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The Game of Zero

The Game of Zero was developed in order to populate the knowledge inventory. The purpose of GOZ is to introduce a constraint to Curiosumé which produces an equal amount of supply and demand for knowledge assets. The reason for this is to incentivise the formation of a market between and among knowledge asset holders.

(The Game of Zero (GOZ) is a subset of The Value Game (TVG) which may be found by searching this site.)

In order for a player to advance in a Value Game, the claims that they make in forming their Curiosumé must be verified by another game player and registered as a combined transaction record on the Knowledge inventory. 

In order to create a dynamic market of data, information, knowledge, innovation and Wisdom, each player must register as both surplus and deficit knowledge assets (teacher and students).  A score of surplus (what one knows) must be balanced by a score of deficit, (what one wants to learn) in order for the player to create tokens. 

Introduction: As the name suggests, game mechanics are employed to move the production forward.  Incentives consist of a combination of intrinsic motivations as well as financial compensation.  A knowledge inventory is expressed from an ontology that brings context to interactions.  The two-way flow of information is expressed as a simple bell-curve distribution for states of knowledge ranging from teacher (+1,+2,+3 Sigmas) to student (-1,-2,-3 Sigmas).   

The Game of Zero gets its name from the only constraint that is applied:  each participant MUST have a total score of ZERO.

Formation of Knowledge Inventory:

Ontology is a difficult topic to address universally because every company, institution, and every affinity group has their own specific means and methods for defining themselves in terms of ontology. 

Example: the following is the Wikipedia Ontology:

Generalized Knowledge Inventory:

Top Level Wikipedia Categories   -3s -2s -1s +1s +2s +3s
General Reference       X    
Culture and The Arts       X    
Geography and Places     X      
Health and Fitness   X        
History and Events     X      
Human Activity   X        
Mathematics and Logic         X  
Natural and Physical Sciences         X  
People and Self   X        
Philosophy and Thinking       X    
Religion and Belief Systems X          
Society and Social Sciences       X    
Technology and Applied Sciences           X
TOTAL = 0 -3 -6 -2 +4 +4 +3
Absolute Value = 22            

Claim your Intellectual Property:

  • Earn Power by claiming your IP blocks. 
  • Increase your power by having each block validated by another participant.
  • Surplus refers to knowledge that you offer to others
  • Deficit refers to knowledge that you need from others
  • Rank yourself as you fit among the community of your peers
  • Positive and negative must balance at zero
  • Adjustments can be made at any time

Important: Each of the above categories likewise have sub categories for which the same constraint holds.  Below those categories may exist many more for which the constraint likewise holds. 

Absolute Values in each category may be analyzed as well for business intelligence.  The combined knowledge inventory will accumulate substantial value. 

Implications for Merchandizing platform:

The Game of Zero provides a way for the participants to increase their “stake” in the system.  By accumulation of Absolute Value, the participant increases their likelihood of gaining a more valuable position / winning a more valuable prize.

The network of participants can safely contact each other based on mutual interests of validating knowledge and information.  One buyer may want to alert other buyers of a good product or service based on their unique identifiers.

There is no incentive to cheat – If I lie about my knowledge inventory, this is the equivalent of spamming myself. 

There is no incentive to troll because any claims that are not validated by one or more participant of relevant profile can be ignored by the system.

Playing the Game of Zero

Most applications require a user to become familiar with a detailed set of rules that are necessary overhead for security (passwords), Identity (KYC/AML), terms of use, rules of engagements, limits and levers, means and methods, etc.  Each requires a mental investment on the player as well as a resource overhead on the application.

Video games are taught with a simple objective and just allowing the user to play at level 1.  Level 1 teaches the player the skills that they will need to be successful at level 2, which likewise prepares the player for level 3 and so forth.

The Knowledge Inventory: The Game of Zero requires that a player complete a detailed profile in order to accumulate “stake” in the community. The profile is anonymous which allows the player to use an avatar or any name that they choose. They can change their name at any time.  They can delete a profile and start again. They can even maintain more than one profile. Each of these freedoms has consequences at higher states of play, but at the beginning the player is encouraged to experiment to find their place in the community.  The system will allow them to do anything that they want except violate the rule of zero. 

The player will quickly realize that the game interacts with them based on the inputs to their profile.  If they create a frivolous profile, they will get frivolous results.  If they provide meaningful inputs, they will get meaningful results.  Once they realize how it works, they may abandon a profile at this early stage and create a new one.  Penalty for this is that they will need to re-start the clock (like starting on square one).  This is not a big penalty at the early stages, but at the later stages this will become a significant deterrent. 

The more stake that a player holds, the greater the payout will be from the system.  Payout may exist in many forms from prizes to targeted economic opportunities such as gigs, validations, contests, and paid product endorsements.  The value of the economic opportunity increases at higher states of play.

Higher States of Play

The Game of Zero forces that player to maintain a net state of ZERO across the entire spectrum of ontology. At higher States of play the players may also need to validate their claims in order to increase their stake.  If they claim to be a +2 Sigma Computer programmer, they will need to find another +2 programmer to validate their claim.  If they balance their expertise with a -3 sigma desire to learn the game of tennis, they will need to validate their claim with a tennis partner.  Other scenarios are possible depending on market forces.

The process of claims and validations builds social cohesion, community engagement, and value of the system.  Failure to complete transactions or validate claims limits the benefit of game play and may eventually upset the balance of ZERO. 

Each claim and validation becomes a permanent record cast in time and cannot be altered without a corresponding counterclaim, or deletion of the profile.  

Network Effects

The next level of growth will include a transformation from a strict e-commerce site to a networked platform. The following features will be added.

  • Branding
  • Encourage communities to interact with each other
  • Precision matching of “teachers” to “students” drives value creation
  • Targeted incentives
  • Formation of affinity groups and buying pools
  • Managed by algorithm

If the system is trained to behave like a network, then a simple valuation component will be reflected by the square of the number of nodes multiplied by the quality of each interaction set equal to the current linear valuations. 

