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Roadmap 09/11 (click here to expand/collapse)

Below is the Roadmap for select September 2011 website articles. 

Provide Predictable Funding for Unpredictable R&D+

We Make R&D funding more predictable ...

At a lower cost of capital

With reduced volatility (i.e., short term predictability)

Without mortgaging {bracketing} the future (i.e., long term sustainability)

Investors can buy and sell shares at any time (during open season+), reducing premiums they would typically charge if we mandated long term commitments, and reducing a perceived need to 'meddle' into investments, demanding 'window dressings' to increase the sale price for the next investor down the line.    Valuation of Intellectual Capital+

Asset valuations (appraisals) are greatly increased due to membership+ in our community. They command premium pricing due to the financial strength of the community, readily available comparables, and tangible benefits of membership provided by the funding agency.    Community

We can have at our disposal (in the U.S.) additional tax benefits that comes from working with member-contributed equity.    The Cooperative Solution 

Long-term investor-citizens come to rely upon the predictability and sustainability of perpetual fund+ share pricing. This reduces premiums they otherwise would charge due to the unpredictable nature of the underlying assets+ (R&D-based ventures).      Valuation of Intellectual Capital

We have at our disposal a broader variety of cost-effective tools for investor retention+ when we work with our investors vs. anonymous / absentee investors.      Investor Retention

Investor-citizen familiarity with our financial safeguards tamps down on irrational investor fears, reducing the urge to sell off during generalized market downturns. Increased volatility in buying and selling forces us to recruit (and pay for) excess investors just to be sure we have enough funds to cover the sell-offs.        Investor Education

We build love of institution in our investors. Our client base will be thousands of thousandaires and only a few millionaires (when they start). We can't do this without investor referrals, outreach, testimonials and involvement in retention and recruitment programs.        Love of Institution

Investor-citizen participation in governance builds an appreciation of the complexities in our operating model (e.g., asset appraisal, the stabilization fund, derivative investment vehicles+). Citizens learn to acknowledge that knowing and doing are two different skill-sets. An idealized vision of the funding agency leads to unrealistic expectations of the funding agents. Our operating model reflects the uncertainties of investing into unpredictable R&D and we need a latitude for our mistakes from investors.      Investor Participation

Asset appraisal, upon which the perpetual fund share price ultimately resides, is performed in a way that tamps down on period-to-period fluctuations in asset value (across a basket of assets). Interim asset appraisals informs the share pricing used by investors to buy and sell during open seasons.    Valuation of Intellectual Capital

A mandate for an accelerating growth rate forces agency management+ to continually recruit new investors, who can then be recruited as natural proponents for safeguards put in place to ensure the future of the agency. For example, new investors will not want old investors to exit with the cash, gutting the finances behind our community services. We make this a first principle.    First Principles+

Mandatory reinvestment of interim winnings is the principle funding source for all our community services. It's so important we make it a first principle.    First Principles

Minority opinions (dissenters+) provide a wake up call to other investors should the future of the agency be placed in jeopardy by self-interested investors or outsiders.    Dissenting Opinions

A common law+ legal approach makes it difficult for today's investors to enact binding legal precedent that can be burdensome on tomorrow's investors. It's very difficult to know the best way to exploit unpredictable R&D. We don't write down rules, precedents or procedures that either 1) make it too difficult for future generations to experiment or 2) make it too easy for future generations to excuse their lack of creativity.    Common Law

Investor voting constructs+ make it difficult for today's investors to enact bylaws, rules and regulations that are binding and can be burdensome on tomorrow's investors.     Voting Constructs


Benefits of a Community-Based Operating Model for Our Funding Agency

Breathing Life into Intellectual Capital

Unpredictable R&D is a different kind of intellectual capital. Its exploitation requires creativity, experimentation, progress that is halting and tentative, and a willingness to throw away all the rule books. We do not pick a commercial direction and start marching. Ours is a wilderness criss-crossed by many overgrown paths, each with unique challenges, and only a very few taking us where we want to go. Consider it a mystery instead of a puzzle. There are many misdirection cues, incredible complexity of plot, and many, many plausible conclusions. The answer often emerges when we discard that which is right before our eyes: discarding yesterday's misleading evidence.

These challenges (opportunities) get reflected in the demands we place on the funding agency. We must better educate citizens (vis-à-vis anonymous or absentee investors) to appreciate the value of the freedoms we make available to our investees. Investees are freed from many arbitrary constraints. Our task is to make these freedoms seem dear to investors so they aren't tempted to take them away, with meddling or impatience. Responsibility for the defense of these freedoms must become a matter of personal mission for many of our investors.

