Friday, November 19, 2010

Standing a crowd

What would a world look like if proprietary did not exist?

During a recent conversation in the office, I had the privilege of telling another entrepreneur that his patented idea was not unique. This has been a refrain that is getting so monotonous that I find myself consciously avoiding interactions with people who promote themselves as creative. It’s not that I’m not fascinated by the eccentricity of those who live in their circumscribed primordial isolation from which ignorance of the activities of others can be transubstantiated into the illusion of creativity. And it’s not that I don’t have my own ego reinforced by appearing to have infinite knowledge at my fingertips when, with a click of a button, I can watch a crest-fallen titan in his or her own illusion find hundreds or thousands of identical impulses flash on the screen of our global innovation archival displays. No, my reason for avoiding “creatives” is my growing discomfort with the social value embedded in the notion of creativity itself.

It’s hard not to carry baggage around the verb “create” and its derivatives. From art to science, from religion to pop culture, the production of artifacts of admiration seems inextricably part of the fabric of our social value system. From a blank canvas, a masterpiece emerges. From a darkened lab filled with bubbling flasks, new compounds are synthesized. And to the admiring throngs, each Merlin’s manifestation of magic – defined as “something I couldn’t do or can’t understand” – becomes the must-have for a moment. We wait breathlessly for the next iWidget to be unveiled and line up to purchase an artifact that we don’t know we need. All the while, we turn a blind eye and a deaf ear to a global humanity dealing with iMalaria, iUndrinkableWater, and iAmHungry. In most of our consumer society, “creativity” has more to do with getting someone to buy your thing or be associated with your social network than tackling challenges that have persisted for millennia.

At a more fundamental level, creation is an archetypal projection of belief. The notion that any animating force can manifest something from nothing – reinforced by religious and cultural narratives – somehow seduces humans into the notion that their piece of the god-complex action is creation at human scale. Sure, planets, the sun, black holes may be above our pay-grade (although the latter seems to be an aspiration of a few Merlins) but we can at least put gigabytes of music on a fleck of silicon. And while a few pursue substantive innovation to take on Quixotic challenges, most labeled as “creative” or “inventive” are merely thus labeled by those who have ignorance of the pursuits of others.

But my indigestion around creativity is probably still more fundamental. While illusions are annoyances made worse when they’re supported by language, culture or general ignorance, it’s what we do with those labeled “creative” or “inventive” that’s more problematic. These labels, once applied, simultaneously lead to intrinsic perceptions of entitlement and, when fed with sociopathic reinforcements, lead to impulses to isolate and defend. In the industrial economic model at present, each word, expression, or artifact manifest in any mode or reproducible form is de facto the copyright of its originator. Where once the sciences and useful arts were intimately linked to the dissemination of knowledge, now patent-before-you-publish is dogma in most universities and laboratories around the world. And tragically, not only is the impulse flawed at a basic social value level, but in its careless execution, no link to commercial or social consequence is considered in the impulse to protect and defend meaning that most such defenses are prima facie useless.

Once ensconced in the cloister of ignorance fueled isolation, the next impulse is to animate the monster with the most usurious form of capital on earth – private equity. In an orgy of greed, those who seek exorbitant monetary gain prey on the illusion keeper and divide future interests on that which doesn’t exist. Seldom is any consideration given to whether the artifact is commercially associated with the control of marginal market value (in other words – in its use, can enough revenue be generated over a sufficient duration to offset the cost of capital and development?) and obsolescence. The theory is that, once animated, the money will be made on an “exit”. That exit is either follow-on deepening of the equity model, enterprise sale, or in the heady days of yore – going public. Ironically, when development agencies around the world promote this model of enterprise creation, none of them disclose that this model doesn’t work without a healthy M&A market, a healthy, regulated public market, and a well-established public investment source like national pension schemes. So think of it. A “creative” or “inventive” person is pastured by an interest who explicitly states an intent to abandon – if it sounds like fattening for slaughter, it’s not by accident. And around this abattoir of aspiration, the carrion of failures outnumber success in developed markets by an industry extolled ratio of 10 to 1 or worse!

Somewhere along the line, we seem to have forgotten a core principle in even the uninspired capitalist system – the notion of revenue and value derived from customers and assets. Whether you subscribe to my framework of Integral Accounting or some variation of classic capitalism, what is missing from our isolation roulette enterprise model is good old-fashion cash flow. I point out to stunned audiences around the world that venture capital never built an economy anywhere on Earth. No, in fact in every place where venture capital has become a market utility, a public procurement preference has been pre-existing at the national level where governments pay excessive contracts to domestic producers. In addition, in each jurisdiction where such models are even reported to have success, the acquiring food chain behemoths have preferential access to benefits (in the form of taxes, incentives and, in the case of GM and AIG massive bailouts) to keep the ecosystem sustaining the illusion. In other words, outside of 15 of the G-20, there’s no possible pathway to make our isolation-based system even appear to work.