Management will then use this relationship to drive policy that concentrates on two things: Increases the number of participants and increasing the depth and breadth of engagement among the members.

Conclusion

How a Value Network Works

In business and commerce, value networks are an example of an economic ecosystem. Each member relies on one another to foster growth and increase value. Value network members can consist of external members (e.g., customers) or internal members, such as research and development teams.

Value networks enhance innovation, social welfare, the environment, as well as many other areas. Weakness in one node can affect the entire network. For example, if a development team is weak, the production team has a harder time creating the product, which can leave a buyer waiting for their shipment.

History: The Game of Zero was first identified by the author in response to requirements for managing the Summer Intern program at The Boeing Company between the years 1998-2002.  Later around 2005-2008 the system was studies for closing the knowledge gap at Boeing as well.  The research showed great promise and some parts of the work have been applied by the company.   Additional research and development was conducted through various companies and start-ups from 2008 until present.  The Game of Zero was generalized from the Boeing Experiments in private follow-on research and development as described in Curiosumé and The Innovation Bank.  Details of this history are outlined in the whitepaper.

Do We Really Need To Fail?

Yesterday, I heard a report on NPR about the resource management department in North West Washington, in response to diminished funding – is certifying private boats for emergency duty in clean up, security, and rescue.  This is logical because nobody knows and understands the waters of Northern Puget Sound and The Strait of Juan De Fuca than the local tribes and others who ply those waters daily.

Today, I heard another report on NPR about how the City of Houston has gained far more from the demise of Enron than their existence.  Enron would recruit the top intellect in the country, move them to Houston and reward them for creativity and hard work.  The collapse of Enron released 4000 hugely talented people to the Houston Economy where many have started new businesses with remarkable success.

Vicious Circle or Virtuous circle:

I will not pass judgment beyond what these reports stated, except that there is something very valid about the “Knowledge Inventory” that exists in a community and their specific location.  The Jane Jacobs externality proposes that endowment of creative and educated people drives economic growth in a community by attracting investment and development, which attracts more smart people, etc.

Vicious Galaxies or Virtuous Galaxies

As the NPR reports suggest, the type of investment and development is dependent on the quality and quantity of knowledge assets that exist in a particular location.  Now, let’s extrapolate that to include all disciplines and talents of knowledge that exist in all communities and we encounter a stark reality that there is no knowledge inventory from which to build – except in the response to a failure such as the corrosion of government spending or in the wake of corruption and associated corporate collapse.

Yes, it is often said that adversity brings out the best in people, but is that really necessary?  Do we really need for the whole rig to collapse before we emerge from the ashes? 

We need to build the knowledge inventory today.  People need to know what people know – that is where the truth lives.   We need to know what can be built from the parts that we have in the bin.  We don’t want to try to build something from the wrong parts any more than we want to misallocate the right parts to build the wrong things.  In any industry in the world, none of these situations would pass the stink test, yet this is the state of our communities today.  We don’t even know that we don’t know what we know.  Seriously, is anyone else wondering about these things?

89% Are Already OWS

99% of Americans don’t have a game that they can win playing by the rules imposed on them by the other 1%.  But in order to keep this game in play, that 1% utterly depends on the remaining 89% who still have jobs to show up for work and do as they are told. The spectre of the 9% fallen is an incentive, of sorts, to those still walking.

These are the 89 percenters…

…who already occupy Wall Street with their knowledge of systems and processes to implement procedures and methods that support the connections and networks of the remaining 1%.  Without these people in place, the system will fail faster than S&P can calculate a credit score, literally.

The 89% know what each other know

The logistics manager knows whom to call when the packages are late.  The account manager knows all of the customers by name.  The service team knows exactly how to get the computer systems back online.  The loan officer knows where the money is.  But only the 1% know where the knowledge is…and where it isn’t…

Knowledge is money

As RIM recently learned, if the computers go down, all the money in the world will not bring them back.  Most companies have an off-line life span of only a few days or hours before irreparable damage occurs.  Only the right knowledge in the right place at the right time can save the firm.   This is a huge monetary vulnerability.

The Public Knowledge Inventory

I found a great picture of the Occupy Wall Street Library from here.  The great irony is that OWS felt the need to build a Library that represents the ideas that they have between their ears.  What they really need is a “Library” for the knowledge that actually lives, breaths, and acts in the minds of the 99%.  Only then can they deploy the force that they need to move enterprises.

Divide and conquer

As long as Americans are fighting with each other, there is little chance that they will organize their knowledge assets and deploy their knowledge assets in a manner that serves social priorities instead of Wall Street priorities.  This is the big shift that the World is waiting for.  As long as people fear losing their jobs, they will comply with the 1%

What scares them the most?

The greatest fear of any company is to have their key employees poached by a competitor.  Companies have gone out of their way to implement non-poaching agreements between known competitors and NDAs against unknown competitors.  Companies hide key players behind a mountain of bureaucracy, misinformation, and obscure titles and job descriptions in order to hide them from the open market; yet they willingly poach other firms when they can.

The cry of the 99% is income equality.

Let me suggest that OWS consider knowledge equality as a superior alternative.  So instead of the OWS book library, they should form a public knowledge Library.  A public knowledge inventory would make knowledge transparent to all people and all companies equally.

Then Let the Poaching begin

If the 89% were not scared heartless about getting another job, then they would be far more willing to join the movement.  In fact, the MVPs would be the most powerful voice of the movement – the top innovators and visionaries toiling their life away for a company willing to raid their pension fund or drop insurance coverage at the drop of a hat.  Nobody is going to tell them to take a bath – they are the water.

The Science of Change

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

The Science of Change

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

Changing Wall Street

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

The Trojan Proxy

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

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

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

It Is Time To Evolve

I saw a Fox News commentary on the Occupy Wall Street movement.  They interviewed a bunch of kids who were taking part in the parade and asked them a simple question: “So, what do you expect to replace Capitalism with?”

