Archimedean Theorem 2 – “Worth Doing” Metrics

Increasingly I find myself engaging with individuals and communities who are tuned into the realization that we are on the precipice of a great transformation. Incumbencies on all fronts are evidencing voids where confidence was once thought to dwell. And while many stand in awe of the crumbling icons, a growing number now believe that they are both observers and actors on the stage of what’s about to be. In many respects, a sense of a community of stewards of that-which-is-to-come is bubbling up in all corners of the globe and the notion of individuated identity is fading.

However, as façade crumbles, a tragic irony has emerged. And this irony struck me quite profoundly in two conversations I had over the past week with two different groups of transformation advocates and prophets. As we discussed the hospicing of the old paradigms of power and values in the interest of affording the immanent transition some degree of grace and dignity, we began to discuss what tentative first steps could be taken into the dawning transformation. And then, like the Medussa from the mist, the phrase was uttered, “We could really get this started if we could find the funding.”

If we could get it funded.

When was the last time you heard this? When was the last time you said this? What manner of idolatry have we come to? An idea is good, but it’s only actionable if it’s funded. Addressing a social need or humanitarian crisis is laudable but it only rises to a level of action if it can be funded. Deploying new forms of development initiatives for the most marginalized states in the world would have merit if only an NGO would step up and fund it. An enterprise may achieve global impact but it only is successful if it accumulated monetary artifacts because, “that’s the only scorecard we can measure at the end of the day.” The UN Development Goals are only actionable if they are funded. Each of these statements has been made in my hearing in the last 7 days.

Well, I am here to tell you that anyone who speaks of transformation and punctuates it with “if it gets funded” is animating money with an insidious power that will perpetually obstruct and destroy every impulse preceding the statement. I have been overwhelmed by those who, in the run up to the UNFCCC event in Copenhagen, believe that we will transform our extractive degradation of the public commons of land, air, water, culture, and community based on a balance sheet argument where money is the final arbiter. We could address carbon emissions with green investments and government incentives if the right political forces just give us our funding. I often wonder if we have invited our "if it gets funded" invocation into such conversations for the explicit purpose of having the faux comfort that we've secured our moral plausible deniability. "After all", we argue, "we would have done the right thing if it had been funded." I am repulsed when I hear NGOs state that they will back off of principled social justice and the rule of law regarding matters such as food production, medicine delivery, and infrastructure support because they cannot threaten their donor base by challenging legal abuses such as trade and industrial property legal violations. When one of the world’s largest NGOs chooses to ignore agriculture and medicine technologies which exist in the open source so that their multi-national donor partners can “participate” in public-private partnerships which are tax-deductible and laden with goodwill marketing, where is the voice that speaks for the millions who suffer and die at the hands of the moral bankruptcy?

Down this bizzare inquiry we find Archimedean Theorem II. Worth doing is a condition in which an individual or collective response to human need persists to a point sufficient to conclude that, with money it would be “worth doing”. An important corollary to Archimedean Theorem II is that whatever exists in abundance in the community discerning “worth doing” is the resource that is required to initiate action and this will never be money. It will often take the form of reputation risk, vocal endorsement, courageous leadership, a prophetic voice, an organizing or catalyzing act or other resources of inestimable and undenominateable value. And it is quite likely that the first measure of integral engagement will actually be marked with an invitation to execute “worth doing” with less money as the first step is likely to be unrewarded with a monetary endorsement. However, when the monetary metric incumbency sees that “worth doing” persists, untold resources will align for subsequent activity.

Living in the realm of Archimedean Theorem II is “worth doing”. As an itinerant in such a land, I can tell you that the consequences are beyond your wildest, wealthiest, imaginations.

-

Global Innovation Commons receives pre–Copenhagen coverage; European Patent Office official minimizes violation of patent law

Global Innovation Commons receives pre–Copenhagen coverage; European Patent Office official minimizes violation of patent law

November 5, 2009 – Brussels, Belgium –– Innovation policy will be the fulcrum for many climate negotiations at United Nations Climate Change Conference 2009 in Copenhagen. Negotiators seek to extend existing intellectual property practices to vital issues including climate change technologies. M·CAM has provided the world's most comprehensive interactive archive of climate change technologies which have been opaque to the global market for decades – being brought to international visibility in the Global Innovation Commons (http://www.globalinnovationcommons.org). In a deployment partnership with the World Bank and International Finance Corporation's (IFC) infoDev, M–CAM has made available over $2 trillion of both revenue generating and research and development technologies for public, open-source, use.

