Marcus Cake

The recent controversy nicknamed Climategate is a catalysing event on the critical path to Web 4.0. It highlights how a traditional scientific research channel to determine the “truth” was completely compromised and, literally, invented global warming. The world could spend US$45 trillion on global warming. The UK may spend 18 billions pounds per year for the next ten years. The result was (or is) a staggering misallocation of global resources to deal with a problem that may not exist.

We need to build the Web 3.0 online social, industry and political networks on the critical path to Web 4.0 and pull in the next stage of financial markets, economic development, environmental sustainability, awareness, life, work and global governance. We need five online networks to solve the worlds problems by 2012 or we decline into conflict for generations. A global community could transform the world in 365 days by building the Web 3.0 online networks on the critical path to Web 4.0.

Regulated capitalism is the last man standing. We have no choice but to make it work. We must, however, acknowledge that regulated capitalism has failed its citizens comprehensively. The failure of regulated capitalism is equal to the collapse of central planning. The communists recognised their system had failed and chose to implement something else. Will capitalists do the same? Or will we try to save the status quo at any price? Will bailouts move on to other “too big too let fail” activities that prevent the operation of creative destruction?

I just lodged five applications to the Knight Foundation’s News Challenge. My applications can be reviewed here. An overview of the Knight Foundation is provided below. A summary of my applications are available below.

Web 1.0 delivered the internet and connected large numbers of people. Web 2.0 demonstrated the technology to assemble and manage large global crowds with a common interest in social interaction. Web 3.0 will apply online network concepts to industry, economic development, climate stability, poverty and democracy. Web 3.0 online networks allow people to see through the community or market and facilitate collective matching, learning and consumption in hours (not months). Web 4.0 achieves a critical mass of participation in online networks that deliver global transparency, governance, distribution, participation, collaboration in key industry, political, social and other community endeavours. Web 4.0 delivers community sovereignty to channels and information.

The United States government could make a profit on its “bailout”. Bailout is an emotive term that is popular in an environment of fear and uncertainty. The primary fear being that the funds will simply replace losses in financial institutions and be government expenditure. The US government would be buying residential mortgages with an exposure to residential property prices that have a recoverable value in the future. Residential mortgages are a safe and predictable asset class (as a portfolio). The US government could make a profit - it depends on three things.

Poverty is a complex issue. Poverty is a complex issue. It has a wide variety of causes that include trade, HIV/AIDS, unserviceable debt, investment capital allocation and immigration laws. Many efforts to change the situation rely upon influencing or changing opaque channels. This has proven to be ineffective. The Millennium Goals could be achieved if we act now. However, these goals won’t be achieved if we continue to try to influence Web 1.0 opaque channels. We need to transcend “opaque channels” by applying the key elements of a Web 3.0 online network to create online communities that focus and coordinate collective energy.

The US system has collapsed. Failed financial firms are trying to convince the government to invest in them. The selling proposition? - “too big to let fail!” Understandably, the US congress are making further enquiries before writing a cheque for US$800 billion dollars. The US already terminally insolvent - even with unprecedented growth it can not repay its debts. Another US$800 billion won’t push it over the edge. It passed the edge a while back. A private receivership committee may have been formed in international markets. It will operate in “opaque channels”. A private online political network would be essential coordinate timely international activities amongst US creditors. The aspirations of the average American remain the same. They can be sold a “story” by mainstream media that permits further avoidance of debt repayments or justifies activities that acquire international “leverage”. An E-democracy online network and/or a US insolvency online network could be used to inform the US public. Maybe, they will assume responsibility, or maybe they would prefer not to know.

The primary ego on the world stage today is the US - its excessive consumption, insolvency, military aggression and use of 60% of the world’s savings make it the world’s most gluttonous consumer. Its military acquisition of the worlds resources may be the greatest strategic move in history. It provides resources to pay back unserviceable debts and leverage other countries on the global stage. However, the destruction of relationships in the process will crowd out an opportunity to deliver a sustainable future for the planet. Unrelenting ego by the US may win the resource wars, but the destruction of global relationships in the process sacrifice the opportunity for a sustainable future. An online network may not save the world, but could a collective conscious network.

