open capital 2015
TRANSCRIPT
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Open Capital
21st Century Financing & Funding
Chris Cook
Paris 20th May 2015
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“21st Century problems cannot be solved with 20th Century solutions”
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Economy 3.0 ?
Economy 1.0 – decentralised but disconnected, physical market presence
Economy 2.0 – centralised and connected, market presence through intermediaries
Economy 3.0 – decentralised but connected, network market presence
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Economy 3.0 – Value Basis
Location – Place (Land) or Space
Energy
- material - embedded in Place (eg buildings)
- immaterial - passing through Space (eg solar or wind)
Intellect
- subjective (people)
- objective (data patterns)
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Open Capital – Credit Instrument
A Credit Instrument is a Promise
- made by an issuer to an acceptor
- issued in exchange for value received from acceptor
- returnable in payment for value provided by the issuer
A Credit Instrument is not
- Debt – acceptor cannot demand payment in money
- Derivative – acceptor cannot demand delivery
- Equity – acceptor has no right of asset ownership
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Open Capital requires Trust
Credit instrument is a Prepay credit - “Pay it Forward”
- acceptor may use credit instrument to pay instead of $
- acceptor trusts that issuer will be good for supply
Economy 1.0 - trust in physical currency
Economy 2.0 - trust in middlemen eg Treasuries/Banks
Economy 3.0 - trust in mutual risk and production sharing agreements or Protocols
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Prepay – Then....and Now
Now – DrinkPrepay
Now – TalkPrepay
Then – TaxPrepay
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Tax Prepay
Tax Prepay – credit returnable in payment of taxes
Tax Return – 'stock' part of tally stick returned to Treasury
Rate of Return - rate over time at which stock is returnable for cancellation
eg Prepay £8 for £10 tax - £2 profit 25% pa rate of return
- not fixed - depends on existence & quantity of flow
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Protocols and Prepay
Asset-based (Peer to Asset) Prepay Credit
– Capital Partnership production sharing agreement
People-based (Peer to Peer) Prepay Credit
- Guarantee Society risk sharing agreement
These agreements are associative two-way & interactive protocols: social contracts or Contrats de Société
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Capital Partnership – Peer to Asset Credit
Location – credit returnable in payment for usufruct ie rental of land/location or production from land
Energy – credit returnable in payment for energy use
Intellect – credit returnable in payment for use of intellectual property eg knowledge, software, video
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Capital Partnership
Capital Partnership is a social contract or trust framework for sharing usufruct of a productive asset
A proportion of production is allocated to the developer or manager
The balance of production is available to be issued to Investors in the form of Peer to Asset prepay credit
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Capital Partnership – Land/Location
Custodian(Community)Custodian(Community)
InvestorInvestor
OccupierOccupier
RentalPrepay
%
%
ManagerManager
Rental
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Land Prepay – Value Proposition
Community
- sells rentals forward at a discount and locks in price
- receives an interest-free land loan until rental credits are returned in payment for land use
Occupier
- prepays rental and locks in price
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Land Prepay – the Value Proposition
Investor
- direct 'inflation hedge' investment in land
- Occupiers buy rental credits from Investors at best price below issue price & return in payment for land use
Manager
- shares in gross rentals or production
- interests aligned with Investor
- no 'Principal/Agency' problem
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Land Partnership - Outcomes
Housing as a Service - relationship-based not transaction-based model - costs transformed to revenue shares
Neutral – transcends ego and politics
Collaborative - stakeholder interests aligned
Sustainable - all have interest in minimising cost over time
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Capital Partnership - Energy
Custodian(Community)Custodian(Community)
InvestorInvestor
ConsumerConsumer
Prepay %
%
ManagerManager
Payment
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Energy Prepay – Value Proposition
Community
- sells energy forward and locks in price
- receives an interest-free energy loan until energy credits are returned in payment for supply
Consumer
- prepays for energy and locks in price
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Energy Prepay – the Value Proposition
Investor
- direct 'inflation hedge' investment in energy
- Consumers buy credits from Investors at best price below physical energy price & return against supply
Manager
- shares in gross revenues or production
- interests aligned with Investor
- no 'Principal/Agency' problem
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Energy Partnership - Outcomes
Energy as a Service - relationship-based not transaction-based; costs transformed to revenue shares
Neutrality – transcends ego, borders and politics
Collaborative - stakeholder interests aligned
Sustainable - all have interest in minimising cost over time
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Currency is an outcome of Investment
Currency is defined as generally acceptable credit
- Land-based credit – currency local by definition
- Energy-based credit – currency universally acceptable
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It'll Never Work
For thousands of years people gave credit to those they trusted: others paid in currency eg gold, silver, salt
For thousands of years Capital Partnerships have existed: Islam calls Capital Partnership 'musharakah'
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Guarantee Society - People-based Credit
Guarantee Society is a social contract within which Peer to Peer credit risk is shared
Sellers and Buyers pay a guarantee charge, share costs of operation & make good any failure to perform
Manager allocates guarantee limits, manages platform, ensures transparency, manages non-perfomance risk
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Guarantee Society - Seller accepts Buyer's IOU
Seller Buyer
IOU
Value
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IOU is guaranteed by Sellers & Buyers mutually
Seller Buyer
IOU
Value
Pool
GuaranteeGuarantee
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Seller & Buyer pay guarantee charge into Pool held by Custodian
Seller Buyer
IOU
Value
Pool GuaranteeGuarantee
Fee Fee
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Buyer settles credit in € or '€'s worth' eg energy-based or land-based currency
Seller Buyer
Value
Pool GuaranteeGuarantee
Fee Fee
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If Buyer defaults: system pays sellers and collects from buyer if possible
Seller A BuyerDefault
Pool
Collects
Pays
Seller B
Default
Pays
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Service provider sets guarantee limits, handles defaults & manages system
Seller Buyer
IOU
Value
Pool GuaranteeGuarantee
Fee Fee
Manager
FeeService
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Clearing Union
Producer Consumer
Pool GuaranteeGuarantee
Fee Fee
Manager
FeeService
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Outcome – the Community is the Currency
Mutual assurance of direct (P2P) credit risk
Banking as a Service
We need Banking....but we don't need banks
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It'll Never Work
For 140 years, Protection & Indemnity (P&I) Clubs have mutually guaranteed risks Lloyds of London won't cover
For 125 years P& I Clubs have been managed by Thomas Miller
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Open Capital – the Co-operative Advantage
Co-operative Advantage
- Open Capital does not give 'something for nothing' return to landlords or shareholders
- Open Capital provides financing & funding with which conventional capital cannot compete
- Middlemen will transition to service provision or fail
Maybe Ethical is Optimal?
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21st Century problems cannot be solved with 20th century solutions.........
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…....21st century solutions pre-date modern finance