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Tag: hedge fund

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?

 

 

 

 

Gambling With New Value

What if the origin of political division in this country could be traced to a simple glitch of the generally accepted accounting practices?  Let me explain:

The Economist magazine recently wrote an article in favor of airlines unbundling fees; Ancillaries; You Know They Make Sense

“By charging fees, once neglected baggage service departments have become star revenue performers for airlines. Department managers can now justify new technology and equipment. Where before, baggage service only represented a cost, it now provides millions in revenue”.

In other words, charging money for baggage essentially transfers this service from the liability column to the asset column of the accounting statement. As a liability, it can only atrophy under the weight of austerity measures.

And Then The Carousel Starts Spinning

What happens next is quite remarkable.  The airline PR machine twists this into a veiled statement of American individuality, claiming “freedom is about having choices” and touting themselves as the protector of all that is good and great in America.  Then, they BLAME the traveler for expecting that mustachioed Soviet-era entitlement to unlimited [baggage] service.

Just give it a French name 

Passengers will continue to complain about being nickel-and-dimed, but it may be that they are making false comparisons … “When a la carte shopping is successfully implemented, it’s not an evil method. Quite to the contrary, it’s the ultimate compliment to the consumer—it acknowledges their right to choose.”

Roll in the legislators

The resemblance to political discourse about a whole myriad of issues is uncanny and would make anyone suspect a larger conspiracy.  But what if the problems are real simple? What if the genus of political division in this country could be traced to a simple but widespread accounting anomaly?  There is no accounting system for human values.

For example; consider the fact that Motherhood does not count in American Gross Domestic Product, but Day Care services do.  So in order to stimulate economic growth, legislators subsidize day care so a parent can go to work while in the same breath witholding services if the mother “fails” to work. Don’t forget to always blame the customer when things don’t go right.

Gambling With New Value

Similar paradox never seems too far from key social issues such as education, health care, Internet privacy, Immigration, International Trade,  Homeland Security, even Banking and Finance Reform:

From Fox News coverage of the JPO Morgan 2 Billion dollar loss:

The basic problem is that regulators have been working for the last two years to define the difference between hedging and gambling, and can’t. Either the rules would be too severe and shut down banking, or would permit reckless risk taking that could take down a huge bank, and potentially put the taxpayer on the hook to pay off depositors through the FDIC.

A hedge acts on both sides of the accounting balance sheet while a gamble does not.  What if that’s what it’s all about; all the fighting, and slander, and division, and prejudice, and injustice, and violence, etc., caused by a simple accounting system problem.

When we do not have an accounting system for human values, we can only gamble with them.  To hedge, New Value must be must be tangible.  The problem is simple; it is a failure in the accounting system for New Value Movements.

Elevator Pitch – The Ingenesist Project

>door closes<

The Ingenesist Project designs and deploys a new class of business methods that will facilitate the production and trade of goods and services against the inevitable devaluation of the dollar.

The systems and methods developed by the Ingenesist Project can create new and tradable value from existing social infrastructure which would act as a hedge against inflation, austerity programs, and lost productive capacity due to high corporate unemployment.

Anyone looking for a hedge on the dollar is looking for The Ingenesist Project.

< door opens >

In case you are still interested

Ingenesist designs and executes a new class of business methods that creates new value by deploying a social game to real asset markets.

A Value Game begins and ends with money because that is the world we currently live in. However, new value is created within the game through the managed interaction of 3 or more communities that share an asset.

Current Milestones  

The Value Game was developed from a large-scale international comparative education research project from the NAFTA implementation era. Currently, Ingenesist deploys a Value Game to the aviation industry with a funded start-up called Social Flights.  In this platform; private aircraft are the shared asset and the operators, travelers, and economic development concerns represent the integral communities.

Ingenesist is currently designing a value game for the construction industry on a large remediation project for a high-rise condominium.  In this case, the condominium is the shared asset while the residents, the contractors, and the real estate market represent the integral communities.

Future Milestones

Ingenesist is currently looking to fund a web application with a working title of Zertify.  Zertify is a proprietary knowledge asset inventory method that will allow The Value Game to scale indefinitely and internationally.  As such, the requirement to convert back into money will no longer be necessary as the value created in one  game can be exchanged with value created in another game.

