It is very interesting to watch Social Media follow familiar trajectories as earlier paradigms in finance. I see many social media platforms struggling to make human knowledge tangible in their respective markets. The challenge is so simple, yet so complex. Let the litmus test for knowledge tangibility be as follows; “Can you buy groceries with it?”
The Romans Empire had a similar problem; how to sack Europe and bring home the booty. The only thing most people had at the time were sheep, fish, and wine. So the emperor created a coin that represented a peasant’s productivity in raising sheep, catching fish, and making wine – and it was a lot easier to collect taxes. The conquest of a continent has far more to do with the social acceptance of the currency than the actual pillaging – pillaging, after all, would be counter productive in a social network.
Today the dollar also represents human productivity – except a ‘necessary flaw’ was introduced to finance innovation leading to fantastic worldwide economic growth from which many people benefit greatly. Now, this flaw threatens to topple the whole system. Money still represents productivity, except it now represents future productivity allocated to paying debt. As long as innovation increases fast enough to outpace debt, everything is OK. Problems happen when debt exceeds our structural ability to innovate.
We do not need to restructure the financial system – we need to restructure the innovation system. The human race is exceedingly fortunate that the end game for debt economics will happen at the exact moment in history that the technology required to start a new game of sustainable innovation economics has arrived. If done correctly, Social Media (computer enabled society) can become the most important human invention since to the printing press.
Today, human knowledge, in the form of social capital, creative capital, and intellectual capital, is captured and hidden inside corporations. Each corporation has its own business plan, lexicon, culture, organization, structure, and processes by which human knowledge is exchanged in the creation of a “product”. Outside the corporation, however, true knowledge assets are either invisible, incomplete, or only appear as a proxy of the corporation. This leads to stagnation, silos, mis-allocation, vulnerability to external shock, and greatly limits the diversity needed for sustainable innovation.
In the 1700’s Banks printed their own currency – these were called “bank notes” because they were little notes that declared who had a surplus and who had a deficit of money relative to the bank. People would trade these notes in society to purchase things, buy feed or seed, and to keep track of things. Everyone had a job to do and the general flow of these notes is what “incorporated” townships. Unfortunately, such banking also lead to industrial stagnation, silos of wealth, and lack of diversification leading to corruption, bank failures, and ‘bottle necks’ in the flow of capital.
Barely 150 years ago, the U.S. government established a central banking system with common currency, common practices, common accounting, and common regulation. The system became much more efficient, diversified, and accessible across the landscape. The industrial revolution, manufacturing revolution, lots of wars, the era of information, and the Internet Industries were all financed through a central banking system. Human productivity increased at a tremendous rate and the relative wealth that we enjoy today is a tangible result of innovation.
Now the Pied Piper has come to take the children to sea. The banking system needs to invent new, exotic, and increasingly risky financial instruments for trading your productivity in order to keep the game alive. Meanwhile, the tangibility of human knowledge is stuck in an 18th century banking system. There is no common knowledge inventory, there is no common accounting practice for skills and abilities, there is no way to measure social capital and creative capital – the system is too biased toward “intellectual capital” measured by Ivy League degrees and access to wealth. Knowledge assets are not tangible, organized, classified, or collected in a society in any structured way. “Can you buy groceries with it yet”?
With the emergence of Social Media, we have an extraordinary opportunity to make knowledge tangible outside the construct of a corporation much like banks notes became tangible outside the construct of a single township. There are vast and crushing problems in the world today. The only way out of this mess is to massively increase the rate of innovation in society. Like off-shore drilling – vast wealth in the form of social capital, creative capital, and intellectual capital lays hidden beneath thousands of layers of philosophical limestone. Social Media and the first amendment = drill baby, drill.
The only thing separating us from a debt economy and an innovation economy is social agreement. The philosophical chasm holding us back is about to be broken by The Ingenesist Project: In the current paradigm, money is backed by future productivity allocated to pay off today’s debt. In the social media paradigm; money will be backed by future productivity created by today’s innovation. At the end of the day money still represents productivity. The conquest of a continent has far more to do with the acceptance of the currency than the actual pillaging. Hey, why not buy groceries with it?