Friday, January 3, 2014

Why do we need a value accounting system?

First, we need to make a distinction between a value accounting system and a value exchange system.

Suppose we have 3 individuals picking cherries in the same basket. The value accounting system keeps track of how many cherries everyone puts in the basket, so that when they sell it on the market they know how to distribute the money, in proportion to everyone's work. It describes how value added by multiple contributors amalgamates during co-creation processes.

Once exchange value is created, i.e. once the basket is full and ready to go to market, it can be exchanged using a value exchange system: barter, currency, etc.

So the value accounting system is not a currency. It doesn't refer to a transaction, to an exchange. Our 3 individuals picking cherries are not exchanging anything among themselves or with another entity while they are picking the cherries. They are just adding stuff into the same basket. The exchange might come later, once their product is ready for the market.

A value creation process that requires more than one individual can be based on following 3 arrangements or a combination of those:
  • stigmergic coordination- Ex. Wikipedia, where contributors don't have aligned goals, don't maintain a relationship other than being contributing members to Wikipedia 
  • cooperation - Ex. any corporation, where very often the goals and interests of employees are not aligned with the owners. 
  • collaboration - Ex. 3 individuals picking cherries, requires a large degree of alignment in goals.
The traditional capitalist economy is mostly about ''cooperation'', which doesn't require an alignment in interests. Value creation is sustained through an exchange process, where workers exchange time spent on different tasks against wages. The exchange process transfers risk from the workers to the owner of capital, but at the same time the workers are stripped of their rights to the output of their labor. Workers cooperate (despite some inconveniences and misalignment in interests and goals) with the owners of capital in value creation processes because there exists an economic dependency between the two groups. Worker need money, which is turn is a predominant means of acquisition of basic necessities. On the other side, owners of capital need labor to generate more wealth. The problem is that this economic dependency is not symmetrical. 

The Open Value Network (OVN) model describes a blend between the 3 arrangements mentioned above, mostly coordination and some stigmergic collaboration. No one works for anyone else. All labor is transferred into fluid equity through a value accounting system, which grants ownership to the participant member to a percentage of the future revenue generated for the lifetime of the product created, if a product is the goal of the project, and if the project reaches maturity. At the same time, we also need to understand that risk is shared among all contributors, which is not a bad arrangement if it is distributed on a wide basis and diversified. The value equation is the algorithm used to assign fluid equity to every participant based on contributions.

normal mode of production
In the traditional capitalist economy wages should be regulated by the free labor market, if we make abstraction of all sorts of mechanisms through which this market can be biased (labor unions and governmental intervention included). This forms the rationale behind the difference in salary between an engineer and a clerk. The notion of job implies that the salary is predetermined before the worker starts working (with possibility to increase the salary based on performance, to stimulate good performance). Since the amount of $ per hours of work is pre-established, the capital owner needs to make sure that the worker produces enough value during the work hours. Therefore, a new role is needed within the organization to guarantee this, the beloved project manager. Traditional organizations spend a lot of energy doing time management, because usually the interest of the worker is not perfectly aligned with the interest of the capital owner. The worker only cooperates with the owner of capital. Thus, classical organizations operate on the normal mode of production (from the ''normal curve'' or ''bell curve''), where the number of workers is minimized, most workers produce the maximum of value, and those who produce maximum value produce in fact most of the value.

long tail mode of production
An open enterprise is open to participation, which means that anyone can add value. Moreover, it is decentralized in terms of allocation of resources and uses a horizontal governance system. An OVN operates on the log tail mode of production, which means that a very large number of individuals are responsible of value creation, only a very small percentage of those create maximum value, the great majority of them create very little value, and most of the value is created by those who contribute very little. A prearrangement on revenue is impossible in this context. First, because the process of value creation is very dynamic and relations of production cannot be contract-based. Second, the process involves a great number of individuals that are distributed all over the planet, therefore it is impossible to do time management. There is no instituted power structure, therefore no one can force anyone else to work more. In this case, an algorithm is needed to turn contributions into equity, as contributions are added to the project. Moreover, the value equation embodies positive and negative (intrinsic) incentives. In some sense, the value equation is a distributed solution to time management, which can be applied in large scale p2p, co-creation processes.

For example, the value equation takes into consideration the formal reputation of contributors. A higher reputation results in higher equity, all other things being equal, and vice versa. This acts as a stick and a carrot, and regulates behaviour. Moreover, the value equation contains parameters to incentivise periodic and frequent contributions. Other factors relate to the quality of execution or of deliverables, and to the priority level of tasks.