Expected Outcomes

If we are successful, a new currency will form; one that is backed by real assets and the real interaction of real communities whose best interest is to preserve real assets rather than consume them.   Zertify.com will be followed by Exoquant.com, and Gamidox.com – which will securitize the new currency to achieve  capitalization.

Why is this important?

This will be very important because the inevitable global currency adjustments would not have a direct impact on a non-debt backed currency.  In fact, Ingenesist will hedge the dollar – as the dollar loses value, the new currency will increase in value.  It is likely that everyone reading this post has a vested interest in the outcome; literally and figuratively.

Why are we different?

Many start-ups just scale Facebook networks and call it a “social currency” for the purposes of  consumption marketing. Other application have formed the asset incorrectly in our opinion. Ingenesist actually produces real things that reflect the real priorities of real social interactions…and this is real serious business.

Contact:

Daniel R. Robles PE, MBA
The Ingenesist Project, Founder/Director
Social Flights, Chief Innovation Officer

Skype: Ingenesist
Linkedin Profile
Twitter:
@ingenesist

YouTube Channel: Ingenesist
Video: Sibos 2011
Video: The Value Game
Zertify.com specs; Contact Directly (for actual)
Gamidox.com specs Contact Directly
Exoquant.com specs: Contact Directly

Speaking: The Future Of Money and Technology Summit 2012 April 23rd San Francisco
Attending: The Unmoney un-conference 2012; April 24th San Francisco

Ingenesist Blog
Social Flights Blog

Why This Bubble Is Completely Different

I had a discussion with one of my partners that we need 2.5 million users and Social Flights will manage itself.  The partner said, “You mean 2.5 million dollars”.

No, I said, “I need 2.5 million users”.

The partner said tersely, “No, I really think that you need dollars.”

Again, I replied, “I need users…. “

This went on for a while until we both got it: The value of Social Flights is contained within the users, not within the dollars. After that, the conversation could progress in a meaningful way, priorities found their place, and the teams found their roles – including the investors.

Nothing economic can happen until people get together to build something

Financial analysts are aghast at the magnificent valuations that social media applications are delivering; P/E ratios of 1000, valuations of 100 dollars per member, billions of dollars per billion time hours in game play – these are not the ratios that they teach in B-school.  Is this crazy or does it make perfect sense?

The Great Rapture

While highly unlikely, suppose the Almighty Father called upon all good and pious dollars to ascend unto heaven in a glorious rapture of currency – on a single day, all money disappears from the face of the Earth.  What would be left?  What happens next?

At least for a little while, I’ll still be sitting in this café typing a blog post.  The value of the education and social network of the person who I will be meeting for lunch will still be intact.  The value of the roads, bridges, schools, and highways would remain intact.  The value to teachers, firefighters, and doctors will remain.  The sun will shine and gravity will continue to act on matter.  The money may go, but a LOT of value remains.

No Such Thing As Free Lunch

Of course, things will quickly devolve when I tell the café owner that I can’t pay for lunch because my money has been raptured. Of course that would seem like a relatively minor problem given the fact that their money has been raptured too.  In fact, so has their supplier’s money, and their Bank’s money.  Obviously, there can’t be a bail out because the government has no money either.

Each of us would probably stare at each other for a few minutes until somebody asks the other, “well, then, what do you have that I can use?”  Once that conversation is exhausted, we’ll move on to  “Who do you know that has something that I can use?” Etc.

The mother of all hedge funds

If this were a game, the person that knows lots of people who do useful things would stand a greater chance of being served lunch than someone who is isolated and disliked – no matter how much money they once had before the rapture.  Likewise, if you have a lot of money, what “Bank” would you put it in?  What “Stock” would you buy?

This bubble is different.

It may be that the dollar is in a bubble and the true value of our economy is stored and exchanged in communities of people enabled by social media.  Those magnificent valuations in social media companies may actually reflect true value and act like a huge hedge fund on currency in the absence of any other plausible financial instrument.

As our noble politicians continue to play their game of chicken with the productivity of honest, educated, and productive Americans, they fail to see the polarity shifting away from money and into “true value”.

The value is in the people, not in the dollars. now we can have a different conversation about how to manage ourselves.

