boeing (a 94 year old company) have a very difficult time re-integrating into society because many of their professional skills and tools are articulated in a language that nobody outside Boeing understands.  Ex-employees of many large corporations often find themselves professionally invisible through an extended period of re-adjustment.

Melting Pot Economics

A Clear and Present Value!

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dev-oClear and Present Value

The value of conversations is real, clear and present – especially in the actions of those who profit wildly from them. I saw this in the negotiations of NAFTA when it was clearly in the best interest of the some negotiators to keep engineers poor weak and disorganized.

I saw it again in corporate America.  Imagine if Boeing was to publish a complete accounting of the incredible intellect, ingenuity, talent, and creativity that roams their hallowed halls – the world would dismantle them piece by piece.  The “knowledge inventory” is a company’s most closely held secret.

Keeping secrets from the secret:

Sometimes it seems that the biggest secrets are held from those who represent the greatest real value. Corporations pay their engineers the minimum amount of money required to get them to their desk in the morning.  Then they resist organization of engineering professionals, and they give them little or no power over marketing, human resources, accounting, and sales promises related to the engineering outcome.

The problems get worse when this big “secret” becomes public. For example: Steve Jobs has now been identified as trying to collude with Ed Colligan, the CEO of Palm, to not poach each other’s employees.

A Currency Collusion Collision Conversation

“Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal,” Colligan said to Jobs last August, according to an article Bloomberg reported.  Jobs succeeded in making such an arrangement with Google, according to published reports. The feds are investigating and the Palm allegations only make Apple look worse.

It is quite amazing that companies would expose them selves to such risk if conversations among engineers were NOT in fact extremely valuable.  Why else would Apple engage in such disrespect to engineers and others who actually create the products Mr. Jobs gets credit for?

The liberation of Knowledge Assets

The IPhone that rolls off the assembly line is not an innovation.  Rather, the millions upon millions of tiny incremental ideas, conversations, and shared thought are assembled into what does eventually roll off the assembly line.  The role of the CEO is significant, but still a minority task in the larger picture.

More than ever, social media is empowering people to hold equally productive and focused conversations outside the construct of corporation.  With the ability to measure and track impressions comes the ability to pay royalties to those that produce, direct, and sustain conversations.

With the Obama justice department and other federal regulators already looking closely at Apple over the iPhone and handset exclusivity and the sharing of board members, Jobs’ alleged anti-poaching efforts only add to the fire that is growing around him. If social media continues to integrate at a rapid pace, the biggest fire that Mr. Jobs and other CEOs may have growing around them is the autonomy of creative, social, and intellectual staff.

Special thanks to a post written by: Veteran industry-watcher David Coursey who tweets as @techinciter and can be contacted via his Web site.

Social Media Staffing: $3 Trillion Opportunity

As the World Churns:

The cost of placing an employee approaches 30% of that employee’s salary.  In fact, most head hunters charge roughly 30% of the employee’s salary to find the right person to fill the job opening for a client company.  Sometimes the employee is recruited from a competitor causing a net productivity loss in a market due to disruption or “churning”.

The company also has a choice of hiring with the internal HR department.  In this case, they are paying HR personnel to place ads, review resumes, check references, and conduct interviews.  These costs can also run into a substantial percentage of the new employee’s salary.  From previous articles, The Ingenesist Project suggests that these methods may not even result in the best employee selection:

The Unnecessary Market Friction

Text only Résumé is no longer adequate in our complex business environment due to subjectivity, semantic inconsistency, and the time and resources required for fully interpreting the content. The cost of delivering a résumé has been decreased by computers and the Internet while the cost of reviewing the résumé has remained constant.  Keyword search programs often eliminate excellent and creative candidates based on criteria not related to the candidate.   Managers tend to hire what reminds them of themselves – from world that no longer exists.

Estimated wasted productivity:

Suppose that 50 Million professionals; doctors, lawyers, engineers, professors, administrators, managers, and directors are employed in the United States.  Suppose that the average salary is 70,000 per year.  Suppose that they change jobs 3 times in their career and that the cost of placement is 30% of salary, or $21,000 dollars per placement.