Above we listed advantages of a community-based approach vis-à-vis a corporate or venture capital approach (our competitors). We take the best and discard the worst from these competing models. We have our investors (venture) but we allow them to exit at any time (corporate). The community-based approach also brings advantages not found elsewhere (e.g., love of institution).

Community

Summary: 

We will be much stronger and more successful by banding together as a community. Individual investments leverage the reputation of the whole, and a community is not overly burdened by the shortcomings of the few.

Note: The September 2011 Roadmap, above, lists the many advantages of a community-based approach vis-à-vis its competitors (e.g., corporate or venture capital). This article provides more detail.

The value of fiat money+ and its acceptance in transactions emerge as properties of a dynamic economic system. The acceptance of fiat money ‘as a store of value’ comes from expectations, enforced by the legal and administrative structures of a society. paraphrased from Martin Shubik (2000). The Theory of Money.

 

Introduction

Why community? Because community in large part defines who we are. We set up the community for success and it fills with successful people. People buy into the prestige of a community. The same house in a lesser community sells for less. Our community is our brand. People join both for the reputation of our community and for what it means for their own reputation.

Community provides social capital+. People in a community care about the thousands of little details that serve to make and maintain the prestige of the community. They take care of their neighbors, both in their time of need and when they need correction. Social capital, caring about what others are doing in the community, becomes financial capital.

We sell shares into the community, not into individual properties. Investors care about the competency of the property management firm (i.e., the funding agency). Investees care about their own properties and the management of the community within which they are located. The success (or failure) of properties within the community affects everyone.

We seek a community of investors, investees and funding agents: the buyer, the seller and the intermediary. Each brings different talents, but all speak the same language. The mission is to provide long-term predictable funding for (perfectly) unpredictable R&D+. What this means in operational terms is very distant from anything yet seen in the financial markets. But our citizens understand. They speak the language of the World Class R&D glossary.

Unpredictable R&D is an intangible asset. There are no revenues or profits. New wealth is created only in the minds of those working on the assets. There are no concrete measures. We communicate measured wealth to investors by means of side-by-side qualitative comparisons across investees. But first we make sure investees are on a level playing field. The community provides the level playing field. The community provides long-term, educated investors who acknowledge the validity of this wealth-measurement approach.

Community provides a store of societal memory. We point back to historical buying and selling prices of shares in the perpetual fund+. We capture the intimate details behind thousands of appraisals for past and present assets. These stand as evidence for future share price sustainability and stability. Community provides a consistency, a centralized archive, for all appraisals and buy-sell transactions based on those appraisals. We build a vast repository of comparables for these very intangible assets we call unpredictable R&D.

Community means banding together for mutual benefit.

Our mutual benefit is wealth creation for investors, for investees and for agency management+. Our community is constantly tested against its mandate of wealth creation. Without wealth we cannot achieve any purported social benefits. We build a wealthy community and by doing so a wealthy citizenry.

We have a perpetual fund, one fount of money for all R&D investments. We share sources-and-uses of funds. All investees dip into a common fund for operating cash. All investees and fund managers reinvest winnings back into the common fund. Individuals exit with their cash only once an investee has demonstrated they can stand on their own as a firm independent of the funding agency (i.e., after successfully launching two blockbuster+ products). In the meantime all funds are available for all investments.

Community, people voluntarily banding together for the long term, allows us to experiment as to the best way to exploit unpredictable R&D. We’re only going to get it partially right at any time. Mistakes are expected and will be common. Our neighbors know the challenges we face and give us leeway. As a community we jointly look for the best way forward.

We do all this because together we will be much more successful than any of us can be on our own. Orders of magnitude more successful.

Our community makes happen investment transactions that otherwise wouldn’t happen. Owners of intellectual capital+ have no need to demand unreasonable prices for their assets. Their membership+ gains them access to funding not subject to arbitrary restrictions.1 Investors have no need to demand bargain prices for any particular investment. They’re buying into a pool of investments (i.e., the entire community). Successes offset losses. Bankruptcies do not taint remaining investments.

There is a multiplier effect+, a new wealth emerges simply because we choose to work together. Stand-alone investments into unpredictable R&D are essentially unappraisable, not fit for rational investment, only fit for gambling. We put in place legal, financial and administrative structures that provide stability and predictability across all investments. We bring forward future winnings (or husband today’s winnings) to purchase stability and predictability. Investors see slightly lower returns from any single asset, but many more investment transactions are now completed, and many more successes greatly offset this single-asset penalty.