We need to deploy five online political, industrial and social networks to avert disaster by 2012. Existing structures that rely on proprietary ownership of information, distribution channels, institutions and regional approaches are unable to solve our most pressing problems. Even if they could solve the problems, they are simply unable to coordinate a global endeavour in a rapidly closing timeframe. I had previously written that online networks could be delayed for up to 50 years by three epic battles. In some aspects of our global community, we can wait 50 years (and there is only an opportunity cost). However, for some specific problems, online networks need to be built, acquire a significant audience, and achieve their objective by 2012.

Recent market turmoil is likely to eliminate the growth on stock exchange trading volumes. This growth had driven the growing revenue of stock exchanges in the last five years. Cost cutting has also contributed significantly to profitability. With growth unlikely and further opportunities for cost reduction minimal, stock exchanges will now seriously consider other strategic initiatives. Collaborative hubs are likely to be at the top of the list.

At its simplest, the business of stock exchanges is the matching of buyers and sellers of quantities of shares. At its more complex are important functions of settlement and custody. The industry could, however, run on a single computer anywhere in the world and offers a very narrow niche of functionality for the equity market. Most of the stock exchange infrastructure in the world is obsolete. It could also be suggested that much of the software that runs enterprises is also obsolete. If the software is not obsolete, it could be replaced or rebuilt at a fraction of the cost. Stock exchange consolidation may just combine redundant technology, declining customers bases and a redundant business model. This legacy may prevent new initiatives to provide greater access to the equity market for smaller companies. We may have a larger organisation with the same redundant business model with limited access to a niche of potential market participants. Will this new organisation provide greater access to capital markets for all market participants?

Grant Thornton conducts an annual review of global growth markets. The report confirms a number of key trends. Capital markets are becoming more global and less regional, financial centres and specialising and certain stock exchanges are growing strongly. The most popular growth exhanges are in UK (AIM), Singapore, Hong Kong and Canada. Companies are becoming increasingly comfortable listing on foreign exchanges. This is contributing the the rise of specialist financial centres and global growth stock exchanges. The internet provides investors with transparency and direct access to information. Many stock exchanges and their closed information networks will struggle to find a niche in a globally connected world and free flow of information. Globally distributed online networks are likely to support growth companies and growth exchanges. Online networks will deliver the international companies, advisers and investors necessary to deliver liquidity to small exchanges that have been historically restricted to local business.

Online networks which embody every facet of industrial, social and politcal aspects of our modern society are inevitable. They simply offer a superior way to interact and transact. The transition to a global community based around online networks will take six months, sixteen years or fifty years. The timeframe will depend upon the outcome of three epic battles. The battles are economic development vs geostrategy, community knowledge vs intellectual property, and online networks vs closed systems. Online industrial, political and social networks which are involved in these battles could be delayed for decades.

The Centre for Freedom and Prosperity Foundation has released a paper which seeks to clarify the myth versus reality of tax havens. An extract from the paper is provided below.

What if we did have cars that cost $25 and got 1,000 miles to the gallon? What if the Moore law rates of innovation and improvement could be applied to the world’s problems. What if Moore’s law rates of improvement applied to aircraft engines, car engines, carbon dioxide emissions, industrial pollution, cures for disease, energy and minerals usage, education and leadership. Our world is evolving. Advances in technology present new ways to organise. Online networks are likely to be a step forwards. An expansion of intellectual property laws is likely to be a step backwards. If there was a new way to deliver greater rates of innovation, we have a compelling need to solve specific global problems. We need to question that our underlying assumptions of how to organise.

The objectives of open source will change over time. As open source evolves and proves its capability, it will move beyond technology, beyond specific industries, to all other aspects of our society. This has been suggested in the past. However, existing organisations are not sufficiently motivated to apply advances in technology to promote development. Business, social and political entrepreneurs that establish online networks are likely to be the primary force for change.

This article outlines the first four stages of the development of online networks and the .Net boom. The objective of the online network in each stage is identified.

China has one trillion dollars in foreigh reserves. This has been accumulated over many years of patient and successful exporting. China earns US$140 billion per year from the United States alone. Apparently, most of the one trillion dollars is invested in low-yielding US bonds. According to the IMF, China only needs 650 billion (65% of one trillion) to provide a safety buffer to operate its economy. China is considering reallocating US$350 billion into other investments that may provide a higher yield. With ongoing trade surpluses, it could invest one trillion dollars over the next yen years. China could become the world’s largest private equity investor.