The total cost is $ 1 Trillion dollars multiplied by 3 placements in a career equals nearly 3 Trillion Dollars.  Now, divide this by 30 years in a career and we can see that 100 Billion dollars worth of human productivity are spent every year not necessarily matching the most worthy employee to the most worthy employer.  This does not include moving expenses, salary increases, disruption costs, or inflation.

The probabilistic electronic résumé system

The Ingenesist Project specifies a vetted knowledge inventory that resides in Social Media. The knowledge inventory, probabilistic electronic résumé system, and innovation bank together would make the paper and language Résumé obsolete.  The percentile search engine would scan the knowledge inventory of the corporation and scan the knowledge inventory of the labor market and seek matches with high probability of increasing net productivity – not unlike Amazon.com predicts what book you would like to read next.

Options, options, give the market its options

election criteria can be adapted to reflect social priority such as reduced traffic congestion or to reflect strategic objectives such as incremental or blue sky innovation requirements.  Trades across companies and industries can occur opportunistically not unlike interdepartmental transfers or even like trades in professional sports are conducted today.

Companies can manage peaks and valleys in employment by trading across diverse industries. avoiding layoffs all together.  Employees that can stay productive in diverse industries transfer new ideas and discover transferrable efficiencies.  Experience gained would be added to the knowledge inventory to enhance the probabilistic résumé inventory available for continuous improvement and tangential applications of innovation enterprise.

A virtuous circle? … A 3 Trillion Dollar opportunity nonetheless.

Social Clipping and the Amazing Disappearing Economy

In the early 1990’s, the NAFTA Mutual Recognition Document (MRD) for engineering professionals was the first modern attempt to treat knowledge like a financial instrument. Unfortunately it failed because of a tiny little flaw that I call ‘social clipping’.

Most trade agreements that followed were modeled after NAFTA and, as such, inherited the clipping flaw.  The flaw is that ‘products’, but not the knowledge assets that created them, are mobile in a global economy.

The MRD handed the knowledge economy to Mexico on a silver platter; but they turned it down.  The government did not want to give their engineers “wings” because they were afraid that they would fly away.  Instead, Mexico chose to sell their extraordinary young engineering talent off cheap to meet quotas promised to Asian, European, and American companies to relocate huge manufacturing plants to the country. Today, Mexico competes with China in a race to the bottom of a manufacturing economy and almost no indigenous design industries.

Two-way street:

Back then, the protesters raged about an influx of cheap foreign engineers to the US.  But many US engineers saw that Mexico needed everything that engineers make – roads, bridges, infrastructure, etc. The needs were endless and the objective was clear; to increase human productivity in Mexico was to create real and sustainable wealth.  Maybe then, the citizens would not need to fly away.

These infrastructure projects could have been funded because the Professional Engineering License behaves like a financial instrument mitigating project risks (so that nothing “disappears”). Only then banks would lend and insurers would insure.  The transfer of knowledge and accountability to Mexico would have been extraordinary; the relationships, profound; their development progress, astonishing.

The Disappearing Economy

But the MRD died by clipping.  Mexican Engineers would have been required to take the same engineering examinations as US engineer.  The government refused citing concern that they could not pass. So, in 1994-1997, this author directed a large comparative education project sending over 250 engineers to the US professional engineering examination (EIT).  The Mexican Pass rate was extraordinary – they were easily comparable to the US pass rate in most subjects and flat-out superior in mathematics.  There was nothing wrong with Mexican engineers, or the culture; there was something wrong with the financial system that keeps them invisible.

Knowledge is Power

As the story goes, Mexico has a family oriented culture where hierarchy is often based on seniority; a common examination may favor recent graduates.  It would be inappropriate for a young engineer to have authority over a more senior engineer.  Dig a little deeper and the real problem was power. In Mexico, power is concentrated among very few people.  It would have been unacceptable for transparency to exist.

