The Economy has 3 Monetary Eco-systems

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This July the observational conclusion that there is a different model for describing economic systems will be explained in my book “Three Monetary Eco-systems” which will be published on Amazon, in Kindle and hardcover formats.  Why?  Because mainstream economists have trouble predicting economic outcomes with the scarcity based models they use to describe how wealth moves and has evolved in our civilization.  In fact, my corporate and political experience has made me lose much trust in high level economic predictions.

The three monetary eco-systems are:

  1. Payments and Commerce
  2. Banking and Financial
  3. Governments and Power

And the first eco-system, that of Payments and Commerce is the one most of us learn to work with in our childhood, which includes barter and different types of currency.   The second, born from the needs of merchants to do commerce over large distances and to handle risk, is the banking and financial eco-system, which evolved into and actually facilitates the existence of a global network of banks and financial institutions that use fiat currency’s flexibility to create monetary wealth as needed to keep commerce (and the people of their nations) happy.   The third eco-system, supports the banking and financial system with the legislation, policies, and exercises of power and influence that represent government support and enforcement.

But why is this important?  Because different people understand how to create wealth at each level, and because they see money differently they can actually generate changes in each eco-system that can increase of decrease the wealth of their nations.   Some will become rich and their riches will be part of the nation’s wealth.  Others will siphon off the nation’s wealth and start weakening the respective ecosystem, especially if they destroy trust in their government while accumulating their riches.  And it can all be perfectly legal even if it seems arbitrary.

In our economy, the government, which works at a very macro level of budgets and negotiations, also makes decisions and rules over transactions in the micro, or detaled payment and commerce ecosystem.  And the most ancient bridge between the two excosystems, tax collectors, are still resented by many.  The exception seems to be the middle and working class taxpayers who receive services that they value and feel are worth the taxes.  Historically, individuals in the payment and commerce system have felt uncomfortable with governance level interventions, though they require the power and security a good government offers inorder to reduce costs and losses.

The intermediate level, that of banking and finance, started as a pure service to both levels, facilitating commerce, contracts and wealth accumulation, but modern technology has transformed it and made it into a major engine for growing gross domestic product and industrial investments.  It is also a major creator of money, and requires regulation so as to prevent loss of trust in the nation’s money.  Of course, most news and economics reports focus on short term losses and gains, which allows for infrastructure and other assets to go unmaintained and unrepaired for years, creating a chokepoint for local business development and job creation.

The Wealth of a Nation, as described by Adam Smith, is the adding up, the aggregate, of all of the individual, corporate, public, etc. elements of wealth in that country.  And each ecosystem recognizes different elements as most important.  Understanding this can allow for the development of the proper mathematical models to accurately manage said wealth so it may grow continuously in spite of the old beliefs in scarcity and hard assets.  In addition, it makes it easier to understand how cryptocurrency can be of benefit to the global monetary system.

In addition, most successful individuals have learned to make use of one ecosystem or another’s characteristics to generate and accumulate personal wealth, as well as corporate.  A few have learned to leverage  more than one ecosystem.  The concern is that they all might be losing faith in the existing fiat monetary networks, and by pulling their wealth from circulation and storing it as unproductive assets, tey could actually diminish the wealth of their nation and generate distrust in their respective fiat currency.

I hope my ideas can help avoid these negative possibilities and open the opportunity for ever greater business and industrial development worldwide.

Manuel F. Perez, MPA, CAMS

 

 

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Interconnectedness vs. Tribalism

1210-1242159719gwzSTribalism, which we also call factionalism, populism, niches, etc., has seemed to gain strength in the last few decades, as the age of interconnectedness has created realities that are not only incomprehensible but that seem dangerous to different groups of humanity.  This article will take a quick look at the problem.

The Interconnectedness of 21st Century individuals has been described in previous articles as an emerging communication and extended network ecology between individuals, technology, artificial intelligence, control systems, and other decision making and communication processes that we don’t even know exist.  In fact, most of us can’t even recognize some forms of interconnectedness simply because our infrant brains learned to exclude many “meaningless” signals that nowadays actually have meaning, much as most westerners cannot differentiate sounds that have meaning in African languages.