In today's cover article in Der Spiegel – Patent Lies: Who Says Saving the Planet Has to Cost a Fortune – M·CAM's work on innovation ethics is highlighted. In addition, a now retired senior officer of the European Patent Office acknowledges, on the record, that the illegal practice of redundant patent filings is merely a "detail." "Sometimes patents are not worth what they claim they are in terms of innovation," Gerard Giroud, the recently retired international affairs director of the European Patent Office, told SPIEGEL ONLINE. "But it seems to me a detail. Patent offices should grant patents to encourage investment in a particular type of technology – because that investment is what will save the planet."

For the complete article, please download:

http://www.spiegel.de/international/europe/0,1518,628606,00.html

It is important to realize that every conversation about "innovation" as a key to economic "recovery" centers around the belief that somehow or another, the U.S. and Europe will emerge as the innovators of the next economic cycle. This assumption is unfortunate for a number of reasons. First, it presumes that the past 30 years of education of the world's best engineers, business people, and technologists didn't produce more Chinese, Indian, Korean, and Taiwanese professionals than the total of those from and residing in the U.S. and Europe. Second, it presumes that the past two decades of consumption have been based on innovation. Unfortunately, we have been seeing a growth of consumption - not innovation - in most industrial sectors. Finally, it fails to acknowledge that our conversion ratio of innovation to enterprise is less than 3% in the U.S. and Europe. We are good at building food chains for incumbent acquisition in M&A but we're not good at transformation and adoption of game-changers.

The new will be collaborative, open source, and borderless.

_

Transforming Values for an Alternative Destiny

Text for World Bank and IFC Plenary Address at:

infoDev Global Forum
Florianopolois, Brazil
October 27, 2009
Dr. David E. Martin
Executive Chairman, M•CAM Inc.


Honorable Governor Luiz Henrique da Silveira, Director Mohsen Khalil, Distinguished Guests, Ladies and Gentlemen,

We meet on this day in the land of the Tupi-Guarani to manifest transformations. At this Global Forum, we have assembled from every land not as explorers seeking conquest but as stewards of experience committed to building a more prosperous future for all. It is only fitting that we begin in this land of the mountain arising from the channel in the sea – the ancestral name for Florianopolis – with a moment of reflection for those whose feet have passed before us and who left the land beautiful for our enjoyment. Let us commit to leave this land, and all the lands from which we come, more beautiful than we found them for those who will follow us.

Today I would like to explore three transformations: Values, Resources, and Leadership and the role they play in our discussions here over the coming days. To do so, we must dedicate some time for honest assessment of where we are together with a consideration of our path to this moment. From that point, we can invite a dialogue about aspirations we have for the future. And finally, we can resolve to take the first step, enlivened and unfettered, into the future empowered by a vision which sees through obscurity into possibility.

What do we value? At conferences like this, it is often quite easy to begin with a series of unspoken assumptions – those untested, unspoken consensus beliefs to which all are presumed to assent. For example, we all assume that innovation is “good”. We are asked to believe that entrepreneurship is a modern ideal to which societies should strive. We are encouraged to hold as ideals the myths of the past 60 years of economic activity and all long for a “Silicon Valley” utopia in every corner of the globe. We are encouraged to speak of numbers and compare “ours” with “theirs” to see who is developed, who is developing, and who has the least. If it’s on a balance sheet, deposited in a bank, or traded on the stock market, it’s valuable. If it’s not, then we best ignore it. We agree, we presume, that it would be strange to speak of culture and indigenous wisdom and, instead speak of semi-conductors, nano-particles, and anti-retrovirals.

When did we lose our humanity? Let’s explore a couple of facts about values in the context of innovation.

Living systems have innovated as long as they’ve existed. And no, humans aren’t the only innovators. Ecosystems are filled with innovation. As trees’ roots respond to nutrients and water but grow to accommodate the pressures of wind and grade so to will the human seek to find sustenance and assurance. Unlike our ancestors, we often limit our use of the word innovation to things – usually things that require the non-replenishable consumption of natural resources, power, and labor – rather than seeing an ecosystem in which innovation has as much to do with how we do what we do as the artifacts we create. In our obsession with development, how many of us take the time to learn from the Heritable Knowledge of indigenous peoples who know how to use plants, soil, and water to live? How many of us have considered that we would benefit from innovation in enterprises and value exchange as much or more than developing the next ringtone on an iPhone?

Entrepreneurship should be encouraged, right? Well, maybe. How many of you remember that the modern corporation was established in Europe to shield individuals from personal responsibility. Would we really want to fly in an airplane built with limited liability wings? Would we want to drive a car with limited liability wheels? Yet we encourage our young entrepreneurs to participate in the prospective future employment for thousands on the foundation of limited liability. While we lament the breakdown of the markets over the past two years, have any of us considered that the very institutional foundations we seek to create – corporations – are expressly established to separate the person from the accountability of the venture?

