Money for the Rest of Us

Before I got off on my rant about our rights as soldiers in the New Continental Army, I had promised that we’d explore Xpertweb’s Open Resource model of collective rewards:

Fees paid by the buyer and seller to their mentor group (cash flow)
(5% of the transaction price paid by each = 10% total)

The voluntary 5% payments are based on the principle that mentors are doing something that benefits every person whom they inspire to join the web of experts. The first question to ask, from a systems engineering standpoint, is whether we support the concept of hierarchical rewards.

The Xpertweb model is based on a view of the macroeconomy as an Economic Operating System (EOS) that we the users have the right to revise as we see fit. A well-publicized feature of the current economy is that some of its users get very rich while most scrape along. We’ve observed that’s because some people are in a position to design the EOS subroutines, but most are not. What they design are accounting systems which are controlled by the companies they form, to which employees and buyers approach as humble clients, with no say in the subroutines they need access to.

Just because the old OS has hierarchical rewards, should the new one? If so, how should they be set up and managed? And what the hell is a hierarchical reward system, anyway? Let’s examine those questions in reverse order

Hierarchical Rewards for Higher Arc-ers

What are Hierarchical Rewards? Anyone who gets money while they sleep (like pension payments or investors) is living off the work of others. In a steady-state model, the payments are fair because the retirees invested money in productive assets which owe them a cut of the later action – think of it as money with a memory.

But people who are way more prosperous than average are those who, like Bill Gates, have developed a toll on others’ efforts way out of proportion to the effort and money they invested in their toll booth. Capitalism says that’s A Good Thing, since it’s so hard to organize ordinary people so they do something productive. Employees aren’t so sure that the salary spread is based on relative contributions, as suggested by this analysis of financial industry salaries for clerks through controllers in 2001:

Hierarchical compensation rises steeply at upper management levels and, as reported everywhere else, spectacularly among those eligible for stock options. Each level gets paid at multiples of the previous level. This is the defining characteristic of hierarchical rewards.

How should Hierarchical rewards systems be set up and managed? There has never been a standard for how to design the really amazing wealth hierarchies – they’re designed by the beneficiaries and are subject to the vagaries of the market, at least in theory. At those levels, professional management is pretty astute and likely to succeed, since…

Equity markets systematically move money from
the less informed to the better informed
.

That’s all there is to it – end of story.

The Set-up But we’re proposing to design a hierarchical rewards system, well, systematically. So the same rules must apply to every participant, presumably through revisions, so the code is backwards-compatible. Xpertweb’s goal, like any meme, is to expand the population of true believers. So, if it’s appropriate to feature hierarchical rewards, they must reward those who increase its population. The algorithm is simple: everyone you mentor will send you 1% of purchases bought or sold as long as they appreciate what you’ve done for them. That’s a meaningful contrast with Ye Olde Economy: Hierarchies in the current EOS are lock-ins. Every organization in our society is locked in to paying the Microsoft tax. If they grow disenchanted with XP’s nagging, they still will be forced, one way or another, to pay for the next upgrade, as long as they are committed to the Microsoft koolaid. Since there’s no Xpertweb Inc., Corp., Amalgamated, or LLC, there’s no one to pay money to except your mentor and the 4 other mentors who are responsible for the chain of mentoring that introduced you to the system. Each month, you pay your mentor support chain based on how you rate your mentor and how each of those mentors rate their mentor. At any time you may start to work with another mentor and start to pay your 5% to a support chain you prefer.

Managing the Hierarchy Hierarchies are always managed in Ye Olde Economy, which is why they work so well for those who benefit from them. In a systematically designed hierarchy, there can be no way to change the rules for paying the participants, so there can be no management of the hierarchy. This is the Xpertweb model. Every transaction can spin off as much as 10% of its value to the participant’s 5 mentors, on a voluntary basis. Those who prefer lock-ins need not apply. Like the sellers and products tracked by the Xpertweb protocols, happy campers pay as suggested. Buyers and “mentees” determine quality ratings and advertise it to their successors. The rewards may be absurdly high, but the quality of services can never be questioned.