Which leads me to propose that a new enterprise model is necessary for humanity. While there are many contours that are vital to such a model, a few core principles seem evident:
- endeavors should be optimized to take advantage of as much latent capacity in the system as possible – the more latent efficiency put to use, the greater the enterprise value;
- endeavors should be optimized to link innovation to engagement with those who have sought any similar manifestation in the past and honor each contributing component in what is attempted in a new undertaking;
- endeavors should be optimized to require as few phase- or state-changes* as necessary to achieve the desired outcome of an endeavor;
- endeavors should be formed with consideration for the duration to value exchange and a specific plan to modify or retire such activities when obsolete or irrelevant;
- endeavors should be capitalized on a Correlated Capital model in which returns are explicitly linked to the marginal productivity of an endeavor rather than a capital-imposed uncorrelated internal rate of return (IRR); and,
- endeavors should invite participation through productivity participation rather than equity (be that dividend returns or discount futures on production).
By reintegrating humans into their endeavors, by focusing on future productivity rather than perpetual financial engineering for the capital roulette racket, we could actually find that integration actually grows in the compost of the excesses of an isolation-based legacy of the past 30 years.

To be clear, we don’t have an option. As Fed Chairman Ben Bernanke reported yesterday, the Fed – Treasury Ponzi scheme (and yes, it meets the legal definition thereof) only works when the tax-payer subsidizes the racket through Congressionally-sponsored additional “stimulus” programs. In other words, it DOESN’T WORK. If we want to build economies at the local, national or international level, we must embrace new modes of engagement and rediscover the roots of economic productivity and employment. These models will focus on building revenue and assets – not on reanimating financial engineered paper shuffling schemes. Fewer lottery winners will come out of the model I’m proposing but, in the lottery of heritable genetic wealth or in the lottery derived from the periodic anomaly of capital excess, I’ve not yet met a cohort modeling behavior befitting generalized aspiration. We’re working on implementing this new path and are delighted that many of you are coming alongside to participate. Here’s to a more perfect Union Together!

Happy Thanksgiving.

* When I refer to efficient phase- or state-change, it may be helpful to consider a simple example. If I know that to achieve refrigeration, I need to compress a gas, the fewer steps required to achieve that outcome, the fewer phase- or state-changes. If I use electricity to effect refrigeration, I start with coal (state), burn it (phase), use the heat (state) to boil (phase) water (state) to convert it (phase) to steam (state) to drive a turbine (phase) to activate a coil (phase and state) to harness electricity (state) to deliver (phase) across a power grid to a home where it animates a coil (phase and state) to drive a compressor (phase) to compress gas (phase) to effectuate a thermal gradient (phase) to cool my beverage (state of madness). If, however I directly animate a compressor using a compression source (flowing water, wind or even combustion) I achieve Phase State Efficiency by removing energy and materials demands imposed by a more inefficient system.

Sunday, November 14, 2010

A Great White Whale and an Empty Rag


“…a purse is but a rag unless you have something in it”

“The urbane activity with which a man receives money is really marvellous, considering that we so earnestly believe money to be the root of all earthly ills, and that on no account can a monied man enter heaven. Ah! how cheerfully we consign ourselves to perdition!”

Herman Melville’s words greeted this day 159 years ago as American readers began their entranced journey with Ishmael, Captain Ahab and the crew of the Pequod in search of the elusive Moby Dick. Cracking open the classic, Chapter 1 reads like it was pulled off the newsstands moments ago:

“Grand Contested U.S. Election”
“Bloody Battle in Afghanistan”

Really? After a century and a half, we’ve advanced thus far?

I was reflecting on this paradox as I drove to Washington’s Dulles International Airport for my flight to California. En route, the BBC was reporting on the interview with British General Sir David Richards who was quoted as saying that the West cannot defeat al-Qaida. Defeating Islamist militancy, he said, was “unnecessary and would never be achieved.” I couldn’t help but think about the futility of Melville’s caricature of the first Anglo-Afghan campaign and the 1843 analysis by the Reverend G. H. Gleig, a British Army Chaplain from the failed war. He discerned that the war was, “…begun for no wise purpose, carried on with a strange mixture of rashness and timidity, brought to a close after suffering and disaster without much glory attached either to the government which directed, or the great body of troops which waged it.” General Richards and his U.S. counterparts have not studied or taken heed of Gleig’s summation in which he declared that “Not one benefit, political or military, was acquired with this war.” For at the end of Richards’ interview, he recommended that the solution for Afghanistan was education and Democracy. Ah, I hear that there’s a great white whale out there!