Sixty years of success since the success of Silicon Valley. Really? Of course, you remember the World War II war reparations that lead to the birth of the computer and data industry now heralded as an American success. Magnetic tape, without which there would be no data storage industry, was created by Hitler’s Third Reich as a propaganda machine. Computers were created to decipher the codes of the Japanese and the Germans – codes that baffled the innovative minds of the U.S, the U.K., and Australia throughout the war. And the wealth of Silicon Valley half a century before came from Federal Government stimulus in the railroad industry and the banking sector – not from innovation. Without the Morrill Act for the railroads, there would be no Stanford University. We do no favors today by forgetting the truth of our past. Not a single element of what made Silicon Valley a success – preferential government procurement, national security technology transfer, trade incentives in the form of preferential tax concessions leading to effective anti-competitive pricing – would be legal today under WTO yet we see dozens of countries attempting to create that which didn’t actually happen.

Let’s visit the past to inform the present and future. Recall that the great trading empires which created the incumbent powers in the North were built on extractive trade. Sure, here in Brazil, coffee played a huge role with the Portuguese. However, the same drug trade which plagues our cities today was the currency of the empires just a century or two ago. Today’s cocaine is yesterday’s heroin. Today’s marijuana is yesterday’s opium. Friends, if the foundation of our markets was built on addictions and violence. Shouldn’t we consider transformation? Shouldn’t our conference be focused on a new morality rather than the next turn of the extractive wheel grinding up those who it leaves behind as consumables?

Today, we might reconsider values. How do we encourage creativity that rewards those who address society’s greatest challenges with prosperity and public confidence? Is it possible, in this conference, to commit to aligning our innovation impulse to meet and exceed Brazil’s visionary president’s call for rainforest preservation and carbon emission reduction? Can we see value in 8,200 cubic kilometers of fresh water in this great country and see this as a Commons Trust rather than an exploitable commodity? We can and we will transform values here today.

In his treatise on the economy, John Maynard Keynes codified a sense of resources that has enjoyed little re-examination until the present day. In Keynesian terms, Brazil is 90,000,000 laborer consumers, bauxite, gold, iron ore, manganese, nickel, phosphate, platinum, tin, uranium, petroleum, timber, coffee, grains, sugarcane, cocoa, citrus, and beef. Oh, and now, we need to be fashionable and throw in millions of hectares of carbon sequestration for the polluting world. How many of you would be happy to be told that your only worth on the planet was limited to the bank account you have, the car or bicycle you have, the number of employable children you have, and the house in which you live? That’s it. Nothing else counts!

Well, you are more than that. We are more than that. It is a tragedy that the last 80 years has reduced our mental capacity to see our land, our people, and our ecosystem for what others can take from it rather that for what it can generously provide.

My company, M•CAM, works with helping countries re-discover and reclaim their own story. In the wake of our discovery of the degree of abuse in the global market of carbon trading – including the growing use of carbon credits to launder drug money and finance terrorist organizations across the world – we decided to work with communities in Papua New Guinea to revalue their forests. Working with the Quachet in East New Britain province, I sat with elders and asked them what a rain tree was worth. They told me about the tree and its many functions. The rain tree supports hundreds of species of plants and animals in its expansive reach. Its bark, leaves and roots are filled with healing teas, pastes, and medicines. Its vast leafy canopy condenses rain from cloudless skies providing pure water to the land and life below. Its wood, when one of its limbs falls, is sufficient for several houses. So when I asked them if I could buy it for its carbon absorption, they laughed. “Why would you want only that from such a generous tree?” they asked.

Together, we worked to create the world’s first Heritable Innovation Trust – a new legal framework which renders obsolete the WIPO’s traditional knowledge paradigms. While here in Brazil and in many other parts of the world there is a growing sense of the need to “protect” indigenous or traditional knowledge, what local communities are not told is that by putting this knowledge into copyrighted form, they are really accelerating its loss into public domain. In 70 years, the information that is recorded by well meaning programs, like those here in Brazil working in Amazonia, will enter the public domain under industrial property laws in compliance with WTO’s TRIPS agreement. In the Heritable Innovation Trust, the community stewardship of community and ecosystem knowledge is placed in a perpetual Trust which can neither expire nor be taken by those who seek to exploit without community engagement.

Resources come in many untraditional forms and are often most prevalent where they’re least expected. Just a few months ago at the infoDev conference in Coimbatore India, many of you witnessed a commitment on behalf of my organization and infoDev – a commitment that is fully delivered today. For those of you who were not there, let me give you some background.

