Tuesday, October 4, 2011

Banking system as a house of cards

Hello all!

Today I do wish to point out some of the mind blowing facts that most economists or politicians do not want to talk about.

House of cards = banking systems
Banking systems of today use debt and interest to submit us. A physics professor using simple mathematics teaches us that we are all participating in a ponzi scheme:
  • infinite growth is impossible in a finite world and that it has to stop at some point in time,
    • we have limited time, resources and capacity to provide services is limited too
  • when we notice the problems that infinite growth is causing, the time to react is almost gone
    • explanation can be found with an analogy talking about  bacteria in the bottle found in third part of that talk 
  • we have to think, question and learn more
Here is a playlist to all the 8 parts of the talk about unsustainable society titled The Most IMPORTANT Video You 'll Ever See.


Socialization of debt and loss
Currently here in Europe we have strong discontent about the euro debt crisis. When a worker is cheated of his pay, nobody is bailing him out. But once the German and French bank lend money to Greeks and other countries that can not pay that debt back - that is private banks, for private profits - those do get a bailout.

In the Greek scenario taxpayers from all around Europe are paying Greek debt. The banks get their loans repaid and are happy, but if the Greeks still do default, the tax payers will have to forget about at least a part of those loans.

As far as I know, US economy did bailout their banks just the same. I do not understand how did the citizens who usually promote private property and entrepreneurship allow such socialization of debt. The phrase TOO BIG TO FAIL should have never existed! Even the sound of the word 'nationalization' would normally cause opposition from millions in the US just a few years ago.


The unemployed are getting paid not to work!
Welfare in it's current form is a scheme for reducing production efficiency per person in society while still keeping some demand in the market. That suits profit oriented organisations very well as it reduces the supply of goods and services on the market and thus raising the profit margins. Behold the consequences! The corporations are reporting higher profits then ever, the prices are rising, the unemployment is raising and the governments are inventing new taxes, which will create a whole array of subsidies and monopolies to be exploited - for profit! It is a profit oriented paradise until the whole system collapses. I just hope we are not going to repeat the history by starting a world war III.


Promoting immoral behaviour
The current mechanics of profit oriented motivation does reward a situation of high demand and low supply. This should motivate individuals and corporations to compete in profitable enterprises, increase the supply and thus reduce the profits and prices for the consumer. Sadly I have noticed several situations where accumulation of power (political or monetary) is being abused to artificially increase demand or lower supply and thus extorting the consumer to pay higher prices.


I complained too much already about the bad stuff in the current socio-economic system. Next time we 'll start perfecting THE PLAN! If you have missed it: the goals are already listed in the post The goals of a new value system.


Sunday, October 2, 2011

Prosperity, what is it and what are the obstacles?

This is a rework of a presentation I did for high school students when they visited Faculty of electrical engineering and computer science where I work. My talk was mostly about why should open source software exist. I was trying to follow Apple's very successful strategy of marketing WHY instead of the easier way of marketing WHAT. 

I will share some of those slides with the reader and explain the contents too. The talk starts with topics like what is Linux and the philosophical differences of open versus closed development model. Right after that it is time to speak WHY do we need freedom (personal, software or economical freedom).

To start the debate of why we need freedom, I wanted to motivate the participants. Teenagers are a though crowd to motivate, especially since they were not volunteer attendants. But I think I managed to get their attention by asking some challenging questions:
  • What are your needs, what are your wishes and how are you achieving happiness?
  • How do you define prosperity? Is it having food each day or is it having luxurious items or is it the ability to visit exotic places?

After a short Q&A session I asked them what do they think is prosperity of a collective:
  • Is it low unemployment rate? Is it high life expectancy? Is it low crime rate?
During that short brainstorming introduction we concluded that people have different needs, wishes and hopes. But we all agreed that perceived prosperity (happiness) comes from having the knowledge how to satisfy personal demands and the ability to actually do so.