Then Fox, in their fair and balanced tradition, portrayed their subjects as the poster children of a failed education system (some children left behind after all) and further testimony to the failure of the Obama Administration. because obviously “These kids don’t know how the real world works”.

The Pundits can’t climb the tree any better.

Unfortunately, nobody else has an answer to that question either – none of the pundits or anchors produced anything except the tired argument that we tried Socialism and it failed so therefore more Capitalism is the only way to fix Capitalism.

It’s a Simple Problem

Market Capitalism only articulates value in the things that people make which can physically sit on a market shelf.  Market Capitalism does not articulate the value of individual people; those things that people make in society.

Of course, it is also a double edge sword since those that really don’t produce anything – like hedge fund managers, pundits, and politicians – will become impoverished. Meanwhile, those who really do produce things – like teachers, engineers, and firemen – will become wealthy.  So watch how the lines are redrawn in this debate.

How the world really works

The Internet and social media have shifted the factors of production away from land, labor, and capital to a higher order of human organization.  This is what we need to be talking about.  People today produce things with knowledge – social, creative, and intellectual knowledge.  These are the factors of production for that 99% of the value that exists on Earth.

A Simple Solution

After many a blue face, I’ll say it again; there is no way to build anything meaningful without an inventory of parts.  Car companies have inventories of parts, Banks have inventories of assets, even biology has an inventory of genomes – but there is no knowledge inventory for our communities.  We don’t know what we do or do not know.  We have absolutely no idea how valuable we are yet we complain that we’re impoverished.  Meanwhile corporation create technology to replace people when people could be just as easily be creating technology to replace corporations.

How on Earth can we determine supply and demand for knowledge assets without an inventory?  How can we expect to create any type of fair and rational economy from a bunch of invisible stuff milling around the parks?  There is no escape from Market Capitalism and no path to Social Capitalism without a Knowledge Inventory, period.

A Stunning Omission

This is a very easy problem to solve and we have all the cards waiting to be stacked in our favor using the tools that are right in front of our collective noses.  If we fail at something so simple, then we deserve to be enslaved.  After all, 100,000 years ago, such people would have been eaten by tigers.  It’s time to Evolve.

Zertified Knowledge Assets

The wisest people in history have been saying the same thing over and over again, yet we fail to listen and act: People are an asset, People are the greatest asset.

So Then, Watch your assets

Meanwhile, our “risk based” capital structure accounts only for the observed randomness of individual human nature rather than trying to securitize the potentially infinite wisdom of crowds.  This is a problem, this is our very serious problem.

Everyone is Committed to The Public Domain

Anyone familiar with The Ingenesist Project knows that we commit a new class of business methods to the public domain for other people to use for building the next economic paradigm. For example, The Value Game developed by ourselves, is being used by at least 3 new start-ups as the value creation mechanism of their business plan.  We likewise consult to social entrepreneurs across the World to help them build a new form of capital structure where knowledge assets are the basis of fungible social currency.

Zertify.com

Zertify.com is a business plan that will convert social currency to financial currency and make money for you, dear reader. Zertify.com can employ well over 40,000 people directly (and tens of millions indirectly) in the US alone within months, not years. Zertify.com is a knowledge inventory system that accounts for knowledge assets as they reside in a community – not necessarily as they reside sequestered within a corporation.

Zertify business plan

Here is a downloadable PDF of Zertify.com Sample Business Method. The word “Zertify” comes from the combination of the words “Certify” and the statistical Z-test.  These two things correspond to “Social Vetting” and “Predictive Modeling Capability” – these are the two ESSENTIAL elements for the capitalization and securitization of any asset.  Of course, I have made certain assumptions regarding taxonomies and proficiency criteria – my intention is simply to re-deploy existing market infrastructure as best as possible in this Example.  But go ahead, change it, modify it, understand it, build it, and let us help. Become a billionaire – see if we care.

Why?  because we do care.

In case you were wondering who all those wise people are, flip through this presentation (great to see Tara Hunt among such luminaries !!)

The Future of Social Currency

The Branded Debit card has long been a staple of the vanity financial services industry.  Having your favorite football team, alma mater, or non-profit proudly displayed upon your purchasing prowess is a clever offshoot of those printed checks of days gone by.  Now, in the age of social media, YOU are the brand. Your product is your information and the information that passes through your social graph.

Self-branding

The most valuable asset is not who you’ve known in the past – many of those relationships are played out.  Rather, it is whom you will know in the future.   Your future connections are where all new innovation will be valued – all the decisions that are yet to be made and all the intentions yet to be acted upon. The only metric that can accurately predict this is your knowledge inventory; what you know, what you are talented in, and what you enjoy doing.  You are the future maker.

Social Value is Social Enterprise

The fastest way to unleash the extraordinary value that is contained in communities of experienced, talented, and motivated people is to provide a substrate for them to trade their knowledge assets among each other.  When people get together around a purpose, they build things that create incredible social value. The Social Value Platform provides an electronic accounting system for social value.  In The Social Value Game, vendors deposit inventory into a strategic community of people and the community creates social value.  This new social value is then converted into monetary revenue in the next economic paradigm called Social Capitalism.


The Invisible Hand of Social Capitalism

Living to work, or working to live?

Everyone knows what money is supposed to be – it is supposed to be a representation of human productivity, otherwise nobody would “work” for it, right?

It is also fairly obvious that money is not the only thing that represents human productivity. People work for family, community, reputation, love, recreation, art, music, etc.   These values are denominated in social currencies.