Since the modernization of the intellectual property system and sponsored research programs of the past four decades, economic development and exclusionary innovation property rights have gone hand-in-hand. However, as far back as 1980, these property systems were contaminated with a growing practice of using patents and other intellectual property regimes to block commercial access and market use. It is no accident that some of the largest patent estates were filed (and restrained from market adoption) by companies who had the most market share to lose. Oil companies filed and held thousands of environmentally desirable patents in fields ranging from solar and wind power to hydrogen and hybrid propulsion. Paint companies filed and held thousands of patents on alternative surface coating techniques only to continue using toxic metals in industrial production. Pharmaceutical companies and their agro-chemical allies filed and held thousands of patents on treatments and cures for disease and on land renewal technologies and insured that these options were not available for deployment. And the list goes on. However, in this “cold war” of innovation abuse, the most economically most marginalized states (a term we use in place of the conventional term “Least Developed Countries” or “LDCs”) were overlooked. Patents were not filed in markets that didn’t seem to matter. And this has created an unprecedented opportunity for bringing hope to us all.

Exemplified in the extreme in the area of climate-impacting energy and infrastructure technologies, an unhealthy alliance compounded the global failure to accept and adopt technologies which could have provided pre-crisis interventions in environmental technologies. Through infrastructure bond funding programs with their associated long maturities, economic incentives existed to blockade the acceptance and deployment of efficient – albeit obsolescing – technologies. After all, there was no effective way to install distributed power generation five years into a 30 year coal fired grid based electrical system. By funding things in extremely large, centralized scale, innovations that were made were not judged for their technical merit or feasibility but rather for their ability to be scaled into legacy inefficiencies. Compounding this economic impediment was the patenting practice, adopted by the majority of patent applicants throughout the 1980’s, called “defensive patents”. Defensive patents – representing an estimated 80% of all filings by industrialized nations – do not represent artifacts of innovation but rather utilities for litigation risk management. By extension then, when patents on litigation anticipation or financial obsolescing “innovations” were awarded, they not only precluded others from entering into research and development or market efforts, but they also froze much needed technology out of the market.

Out of this ill-conceived industrial policy emerges an unprecedented opportunity. Patents on environmentally necessary technologies born in the research and imaginations of energy shocks dating back to the 1970’s afford an amazing Global Innovation Commons which can serve to catalyze solutions for the climate crisis as well as the global economic disparities which have fueled acrimony between countries leading up to Copenhagen.

It is a violation of patent law to engage in “double patenting”. This practice is simply the seeking of a patent on something that someone else has already claimed. When Volkswagen received a patent for a hybrid electric vehicle that includes a rotating flywheel mass variably engaged by a series of clutches in 1979, their allowed claims are so broad as to describe virtually every hybrid electric vehicle built since. This patent expired in 2002 and is now in the public domain where anyone, anywhere, can practice every element of this invention without any fear of patent enforcement. That’s right, an automotive company in a marginalized country could use 100% of this information to design and build a car to compete with Toyota’s Prius. Today.

When policy-makers debate concepts like “compulsory licensing”, the problem is that they are masking a giant asset which exists disproportionately benefiting the Most Marginalized States (“MMS” or conventionally designated “Least Developed Countries”). They are attempting to reinforce, rather than reform, a patent system which has been failing all interests – including those in the industrialized nations.

In short, the perpetuation of the illusion that we still haven’t “innovated” enough has placed the challenge on the wrong dynamic. Over US$1.6 trillion in market innovation latency has been created over the past three decades alone which has been overlooked – not on its merit but rather on the fact that it would challenge incumbencies. Given the magnitude of the challenge before humanity, our clarion call is for the deployment and honoring of these innovation impulses which have been marginalized and the use thereof to seed enterprises in the Most Marginalized States.

Using a framework called the Global Innovation Commons, all innovation artifacts (patents, research publications, government or industry sponsored research reports, and technology procurement records) have been assembled and reviewed for their legal standing in every country on Earth. These innovation artifacts have been compiled so that jurisdictions of enforcement are easily assessed to avoid any infringement in any jurisdiction. This enables a business or government to know what can be developed for domestic use only, for limited export, or for general export. Wherever possible, using abandoned patents, global freedom-to-commercialize positions are identified for unrestricted commercial use and deployment.

At this conference, in a partnership between infoDev and M•CAM, you all will have access to almost $2 trillion dollars – more than the entire GDP of virtually all countries represented here today – of innovation waiting to be put into use. It represents the greatest assembly of innovation ever and it’s yours today! We have an opportunity to transform our view of resources to include a world of innovation which has been kept from deployment until today – a world of innovation that will lead to clean water, ethical health care, adequate food production and distribution, and renewable energy. And when we have ethical and open use of this innovation, we will be free to innovate exchanges of value which do not require wealth asymmetries which foster poverty, violence, and terror.

While conferences across the world lament the lack of financing for small and medium sized enterprises – they turn to venture capital as a solution. Why? Because that’s what the U.S. and Europe did, right? Did you know that here in Brazil and in most countries represented at this conference, the greatest available cash to start ventures is currently sitting, unused in the hands of your governments in the form of Trade Credit Offset obligations? You’ve probably never heard of these because you were being deafened by those who wanted to sell you inefficient equity models which have destroyed more enterprises then they’ve created.