We are facing a similar situation in America today.  Power has been steadily consolidating over the years.  A huge and fast stimulus package will enter a financial system with a shortage of vetting institutions. There is a strong pull toward ‘business as usual’ – creating J-O-B-S; not necessarily more entrepreneurs, engineers, or mentors, and certainly not empowering whistle blowers.  In the knowledge economy, Americans salaries are pegged to off-shore outsourcing. This is a game that we can no longer win playing by the rules.

Social clipping

As we have seen with less developed nations; when people are held below a certain economic level, they fail to organize for innovation, social change, entrepreneurship, and value creation because they are too busy trying to pay off debt and feed their families.  Social capital, creative capital, and intellectual capital are muted; that’s when the magic of innovation disappears. That’s social clipping.

America must move on to the next level of economic growth.  The Innovation economy is a game we can win playing by new rules. Government must trust the people, empower social media, and not clip our wings with an outdated economic model.

Factors of Production for an Innovation Economy

Many years ago, economists in the midst of the industrial revolution identified three variables (productive inputs) for building industries; Land, Labor, and Capital.  The rate of output was related to how these inputs were allocated. If any of these factors of production were missing, the other two had little use.  The concept of Land, Labor, and Capital is still the foundation of much of today’s economic thought.

We know that in the knowledge economy, the location of knowledge work is highly mobile – so “Land” does not have the same significance for making things as it did 100-200 years ago.

What about “Labor“? Knowledge workers analyze situations, manage many variables, and create unique solutions. They do not really produce identical knowledge pieces like a machine operator or a production worker –so Labor also means something different than a century ago.

The term “Capital” refers to money that would be needed now to build future structures, buy machines and to pay wages. Today money buys access to information, education, and knowledge workers. So we see that many old economic principle may not be as applicable in the new economies.

The factors of production for the Innovation Economy are Intellectual Capital (also call Human Capital), Social Capital, and Creative Capital + entrepreneurs. (Reference: Jane Jacobs, Robert Putnam, Richard Florida)

Intellectual Capital Model suggests that concentrations of educated and motivated people attract investors to employ them and invest in the communities where they reside. This investment attracts other intelligent people who in turn attract more investment thereby creating a cycle of economic growth

The Social Capital Model suggests that people acting in communities can create better solutions, greater accountability, and more economic growth than management, governments, or bureaucracy can induce on their own. Examples of Social Capital include Civil Rights Movement, community watch organizations, Democratic Government, and recently, Social Networking.

The Creative Capital Model, suggests that engineers and scientists think more like artists and musicians than like production workers – their ideas come 24/7/365 – and that an environment of tolerance, diversity, and openness promotes creative output.

Silicon Mouse trap

Many people argue that Silicon Valley, in fact, was created and sustained by a perfect storm of Social Capital, Creative Capital, an Intellectual Capital + Entrepreneurs.  Other countries have tried to duplicate Silicon Valley but most have fallen short – if any of these factors of production are missing, the other two have limited utility for production of innovation. To demonstrate how these productive inputs might appear in an innovation economy, consider the following example:

Suppose that we take 5 mechanical engineers and lock them in a room with instructions to build a better mouse trap, they’ll emerge with a better shingle, a better spring, a better whacker, and a better trigger – but not necessarily a better mousetrap.  Suppose that we now put a dog catcher, an engineer, a plastics manufacturer, an artist, and the mother of 4 rowdy children together with the same task. We can be quite certain that innovation will occur. They may actually come up with an excellent mouse trap.

The Innovation Economy

Innovation Economics will bring the factors of production together in diverse combination rather than similar combination.  In an Innovation Economy, the “secret sauce” for the production of innovation becomes far more valuable than any single innovation itself.  The secret sauce provides a monopoly on dynamic repeatability rather than a static device.

As such, technologies can be open sourced and innovation crowd sourced across a much wider domain of possible user applications.  Such conditions will change the type of innovations that are favored to reflect the broad and sweeping social priorities rather than innovations that are easy to patent, protect, and monopolize.

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