Wealth creation emerges from the minds of our citizens.

See the Encino story for a stark illustration of wealth creation simply in the minds of a community’s residents.

With the perpetual fund we take wealth as it is found mostly in the minds of researchers and package it for consumption by investors. Investors pay national monies in exchange for fiat money+, shares in the perpetual fund. They do this because we tell them, and they believe, that wealth denominated in fiat money will later be convertible back into their national monies. Furthermore, wealth creation is also only found in the minds of our researchers. The virtual nature of wealth creation only comes to a close when a consumer reaches into their own wallet to pay for a physical manifestation of our research, that is, purchasing a product and/or service coming from that research.

We paint a picture of what our future community will look like. Go to the physical location and you’ll see empty fields filled with weeds and brambles. Go to our drawing boards and you see tree-lined avenues, a robust school system and architectural drawings of beautiful homes and businesses. Investors and investees do a mental walk-through of the community and the houses they intend to build or finance within the community. For this analysis investors rely on their frames of reference+. Is this feasible? Can we get all the necessary permits? What about community services? Have we lined up our first showcase citizens? This vision, this mental walk-through, opens up the minds of investors and investees alike so they are moved to action, so they set aside unfounded fears and push ahead to make the vision come true.

It’s a virtuous circle. We siphon off a portion of today’s wealth to create wealth for tomorrow’s citizens.

Your success comes from the investments of those who came before, so you invest to ensure the success of those to come. We mandate investees stick around until they can show lightning strikes twice+, that their initial success can be replicated after they exit the perpetual fund. We practice mandatory reinvestment of interim winnings from both investees and agency managers. This provides enormous amounts of cash (e.g., the value of a firm having two blockbuster successes under its belt). We stand on the shoulders of our predecessors and the next generation on ours.

Everyone contributes to the community chest. It’s not just a tax on success. Investees and agency management have requirements for hands-on participation in community building. Investors are rewarded for their participation (e.g., as jury members in a Trial by Jury+). All investees and investors are expected to pay back into the community that did its best to make them successful.

This sense of community is found in our common understanding of business practices, dispute resolution mechanisms, business services, education, member retention programs, property appraisal mechanisms and more.

Unpredictable R&D is, well, unpredictable. And this is hugely influential on the design of our community services. Individuals looking in from the outside will view many of our community services as unusual, to-say-the-least. What normal firm would maintain a judiciary and run jury trials? What normal firm would pay me to write an online essay as to why I am voting for a particular business proposition? Our business model is unique and we need our citizens, the investors, to understand the rationale behind this model. With understanding comes greater investor retention+ and greater predictability of funding.

For example, we inform and involve citizens into our unusual ways for decision making. The educated investor, for example, will not be off-put by the quasi-objective nature of our asset appraisal mechanism, where there are no formulas. They will come to appreciate our common law+ approach to dispute resolution where we use no bylaws or legal precedents. It can take years for rules-hardened investors to gain an appreciation of our unorthodox methods. Citizens in our community learn to respect these methods and stick around because of this respect.

Community services allow citizens to forge ahead fearlessly.

Our citizens feel superior. They are proud, emboldened, and perhaps brash. That’s the way we want them. They are emboldened by having the big guns of the community stand behind them. You sense this boldness in the tone of their voice and the lift of their walk.

Investors trust in the long-term sustainability of the perpetual fund. It’s a source of reliable wealth creation under a wide variety of future economic scenarios. Investees have no fear of having the financial rug pulled out from underneath them. They are not subject to arbitrary restrictions on funds for their operations. As long as they continue to show results they are free to dip into the common fund. We eliminate ‘investor terrorism’.

Agency managers, citizens too, are fearless in experimentation with the funding agency. They ultimately answer to investors, but we erect significant hurdles to keep investors from meddling into the duties of agency management. We set up community participation to give investors a greater understanding of the challenges faced by management and to give management leeway in their actions. This lasts for as long as agency management continues to show good results.

Key to our success is a sense of exclusivity.

We make it desirable to get into our community. We have waterfront property. Although we’re still standing on empty lots, it’s clear there will only be room for so many investors on this property. Those outside our community are made to understand membership is not open to anyone with a checkbook.

We make it tough to get in and tough to stay in. Membership is by invite only. You will not enjoy the full benefits of membership without first providing significant hands-on participation into funding agency activities. There will be literally hundreds of opportunities and corresponding benefits. Slip in your level of participation and you’ll find yourself risking marginalization (or limited re-entry should you decide to leave). We leverage investor participation as a tool for building exclusivity.

