The Perfect Storm:
We are at an historic time in human history; one that may never repeat itself again. The current financial crisis may provide just enough disruption for a completely new economic paradigm to emerge; the Innovation Economy. We cannot squander this moment arguing over common logon for our Twitter and Facebook profiles; a far greater integration is required from Social Media today.
Advertising is not the correct revenue model.
It is astonishing that Social Media, in general, has not figured out how to make money. Social Media IS money. All wealth on Earth was created from the social capital, creative capital, and intellectual capital of people – wealth creation is already crowd sourced, except it is hidden behind the corporate balance sheet as an” intangible asset”. Now, there is an opportunity for Social Media to harness this engine of economic growth and wealth creation – if the nascent industry could only see this.
The problem is simple: Globalization is proceeding as if economic growth can occur before technological change. Some time in the past, we got these two things up mixed. It does not take money to make money; it takes innovation to make money. Technological change MUST ALWAYS happen before real economic growth can occur. Anything else is a transfer of wealth, not the creation of wealth. All that is unsustainable today – the economy, the environment, natural resources, energy – may be due to this tiny anomaly of current market economics. Today, we can easily correct this little flaw with almost a flip of a switch – but the window of opportunity will be short – and we need to be clever.
The idea that human knowledge is tangible and behaves individually and collectively like a financial instrument is still considered impossible. The ability to place a market value on the social capital, creative capital, and intellectual capital of a team, community, or geographic population of people – let alone a social network – has never been accomplished. This idea remains the Holy Grail of finance and one that Social Media is uniquely positioned to capture. If the finance industry can invent “tangible derivatives” out of thin air paper based on assumptions of future productivity, then we ought to be able to do the same with knowledge assets that live, breathe, and innovate tangibly all around us.
If it looks like money, it will behave like money, guaranteed:
First, we need to build a knowledge inventory system that includes everyone; and which can be anonymously codified and amalgamated with logic in machine readable format (the Universal Decimal Classification System is a good candidate). Second, we need to sample our knowledge inventory in a community so we know what knowledge exists and where. Third, we need to develop a search engine that returns the probability that a strategic combination of knowledge assets can execute a given objective. Fourth, we need an innovation Bank that will “pull” knowledge surplus and “pull” knowledge deficits together from diverse communities. Such a system is described at http://www.ingenesist.com (page IEc101)
This should not sound too weird; it is the same calculus used on Wall Street. The switch is flipped when we engage and reconcile our new innovation system with the old financial system.
Go where the money is:
Social Media is perfectly positioned to develop these features in their products and in our communities. We first must understand that innovation is predictable. We may not be able to say exactly where the innovation will lead, but we can be sure that if we place a group of strategically diversified persons in a room, innovation will happen and we can capture it. If the fact of innovation is predictable, related risks can be pooled, and diversified. If risk can be diversified, it can be hedged to zero. If innovation has zero risk, Wall Street will salivate to issue “innovation bonds” to finance diverse communities of practice. If innovation capital is inexpensive and accessible, a great amount of innovation will occur. The anomaly of capital markets can be reversed, and the result will be sustainable economic growth.
Naturally, the compensation structure will be in the form of dividends, both financial and in social welfare. New corporations will emerge and the old corporations will become more efficient with improved allocation of knowledge assets. What is invented will tend to reflect social priorities rather than today’s short term Wall Street priorities. America must innovate at an intense and sustained rate in order to compensate for the imbalance of debt economics that has been created in its absence. Social Media can be, and must be, the infrastructure upon which an Innovation Economy is built. Again, this opportunity is staring us straight in the eye. This is the conversation that must be having today if we will meet the challenges of tomorrow.