Working for Social Currency

Market Capitalism has deftly turned social currencies into consumption verticals.  People consume recreation products, family products, community products, reputation products, etc. The irony is that people are  foregoing all those things to drive off to work in order to earn the money so that they can buy back their family, recreation, and community. People are “working” for social currencies denominated in dollars.  The Mantra of Madison Avenue is to “Steal the thing that people love about themselves and sell it back for the price of the product”

Influence Peddling

Well known internet celebrities are getting sponsorships from some well known corporations – but not all.  The reason is clear – these people have the ability to influence the opinions and interactions of their community.  However, if the sponsor has a terrible product, that same influence can turn against the brand and the influencer in an amplified manner.  It is clearly in the brand’s best interest to match the product with the message of the influencer and vice versa.

Everyone is an influencer within their own knowledge inventory

A mechanical engineer can influence the professional community of engineers.  A math teacher can influence students.  A police officer can influence citizens.  A patriarch can influence an extended family. A big brother can influence a little sister.  Taken together and segmented across a hugely diverse knowledge inventory of human civilization, everyone is an influencer of everyone else.

Printing Social Currency

So instead of going to work to to earn money, people could just as easily go into their community to earn influence.  Brands can sponsor people based on their knowledge inventory to use, share, organize, and improve communities and products.   The most successful product will be those that help people to improve their communities. As such, brands and products will likewise benefit from stronger and unified communities.  Products that weaken, marginalize, oppress, or isolate people from their communities will fail.

The Invisible Hands of Social Capitalism

Nothing economic can happen until people get together to build something.  Strong linked communities will get together to build “economic” things. What they choose to build will become the value generation mechanisms of the future economy that will transform social value back into financial value.  Like Adam Smith’s invisible hand of Market Capitalism, the Invisible Hands of Social Capitalism will reward people for organizing themselves to make what they enjoy most and are naturally talented in producing.  We’ll call them “Recorporations“.

80/20 Rule: The Value of Human Interaction

If an IPod is shuffling in the forest, and nobody is around to hear it, does it make a sound?

This is a standard philosophical riddle that raises questions regarding observation and knowledge of reality. Alexander T. Jackson, one of the great minds of the 20th century, may have said that, “View points of this riddle differ based on the perceived definition of the word ‘sound’, often confused with the definition of the word ‘hearing’.”

A $300 Ipod is shuffling in the forest and nobody is around to interact with it, does it have value?

This philosophical riddle also raises questions regarding observations and knowledge of reality.  Viewpoints in this riddle differ based on the perceived definition of the word ‘money’, often confused with the definition of the word ‘value’.

To this question, Wall Street would say “Yes”, but Main Street would say “No”. In fact this brings into question the order of how we assign value in our world.

Suppose we constructed the same riddle for any physical asset such as a bridge, house, airplane, computer, car, university education, insurance policy, Marketing Department, tennis shoe, police officer, trumpet, leaf blower, FaceBook, Twitter, Linked In, fungus cream, guacamole, anything at WalMart, etc…..

Value of human interaction

Before long, we notice that the value of nearly all products and services is wholly derived from the value of human interaction with the object.  So where exactly is the true value of our economy, in the object or in the human interaction?   Wall Street would say “object”, but Main Street would say “human interaction”.

Credit Score

In finance, the credit score was established to assess the human interaction with a financial instrument called debt.  Yet, in the above example it is relatively clear that the vast majority of value created is dependent on human interaction with products and services that may or may not be financed with debt, not the debt itself.  It would seem that a social credit score and a knowledge inventory would be more appropriate way to assess the true value of economic activity. But where do we start establishing such an index?

The Social Value Index

We’ll start with a baseline 80/20 rule first identified by an Italian Economist named Vilfredo Pareto.  In our rendition, 80% of the true economy is created in the form of social value and 20% is created in the form of financial value.  Keep in mind that Dr. Pareto also defined a concept called the “Pareto Efficiency” for social resource allocation. This refers to the end-state of an economic game where no player can become better off without also making at least one other player worse off.

The objective then, is to design Social Value Games that are 80/20 (social vs. financial leverage) compliant and Pareto Efficient then, test the hypothesis and improve it toward optimality.

The Social Value Game

The Social Value Game

The value game is a social media business method developed by the folks at The Ingenesist Project in a dynamic application of social technology.

Most applications of game theory are controlled from in-house or deployed against a competitive landscape.  The Value Game is deployed external to the corporation and in a cooperative landscape where rewards are given to those who organize people around a “highly leveraged product” in valuable ways.

There are 5 elements to The Value Game

The first is what we call a highly leveraged product such as a conference, experience, convenience, ZipCars, or reunion – we’ll see that almost any product can be leveraged.

The next element is a secondary product vendor such as a hotel, restaurant, transportation, clothing, or equipment supplier – we’ll also see how almost any product can be deployed in the secondary role.

The third element is a consumer who seeks to minimize financial cost and maximize social value.

The fourth element is a 3rd party entrepreneur who is able to organized people in social networks and leverage primary and secondary assets in unique combinations.

The fifth Element is a true value calculator called the Social Value Index (SVI).   The SVI is the scorekeeper that calculates the actual value of the leveraged product after all of the discounts and social value factors are counted.

The game starts when everyone joins the same social network underwritten by a mobile electronic debit card platform and sets their filters for what information can enter (and to block out spam).  The highly leveraged product in the middle acts like a ball in play whose value is dependent on the interaction of the other elements.  Secondary vendors will deploy incentives into the field.  Third party entrepreneurs will organize people around the incentives and take social profits.  The Social Value Index will keep score.

Example 1: A ZipCar costs about 8 dollars per hour; this business model does not encourage social activity; it encourages fast shopping. Suppose that a person pays for the ZipCar on their debit card.  Local restaurants will be made aware of the purchase and then deploy coupons against the ZipCar to the buyer’s debit card. Next, a 3rd party entrepreneurs may improve the SVI by organizing a ZipCar swap so that the person does not have to leave in the same ZipCar that they arrived in and can spend more time shopping.  Another entrepreneur may organize events for families and friends that increase the passengers in each ZipCar, or by capturing any inventory from the community such as movie tickets or family experiences to deploy against the ZipCar.  After the event, the SVI updates the net cost of the ZipCar from 8 dollars per hour to, say, 1.42 per hour.  This is 80% savings on the ZipCar and 33% savings on a day out with the family over using their own car.