I disagree with freemarketeers who over complicate the preconditions for prosperity and twist them to fit their agenda. I strongly disagree with this talk and the path to prosperity mechanics listed at 8:40.
  • Competition
    Is very useful concept for weeding out the unneeded and less efficient processes in society. Sometimes competition is desired, sports do help us release the tensions of evolutionary pressure of being the fittest to survive. I do think this is one of the primitive urges that human personality embeds. However forcing or encouraging unnecessary competition is a waste of resources and effort. The ones who lose in a competition wasted a lot of effort and the resources that they had allocated to be able to participate.
  • Private property
    Private property is a form of a guarantee that the owned resources will be available when the owner wants to use them and in a state the owner has left them. I agree that high availability is a good thing, but most of the time it causes resources to be underused and thus it is wasteful. Two examples of public services being more practical than private property are the yellow cabs in New York or health care - to employ a driver or a doctor for yourself is a huge waste of resources.
  • The consumer society
    Yes we do want goods and services and yes we do want them upgrading over time, but I (and many others) do not want to be forced to waste a fortune on consumables if there is a more sustainable alternative available.
It is quite simple to voice what we need to reach prosperity: we need to know how to reach prosperity and then execute the steps needed to get it done. Sadly, figuring out a plan to reach higher level of prosperity and executing those steps can be darn hard.


On the topic how to reach prosperity I quoted a sentence from Isac Newton about standing on giants shoulders. We went on to discuss that all progress happens in incremental steps - some steps are huge, most are small and barely noticeable. And another point was how wasteful the competition based models are. Worse even - obstruction of competitors not only delays a step of scientific or technological progress, it can even prevent it completely.


Next is listing the limitations we face in reaching prosperity.
  • Physical limitations are 
    • lack of time, or inability to coordinate time between multiple actors
    • distance or detachment
    • lack of resources (tools and materials)
  • Sociological limitations are
    • laws - some of those limitations are needed, but there is many rotten apples in that basket. We formally did abolish slavery, but many more unjust laws exist.
    • patents and licenses - in my humble opinion, currently those are the biggest unnecessary causes of inequality in the world. Any free market advocate will tell you that we need to bring down barriers to production and trade, but sadly that logic somehow does not apply when they are talking about their own monopolies.
    • lack of money - most obvious obstacle and most overrated one at the time.
  • Personal limitations
    • inability to understand - there are a few cases of people who have mental disorders and I do believe they are not capable to acquire certain advanced knowledge. However I do believe that any healthy individual can understand anything if they invest enough time and effort in obtaining said knowledge. Some people are faster and others are slower learners but standardized teaching systems we have at the moment do irreparable harm by eliminating learners who just need more time.
    • lack of motivation - this is probably the most common obstacle in personal or collective development today. We are literally throwing our future trough the window, but the worst thing is that the bankers and the politicians are gladly taking that burden from us and use our future for their own agenda.
    • conflict of believes - often our believes prevent us from accepting new knowledge. We have to question everything and re-question it regularly to be able to make the best possible decisions.

The first technology that started to bring down the barriers of space and time was invention of writing. Writing allows us to transfer knowledge without a teacher and a student to ever meet at the same place and at the same time! That is an incredible and exciting advantage. Moreover written messages can also be transported with far less effort then persons which makes it an even more beneficial invention.

The next big thing was the printing press. Invention of the printing press allows us to reproduce knowledge faster and thus allows greater number of learners to learn in parallel. 

Digitalization era and the internet have brought us even more efficient ways of replicating knowledge and distributing it. Invention of video playback on demand is another step into providing more comfortable and more efficient learning. Knowledge spreading and learning is easier and more efficient then ever before!

As an example of efficient knowledge transfer the slide above contains a screen capture of a 4 minute video on youtube on open source blueprints for mechanical tools we need to start a civilization. Check it out here.

We should always obey the law. If we do not like it, it is less harmful to try to change the law then break it. That said - the easier way is not always viable, so I am not condemning civil disobedience. For example Mahatma Gandhi and his struggle for independent India is one of my greatest heroes.

