economic systems thinking_23_07_10
TRANSCRIPT
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Systems Thinking and Finance 3.0
Strathclyde University
Chris Cook, Glasgow
23 July 2010
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“You can't solve 21st Century problems with 20th Century solutions”. Dr Narsi Ghorban
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Market 1.0 – was for thousands of years decentralised but disconnected
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Money 1.0 was a physical object and market presence also physical
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Market 2.0 is centralised but connected
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Money 2.0 is a credit object and market presence is through 'for profit' intermediaries
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Market 3.0 will be decentralised but connected – a “Peer to Peer” Market
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...market presence is network presence - intermediaries become service providers
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Money 3.0 – is a relationship defined within an interactive protocol
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Money 3.0 – is one of the outcomes of P2P Credit and P2P Investment
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Let’s look first at P2P Credit
Sellers Buyers
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Sellers give buyers interest-free credit –or “time to pay”
Sellers Buyers
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Credit
Value
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Credit is guaranteed by a Guarantee Society of seller and buyer members...
Sellers Buyers
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Pool
GuaranteeGuarantee
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..with some kind of “common bond”: geographical, functional, or both....
Sellers Buyers
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Pool
GuaranteeGuarantee
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Both sellers and buyers pay into a Pool for the use of the Society’s Guarantee
Sellers Buyers
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Pool
GuaranteeGuarantee
FeeFee Fee
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Buyers settle credit in money, or money’s worth of Value acceptable to Sellers
Sellers Buyers
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Pool
GuaranteeGuarantee
FeeFee Fee
Value
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If buyers default, the Pool pays sellers, and collects from buyers
Sellers Buyers
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Pool
CollectsPays
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A service provider sets guarantee limits, handles defaults & manages the system
Sellers Buyers
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Pool
ServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
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P2P Investment and Unitisation
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There are conventionally two types of ownership - Public or Private
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There are two conventional investment protocols: Debt and Equity
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The statutory Limited Company protocol
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....a 19th Century legal dinosaur...
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...is what makes the Private Sector Private
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Credit is typically issued by banks and secured by debt protocols....
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...giving two conflicting claims over the same productive asset
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But there’s a new furry mammal out there....
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...the 21st Century UK Limited Liability Partnership (LLP)
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A UK LLP is a corporate body with limited liability....
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...and...errrr...that’s it!...
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As far as the UK Tax Man is concerned it is a Partnership
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It’s an “Open” Corporate where partnership working is possible....
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... even without a written agreement
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It enables direct Peer to Peer (P2P) Credit and Investment
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Over 60,000 UK LLPs are now in pervasive use for purposes never intended...
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...even in the Public Sector, where Glasgow has five municipal LLPs
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Capital Partnership – direct Peer to Peer investment in productive assets
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Hilton Capital Partnership ( > £1bn)
Capital Partnership LLP10 UK Hotels
Gross Revenues
Hilton GroupCapital User
Consortium LLP Capital Provider
Bank PropertyDeveloper
HotelSpecialist
% %
%%%
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Capital Partnership
Assets
Investors
Payment
% %
Custodian
Use
Managers
Users
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Productive assets are held by a Custodian
Assets CustodianOwnership
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...who safeguards the asset on behalf of the Community
Assets CustodianOwnership
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Investors put in Financial Capital in money, or money’s worth…
Assets
Investors
CustodianOwnership
Financial Capital
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Managers provide Human Capital of time, expertise and experience....
Assets
Investors
CustodianOwnership
HumanCapital
Financial Capital
Managers
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Users pay for the use of Capital
Assets
Investors
Payment
% %
Custodian
Use
Managers
Users
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Result: Capital Partnership
Assets
Investors
Payment
% %
Custodian
Use
Managers
Users
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Capital Partnership reinvents Equity
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Equity Shares - % age shares in revenues or production...
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…..which may be transferred, but never redeemed, since there must always be 100%
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Units – Redeemable in production eg Kilo Watt Hours, natural gas
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Example: “The Art of Flirting” – a film incorporated as an LLP
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The actors received nth’s of the gross revenues...
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...I got 5%...and the producer the rest...
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...except that we needed lights, cameras, pizza, coffee
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Two Capital Partners invested £10k for 20% of revenues
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...if there are any
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Art of Flirting Partnership
Art of Flirting Partnership
Financial Capital(Investors)
Viewers
Human Capital(Actors, Producer, Me)
Custodian
% %
£
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Everyone was on the same side
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Example: Albion Trust...a charity
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..which provides affordable office space for social enterprises
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...due to demand they bought a disused church next door
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...and planned a £4m development
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But if they borrow, the rents will be unaffordable
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Solution? An Albion Partnership?
Albion Partnership
Investors
Tenants
Managers
Custodian
% %
£
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Capital Partnerships and Guarantee Societies are not Organisations
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They do not own anything, do anything, employ anyone, or contract with anyone...
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They are simply framework protocols with cross border application
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...transcending borders through interactive consensual agreements
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...rather than adversarial contracts imposed by national statutes or courts
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Law is Code
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Partnership protocols require no legislation
Master Partnership
Financial Capital(Money, IP etc)
Users
Human Capital(Developers, Operators)
Custodians(National)
% %
Payment
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There need be no national or international organisations or hierarchies
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Money 3.0 is not an Object: it is a Relationship
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My vision for Money 3.0 is of a networked Clearing Union....
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....where 'Money's Worth' of value is exchanged on credit terms
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....by reference to a Value Standard
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I assume three fundamental bases of Value.....Location
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Energy
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Knowledge
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Units redeemable in payment for location rental will be acceptable geographically
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Units redeemable in payment for energy will be acceptable generally
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Credit Units issued by individuals and enterprises are backed by knowledge
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Transactions will be priced by reference to an energy standard or Unit of measure
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Communities with a common bond constitute Guarantee Societies
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The agreement defines the Community
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Money 3.0 - the Community is the Currency
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Thank You
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