In effect, the leveraged product buys itself in a convertible social currency

Example 2: Suppose that a popular aerobics instructor has 40 students.  The local health food store may authorize her to give away 1000 coupons for 5% discount on store products.  In return, the aerobics instructor gets 5% of total purchased.  The health food store already spends 10% of revenue on advertising. It is in the instructor’s best interest to give the coupons to people who are likely to spend the most at the store.  After all, if 1000 people spend 100 dollars each, she stands to gain 5000 dollars.  The health food store stands to gain loyal customers without advertising. The aerobics instructor may maximize her profits by joining with a health food chef to teach classes in healthy cooking.  Or, she may join with a caterer, wedding planner, or hotel to supply an entire event for which she will receive social and financial value.  She may give them to colleagues who also become authorized to give away coupons – and she negotiates for a percentage of their output as well. She will become knowledgeable about the products at the store and talk about them with her friends.  She may even sell the face value of the coupons for cash since it is likely that a high bidder would also be a large customer for the health food store.  The Social Value Index favors this store, this aerobics instructor, and this social network – higher than competitors.  SVI registers with Search Engines and bargain hunters seek the Aerobics Instructor for deeper information and services.

Millions of applications will arise limited only by the imagination of communities not Wall Street

The Capitalization of Silence

"Silence" by Horst Schmier

Coupon Madness

The business concept of rewards coupons is not new. S&H Green Stamps were among the original applications of the concepts. The fact that coupon cutting is now going on-line is not surprising to anyone. A second major trend is in the area of data collection. Supermarkets have learned that it is valuable for them to “pay” the customer in exchange for data that makes stocking and distribution more efficient. When combined, coupon + data is a tremendously valuable marketing and logistics tool.

The next development of coupon + data model is the notion that if a person likes a product, so too will their friends. This is the coupon + data + association model. Not surprisingly, the marketing value of the combination of these linked data increases almost exponentially.

To Pay Dearly

Brands are now willing to pay dearly for information about the transaction as well as the social networks associated with a transaction. With the ability to track several layers of transaction and association, vendors can paint an extraordinarily accurate predictive model that can be used in their favor – and in competition against market challengers.

The half-life of noise

The hype is brisk and often short lived as most companies eventually run up against the proverbial viral backlash. Someone somewhere can just as easily elevate their own influence by challenging a big influencer. Privacy issues, fair trade issues, corporate responsibility issues are all fair game. Social media forces transparency in an organization too as controlled data can quickly become uncontrollable data.

The battlefield is strewn with the corpses of marketing campaigns gone horribly wrong. Even Groupon, once touted as the champion of mom and pop shops across the land is now accused of dumping economic “sugar calories” into a zero sum game where size does matter – a lot. Groupon is now used by competitors against each other thereby wrecking havoc on Mom and Pop Shops across the land.

Help, I need a Guru

Social Media Gurus continuously pound home the message that they must find their customers grazing in their own pasture and engage them in order to be truly accepted into the herd.  Now the Gurus have all the vendors looking like wolves in sheep’s clothing – nothing could be more obvious or look more ridiculous.

The inherent flaw is that companies are designing and delivering products predicted to interact with people in their own setting. Instead, they must develop a set of products and services that are designed to facilitate human interaction with each other in their own setting – and as a consequence, filter out all the noise that wastes valuable social time.

Coupon + knowledge inventory + anonymity

Learning what people know does not mean that they need to give up their identity.   Joining people who have complimentary knowledge is a superior value creation mechanism than harvesting relationships already played out. The ability to protect and empower the customer in their home setting is the greatest branding opportunity on Earth. The ability to filter out the noise is the single greatest competitive advantage that any marketing campaign can ever enjoy. The ability to bring communities of people together to solve the problems of their own choosing is far more powerful than trying to convince people that they have a problem for which only you have the solution.

This is the capitalization of silence

Image by Horst Schmier

The Innovation Banker

Future of Banking

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

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

The Innovation Banker

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

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

A Virtuous Circle

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

Ingenesist.com

Music by Phil Felicia

Calculus for Dummies and Capitalists

Mathematics Dysfunction Disorder

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

Puzzled by Limits?  Perplexed by derivatives?

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

Calculus is astonishingly simple


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

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

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

Death By Résumé

Résumé: A French word for separating the body from the brain

We are entering a renewal in the work force. The global imperative is for the United States to become an innovation economy now. This is an entirely different animal than the Industrial revolution; I have long argued that the résumé system is by far the most archaic knowledge management “currency” of trade in use today.

The entire premise of the résumé is destitute, if not destructive, in the modern world. Words on a computer screen are a very low level ‘media form’ being used to describe a very high ‘media form’; social, creative, and intellectual capital. It’s like using crayons to design an aircraft.

If the key words are so important, why have any other words?

A manager always hires people that remind them of themselves. They estimate the future success of a candidate based on their own limited, and often static, past experiences. The world is moving so fast and has become so complex that no manager can possibly know enough to capitalize the future based on a viable statistical sample of past experiences – we’re all holding on for dear life in a hurricane of change. The problems and opportunities of the future are so huge, so important, and happening so amazingly fast yet the allocation of human resources is worse than random for a candidate pool.

Here are a few comments that I’ve picked off some recent Human Resources Community Blogs:

***

1. And our future goes with it:

“Most recruiting systems I’ve seen screen out innovators. Any résumé that is unique, different or convention-defying gets surreptitiously put in the junk pile.”

2. Start by looking in the junk pile:

“The Innovation Economy requires that the talent that creates the most value for an organization must rise to the top. Innovators are playing an increasing role in creating shareholder value – one might argue that they create the most shareholder value these days – and figuring out how to find and attract this very different breed of talent is one of the most critical initiatives you can launch within your organization.”