 

In my last article, I reminded the reader of Walt Disney’s suggestion that it’s fun to do something impossible, and be a child again, discovering this new world of interconnectedness.  Which brings us to the concept of tribalism: the gathering of like-minded individuals around an authoritarian leader and shared beliefs.  For most of us that grew up believing we were separate and distinct from everyone else, hand held electronics that connect us with individuals across the globe, are only used for contacting people who share our beliefs, or for entertainment so distant conflicts and disasters are looked upon as almost fictional events.

These self-imposed limits on extending ourselves via cognitive linkages (interconectedness) can actually facilitate tribalism,   and even bring far-fetched communities together in the pursuit of a shared goal, forming an extended tribe that focuses on specific similarities while pursuing that goal.

In a previous article I explained about using interconnectedness for a purpose, and this is what is occurring regularly within the transition of the Age of Communication to the Age of Interconnectedness: many individuals use the tools of extraordinary communications and connections to develop their own tribes, eschewing (rejecting) all information and communications that are different from their hard held beliefs. Eschewing is a decision,  avoiding and keeping away from, and less intense than simple rejection, but it is an action that limits and can even eliminate the interconnectedness that the individual could enjoy.

In many ways, tribalism is easy, similar to a computer program with few instructions and requiring few decisions on the part of the user.  Very few inputs result in very few alternative results, and variations are seen as incompatible.  Change occurs inevitably, but the tribe barely perceives it as it ignores differences, and so the tribe is easily and predictably controlled and led by its leaders.

 

Interconnectedness, on the other hand, requires the individual to accept multiple realities and possibilities as valid inputs, and it thrives on diversity of inputs and results that allow for uncontrolled and possibly unpredictable growth.  The image that comes to mind here is that of the flash mob, a phenomenon that many marketers and politicians have tried to manipulate, but which defies “top-down” communications that they use.  It seems evident that social media is a key for mobilizing people in a flash mob fashion, and further study is probably under way at this very moment as to how it works.  My proposal is that during the transition, in which we are training our subconscious and conscious minds to work with information and  ideas that were unknown a century ago, we remember that our minds are already full of unconscious programming.  These instructions and lessons learned as children can be activated with catch phrases and acted upon without thinking, as long as we are distracted with novelty or emotion.  On the other hand, the new way of communicating and connecting that we are learning requires our being aware and thinking about our alternative responses to any stimuli.  For example, as adults in NYC, we consciously know that only children respond in game fashion to topple anyone standing on a rise that shouts “I am the King of the Hill” while raising their arms.  But, if the call arrives via social media (or a corporate restructuring), we might just respond instinctively to knock down the person simply because that’s part of the game.   Of course this is an extension of the concepts presented in the bestselling 1964 book, “The Games People Play” by psychiatrist Eric Berne, but Dr. Berne’s proposals are still valid.

Basically, people in the same tribe know and play the same games, according to their roles.  And people who do not play the games are considered outsiders and can be subject to exclusion  and even violence. Now, this is changing: in the age of interconnectedness, we can all learn multiple ways of interpreting the same set of data, and so have the ability to disconnect from games at the moment we detect them.  But, through interconnectedness individuals also learn to recognize patterns that others do not even know are there, and that extra information can allow for greater success and effectivity in business and other areas of life.  This, of course, can generate anger on the part of the tribe that cannot see or understand that extra information.   This is actually most visible when city dwellers go to stay at a farm for a period of time, when they are very different from the rural community and are ignorant of the most basic survival skills yet very knowledgeable of world events and technology.

