Throughout the articles and videos on this blog, I try to make a direct and rigorous analogy between Market Capitalism and Social Capitalism because there are two characteristics that no Social Currency can approach, yet which define the very nature of Capitalism: capitalization and securitization.
refers to the ability to consider the present value of predicted future earnings as if it were, in fact, tangible. This is the factual basis of the U.S. Dollar. In finance, this is called debt. If done correctly, debt is an extremely effective tool for economic development responsible for huge productivity gains in the last century.
refers to a structured financial process that collects all those debt payments into a big pool of money and then chops that pool of money into smaller pieces called securities, which are then sold to investors. Risk is said to be diversified away because it is unlikely that all debtors would default at the same time – so if a few of them fail, the investment in the securities remains relatively safe.
This is very important because in the video series on Social Capitalism, we have described a structure that allows us to capitalize and securitize knowledge assets in a social currency representing real productivity.
For example. The knowledge inventory tells us the probability that a collection of knowledge assets can execute a business plan. Applying WIKiD tools, the rate of change of knowledge is a proxy for innovation. If we can predict the fact and value of innovation with The Value Game, we can estimate the risk adjusted value of its corresponding future productivity gains. Now, the cash flows of many communities of knowledge assets can be aggregated into a diversified pool of value and chopped up into securities. Since the securities represent future productivity, they are readily convertible to Dollars, Yen, or Euros and sold to investors.
This new security, called the innovation bond, will become the basis for a new social currency.