3. What part of “share holder value” are we having difficulty with?

“The most innovative people I have ever met don’t follow conventions in their experience or in their résumé. Or, they get bored very quickly when they can’t innovate or are forced to focus on operations, and efficiency. Most might look like (and even be) job hoppers”

4. Here is my favorite comment – I wish I could hug this person:

“I think it takes more than a résumé to screen an Innovator in or out. As blogs, blog posts, social networking, more powerful search tools, personal websites, the emergence of video on the web, talent platforms that offer CRM, etc. etc. etc. continue to become additional tools for an employer to consider in making a hiring decision, is the résumé still a currency for a candidate?”

***

We have an inventory and CAD model of every nut, rivet, and panel that goes on an airplane – why would we try to build anything without one?

So Please, let’s evolve out of the revolutionary times and develop a real community knowledge inventory. It must be computer enabled and based on a taxonomy that everyone knows and understands. It must be read, analyzed, sorted and vetted by social networks and communities of practice. It must integrate with knowledge assets from anywhere in the world.

An IPO For Humanity

The term IPO conjures images of empire-making where a hot young company with a great product offers pieces of its future-self for sale to the public as a means of raising money without incurring debt.  The money is then used to create the next titan whose new jolt of growth is shared with all who participated.

Today, every annual report to shareholders touts the great team of people whose social, creative, and intellectual capital make it all happen, the worthy and stoic investors whose vision drives sound decisions, and the legions of happy customers who make it all worthwhile.

Essentially, an IPO is people buying into the productivity of other people.

Yet, the IPO is a strict and complex legal and regulatory maneuver that establishes property rights on these small pieces of future productivity – represented by “stock” in the company.

There are underwriters (usually a bank), battalions of lawyers, the securities and exchanges commission (SEC), brokers, insurers, re-insurers, institutional investors, private investors, and retail investors.  There is a full infrastructure supporting the facts of incorporation, disclosure, accounting, and proper management of internal “inside” information.  And, of course, there is a media /PR campaign.  All are integrated to keep the game fair, yet viable.

In the Age of Social Media

I could be wrong but it seems that such vast infrastructure appears a bit awkward if the end result is simply for people to buy into the productivity of other people.  This happens everyday in Social Media.  At some point, we really need to ask; why can’t an individual or a group of individuals raise money without incurring debt like corporations can?

In Social Media, people own and deploy their relationships,  communities, motivation, their knowledge, creativity, intellect, mentorship, leadership, teamwork, their network, and even their ability to form corporations – people own their time.  Social currency is backed by the scarcity of time and the availability of surplus knowledge.

All of the structural components of the financial system are appearing in an analogous form in social media; social vetting, social gaming, aggregation, influence, knowledge inventories, communities of knowledge assets, local social, global social, tag search, deep search, semantic search, stream of consciousness search, geolocation, mobile computing, multi-media, and many more innovations are being created and deployed everyday which literally serve the functions of banks, lawyers and legislation in an invisible economy.

The Ingenesist Project tries to string this all together with just enough specificity so that an alternate financial system will jump start itself and become both visible and available to everyone.

We’ll hold an IPO for Humanity

All of the infrastructure and the potential for people to produce things would remain intact regardless of what happens to the currency.  Think about what would happen if all the dollar based money system evaporated. The only safe haven for the storage and exchange of value will be in people and their communities.

The only thing missing is a system that can articulate social capital, creative capital, and intellectual capital instead of land labor and financial capital.  This system can be built today.

Social Capitalism and The Innovation Bond

We know the Venture Capitalists look for returns of 1000% on their investments. We also know that Corporate innovation (as reflected by the S&P 500) enjoys a long term median return rate of about 9-10%

It follows to reason that all of the innovation that could return somewhere between 10% and 1000% goes largely un-capitalized. This does not mean that the innovation does not exist – it only means that it is invisible to any existing financial system, it is accounted as “intangible” – or worse, it shows up as a liability.

Parents caring for children, Children caring for elderly parents, Mentors educating proteges, groups of people organizing, sharing knowledge, and growing families – all increase the net productivity of society. Legions of people creating options and opportunities for themselves and each other in communities, social media, and extended networks – all increase the value stored in communities.   Billions of people-hours inventing better ways to do the things that they do, compensating for the shortcomings of governments and corporations – all of this innovation falls into the range between 10% and 1000% ROI, yet, remains invisible and un-capitalized.

Social media as a whole is growing at well over 200% per year where every single interaction creates incremental multiples of social value – otherwise people would not do it (to say that people are irrational is to say that markets are irrational).  Where is all that value going?  Meanwhile, in the current Global financial debt crisis, institutions that hold huge amounts of cash are scouring the globe for pockets of low-risk productivity as sanctuary from volatile financial markets.

Now, suppose that an innovation bond were to come along which produces a risk adjusted return of, say, 15%. This means that human productivity is being reliably increased somewhere in a community by only 15% per year. If this were the case across a broad sector of inter-related communities where productivity were denominated in a fungible currency, investors would seek refuge in the Innovation Bond.  If the Innovation Bond returned say, 20% or more – all the money in the world may drop the debt based currency in favor of the innovation based currency by seeking refuge in innovation bonds.  Yes, I said it – “all the money in the world”.  Now, get over it.

Proceeds would be distributed to organized communities whose knowledge inventory is formatted like a financial instrument in the form of entrepreneurship. Proceeds would go to communities where the probability of success is known long before the bets are made in the form of Cheap Venture Capital. Proceeds would go to communities where productivity is defined by an un-corruptible algorithm through decreased volatility coefficients. Proceeds would go to communities where assets are valued accurately by true supply and true demand.  Proceeds would go to less developed communities with the highest social arbitrage potential rather than those with the most powerful marketers and lobbyists.  Most importantly, money would go to corporations that adopt the innovation economy. The stronger the institutions of Social Capital become, the greater the value of an innovation bond.  New production of goods and services would reflect these social priorities in the True Value Game.