My definition of the word hacker has evolved. From programmers cracking computer security (called crackers) to my modest efforts to improve my golf and, now, to skilled people contributing to online networks that reflect their passions and interests. A hacker has the tenacity and persistence to solve problems, often for the sake of solving it. They have the vision of architects, the skills of engineers and empathy of a mother with her upset child. They make significant sacrifices in pursuit of their goal. They navigate around, or though, barriers in their path. They do not rest (if inspired) until the problem is solved, or the challenge is overcome. If only my golf, could be described in these terms.

Online networks will be an essential tool of hackers. The will capture and focus the unique contribution of other hackers. Collective talent, energy and innovation will reshape industrial, social and political frameworks over the next decade.

Halliburton is restructuring its business to reflect new realities. The suppliers of oil are in the middle east. The largest customer for oil will soon be Asia. Capital is moving to non-US markets. An increasing proportion of revenue and capital will come from outside the US.
What makes a company a US company? Is it where its customers are? Is it where they have most of their employees are? Is it where future growth will come from? Is it where shareholders reside? Is it where it is incorporated? Subtle changes occured in Halliburton and the world which have all accumulated over time. A change in incorporation may simply reflect new realities. The Halliburton is a very public statement of global shifts. I do not know what conclusion can be drawn from the strong political reaction.

To ensure their survival, all organisations must serve the interests of their stakeholders. In the case of corporations, that is the shareholders. Corporations do not have the luxury of serving the wrong constituency. Quarterly reviews of performance and the possibility of takeovers serve as important tools to keep corporations focused on their constituency.

Companies in developed countries will need access to the 33 million university educated professionals working in the developing world. Immigration can only solve a proportion of the problem. Online networks will be an essential tool to find and coordinate delivery of talent from the developing countries to global projects. This international talent pool will deliver services to every industry on every continent. Organisations will need to know how to participate in, or build, an online network to access this resource.

My previous article, Could an online social network deliver a virtual Silicon Valley to non-US economies? , I concluded that online social or industry networks could deliver the people and chain reaction that could spawn a new Silicon Valley. Financial centres currently specialises in specific niches. The rise of online industry networks and the rise of global capital markets will result in the rise of specialist financial centres. to an unprecedented scale. These centres will offer a specific regulatory environment tailored to specific companies in specific industries.

The repatriation of capital from the US over the next five years is a once in a 200 year event. Financial centres will need to determine their strategy and execute unequivocally if they are to secure a niche.

The patent system emerged to motivate business to organise people to develop new technology. Without providing an exclusive opportunity for profit, business would not assemble the structure and people necessary to create new technology. Technology means ways of doing things. This includes information technology, biotechnology and healthcare. If the global objective is the creation of new technology, then there is another way to organise.

The US consumer has driven much of the world economy for decades. It has been the perceived centre of the world for many industries. This is shifting. The primary source of global growth is likely to be Asia and Europe. This is a demographic reality as hundreds of millions of people in Asia enter the middle class. We only need to survive the shift from US centric to global.

Global capital will need to be looking for investment opportunities in Asia and Europe. Some markets are too small or have insufficient experience to deliver efficiency. The internet is likely to play a greater role in making the global capital market more efficient. Online industry networks will have an essential role to play in improving the allocation and efficiency of the capital allocation process.

Industrial use of the internet is at an early stage. Existing corporates have used the internet to reduce costs by distributing information in a lower cost means. However, there are few examples of industries that have been completely transformed. The primary purpose of some major industries is distribution of information between market participants. They have significant economic rents for taking information from one market participant, mildly transforming it and delivering it to another market participant. The internet offers free (almost) distribution and the ability to find other market participants. These significant economic rents for distribution seem redundant in an age of the internet.

The next wave of internet companies are likely to target the distribution of information with a commercial value. These are Online Industry Networks. These networks will simply break down existing labour intensive interactions and coordinate them in the internet. They will rely significantly on user generated content and each user assuming responsibility for the distribution of that information. The current intermediaries are unwilling to sacrifice the high economic rents for distribution by adopting new business models. Only new entrants will apply new business models to take advantage of the internet to deliver products and services at significantly less cost, in less time and without needing to visit a specific retail location. These businesses will facilitate the exchange of information from people to business. Freelancers from all around the world will manufacture the information and deliver it directly to the end user. An online industry network promote products and services of the community. Service providers can find customers and customers can search for service providers. The consumers of the information may have access to products and services previously denied by closed distribution channels.