Social Currency Derivatives Trading

The New York Times published an article yesterday about derivative traders being controlled by 6 powerful banks whose influence serves to keep out competitors and decrease the transparency of transactions. What struck me was the graphics that the article used to demonstrate both the problem and the solution for derivative trading:

The Problem:  Murky Market – no transparency

The Solution: Introducing a clearinghouse for transparency and correct pricing

The second diagram demonstrates how the introduction of a vetting mechanism inserted directly at the spot of least transparency greatly increases socially valuable attributes such as transparency, true pricing, reduced risk, open sourcing, elimination of conflicts of interest, and increased sustainability, etc – many of the attributes demanded by the new generation of activists seeking their place in the discussion that they struggle to understand. Hedge funds are indeed important tools for reducing volatility if, and only if, they don’t themselves introduce new risks.

The Value Game:

The second diagram looks a great deal like The Value Game developed by The Ingenesist Project for the monetizing social currency. By introducing a leveraged asset in the middle of a series of transactions, true value of the whole transaction system can be established eliminating volatility and reducing systemic risks.  The Value Game works in a manner quite similar to a hedge instrument.

The Airplane Game:

The Airplane Game deployed by the new start-up called Social Flights, for example, introduces a jet airplane transaction as a clearinghouse for the balance of the transactions in the game of door-to-door travel.  When all the players put their money down on a jet flight, they convert the financial currency to social currency, the true value of the transaction can be established when compared to an alternate market such as commercial airline, driving, train, etc. – not necessarily to dollars in the bank.

Financial Currency is a derivative of social currency

It is not surprising that social currency will become a hedge instrument for financial currency in markets.  After all, nothing economic can happen until people get together to build something.  Nothing of any significance can be built unless people exchange social currency. Only after all of that, can it be converted into money.

Intrinsic Banking

As such, every broker in every market can be replaced by a Social Value Game providing intrinsic banking services.  Can you see it?


Social Currency Hedges Financial Currency

I have yet to see anyone of any importance in the social-media-guru-camp who has identified the inherent dichotomy between social currency and financial currency that rages all around us.  No, seriously; every financial action is balanced by an equal and opposite social reaction.  It’s a balance sheet of the balance sheets.

BP underestimated the social liability of their financial decisions by a factor of 100,000:1.  US Corporations underestimated the social liabilities of outsourcing the knowledge economy by a factor of 1000:1,  US Government underestimated the social liabilities of Wall Street Bankers by, likely, 1000:1. Tiger Woods underestimated his social indiscretion by a similar ratio; 10,000:10.  Mel Gibson is trending hard on Twitter this week….etc.

I received the following press release today from “Professor Guru” at a famous US University:

US CITY, July 2 – despite a slight drop in the national unemployment rate, the situation is still grim for millions of Americans and thousands of businesses, many of whom fear double-dip recession.  Beyond the numbers are some under reported aspects of the current situation: the toll it takes on employee morale and how it forces companies to manage downsizing in a manner that maintains their reputation, avoids embittering their terminated employees and keeps their remaining employees engaged.

Astonishing Omission:

Nowhere does this statement address a notion that for every dollar of financial currency saved, X amount of social capital will be lost. This is an astonishing omission of statement and purpose.  All the social currency is well-accounted for with guru code speak like: “grim”, “takes a toll”, “morale”, “reputation”, “embitterment”, “terminated”, and “engaged”.  And, all the financial currency verbiage is accounted for with pop-terms like: “double dip-recession”, “under-reported aspect”, “the numbers”, “downsizing”, “remaining employees (assets)”, etc.  The call to action statement, of course, is that the situation “Forces Companies to manage….” or, to act in some new way that will,… uhmmm, well,….. what is it? ….minimize, balance, exploit, empower, update the Facebook page….what?.

Really, it’s time to get real:

Nobody is willing to say that for every dollar of financial capital saved, X amount of Social Capital is Lost.  Obviously, nobody in their right mind would say that social currency is acting as a hedge on financial currency.  Nobody has the guts to say that to cultivate social currency is to gain financial currency.  Nobody is willing to acknowledge that if there are riots in the streets of America, the US currency will crash.  Certainly no politician is willing to admit that it does not matter if that happens, it only matters “when” that happens.

Turning point of civilization

We are at an extremely important phase in World History.  Will social media provide the fabric that society has lost from the domination of financial morality on social priorities?   If so, then then keep your eyes on the ideas of a social currency conversion factor to drive Social Capitalism as a replacement for Market Capitalism.

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