In effect, Social Priorities will drive Wall Street priorities instead of Wall Street priorities driving Social Priorities – that is Social Capitalism

In the future, there will be only one sustainable investment left – people, communities, and their natural willingness and ability to be productive with their time. The rest is history.

***

Material based on video series here

What is Social Capitalism?

July 8, 2014 Update:

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

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

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

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

Reorganizing For The Era Of Social Capitalism

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

***

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

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

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

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

In The Shadows:

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

Conflict:

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

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

A worst case:

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

The Special Case:

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

Structural Capitalism:

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

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

The Next Great Leap for Social Capitalism

The Knowledge inventory will become the most important element of Social Capitalism.  Today, knowledge is largely sequestered behind the walls of corporation in the form of titles, skill codes, resumes, job descriptions, certifications, and college degrees.  In order to predict the future, we point to the things that we have done in the past.

2nd Place is 1st Loser

10% of the country is unemployed and less than 10% are fully actualized in their profession.  Competitive forces drive the hiring manager.  The consequences of all business decisions eventually lead to win-or-lose market scenarios.  People compete with each other for promotions, the boss’s time, the corner office, or just staying off the unemployment line.  That is the only future anyone can truly predict based on the past.  It’s easier to predict the loser than the winner – so that’s what happens.

Social media is very different.

People are organizing themselves in a new form outside the construct of the corporation.  Linkedin aggregates intellectual capital, Facebook aggregates social capital, and You Tube aggregates creative capital.  Millions of blogs, Twitter, and a generation of search engines reassemble all these parts in ways that create social value.  People are not competing with each other, instead, they live on a bell curve.  They are seeking cooperation and collaboration. People use “like” buttons, tweet counts, and analytic data to “value” the quantity and quality of another person’s knowledge.  There are fewer losers, hence more winners,  because there are a greater number of  markets – not just one corporation.  Everyone is a corporation.

No Governance, no anarchy, no problem

Since social media is outside the construct of a corporation, there is no governance. There are lots of people trying to control only to experience diminishing returns.  Microsoft, Apple, Google, and Facebook must tread extremely carefully on the landscape of public opinion precisely because of their dominance.  People use Facebook to attack Facebook, PowerPoint to attack Microsoft, YouTube to attack Google, and Twitter to attack everyone.  Retribution would be suicide.

The Last Mile of Social Media

Now, geo-location services are filling in the Last Mile of Social Media where communities will form to produce things that are tangible and real.  As a result, there is a sharp increase of interest in a form of currency that can represent this social value.  Some of this is because the dollar is losing its ability to represent people’s productivity.  So they engage a different economic system.

Social Productivity

The next great leap in Social Media will happen when people reorganize themselves in an external knowledge inventory, outside of corporations, and segmented in high granularity of knowledge assets in close proximity to each other.  Entrepreneurs can then assemble people in unique, efficient, and productive ways.   People will then build things for profit using a new currency – a new social currency.

War Is A Social Agreement

I often make the point that a currency is simply a social agreement. People need to agree that a monetary unit represents their productivity so that they will use it to trade their productivity with the productivity of another person. The test question for any so-called currency (coined by Jay Deragon) is: “Yeah, but can you buy groceries with it?”

I am now seeing a SHARP increase in the social interest for an alternate currency to the dollar. The dollar does represent productivity – albeit future productivity in the form of debt – that’s why it is still exchanged for the work that we do. My suspicion however is that the social agreement regarding the dollar is, in fact, increasingly becoming a social disagreement.

People have a deep seated unease with what the dollar is and what the dollar represents. To escape the dollar is to escape a tangle of influence that impacts everything we say, do, and think about ourselves and about each other. It almost seems that to escape the dollar is to escape ourselves.

That’s just the idea that came to me after watching this video about a soldier questioning the occupations. He is saying something very interesting:

War is simply the soldier’s willingness to fight it. It is a social agreement.

The Secret Weapon of Social Capitalism

It should be fairly obvious that there are some extreme financial anomalies on the Global Horizon.  That legendary, but long-in-the-tooth social system affectionately known as Market Capitalism, is up against the ropes as the debt monster gobbles up everything in it’s path faster than any austerity measures can ever keep pace.  Take note that debt can reach infinity but austerity measures can only reach zero … you can do the math on a postage stamp.  If there ever was a need for a secret weapon, it is now.

The following 4-minute story-board video is part 3 to the series called “Will Social Capitalism Replace Market Capitalism?“.  The video introduces an important futures methodology and algorithm called WIKiD Tools for the management of Social Capitalism.   The next few videos will define WIKiD tools more fully while introducing a segment called “The Knowledge Inventory”.   Next, the SC>MC series will lay out scenarios for the capitalization and securitization of knowledge assets. Finally, we’ll revisit the Airplane Game to wrap it all up.   In other words, within the next few weeks, I should have published a fairly explicit set of functional specification for the next economic paradigm answering the question “What comes after Market Capitalism?”

Hold on to your hats and thank you for joining us on this wild ride.

Social Capital Trolls

A Troll is a member of a race of fearsome creatures from Norse mythology. Troll mythology is, in fact fairly complex but seems to resolve to common images of Neanderthal type people living under bridges who extort money from passersby, steal babies, and fear God.

In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum, chat room, or blog, with the primary intent of provoking other users into a desired emotional response or of otherwise disrupting normal on-topic discussion [Wikipedia].

In the Intellectual Property world, a troll is an individual or business that holds patent or copyrights with no intention of developing the IP and every intention to enforce against infringement by those who do develop ideas.

Naturally, we seek to anticipate the future usage of the term Troll in a context of Social Capitalism. We can say that someone who was in a position to constrain Social Capitalism has the potential to engage in troll behavior.

The troll does benefit from the eventual success of traveler passing through the constraint; however, they create an unnecessary or non productive friction in a market. This can kill many business plans as troll fees and uncertainties need to be factored into the risks of doing business.