When a government – like Brazil – purchases goods from a U.S. company, for example, a percentage of the value of the contract – often between 10 – 30% - is required to be “returned” to the country in the form of a Trade Credit Offset. The selling company may be required to set up a local manufacturing center for critical components. In the case of China, the company is required to transfer technology and training. In every instance, before the seller can book the revenue for their contract, they must reinvest in the country involved in the purchasing. So why, at a conference like this and at every innovation and entrepreneurship conference around the world, aren’t you being told to link your business incubators with your countries’ Trade Credit Offset managers? In a few cases, it’s because these offsets have become the source of corruption. But, in most cases, it’s simply because you didn’t know. Well, now you do.

Honorable delegates, what I’m really calling for is leadership. I would like us to invite a transformation of our view of leadership – away from the belief that the loudest voice with the largest crowd is leadership. In our CNN 24 hour flat-screen New York Stock Exchange view of the world, we’ve failed to realize that leadership comes from those who are worthy of being followed – not from those who demand attention and blind loyalty. In fact, the only place where leadership can emerge is from those who learn first to be good steward citizens. Our challenge here today and in the coming days is to evidence a humanity so inspiring that others will choose to follow.

When Professor Anil Gupta and Dr. R. A. Mashelkar and others in India chose to launch the National Innovation Foundation and other grassroots innovation initiatives, they embarked on a journey that was filled with challenges. In partnership with my organization and many others, we began working with grassroots communities – people in rural villages in India – to re-imagine a world where to be an innovator meant addressing real human needs. In its first year, only a few innovations gained a market however, in its second year, acknowledged by India’s President Abdul Kalam, over 2,500 innovations were serving as the basis for prosperous engagement across India. Mind you, many of the markets were not based on the exchange of money. Many of the grassroots innovators actually gave and received goods and services in exchanges ranging from barter to complex utility derivatives. In some instances, the value that was bestowed upon the innovator was a garland of flowers placed around the neck of the distinguished person by India’s President. While this is not “money” in your traditional sense, in many communities throughout India, honor from the President is a social value money could never buy and lasts far longer than a few thousand rupees.

When we work with small and medium sized enterprises in South Africa, the Kingdom of Tonga, or Chile, our goal has always been to look at a practical way to transform the past models into a prosperous future. I would encourage you to consider the following as a process to employ.

First, honor and value the innovator. Every person who has an impulse to change his or her life or those in the community should be honored. However, this does not mean that they must be pushed into a company. To the contrary, we need to transform the incorporation of a company into the incorporation of an innovator into the global community of like-minded innovators. When we see innovation as the inclusion into a community of creative people rather than an isolated event to isolate a hero, we will transform innovation.

Second, honor and value the community. In every innovation, many creative minds have come before and every one of their contributions must be included in the next step being taken. By using models which reward collaboration rather than proprietary isolation, we create value that impacts the lives and livelihoods of many rather than the wealth of a few.

Finally, reward that which replenishes rather than extracts and destroys. For too long, we have been told that we are a sum of our extractive parts. I am delighted to be here in Brazil – a country which spends 30% more of its GDP on education than on the military – discussing the transformation of value. While this government has served as a beacon for many others in calling for a “sustainable” future, I’m encouraging you today to innovate that vision. Take the next step and be the first country on Earth where we see consumption as one element of an economic cycle but where we also see stewardship and citizenship a value which is cherished in tangible and intangible ways. Transform the impulse to protect from outside abuse to a motivation to celebrate a Common heritage and destiny in which innovation serves to integrate a better future rather than isolate an unfortunate few. Today, let us all commit ourselves to a Common Future built on Transparency, Accountability, and Citizenship.







Dr. David E. Martin
Executive Chairman, M•CAM Inc
210 Ridge McIntire Road
Charlottesville, VA 22903
Web: www.m-cam.com
E-mail: info@m-cam.com


Batten Fellow, Darden Graduate School of Business Administration,
University of Viriginia

Archimedean Theorem 1 – “Reality” Metrics

One cannot escape the cognitive reductionism which is a constant companion in our recent economic paroxysm. “No one saw it coming.” “We are adequately capitalized,” immediately preceding business failures and bankruptcy. Triple-A ratings on investments that had no market or value. Bank stress tests. Earnings growth by slashing future productive capacity. Equity market euphoria over missed earnings forecasts. Without question, we are collectively measuring the wrong stuff, or applying the wrong metrics, or applying the wrong metrics to the wrong stuff, or we just haven’t a clue. While we bask in the nuclear winter light of what I’ve been told is our post-post modernism (come-on, we can’t even come up with a decent name for today so we just revert to a very, very, very, very old technique we last used when counting words for our first written assignment in elementary school in which the number of words was the objective), we seem to not only have lost our way, we seem to have no clue where Polaris is or how to use a compass.