Populist politicians are excellent at creating and using the tribal effect, and they often stimulate grass roots support by creating shared identities around specific, tangible concerns and beliefs.  Many of these concerns and beliefs keep on recurring in history, even when they have been proven wrong time and time again.  The politician knows the tribe does not care nor does it care to know if the belief is true or not: their belief is proof enough.  In this sense, the interconnected politician has a disadvantage, because understanding multiple communities interests and beliefs makes it easy to seem unfocused or unauthentic when speaking to a homogenous group.  This disadvantage is clearly only a disadvantage if you are trying to connect to people who have yet to enter the Age of Interconnectedness, but that is one of the inevitable problems of the transition.

If the transition brings with it problems of tribalism, what can we do?    In politics, from a global perspective, we can observe that many countries have gone through destailizing tribal events, from different ideologies.  I will be looking at this in the future,  so please stay alert to my blog.

As for the other changes coming about for humanity, the interconnected individual will perceive and prepare for the economic, personal, industrial upheavals and transformations that are already threatening to upset many nations and regions, and will make the best use of the technological innovations that will change our lifestyles and conditions.  Will it be for the better?  Or will it be for the worse?   Interconnedted individuals will see how we are building the future while tribes and elites will probably complain that we are destroying the past.  Of course, I am in the first group, excited to see how we build the future.

Manuel F. Perez, MPA, CAMS

 

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Interconnectedness for Purpose or Function?

u-buckles-and-white-chain-connectedIn previous articles I have described the Interconnectedness of 21st Century individuals as an emerging communication and extended network ecology between individuals, technology, artificial intelligence, control systems, and other decision making and communication processes that I don’t even know exist.  In fact, I’ve already argued that I can’t readily recognize some forms of interconnectedness because as a child I learned to do things on my own and on my own resources. Maybe, as Walt Disney reminded us, I need to remember that its fun to do something impossible, and be a child again, discovering this new world.   Our youth have grown up using hand held computers and communicators (cell and smart phones, gaming units, tablets, “wearables” etc.) to extend their environment to places and distances and even realities that many older adults cannot understand at all.

 

This extension of self via cognitive linkages/interconectedness can be for a purpose, as in the case of developing country individuals who use new technology and the internet to achieve freedom and opportunities generally unavailable in  their region, or as a collection of functions that are made possible with interconnectedness, as is the case of the wealthy first world child that uses their smartphone for making friends, planning, dating, trivia, games, homework, etc., in which knowing how to navigate their brave new world is more important than actually exploring its capabilities.

Of course, truly innovative and smart 21st Century individuals do both: they learn how to have new capacity and functionality in their lives, and they apply these skills and abilities to specific purposes.  A high profile example is that of hackers, who often use their newly learned skills and the access to international networks for purposes that global financial systems find abhorrent.  The book “Unthought: The Power of the Cognitive Nonconscious “ by N. Katherine Hayles, the author covers 50 years of develelopments in the study of thought, cognition and consciousness, and presents a solid case for the evolution of a new form of intelligence, one which uses “cognitive linkages”, a scientific term that could be summarized as interconnectedness, to allow individuals to do what would have been impossible a few decades ago.

By recognizing, learning about and utilizing other forms of information gathering and decision making, the individual is capable of doing more than what his natural abilities can allow for, and that is the major difficulty established systems are facing with the innovators of this new century: that the experts running these systems usually have little if any clue as to all the changes and advances available to our youth and to young hackers.  This will be the subject of a future article on Interconnectedness and Regulation.

So, are we “mature” individuals doomed to remain unconnected?  Of course not.  Otherwise I wouldn’t even be writing this article.  But we do have to make an effort to understand the changes, the novelties, and the possibilities that are available to those that are discovering a new frontier for their thoughts!   We might not want to accept it, but most innovations are actually products of reusing and recycling old strategies, techniques and tools, simply changing the names and technology associated with them.  And, when we understand the origins and fundamental concepts of any technology, we can figure out how to use it or them to make our plans, our businesses and our lives be successful!

Yes, it’s a short article, but I hope you understand that interconnectedness must be both functional and purposeful, and that only you can make it so.  Otherwise, you will only enjoy some few advantages of the new technology and cognitive linkages, and miss out on a whole new world.  Or, if you are young, you could get distracted by fun and games and lose out on achieving the success you dream of.  It’s your choice and mine to make.  I choose connections.  How about you?