I am reminded of a legal system that facilitates litigation over education, negotiation, and cooperation. Social media has an inherent self-policing aspect that may threaten “regulators” in law and government who seek to hold exclusive vetting privilege over a social market.

I am reminded of advertisers who put lipstick on the pig by pretending to play up the whuffie, trust agent or engagement vibe, but instead lay Astroturf and buy up social media outlets. Spam is spam is spam.

I am reminded of Internet service providers that purposely slow down a connection and charge for speed that costs them less to keep open than to slow down. I am reminded of the demise of unlimited data packages for mobile Internet – now that the user is an addict, pull back the dosing in exchange for compliance.

In short, a social capital troll is any person or organization that seeks to CHANGE the online behavior of an individual and their community rather than EMPOWER the individual and their community to do what they would have done in the absence of the troll.

Fell free to add more for future posts on this subject……..

Will Social Capitalism Replace Market Capitalism? (Parts 1&2)

This video describes a set of predictions for 2020 based on an entirely new form of capitalism whose velocity and voracity will take the world completely by surprise. Nothing is sacred and nobody is immune, not Facebook, not Google, not Wall Street, not even Governance itself….

Part 1

Part 2:

Knowledge Failure Is Business Failure

The top ten reasons for business failure are due to a lack of knowledge, not a lack of money. In fact, the lack of money is itself a failure of knowledge.

Top 10 reasons why businesses fail

1. Lack of an adequate, viable business plan
.

2. Insufficient sales to sustain business

3. Poor marketing plan: unappealing product, poor customer identification, incorrect pricing and lackluster promotion

4. Inadequate capital, misuse of capital and poor cost control

5. Poor management skills: lack of delegation, leadership and/or control

6. Lack of experience and knowledge

7. Lack of managerial focus/commitment

8. Poor customer service

9. Inadequate human resource management

10. Failure to properly use professional advice: i.e. accounting, legal, financial, etc.

No excuses:

Lack of a viable business plan is an act of negligence where research, scenarios, and assumptions have not been tested. Market ignorance is not an excuse nor is the failure to know one’s customer. Death by poor marketing plan is knowledge deficiency related to product appeal, customer identification, pricing structure, and lackluster promotion. Obviously, one needs to know how to manage a company in order to be focused, let alone correctly estimate capital needs. Lack of customer service knowledge is deadly in the age of social media. Inadequate HR is an oxymoron – if it’s inadequate, it’s not a resource – human or otherwise. Finally, failure to listen to knowledgeable people is ego driven irrationality.

The financial system is not the only problem;

The innovation system (or lack of) is a crucial element. Information, knowledge and innovation, by any definition, are profoundly and inseparably connected. A failure in one kills the other two. So, just because an entrepreneur does not have the knowledge, does not mean the ‘knowledge’ fails to exist – it simply means that entrepreneur failed to find it.

So where is the knowledge?

Unfortunately, there is no public knowledge inventory – people do not know what each other knows. With social media raging all around us, there still is no way that anyone can assemble the knowledge needed to execute a business plan with a known probability of success given the information available. As such, there is no way to finance public innovation.

The emergence of Social Media technology presents an extraordinary opportunity to organize a knowledge inventory outside the construct of a corporation and marry it to the financial system, much like a corporation.

Tangibility of Knowledge

Knowledge tangibility must be the most important “innovation” in the pipeline today if we expect to meet the crushing challenges that await us. Just because we cannot predict innovation does not mean it cannot be predicted – it just means that we do not know how… yet.

Tangential Innovation Communities

In an earlier article (Cluster Funk) I argued that Industrial clusters can lead to stagnation, vulnerability to external shocks, and the erosion of social capital. Since I’m not one to complain without also providing an alternative, this article argues that the future will favor technology clusters rather than industrial clusters.

Make it up as you go along

Technology clusters serve what we call the tangential innovation market – or diversity innovation dynamics. Don’t worry if you have not heard of these things, I’m making this up as I go along.

For example; composite materials technology is very useful in many applications like aircraft, medical devices, transportation, recreation, and even musical instruments. The airplane company has no intention of building cellos and the automobile company has no intention of building snow boards.

Why compete when you can collude?

As non-competing industries, they can readily share technology and people. The system is naturally diversified and inoculated against stagnation, shocks and silos; if one industry encounters hardship, people and capacity can shift easily to another industry preserving knowledge and expanding social networking benefit while the damaged industry heals or dies off. Corporations may not like this idea, but social networks should.

The Ingenesist Project goes a step further by modeling the business structure of tangential innovation markets as an integrated financial system. Suppose and Originator Company has a promising new composite technology idea but is unable to meet the ROI requirements of their stockholders? Today, such innovation would be shelved. In an innovation economy, tangential markets are factored into the business case.

New applications of social media will identify other industries that would be most worthy borrowers of your technology, if developed. The Innovation Bank can estimate the return on investment that can be expected through the tangential market as if it were another customer. The additional revenue projection would allow the originator to meet the ROI requirement prior to committing development funds.

Intellectual Property can be managed with contracts enforced through social network vetting. The originator can hold an option to see further development conducted by tangential users effectively multiplying their R&D reach and further adding to the expected return.

Then something magical will happen. At some point, the value of the tangential innovation market would exceed the value of the origination market. The originator will begin to specialize in pure innovation as a primary product and airplane applications as the secondary product. As all industries in the technology cluster begin sharing technology among each other, R&D costs and risks are effectively spread across industries. As risk is diversified away, the cost of venture capital approaches single digit rates.

Then, another magical thing will happen. As the mixing of people and ideas accelerates, the definition of corporate boundaries will become more fluid. Ownership will exist in the form of contracts among entrepreneurs now defined by social networks, options, and derivatives in a diverse innovation enterprise.

While the boom bust cycle of Industrial Clusters has brought us a great distance in economic development, technology clusters in an Innovation Economy supported by social networks may turn out to be vastly more efficient at economic growth without the perils of Cluster Funk.

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