By t!b! 

 AllOfUs

Wednesday, October 30, 2013

What should we do with dark IP?

Answer: Open it! 

My friend Layne Hartsell sent me a link to an article on Yahoo news "Anti-Troll' Marblar Unites NASA Patents, Samsung to Crowdsource New Products".
Marblar CEO Daniel Perez said that although many companies' research and development departments spend millions of dollars on such patents, more than 95 percent of them sit unused.
"They're just kind of laying dormant," he told ABC News. "But what if people saw the patents for a special type of material from NASA or a unique laser from Oxford? What are some new ways that we can incorporate these patents into new products?"
I digested the text and put some comments on it, you can access it through Diigo HERE.

Marblar is a new tool for mining and valuing dark IP. What value Marblar brings to the market? They bring dark IP to the surface, from different sources, and they put in one place. The huge database of patents also gets sorted and refined using the users of the website (so they crowdsource that work too). They also ease licensing/royalties agreements between at least 3 parties: the owners of the IP (NASA for example), applications developers (the crowd), and companies that have the capability to put products on the market, (Samsung for example).

I see here old school mentality trying to adapt to the new. These are people who still value IP, who don't understand the open innovation game, who don't realize its potential, or who simply can't play it in their current setting. They have spent a lot of money developing all sorts of technologies and are now trying to value them in a different way. In other words, they feel that the IP they're sitting on surpasses their capacity to put it into practice, to develop its full potential, and they are essentially outsourcing (by crowdsourcing) applications development. This is already recognizing that they (closed corporations) aren't innovative enough. This is recognizing that the creativity economy will be driven by the multitude (the crowd, in their terms). But they are still holding on to their patents because they feel they should get a return on their investment and, most importantly, because they don't know how, or they can't play the open game.

If you ask my opinion, I would put all this dark IP into the public domain, especially the one developed with public funds. This will do a lot more good for the local economy!!

If I was a large company like Samsong, I would re-purpose my business core into a value network management group. Don't need intermediaries like Marblar. Samsong has the resources to become a locus of open innovation, an attractor of bright minds, by providing the space, the equipment, and the proper incentives for an innovative ecosystem to grow around their mission.

But I am not a large company and I am with the 99%, which is now merging into open value networks, powerful (I believe) economic entities, capable of bringing ideas to market. Watch the video below where I explain the open value network model.



Open value networks like SENSORICA also have strategies to mine dark IP. You can take a look at our approach in THIS document.

In my opinion, Marblar is only a transitory system. This model is missing something extremely important, the dynamics of open innovation, which is beneficial for society at large, but also for individuals who engage in it IF we give ourselves the proper tools, like a value accounting system, and a p2p production framework like the one proposed by the open value network model. Nonetheless, it is refreshing to see that Marblar implements a rudimentary value accounting system with their "marble" points, which has the effect to turn competitive product development into large scale collaborative product development. This is precisely the dynamics we're nurturing in entities like SENSORICA, to turn product development into a long tail process.

But systems like Marbler are setting up a candy economy (see THIS post for the definition) and are furthering the netarchical capitalism agenda. SENSORICA is setting up a commons-based peer production system, in which ALL revenue is redistributed in a FAIR way to ALL the participants. The Marblar scheme treats participants as resources, as the crowd, as a mass that can be organized to produce new ideas for the big guys to exploit and rip all the profits, giving a candy back to the crowd (see my post Why I don't like crowdsourcing). SENSORICA is empowering, see participants as equipotent peers, is inclusive, is fair. Which one feels better? Which one do you think will grow faster?

The new world will not be uniform or monolithic. As in the old world, there will be oppositions or antagonistic systems in the new world too. Netarchical capitalism, which is in fact a new form of feudalism is gradually defining itself and growing in opposition to peer production. Those who own our most important resources are looking for ways to transfer their assets into the new economy and to preserve their power. They are building platforms that they can control, and are hoping that the rest of us will get trapped in there or become dependent. The p2p or the multitude movement is building p2p infrastructures parallel (that fulfill the same functions) to these centralized and controlled platforms, with the hope to free the individual. We need to distinguish between being able to co-create value using a platform owned by someone, and being able to co-create value in an environment that is not owned or controlled by anyone, as autonomous and equipotent peers. In both cases we co-create value, we collaborate, but I prefer not having someone to randomly decide if I'm in or out...

By t!b!