Manuel F. Perez, MPA, CAMS

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The Big Value in Bitcoin & Cryptocurrency

secure-awake-and-aware
The true value of Bitcoin is not what you think. As I see it, cryptocurrency does not replace fiat money, banks, financial systems, or anything else: the airplane did not replace the train or boat, and the train did not replace horses. Cryptocurrency is simply a whole new world of possibilities, addressing and finding solutions for the needs of those people that have always been the first to benefit from new technology: the ones who can pay for it, the movers and shakers, which of course includes de early adopters.

Bitcoin and cryptocurrency in general, just like the airplane and other technological advances may be said to respond to a dream, not a need. And speculators certainly take advantage of the dream and aspirations of individuals to make profits and other advantages, creating price bubbles and market distortions that have nothing to do with a tangible value for whatever they are speculating on. Of course, speculators are often transitory millionaires, much like the gambler that hits the jackpot and keeps on playing the game. So, what is the value of this new form of money? For one, it is designed to be independent of all political governance mechanisms, incorporating what the Cryptocurrency Standards Association calls “Satoshi Standards” into the open source software that operates it:
a) Freedom, in that it is free of jurisdictions and of conditions for its use, and anyone with an Internet connection can use it;
b) Equality, in that all users are equal, all miners are equal, and coders need miner approval for changes to be made to the system; Equality also means that the user of the software is not subject to centralized controls or validation, since the Blockchain is a descentralized, globally distributed open ledger that all can see.
c) Transparency, is a product of the open distributed ledger, since every transaction and a “paper trail” of transactions for every unit of currency are there for all to see.
d) Privacy, in the form of pseudonymity, in which all users have unique identifiers, with encrypted public and private keys that serve to ensure security.

No other money offers all four benefits, and only cryptocurrency is independent of our financial controls and regulations, which is why it became of interest to criminals, including petty thieves who think that privacy is anonymity. This is also what regulators and police have focused on: the possibility that they might not be able to identify a criminal who is using the money, which is often the case with unmarked cash. Gold and other high value assets can also be anonymous, but remelting gold or erasing micro engravings in diamonds is really a lot of work. Not surprisingly, in this age of fake news, the fable of anonymous and untraceable Bitcoin or other cryptocurrency often makes good headlines, and serves to disguise the true value of this new form of money: the powerful elites can use it to free themselves from the perceived dangers of our present day financial systems.

Cryptocurrency is an honor system backed by mathematics, not force, and the price is set between buyer and seller, with the possibility of including conditions or “smart contracts” to protect against fraud. You do not have to pay the financial system to protect, store, or even transport your value: cryptocurrency does that by itself, and the same security measure you must take to protect your banking accounts are used to protect your private and public keys, and the equipment you use to connect to the internet. It is an honor system in that it is not based on law nor backed by anything of value save the honor of the mathematical program that it is built upon. It is an honor system in that any use of force to take your wealth within the cryptocurrency system is, by definition, useless unless you personally give out your information.
Of course, this can be portrayed as useful to criminals, but it also protects the wealthy from being targeted by those same criminals.
In fact, the privacy of the “ultra-rich” has been under attack for the last few decades, because criminals also used private banks, unnumbered accounts, fake identities and other tools to evade controls and launder money, and even to finance criminal and terrorist activities. But no means was offered to help the ultra-rich maintain their privacy, and they became subject to the same controls that applied to the rest of the population.

Privacy and freedom are the two great benefits and value of cryptocurrency. And regulatory compliance can be built into all transactions without compromising these two elements, which are balanced by the other two Satoshi Standards: transparency and equality.

And in 2017 the conditions have come about in the country that most uses Bitcoin to allow the wealthy to literally invest in these two critical values, divesting themselves of holdings in fiat currency with all its limitations and problems, and depositing them in cryptocurrency that they recognize as a valid form of transferring and storing value.