When Sir Isaac Newton inadvertently set in motion our present economic calamity, he did so by postulating that to every action this is an opposed and equal reaction. He never knew that central banks, bound by his “law” would find themselves compelled to engage in manifold folly by falsely misdiagnosing the action (the mortgage crisis rather than a destructive, dehumanized consumer debt cycle propped up by careless leverage policy which turned real estate into ATMs) leading to an insanity where recovery came from further indebting the taxpayer by bailing out AIG and providing year end bonuses for bankers who actually made their earnings on fee income derived from moving bail-out funds between themselves! We have a malignancy of ignorance and, courtesy of the market reporting media, we have the evangelists for the cult of impulsive greed chanting incantations at such a frenzy that if you wanted to find the truth…wow, I’m exhausted.

Let’s take a breath. Let me take you to one of the first places we lost our way. To find the roots of our current value bankruptcy, we need to understand that our current debt-based view of economic systems has inextricable roots in the 13th century – specifically the Fourth Lateran Council and the funding mechanisms put in place by Pope Innocent III for the financing of the fourth Crusade. In his Papal Bull (why does this animal keep showing up? – and yes, I know it’s not that kind of bull), he details the establishment of taxation of the public, preferential dispensations for the central bankers, and a removal of all rights from those outside the faith – not to mention his ultimate creativity of accelerating mortality for those who didn’t play by his rules. All of this to fund a war and provide liquidity for the State. Sound familiar?

Ironically, the reason why I link Newton and Pope Innocent III is critical. Both of them were absolutely confident in their definition of “truth” “values” and “laws”. Both of them were greatly motivated to impose reductionist simplicity on a world filled with heterogeneous thought. And both set in motion those who would become sycophant adherents who would conduct literal and figurative inquisitions which would stifle enlightened, creative thought and inquiry. And they did so by what appeared to be an innocuous act. Pope Innocent III gave us reality in the form of transubstantiation where the paradox of St. Augustine and Aristotle was resolved by fiat – it was the body and blood for Christ’s sake! And Newton gave us reality by confirming that only that which can be measured and observed is, in fact, real.

In our collective evolutionary regression, we obsess with “real”. We want to measure things, count things, compare who has more, who has bigger or better. Our obsession with metrics has paralyzed our creativity. It has dehumanized value and values. When my friend Tony offers to buy happiness from a company because they say it has no book value, no one is willing to part with it for any price. If we have less, than others with more should move to action. If we have more, we want to keep it from those who have less and want ours or find our morality in self-laudatory generosity and sharing. Pope Innocent III gave us debt-based currency. Newton gave us metric-delimited reality. And the present moment has given us a wonderful opportunity to realize that we have no clue what we’re measuring anymore.

What is the value of gold? As we swooned to see our golden calf (there’s that animal again) leap over the $1,000 an ounce moon, did any of us realize that the all in cost of movement of ore for processing last year’s production of gold required the equivalent of 14 billion human year’s worth of effort? That’s right, just to move the ore from mine to refinery, it would take 14 billion people working 24 hour days every day for a year just to move the ore. If you’re reading this, you clearly weren’t carrying ore. Neither were most of your neighbors. No, thanks to technology that pollutes the earth, water, and sky, we’ve become more efficient. But did we ever pay for the land from which we’re taking the gold? Did we actually set aside value to repair the environmental, social, and ecological damage of gold? If we did so, would gold really only cost $1,000 per ounce? Is its value what it costs? What it will cost the future? Is it worth what someone pays for a certificate saying that someone, somewhere has a bar with your name on it? What is its value? We have NO clue.

What is the value of earnings? When Intel and JPMorgan reported better-than-forecast results, their stock was rewarded with a vote of confidence, right? No! They lost 2% of their value. IBM topped expectations but investors rewarded it with a loss of value.

What is the value of prosperous engagement in the workforce? Unemployment continues to rise. The Federal Government demonstrated this week that it cannot even track its own expenditures when it attempted to report on the jobs saved or created with the Recovery Act. Silver lining? The Recovery Board is spending a reported $18 million on updating its website so the stimulus recipients’ self-reports of economic impact are more prone to accuracy.

What is the value of public support of innovation? I just spent the past two days with an inspirational leader from South Africa. During our conversation, I was disheartened to hear yet another instance when the innovative value of a country was measured by the number of patents filed by its researchers. We measure the innovative contribution to the world by how much we block others from using creativity? How tragic.

I am repeatedly asked questions about how much revenue my company makes. How many employees do I have? Why don’t I turn our technology towards making massive wealth and, after amassing a fortune, use it for good causes? And these questions come not only from crass capitalists but by perplexed social activists.