Tuesday, April 16, 2013

Open source hardware meets the p2p economy

We are at this moment in history when we can say with certainty that open source hardware (OSHW) is economically viable. The video below tells the success story of Adafruit Industries. Barely formed, this business model relying on OSHW might already be obsolete. A new model, the open value network, is already threatening to transform the landscape of the open source economy. This article explains why.



Most people find it counter-intuitive that companies can survive in a highly competitive capitalistic environment, designing and distributing high tech products, giving away their recipes, AND allowing (even encouraging) everyone else to copy them, WITH THE RIGHT TO MAKE COMMERCIAL USE.

If you don't believe it, stop wasting your time arguing against it. It is real, it is here, you better understand it fast before the world changes around you, leaving you an alien in your own surroundings.

The business around open innovation cannot be learned in school. It belongs to a new economic paradigm. Old arguments don't apply anymore, because the semantics and the logic are not the same. Some time ago, we published the article How to play the open game in the present and future economy, which tries to capture the essence of sustainable open innovation. You should revisit this article from time to time, because we'll continue to improve it.   

The most successful ventures built around OSHW, like ArduinoAdafruitSparkfun, etc., can only be understood within their larger ecosystem. We can identify two main structures: a commercial entity and a community. The commercial entity is a classical form, usually a corporation or a co-op. It takes care of manufacturing, insures quality, structures and integrates the feedback from the community into new products, nurtures the community, performs legal functions, integrates all the transactional logistics (storage, shipping, payment), and provides services. The community plays different roles: consumers of products, provide feedback on products, propose new designs, spread the buzz, educate new members of the community and provide help, etc.

What we see in the case of OSHW is a greater integration between a commercial entity and its market. Traditional commercial entities maintain provider-consumer type of relations with their markets: some "smart" individuals within the firm study what consumers might need, pass that to a team of engineers to make it, and put it for sale with a team of marketing wizards who will make almost anything look like the perfect fit. If the firm was right about the need, which is not always the case, customers pay for it and take it, and ask for service if needed. Service is provided by the commercial entity in exchange of customer loyalty. In this approach, the consumer is educated about what he needs and wants, after the "smart guys" have made the market study, decided on the general need, and offered a one-fit-all solution. This is obviously the extreme case, or what was widely practiced 20-15 years ago.  Today, traditional corporations build communities around their brands, and they try to absorb more feedback from their consumers. In the case of OSHW, individual consumers drive design and development.

This integration between the commercial entity and the market in the prevalent OSHW models is made possible by the internet technology. But as we saw above, there is still a clear distinction between the commercial entity and the community. For example, a community member who proposes a new design that becomes commercially successful is not rewarded with a fair share of the profits made by the commercial entity. I call this the "candy economy", meaning that the members of the community around a OSHW company stick with it and contribute mostly for intrinsic motivations, and a small present (a candy) or a token of recognition from time to time.

Is this division between the commercial entity and the community necessary? Or is it an impediment for a better arrangement?

The open value network model abolishes the distinction between 
the commercial entity and the community!

The open value network is a model for commons-based peer production. See SENSORICA as an example.


The diagram above depicts the structure of a value network. The physical and the virtual infrastructure, as well as the tools and the equipment used in R&D and in production are part of a pool of shareables, legally owned by a custodian, which is bound by a contract to act in the interest of the community, obeying a set of predefined rules set by the community. All the information and the knowledge generated by the value network become part of the commons (there is no intellectual property). Affiliates (agents) rely on their know how to create value (products), using these resources. This value (products) is exchanged on the market for some form of revenue. The revenue is redistributed among all affiliates in proportion to their contributions, using a value accounting system. The barrier to participation to value creation processes is very low. In that sense, the value network is open. Value creation is so widely defined that it encompasses activities usually performed by members of the commercial entity and the community, in the prevalent OSHW model cited above. Therefore, the two structures, the community and the commercial entity are merged together at the level of value creation.

The open value network model distinguishes between different types of agents, based on their degree of involvement/participation. Thus, we can distinguish between active affiliates (those who take part in value creation) and unaffiliated observers (those who know what's going on in the value network). If we go back to the prevalent OSHW model cited above, we can say that the owners and the employees of the commercial entity, as well as the community members who provide feedback and new design ideas, or who actively propagate information about products are ALL active affiliates.

We also need to note that active affiliates are those individuals who participate in value creation AND who decide to log their contributions within the value accounting system. Participation in the value accounting system is NOT mandatory. Someone can elect to contribute to the value network without expecting something in return. Thus, the open value network integrates a gift economy with a market-oriented economy.