Some bloggers and news media says that this is a ploy to evade foreign exchange controls, or to evade taxes, and it may look that way in the short term, but in the long term all fiat currency and the financial systems that use them are suffering from constant devaluation, market manipulation, hacking and other security issues, to mention just a few problems. Cryptocurrency runs on the Internet for speed, but as Andreas Antonopoulous loves to explain, can be run with paper wallets and text messages. A perfect solution for the individual or organization with a truly secure vault!

Which brings us to an unexpected value that cryptocurrency has: that of security. The four Satoshi Standards offer security to the user and the miner. How much is that security worth in money? I really don’t know, but I do know that the market for security and privacy services is huge. And smart contracts make it easy to define how and when the store of wealth can interact with the fiat currency system, and added level of security.

So how much is a Bitcoin really worth? Well, how much is a diamond worth? Who defines the price of diamonds? Instead of being defined by a market or government, the price is set by a private business that controls not only the supply but also the demand by means of its marketing campaigns. The Enron Scandal in the USA demonstrated how oil and energy prices were also manipulated, as did the recent LIBOR scandal with respect to foreign exchange markets. Well, nothing stops a small group of key investors from doing the same to protect the value they are storing in cryptocurrency, and I believe they’ve started doing so at this time. Of course, the lack of community standards creates risks for individuals who don’t know what they are getting into, not to mention the possibility of outright fraud, but governments have already seen that cryptocurrency is actually much more secure and stable than fiat currency. As was recently reported,

“Regulators of all countries have come to the conclusion that it is necessary to do a national virtual currency. This is the future. Each country will decide the issue of a specific time and maturity independently,” said Skorobogatova, speaking at St. Petersburg International Economic Forum (SPIEF 2017). (www.rt.com/business/390608-russia-bitcoin-cryptocurrency-central-bank/)

But I seriously doubt the governments will use a true cryptocurrency and will attempt to create a hybrid fiat coin that allows them to control all aspects of financial transactions int heir jurisdictions. This might actually work, because if salaries and bills and taxes are paid in the hybrid coin, it will be used. But I also think that the ultra-rich of the world, including international crime organizations, will avoid fiat currency as a means of storing value over the long term.

This will result in a new monetary ecosystem being created, one that can interact with but also exist independently of the payment, financial, and government finance systems. This will be the subject of a book I should be publishing before October, 2017.

Manuel F. Perez, MPA, CAMS
A renaissance man, student of how humanity’s multiple changes are leading to social, economic, political and technological transformations that he is actively tracking. With public, private and non-profit sector experience on an international level, Manuel Perez is active advising and coaching entrepreneurs in the Cryptocurrency and technology fields. He is also Co-Chair of the Cryptocurrency Standards Association (CRYPSA) and president of Space Renaissance USA (SR-USA).

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Global Innovation Rankings

The linked article titled “America Rules the Innovation World”, presents a n surprising view of the United State’s leadership in the global tech, social and cultural transformation I have previously described as the “Space Renaissance in this blog.  In the article, they show that the USA, Japan and Germany lead the world in patent creation up to 2015.  More interesting is the fact that leading countries in patent creation are democracies with strong civil and human rights, as well as being safe places to live with strong rule of law.

Interconnectedness, which I’ve also written about here, is also a key element in the issue of innovation, for it allows cross-pollination of ideas and insights across borders and language barriers.  And, more importantly, interconnectedness helps innovators find the best places in which to develop their ideas and be successful.   In a brief and unscientific analysis, I observe that though Japan has better Internet connectivity than the USA, it does not have the huge diversity of peoples in its Universities, businesses and research institutions that characterizes the USA.

You might ask what the importance of having more patents is, and I would have to point out the great advantage in terms of what used to be “balance of trade” issues, since foreign countries that use the US’s patents must pay licensing fees to use these innovations.  The same situation exists for another country’s patents, and this means that a country can make money from licensing instead of simply manufacturing.  In addition, more and more countries are enforcing patent protections because they realize that innovators prefer living in places where their ideas can produce multiple streams of income for them.