We make it clear many try to get in and fail. We trumpet those moments when we deny entry to major investors due to incompatibilities in investment philosophies. We want to reject investors only interested in the money. We want to reject investors only willing to commit for the short term. We build a larger sense of social purpose for our community, with outrageous financial success as an attractive perquisite. You as a potential investor must show a genuine interest in this social purpose.

We build citizen participation in the community.

We seek both an educated and a participating citizen – investor. Ours is a very difficult investment concept. We take investments that are perfectly unpredictable and convert them into steady share prices over the long term. We do this without diversification and without economies of scale. The mechanics behind this ‘magic’ can seem arcane or counter-intuitive. We are essentially setting up a small island nation with our own currency, foreign exchange, immigration bureau, accounting standards board, legal system, etc. All this alongside the legal and regulatory structures of our host government(s). Nation-building is not something that comes to mind for most investors.

Understanding the logic behind our madness takes both education and participation. You will only really understand by doing: assisting in investor recruitment and retention, sitting in trial juries, casting an informed vote, contributing to consumer panels, reviewing asset appraisals, providing voter education, participation in community outreach, to name a few. Everything investors have learned for trading on the NYSE or NASDAQ exchanges must be unlearned. We throw away all the investing rulebooks. Success in our model comes from the strength of our community. As a stark (but imprecise) comparison, investors must learn to care for the strength of the NASDAQ exchange itself. For at least a decade or so our perpetual fund will play the role of a NASDAQ for unpredictable R&D.2

We inculcate investors to value membership for its own sake. Even though we will make lots of money, our mission in the final analysis is to create great jobs and exciting products for the economy. Blue collar jobs, employment for individuals who coach our kids’ soccer leagues and fill our places of worship. Products consumers willingly reach into their own pockets to purchase. These will be a direct outcome of the fidelity with which our members build and maintain the community.

We tap into an individual’s own self interest for the benefit of all.

We invite investors to vigorously pursue their own self interests. We do this in recognition that self interest is a powerful motivator, especially in a financially-oriented community like ours. We channel self interest through officially-recognized special interest groups which we support, and over which we will be vigilent.

We encourage investors to latch onto and defend their own special interests within our community. It’s hard to feel an intimacy with thousands of other investors. You can develop rapport with a dozen or so like-minded investors. We need special interest groups to stand up and defend their specialties, for example new investors defending investments into today’s community services so as not to shortchange future wealth. Or, we may have another interest group keeping a close eye on the asset appraisal mechanism, to ensure their assets get a fair shake. There are many possible specialty groups, and we nurture and support them as a valuable check on complacency+, convention or chicanery.

It’s a virtuous circle. The more citizens put back into the community the greater their own personal success.

We seek activist citizen – investors. We deliberately push them into that role. This helps keep agency management honest. This provides (dissenting) opinions that tighten arguments for any chosen course of action. We understand many individuals will try to force fit the understanding they bring from the corporate or venture capital worlds into our unique business model. That’s okay. The worse that can happen is we end up with a better understanding for the educational needs of the next round of investors. We acknowledge up front we will never quite get it right. We invite investors to help us get it right.

All the above is exactly what you would expect to hear from the investor relations department in today’s investment venues. They know all the buzz words.

The key difference for our funding agency is found in the level of participation by our investors in its governance. Our investors are educated, participatory, empowered and have easy and full access to the levers of power. Our investors have the motivation, the right, and the means to question and get speedy, meaningful resolution of their concerns. No one or few investors have their way, but every investor gets their day in court. Citizens expect and receive one person, one vote+, no proxies. Despite the rhetoric, other investment venues only provide a patina of investor participation. In our community, our venue, participation is at the heart of all we do.


Home Page September 2011

  • 1. This is not the same as unlimited funding.
  • 2. The analogy breaks down because investors will be trading with us, the owners of the exchange, and not with each other.
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Reba Tull
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Joined: 03/30/2011
Is it real or is it marketing hype?

As an outsider-looking-in I have no way of disentangling your promise from the marketing hype of all other investment houses and/or firms. My safest, most rational, bet is to dump your shares before all other investors do the same. When there’s a run on your shares it doesn’t matter if you’re good or not. All that matters is I exit first. Much of the picture you paint can be expropriated by the corporate or venture capital venues. For example, ‘banding together for mutual benefit’ or ‘wealth creation arises in the minds of our citizens’. The investor will have a hard time distinguishing how your community is different from the failed investment venues it intends to replace.