It is time to understand the elegance of the Archimedean Theorem I. Reality is that which catalyzes, harnesses, releases or perpetrates action or stasis in one or more projections thereby evidencing energy, dimension, field effect, and consequence. The understanding and assessment of Reality can be described only when Perspective delimiters are honestly disclosed with sufficient clarity so as to evidence understanding in the observers. The fulcrum we need to open a new, more integral view of value and its exchange will include a dynamic, kinetic understanding of Reality. And our social challenge is to move our ontology from metric to metaphor – from finitude to infinite orthogonality. One step closer to the next…

-

A Nobel Paradox – Orpheus in Detroit

In the space of 7 days, I journeyed between a glorious meeting with James Quilligan and a small cadre of social and financial luminaries in the Berkshires hosted by Tim Murphy, to a quixotic gathering in Detroit hosted by the Rev. Jesse Jackson’s RainbowPUSH Coalition vainly attempting to use outmoded tools to stem the carnage in the minority-owned automotive business sector in North America. I reflected, as I experienced this existential schizophrenia, that we are living out a paradox not unlike the one that warranted the 1972 Nobel Prize in Economics – Kenneth Arrow’s “Impossibility Theorem”. For those not familiar with the Arrow’s paradox, it is, in brief, the assertion that when presented with greater than three options for consideration, no voting system can accurately find an acceptable and stable representation of a social group’s values. In an effort to define a socially acceptable order of priorities around which consensus can be built, Arrow postulates, complexity of greater than three options renders any attempt largely futile.

I’ve given several speeches over the past few months where I have discussed my latest understanding of the word “impossible”. To understand impossible, it is helpful to consider what “possible” is. The word, derived from Middle English generally refers to that which may be done or that which is feasible. So, when one concludes that a thing is impossible, the imputed judgment is that it cannot be done or is impracticable. I’d like us to see “impossible” in a new light – an invocation or prayer of what is about to be. Remember, when we apply the term “impossible” in our present day, what we really are saying is that, with the resources, knowledge and time that we presently have, we are unable to see a resolution manifest in a time-frame or at a cost that is acceptable. And by judging a thing “impossible” we discourage others from threatening the finitude and truth of our judgment.

Well, no time like the present to re-examine the “Impossible Prayer”. We are a few short weeks from Copenhagen when, in December, it will be impossible for the leaders of the world to arrest our rush to self-immolation. While Wall Street and Washington bathe themselves in impossible greed celebrating a recovery to their bonus-laden excesses, while cities like Detroit hold the ruins and tombs of a productivity that is impossible to replace, while water, food, and energy crises form an impossible specter too hideous to address – we find ourselves drowning in a cacophony of impossible. As a result, we sit and wait for the next shoe to fall, crushing another unsuspecting glimmer of humanity. Impossible… we pray.

I was invited to participate on three projects to envision a way to answer the impossible prayer. To show a path forward in the face of all convention arriving at the terminus of its force and sway. And, in each case, what I’ve started with is the Archimedean Theorem (by the way, don’t try to find this one because you’re reading about it here first). While the world and its power models have abused and enslaved one half of Archimedes wisdom – the lever – too little time has been spent on the real genius of Archimedes which is the fulcrum. Over the coming weeks, I am going to begin building an Archimedean Solid (you can look this one up) which can serve as the foundation for a new future – one in which we show that Arrow’s Theorem is a lever model and lacks the kinetics of a well positioned fulcrum.

There is a way out for Detroit. It involves a conceptual shift from the legacy of entitlement and set-asides where manufacturers and their suppliers maintain an unsustainable obsession with the top of the levers and those objects in motion to an understanding that the future is about well positioned fulcrum where the inevitability of the future becomes certain. Detroit will not be rebuilt on Obama’s proprietary technology “green jobs” program because the U.S. abandoned its ability to build proprietary positions by abuses in the patent system since the 1980’s. It can rise on the wings of collaborative innovation commons funded by technology procurement receivables. We will not heal the ethnic, geographic, and employment injustice if we allow the >60% of FDIC watch list banks co-located with critical manufacturing entities to fail thereby extinguishing vital lines of credit for our production base. The private sector needs to see that the road to Copenhagen will pass through the ruins of Detroit because we must see an entirely new vision in which we answer all the “impossible” prayers. Stay tuned.


-

Read This and Act - If you want to be part of the change...

If you would like to be part of the solution and you are in agreement with the following, use this text and sent it to the e-mail address below following the Federal Register response rules...