That is all fine on the value production side, but what about the distribution side, or the market side?
All the transactional logistics (for the exchanges between the value producing network and its market) and the legal aspects associated with it are moved into what sencoricans call the "Exchange firm", which can be embodied as a non-profit, with the sole purpose of serving the value network.

So why is the open value network a menace to current OSHW business models? Because by abolishing the distinction between the commercial entity and the community, value networks like SENSORICA threaten to drain these communities associated with OSHW-based firms of their talent!   


More on the open value network model

The open value network model departs from capitalism for 3 main reasons:
  • No economic cast, no division between owners and workers, between those who own the means of production and those who provide work. The commons takes care of that. 
  • No clearly defined frontier between the system of design-production-distribution and the market, the system rewards every contributor to value creation in proportion to his/her contribution. The value accounting system takes care of that. 
  • Reappropriation of labor. Active affiliates who are involved in value creation are not exchanging their labor for wages, they are in fact accumulating equity, which gives them rights to the future revenue generated by exchanging the value they create with the market. Thus the individual is always the owner of his work. 
The value accounting system allows value networks to go beyond the gift economy AND beyond the candy economy.
By t!b!
By AllOfUs

Saturday, February 2, 2013

Leadership? What's that?

I am trying to understand how networks respond to problems. I use the presentation below to structure my understanding. I am pursuing this reflection in the context of SENSORICA, which is a value network. The presentation will continue to evolve...

See also the discussion on Next Edge.


By t!b!
By AllOfUs

Saturday, November 10, 2012

How value networks can articulate with the present economy - an example in food preparation and distribution

Yesterday I had a conversation with my friend Paul about the advantages of value network over classical structures, including co-ops.

picture comes from this website
Context
Paul is involved in #occupy Montreal and they are now organizing a center for preparation and distribution of vegan food in Montreal. They also want it to be very local. This operation would require gathering products from different local farmers, cooking/preparing, packaging and distributing raw or prepared food. 

Question
Should they create a co-op or a value network

My answer 
They can have a co-op embedded within a value network. 

Tuesday, September 18, 2012

The role of power relations in a p2p economy


The #occupy movement, which is a surface manifestation of a deeper Multitude movement, is in fact a refutation of power. Not only of the "power in place", i.e. big banks, governments, etc. but of what we call "instituted power", the kind of power your boss has over you. The consensus decision making process, a form of direct democracy that has been adopted by the #occupy movement, is the most obvious affirmation of this refutation of instituted power relations, which until now has been seen as a necessary structuring mechanisms of society. 

Where is this coming from? Was it there before? Is this pure Utopia? Or is there something fundamental happening, which makes instituted power relations lose their importance?  

We often hear that instituted power relations are tolerated by people because they are believed to be essential to organize us into efficient and effective groups, to achieve complex goals. Some say that without instituted power relations society would simply brake down, collapse. Go tell that to an anarchist... 

Sunday, September 16, 2012

Value Networks, about commercializing their products

We take the example of a specific value network, SENSORICA.

The problem

One of SENSORICA’s main reason for existence is to provide for its members/affiliates the means of subsistence and well-being. This is to say that the surplus value that is created by the network must be exchanged on the market against other values, which are to be redistributed to participants based on their relative contribution. This redistribution is done according to the value accounting system, to which all members must adhere. The goal here is to establish a channel of distribution for SENSORICA’s products. The problem is that there are laws and regulations which makes it difficult for a non-legal entity like SENSORICA to sell certain products. Someone must take the blame if those products don't respect established standards, and our society doesn't know how to interface with things like SENSORICA.

Solution 

In the current situation, we need to create legally recognizable forms to channel products through them. This is actually the role Tactus Scientific Inc. plays for the Mosquito Scientific Instrument System, designed for the scientific instrument market segment.

Monday, August 27, 2012

Re-Occupation 2.0?


What do we do next?  The question for revolutionaries in North America is to figure out how to activate the anaesthetized. But why are we anaesthetized? There is a realization, at least to some extent, that we are the ones responsible for the global ills; the reification of individualism and the exporting of capitalism and ‘democracy’, yet the vast majority of people are too ‘comfortable’ to do anything more than nod their head when presented with the evidence. Why is this? In short, most people don’t feel enough pain on a personal level to motivate them to take risks... If this is so, do we need revolution?

Yes, because we are living within a lie, and this cannot be healthy...

         Read more...

By Suresh
(more notes by Shresh)