Quite possibly, the most profound observation in Moby Dick is Queequeg’s observation that “…there is no quality in this world that is not what it is merely by contrast. Nothing exists in itself.” While I waited in the interminable line at the moribund TSA queue at Dulles (quite possibly now the single most inefficient TSA outpost in the U.S.), I reflected on the events of the past week. No really, with over 20 x-ray machines and body scanners sitting idle, TSA, thanks so much for giving travelers time to reflect! With an employment crisis in America, staff the equipment for crying out loud! Oh, there I go…, now back to my reflection.

Melville’s wisdom spoken through a South Sea Islander showed up in many manifestations this week. As I spoke to a colleague about creating new economic models for farmers in Bangladesh, I was impressed by the intellectual poverty our society has when thinking about alternative capital models. While conscious of the usurious tyranny of micro-credit (celebrated with a Nobel Prize) in which people are charged over 40% interest in the world’s poorest nations in the name of development, equity was suggested as the only alternative. Why? Was there any notion of enterprise liquidation possible? Was there a healthy merger and acquisition middle market to monetize an enterprise in Bangladesh? Was there ethical capital that would be patient to partner with a new enterprise in its bumpy launch? No. Equity was suggested because we don’t know a different way. When the Treasury and the Federal Reserve both know that our economic “recovery” is a fa├žade masking the obfuscation of toxic assets which overlay our current Great Depression, they turn to printing more money so that the Fed can support bank dividends one last, euphoric time before the sham is revealed. And when we know that our Bretton Woods debt-based currency is valueless, we haul out the G-20 apologists to rail against a gold standard failing to realize that China and the rest of the growing economies have already adopted a de facto basket commodity monetary standard.

And for the moment, let’s set aside the screaming reality that needs to be addressed – namely, that we don’t understand the illusions in our own fallacies which lead us to believe that the levers we’re manipulating will change the collision course with reality. Rising above the din of hawkers of “recoveromics” is a commentary that Melville and his literary contemporaries Nathaniel Hawthorne and Oliver Wendell Holmes seemed to discern 160 years ago. We don’t effectuate change by altering the narrative by degrees. We can only provide perspective to effect social change by offering an entirely new narrative that is evidenced in graphic realism.

Let me explain. The reason why the British went to war in the first Anglo-Afghan war was to secure safe-passage for industrial interests. That’s right. Men were sent to their deaths in service to companies – not to a country. Resources required to sate the consumption of Europe needed to have access to overland routes from India and Afghan interests were not cooperative. So tens of thousands were killed and the world was no less dangerous. For business and ideology, the British – in the Second Anglo-Afghan War (and then the Russians and Americans) – followed the same path. Hundreds of thousands were killed and the world was no less dangerous. While Americans were literally and figuratively fighting amongst themselves (levying tariffs to make Northern Industrialists wealthy and hold the South in a subordinate position) and the British were campaigning in Afghanistan, Germany’s Second Reich was investing in science and technology and coming up with things like the internal combustion engine (1876) and high speed rail (1879). By 1900, the economy built on investing in new metaphors for industrial vision in Germany eclipsed the British economy built on military defense of trade routes.

Whether it is in how we view economic, political, or ideological systems, or how we approach transformation, a picture seems to emerge like that barnacle encrusted white whale from the depths of the abyss. We can continue to use the tools which have brought us our current ruinous condition – usury, subterfuge, futile conflicts animated by ideological monomaniacal despots, and wanton gluttony – and, when enlightened, rail against the same. Or, we can actively endeavor to manifest a different narrative. The harpoon rope that pulled hunter and hunted into their watery grave is as unimaginative in the governments of the U.S. and Europe today as it was 160 years ago. And in 2170, another carbon-based life form may sit at his keyboard and join Melville and me in trying to point out the need for new modes of engagement. However, I know that we’ve had our fill of Ahabs. In collaboration with colleagues around the world, we’re lighting lamps without blubber. Consignment to perdition is not a human condition that must persist.

Call me David. Some years ago – never mind how long precisely – having little or no money in my purse, and nothing particular to interest me on shore, I thought I would sail about a little and see the watery part of the world… let’s write a new story.