So now I suggest we all strive to be innovators, to get copyrights and patents for our creations and so help our country’s economy grow as the world changes before our eyes.  Patents are not easy (nor cheap) to get, while copyrights are much simpler, but your application for a patent or copyright alone will serve to give you some legal protection as you innovate and create the future!  So lets go for it!

Manny Perezthe-usa-of-innovation-7ff2

 

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Interconnectedness, Freedom and Sovereignty

global-people
How can a country with open borders be sovereign?
How can a truly free market economy country be sovereign?
How can a country subjected to external global legislation be sovereign?
What is the difference between national sovereignty and personal freedom?
What exactly is sovereignty in the 21st Century?

These are all great questions, and many countries are undergoing serious political upheavals as they explore the topic, looking at many related controversial issues that include migrants, refugees, public services, nationality, national budgets, military expenditures, culture, language, the Internet, mass media and more.  Some argue that national sovereignty requires control and restriction of personal freedoms, and others point to the value of democracy and participative governments. But few look at the way in that the accelerating transformation of communications between individuals of all societal sectors and places are allowing them to connect with others beyond their physical borders, in real time and with real consequences. This new phenomenon of interconnectedness goes beyond networks, data and communications, which governments and elites have already learned to manipulate and control, and individuals are actually being connected to others in ways that seem incomprehensible and uncontrollable (and even threatening) to governments and elites.

First, let me clarify that, based on my life experience and overview of history I have concluded sovereignty has to do with the ability of a people to exercise self-determination for their nation or physical community. In fact, history points out that those communities that achieved sovereignty then declared themselves independent from everyone else!  This is not necessarily the case in the 21st Century, where countries recognize “Autonomous Regions” and such. Individual freedom, as the expression of personal self-determination, is actually a contributor to national sovereignty as long as there are shared goals and experiences that identify them.  In the past, though, in recorded history, sovereignty was more related to might and power than to real self-determination, though dictators, kingdoms and pseudo-democracies may assert that I am wrong.  Interconnectedness enhances individual freedoms because it enhances the ability of individuals to work together, and stimulates the higher level motivations of self-expression and self-discovery.  As far as I am concerned, sovereignty based on coercion is part of the past, of the limited civilizations that followed the rule of the sword, of jailing and killing people who objected to the ruler’s decisions.   The isolation of those that exclude the will of the people themselves, also excludes them from the new future we are creating.

Legally, sovereignty is often determined by treaties and international agreements, but let me propose that in the 21st Century it will also represent the capacity of a country’s populace to decide for themselves, without having to follow foreign orders or mandates. To clarify a commonly misunderstood concept, collaborative, friendly negotiations are an excellent exercise of sovereignty that allows the country to get other nations to follow their lead. Similarly, team work between equals is an excellent example of exercising personal freedom for greater gain.  On the other hand is an exercise in opposition for opposition’s sake, makes the country and individual reactive and subject to manipulation by external interests. In the age of Interconnectedness, international negotiations actually serve to enhance the interconnected government’s ability to lead the country and speak for it.  Of course many governments still practice fierce opposition and objections as a matter of honor, separating themselves from other countries that could help them.  Wars and destruction are also a poor example of self-determination simply because they involve losing internal and external resources and connections, leaving leaders with no leverage to use against those who would manipulate them.  On the individual level, laws tend to control individual violence and criminal acts, but this, too, is still present in our societies and communities. I admit that  humanity is still learning what sovereignty is for an interconnected community of citizens: since much of the world still believes that “might makes right” and our leaders were born in an age of non-connections, where survival was an individual effort and coercion and resistance were necessary to demonstrate strength and sovereignty. Even though this might offend some leaders, I see parallels with childhood development patterns in which the toddler discovers the power of saying “NO”, and uses it as a way of demonstrating independence.   As a parent and former teacher,  I know the difficulty of having that child and teenagers learn the benefits of delayed gratification, of planning, or working for a goal, of cooperating, sharing, waiting for the right moment, and being part of a family and community.