E-mail: Comments@FDIC.gov. Include the RIN number in the subject line of the message. [RIN 3064–AD49]


Under President George W. Bush, American depositors were encouraged to step in to bailout the balance sheets of banks with an enticement that extended FDIC insurance to $250,000 per insured bank deposit. American depositors obliged. They inverted the troubling trend of negative savings and began depositing cash. Ironically, while the Bush administration was desperately seeking to stabilize the financial sector, they did not heed my, or others’ warnings that this was neither a fix nor even a temporary logical step. Further, they were not carefully considering the now lamented decrease of cash-flow in the consumer sector now helping fuel the deepening recession. At the time of this ill-considered decision, we suggested that the FDIC consider a more appropriate action. By actually measuring the “real” assets of our economy, the risk criteria paralyzing banks could be modernized to reflect both present and future financial performance and the drivers thereof.

In its Federal Register publication on October 2, 2009 (12CFR Part 327, Vol. 74, No. 190), the FDIC has proposed a booking-keeping plan to raise liquidity which will have disastrous effects both prolonging the real reform of the financial service sector and actually increasing the likelihood that more banks will fail therby further impeding access to credit. Under a book-keeping manipulation which is meant to satisfy quantitative investors but do nothing to actually fulfill its statutory requirements, the FDIC is proposing a “pre-funding” of assessments due by participating banks based on estimated risk as of the fourth quarter of this year. These “pre-fundings” are to be paid on December 30, 2009 and are to cover insurance premiums for 2010, 2011, and 2012. This strategy would raise an estimated, paltry $45 billion. There are two fundamental loopholes in the language of the proposed rule which are clearly advantageous to the FDIC and its member institutions but disadvantageous to the public. First, by calculating the assessments on December 24, 2009 – not at the end of a reporting or fiscal cycle – neither the FDIC nor the financial institution will have confidence in the appropriateness of the real position of any member bank and its reserves. Second, by allowing the pre-payment to be credited for special assessments, the FDIC cuts off its own capacity to respond to immediate liquidity constraints as it will have merely an acceleration of recognized cash – not genuine new liquidity at such time as a special assessment is required.

I would like to renew my call from 2008, that the FDIC immediately pursue another option which would: 1) more adequately reflect the current U.S. economy and its drivers; 2) align with economic development strategies promoted by the President and the Congress targeting the expansion of new and high technology businesses and the capital required therein; and, 3) correctly account for the correct value of assets both in its own portfolio of distressed and toxic assets and those of insured institutions. Specifically, it is vital that the FDIC and its member banks establish a means by which the intangible assets (executory contracts, licenses, franchise agreements, copyrights, patents, and trademark uses) are actually counted as bankable assets. Representing an estimated 80% of the value of the S&P companies, at present, neither the banks nor the FDIC are authorized to view any of these assets as investment grade. The irony of this is staggering in the face of the FDIC’s present proposal in which they are using one of the least creative accounting manipulations to stem a short-term problem with a longer term calamity.

Should the FDIC’s recommendation be adopted as presented, the banking system of the United States and the depositors therein, will be assured of decreased confidence in the FDIC and greatly reduced incentive to place funds into savings accounts. This, in turn, will further impair an already dysfunctional link in the capital system that has underpinned the U.S. business landscape for decades. However, in the event that the FDIC has the vision and foresight to plan for the present and future by adjusting its arcane metrics to those that reflect present reality and future aspirations, it can expand upon the nascent efforts that the FASB took in its impairment testing rules and that the IRS took in beginning to instill discipline around intangible asset opaque accounting loopholes that robbed the Treasury of billions of dollars.

Do something! Copy the message above and send it, by e-mail, to the e-mail address above. Add your thoughts and join in an effort to begin bridging into the new rather than continuing to apply patches to an already popped balloon.

Make sure you read the preceding post which is part of this one...

_

Investment Grade? Your FDIC deposit isn't "I" anymore

If you want to understand where I’m going with my next blog post coming this weekend, please take 26 minutes and listen to the most audacious accounting slight of hand pulled off by the FDIC board on September 29, 2009. This is the day before September 30 which happened to be the day that the FDIC actually fulfilled my forecast of becoming insolvent. (Remember that the Chairman of the FDIC said that it was "impossible" for this to happen just a few months ago) And yes, take heart, the “staff” are optimistic that they can be compliant with their statutory reserve balance in 2017! The Bush administration’s expansion of deposit guarantees – unaltered by the current administration – means that the U.S. depositor has an actuarially insolvent position and, as of October 1, 2009 – we’re all 100% exposed and effectively uninsured. So, how does it feel? The “full faith and confidence” of the U.S. banking system now hangs on an accounting game where banks will “pre-pay” their assessments on December 31, 2009 so that the FDIC can appear to have liquidity that it actually doesn’t have thereby creating the illusion of a guarantee that fails the most basic test of legally mandated fitness. Take the time to view this and let’s talk about a new future – one in which transparency and accountability are both expectation and responsibility. Here it is…http://www.vodium.com/goto/fdic/boardmeetings.asp. Download the file of the board meeting on September 29, 2009.