Sunday, November 7, 2010

Gordian Trust Manifest


Remember, remember the 5th of November
The emperor severs Gordian’s Knot
Entwining the globe the knot is rewoven
And shall never be forgot

Adapted from Bishop Andrewes’ 1606 poem

Remember, remember the 5th of November
The Gunpowder Treason and Plot
I know of no reason the Gunpowder Treason
Should ever be forgot.

When Lancelot Andrewes delivered his Gunpowder Plot Sermons in 1606, this brother of the translating editor of the King James Bible had no clue that his poem would be as remembered (or more so) than his brother’s verses. Precisely 405 years following the Guy Fawkes’ foiled attempt to blow up Parliament, the Fifth of November served as the day of the launch of a new global initiative called the Gordian Trust. And, in a beautiful irony on this anniversary, what a dedicated group over 20 global citizens did, while more profoundly destabilizing to the status quo than gunpowder under Parliament, was to put in motion a path towards reunification, reclamation, and reconciliation of centuries of humanity’s progressive isolation.

The Gordian Trust is the launch of a new socio-economic model. In a world where millions of creative people and their artifacts have been almost achieved and manifest only to fail on a singular reliance on monetary scarcity, the Gordian Trust provides a new context for integral engagement. Let me explain.

Ever since the 1960’s, when a person in the U.S., Europe, or Asia sees an innovative way to address a social or technological challenge, they are encouraged to enclose that impulse in “proprietary” intellectual property. Everything that is written or reduced to some media is copyrighted. Technical innovations and processes are patented. Brands or images are trademarked. And the enclosures go on. Once entombed in a proprietary “property right”, the manifestor is told that they need to get funding to take their idea to prototype and, if successful, on to commercialization. By placing these “property” artifacts in the hands of usurious capital, greed and its cousin – desperation – drive the manifestor and capital provider to get as much return as possible for as little input as possible. Worse yet, in the U.S., ALL innovation and creativity is held by banks in liens which impair all diversified options arising from intangible assets while the banks ascribe NO value to any of these agents of business development and network benefit. Through a perverse system of maladjusted affronts to free markets, creativity is forced into scarcity, creatives are forced into isolation, and the lottery winners are those who have careless excess to squander for the episodic, disproportionate return. Generosity of creativity is replaced by greed animated scarcity. Collaborative inspiration is replaced by proprietary isolation. And networks of collaborative value exchange are forced into artificial scarcity premiums to reward the lottery odds makers. And for 50 years, vital innovation has not reached humanity to address its greatest needs. Millions of creatives are disillusioned and bankrupted (actually, morally and socially). And wealth aggregation has benefited an ever fewer elite.

The Gordian Trust is constituted of all of the technologies (social, technical, mechanical, etc) which have been manifest but then immediately been enslaved by the “funding impulse.” Recognizing that we all have been seduced into laying creativity’s gifts on the grisly alter of monetary idolatry, we now reconcile ourselves to our creativity and re-engage the stimulus for creativity. Rather than an Enterprise (where the heroic is defined by the success of the evermore insular creative scarcity drunk on the wine of greed), the Gordian Trust is based on the principle of honoring the impulse ex nihilo.

Here’s how we do it.

All assembled share the artifacts, innovators, stories, etc. of things that address big and small challenges which served as an impulse to create a business or venture. A catalogue of the Collective Abundance is compiled. Next to each venture, we identify a truthful accounting of what went into each (money, time, employees, relocation, mortgages, marriages, relationships, etc) and we take a moment to honor each of these. In particular, we name the people who have borne the cost of our addictions to a scarcity resource model.

Then we invite each of these artifacts and innovators to contribute their in-process, “failed”, or contemplated technologies or ventures into a Gordian Trust. This Trust will be stewarded by all who contributed – including all of the relationships which paid the ultimate price for an adherence to a broken model. All integral benefit arising from the Trust (commodity, custom & culture, knowledge, money, technology, and well-being) will be used 2/3 to dividend back to the Trust contributors and 1/3 to a Future Option pool which will be used to empower future Trust contributors who are equally willing to join the effort. On an annual basis, the Gordian Trust will hold a reunion of reconciliation where all those who have lost personal connections or suffered injury can reassemble and celebrate emancipation from the forces which caused the loss and welcome the energy of networked benefit and accountability.

Indeed, the Fifth of November will be remembered. But unlike the 405 years that have passed during which the Act of Thanksgiving (the 1606 law that enshrined the divine right of Kings celebrated on each November 5th) has been marked by the reinforcement of hierachical and tyrannical models, this first Fifth of November heralds a new beginning into which you are all invited. You will be learning about specific ways to be involved in the coming weeks so stay tuned...