In this century, self-determination has expanded to many formerly excluded populations, including women: these groups now work with others to go far beyond what they could even conceive, learning and utilizing the skills of negotiation, planning, compromise, management, compounding interest and many more to reach their goals.   Though some national groups and leaders still want to separate themselves from the rest of the world by structuring laws and governance models that exclude outsiders, they simply end up creating parallel or underground economies and activities that are outside of their control, since they rely on people to people connections, not on formal hierarchies or rule based requirements.   The answer is simple:  as I see it, Interconnectedness is a new human condition that implies transparency and very limited secrecy, so everyone knows what everyone else is doing except for those who hide behind walls.

So, getting back to sovereignty, how can a country increase or enforce sovereignty in this new age?  First of all, it must respect and follow its own laws and culture.  Laws can be changed, if needed, but self-respect is needed for interconnectedness to bring forth the benefits and the wealth that sovereignty offers.  Dealing constructively with conflict and opposition is critical for success, and we have seen examples of countries demonstrating the effects of both respecting, and disrespecting popular mandate, elections, agreements, etc. Interconnectedness seems to take the concept of “strength in numbers” much farther that what we had ever imagined, since interconnectedness within a country or community can create a socio-political equivalent to reinforced concrete, in which the natural tensions of inevitable conflict and opposition are handled in such a way that the country becomes stronger.

To conclude, I propose that Interconnectedness will, over time, result in greater sovereignty for nations, communities, organizations and individuals, creating greater capacity for self-determination in each.  But we are presently in a period of transition in which the “us vs. them” way of thinking is interfering with the opportunities that interconnectedness offers.  In the past, “us vs. them” offered clear national and security benefits, but this is no longer the case: peaceful international exchange and the interdependency of global actors are inescapable if a country wishes to prosper.  Of course, we still have isolated nations that threaten war and refuse to work with other countries, focusing on matters of national pride and old rivalries, but those nations have a very low standard of living, and of education, for their populations compared to the nations whose people are interconnected.  My observation is that those governments that are learning to expand their sovereignty by means of interconnectedness are thriving, too.  In my experience rule of law, transparency, equality and participation (all of which are elements of interconnectedness) are much more important than secrecy, dogma, power struggles and authority, which only divide the people and weaken their collective will. Interconnectedness is already with us, and it is offering the opportunity of greater means of self-determination than humanity ever experienced in the past.  I propose we support and develop it further in service of both freedom and sovereignty.

Manny Perez, MPA, CAMS               Jan. 24, 2017

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INTERCONNECTEDNESS AND WEALTH

 

440px-metcalfe-network-effect-svgInterconnectedness is one of the big changes of our 21st Century transformation, also called the Space Renaissance, and its wealth is represented by the metropolitan “city that never sleeps” and the 24/7 (24 hours a day, 7 days a week) connected individual, business, and financial system.

This interconnectedness is a great source of wealth because it allows people separated by distance, time zones, language, and sleep cycles to participate in all sorts of commercial transactions and work.  Interconnectedness also increases productivity py reduces inactive periods for equipment, buildings, people, and even things and ideas. Better yet, according to some economists, it follows Metcalfe’s Law, according to which “the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).”, as described by Wikipedia.

When we think of the Payments and Commerce monetary ecosystem, we can often identify businesses and individuals who only use a few hours a day for producing products and wealth. Their office hours limit their productivity and their opportunities to generate wealth.  Yet it is only in the past 50 years that the productivity of automation and technology has been extended to many global human activities, including transportation, marketing, communications, administration, manufacturing and commerce, to mention a few.  In the past, financial systems often followed the same pattern of activity and inactivity as the people of their communities.   This is still the case for many places, especially when laws force businesses to shut down regularly, but this is changing rapidly as global businesses coordinate activities in different time zones to create virtual 24/7 operations, and local businesses are adapting in order to compete with them!   Even health institutions are adapting to use expensive medical equipment on a 24/7 schedule so as to maximize return on investment and bring down their operating costs.   The Internet, of course, has allowed people to coordinate activities on a global scale, and the individual’s physical location is becoming less important in determining opportunities for commerce and for creating wealth.