Should Xpertweb’s Designed Economy offer Hierarchical Rewards? This is the central design question. Probably the self-generating reputation index is enough of a benefit to attract new users. But the system asks a lot of users – more than any commercial system would: you must have your own web site. You need to upload your starter kit via FTP. Where will you get a starter kit? If it’s only available from a central site, that site is a business that must charge for its service and, if the service is well received, will increase the price as it becomes a necessity.

No, there must be a mentor for each new user. Any user must be equipped to be a mentor. That means that the skill set for any user is broad. A mentor will be needed to set up every new user. Why would someone doall this? The immediate attraction is to get paid something by several generations of new users, maybe a lot. The payoff is a sense of community, IF the users relate to each other as carriers of a shared, successful meme.

Xpertweb User Skill Requirements

  1. Understand the buying and selling forms on your new Xpertweb site.
  2. Know how to use an expert to modify your forms or create new forms.
  3. Understand the structure of your new Xpertweb site: what’s a directory, a data set, a form.
  4. Know how to send and receive money electronically: any way that’s best for you.
  5. Know how to treat others fairly, both when buying and selling: how to give and get good grades.
  6. Understand why you must never contact anyone without their explicit permission.
  7. Understand why your new reputation means you will never need to contact anyone without their explicit permission.
  8. Actively use all the Xpertweb forms and protocols until you’re a power user.
  9. Buy something and sell something, every month, $100 total.
  10. Know how to mentor others in the skills you’ve mastered.

The Payoff

All those skills are the responsibility of the mentor. Let’s pause for a minute:

Have you ever had a computer mentor? You know, one of those mavens described by Malcolm Gladwell who knows everything about your computer and its software. Someone who’s patient with your questions, which are elementary at first but increasingly sophisticated. Have you ever evolved from a newbie to a mentor to others? Has any of us not so evolved? Doesn’t it prove that it’s even more fun to give than receive? Otherwise, why would we do it all the time?

We have genes for usefulness.   – Lewis Thomas, Lives of a Cell

Run The Numbers – This is the Scary Part

As part of their training, each new user is expected to buy and sell stuff and train others, to master the 9th and 10th skill requirements. Every new user buys or sells a total of no less than $100 every month for a year. They can buy $50 of stuff from someone and sell $50 to someone.The point is that they will have a reason to use the software every month for a year.

This activity will require the new user to send up to 1% – $1 – to each of her 5 mentors every month, requiring her to rate her mentors and to use the forms which manage her mentor ratings and support fees. Each user is expected to witness the mentoring of 4 other new users during their first 4 months. The mentoring is done by the new user’s mentor, but by the time it’s done, she can do it herself. This means that that her “mentees” will also be buying and selling a total of $100 each month, also for a year.

The Amway Part

OK, the issue is in front of us. Do we have the right to do this? Don’t we need permission to establish our own distributed shared-source data base? Are we allowed to send money to each other according to a published but non-obligatory set of rules, with no company approving and managing our transfers?

If everyone trains 4 users, who train 4 others, etc. and each of those sends/receives $100 per month, everyone will get $1 a month from 4+16+64+256+1024=1,364 people = $1,364 per month, after about a year. They will also learn that 1% of all receipts are paid to their qualifying mentors, so they send another $13.64 to each mentor. After about 2 years, the theoretical total is $1,464 paid by 1,364 people to each mentor = $19,969 per month. That’s a lot of mentor motivation.When people start using the protocols for real work, the numbers get much larger.

What’s Wrong With this Picture?

This is a lot of money to contemplate, especially moving among a loosely affiliated bunch of people with no obligation to do anything until and unless they’re satisfied with the value they’ve received from sellers and mentors. Who knows if any of this will really happen?

No One. It’s an experiment! It’s not venture-funded, so we can design a system with an unknown outcome. There’s no cost to keep the system alive until it gets traction, so it doesn’t have to take off immediately. There’s time for people to play around with it and see what works and what doesn’t. The forms publish all the cash flows through the system so, when the process does get traction somewhere, it will be known to everyone. We can’t know ahead of time if the protocols trigger the expected actions. But when there are actions, we’ll all know it immediately.

That’s when we the Xpertweb users will discover what uses we’re putting it to.

11:29:58 PM    

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