Of course, this increased productivity first became possible thanks to the benefits of the present renaissance, including lighting, relatively inexpensive electric power networks, global transportation, telecommunications and data processing networks, satellites, and a global legal and financial structure that ensures contracts, value and agreements have the force of law around the world.  International commerce is a direct beneficiary of this 24/7  ethos, which allows multinational organizations (public, private, nonprofit, religious and even criminal)  to work efficiently throughout all time zones, languages and regulations, with and without human intervention.

I propose that all of these advances are, in good part, the result of interconnectedness of individuals, innovators, students, educators, organizations, equipment, and basically all the productive elements of the global community. Now consumers connect constantly to global services in new and disruptive ways, creating new markets and fortunes by doing so.

On the other hand, countries whose populations are not freely connected to the world’s financial and telecommunications networks are at a disadvantage, be it accidental or part of a government’s policy.  Wealth is generated through international and regional commerce, and also needs accessible financial systems and legal guarantees for investors and entrepreneurs. Sadly, it seems that unconnected regions and countries also tend to be more highly restrictive towards entrepreneurs and innovators, and under these conditions, prosperity is difficult to achieve and their populations must accept many unsatisfied needs or generate illegal alternatives to satisfy them.

Of course, Interconnectedness alone does not generate national wealth: it is easy for some countries to take on huge loans for short term gains and other activities that do not accumulate nor leverage future wealth creation. And, thanks to interconnectedness, some countries may even rely on other countries’ monetary systems instead of their own, which in time reduces their opportunity for financial leverage of their own markets. Capital flight is much easier in this interconnected world, though the impact of, for example, corporate tax evading “capital flight” from the USA in the last decades has not been studied, though the US economic engine still seems to be quite strong.  In addition, new forms of money, cryptocurrency, allows for simple peer to peer movement of value outside of government and regulatory controls, which has caused alarm among governments who are afraid of this economic activity.

As I see it, The nation that does not plan for the wealth created via international commerce and communications, is destined to lose wealth due to short term policy decisions that push local investors to disdain their own industrial and commercial structures and invest in other lands. This true capital flight joins the brain drain in taking away much wealth from the restrictive nation.  Certainly, the short term return on investment via isolationism is popular among some politicians, but the long term wealth of a nation requires years, if not decades, of establishing trust and reliability. Individuals and corporations consider the future of their investments carefully, and news of confiscation or arbitraty restrictions is quickly communicated, and this can severely restrict the ability of a government to care for and protect its people, businesses, industry, financial sector, and sovereignty.

Reality, as usual, is much more complex than what I describe above:  economists have many theories as to  what makes up the wealth of a civilization or nation, and all governments try to demonstrate that their policies generate well-being.  To add to te  confusion, we must also consider that globalization tries to fit everyone into the same mold which is clearly restrictive and abusive, and does not promote interconnectedness.    Wealth creation requires every sector of the population, including the poor, to accumulate wealth.  And the wealth they accumulate must be capable of generating even greater wealth – as capital, as infrastructure, and as opportunity. 

Interconnectedness itself, then, is a new form of wealth: one that falls into the realm of opportunity.  New York City, London, Tokyo and other financial centers demonstrate the value of being a communications hub for investors and bankers in their regions, and many small communities have also generated wealth by becoming specialized communications hubs – even for unethical activities.  Individuals can do the same

To conclude, then, I propose that we see interconnectedness as a resource and investment,  one that must be planned for and maintained so that it generates wealth for us, instead of being a distraction.  In future articles I will look at other areas in which Interconnectedness impacts modern societies, including sovereignty, citizenship and even space development.

Manny Perez, MPA, CAMS           Jan. 6, 2017

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