Mahatma Gandhi
Picture from wikipedia.org
To combat the lack of money there is always a bunch of options. Those are listed up on the slide and I also talked about that topic in my previous post on economics of open source projects.

About the patents and licenses, let me shortly repeat myself: those are outright dumb limitations that provide short term monopoly on knowledge to the owner of the intellectual property, cause inequality and slow down adoption of technologies while also waste enormous amounts of effort in legal procedures. Another big problem is also incompetence of patent offices to distinguish between valid and invalid patent claims.


I already talked about personal limitations. On this slide I just pointed out, that we can overcome most obstacles if we just commit ourselves to it.

Huh, this was a long post, I hope you liked it though. In previous posts I already wrote about WHY, WHAT. Now I wrote about What are the CONDITIONS FOR PROSPERITY and what are our OBSTACLES on the path to reaching it. Now the remaining part that is still missing is HOW to get it done!

Thursday, September 29, 2011

About economics of open source projects

I am surprised how many advocates of open source software actually don't know why and how the open source development model works. Even some highly educated persons with a PhD in computer science who have been using and promoting Linux for more then a decade, do not understand how the contributors get motivated to work on such projects.

I am a strong believer in swarm intelligence (as it is expressed by bees, fish, birds or crowds of people). People are not willing to work for free or just for benefits of others. When that happens I call it slavery. Even volunteers working for red cross or other organizations, do want to create a better world for all of people - there is definitely benefit of living in a better world, so that implies they are working free of charge, but not selflessly.

Egotistical individuals use, abuse and exploit others. Smart people build a better world for all. Including themselves.

Corporations do know that collaboration is more effective then competition. That is why the management of a company is forcing people to work together. They also fear it the most. Efficiency is enemy of profit. Every human need that is properly taken care of in the society does have very slim profit margins. Efficiency of production does bring down the costs and increases availability of goods. And since we all know that high supply is the worst enemy of profit, efficiency internally in a corporation is praised as a good thing, but outside of a corporation efficiency is the worst thing there is for any company.

The greatest argument for collaborative work that I can think of is the example of Wikipedia's success. People from all over the world are contributing to its growth free of charge - but we have to admit, that having unlimited access to the largest encyclopedia in the world is a far greater value then the effort that is needed to build one. And since collaboration is one of the most efficient ways of production, the effort contributed by any individual is far less then the value he (and any of us) benefits.

Let me rephrase the wikipedia example in more generalized way:
Wikipedia is a tool, and the benefits of creating such a tool provide us with new and more effective everyday processes. If those new processes provide us new products and services with greater value then the invested effort or just save us more effort that what was needed to create it, we have created new value. The produced value (not talking about money, but real value) is even greatly boosted by the product being widely adopted. For an example: the more hammers we use in our everyday life, the more important the tool and the invention of it are.

What I believe I am noticing is the demise of proprietary software and closed development model. Sure I am biased, but I do see people turning away from too expensive products and bad business practices (ie. vendor lock-in).

I was always guessing that the rise of Microsoft is due to high levels of piracy of Microsoft Windows 3.1, 95, 98 and XP and their flagship product Microsoft Word since version 6.0. As soon as they started to enforce anti-piracy policies, the alternatives (MacOS, Linux, OpenOffice / LibreOffice) became more attractive. I believe the biggest problem Microsoft has is the customer discontent because of their power abuse.

Let me list the benefits of open source development model:
  • it does lower the needed effort of an individual or organization trough mechanics of collaboration
  • there is lower barrier to acquiring the product (usually download for free), thus the bigger acceptance and value of that product
  • it empowers the user to actively shape the product for their needs - thus maximizing its perceived value
  • it is inclusive to all who can contribute some value
  • the product allows and encourages infinite upgrades, improvements and extensions
To sum up: open source contributors are not working for free, they are investing resources and effort into creating new value that everybody will benefit from including themselves. And they do it in a very smart way, by sharing and collaboration they reduce the costs of development and maximize produced value. And due to openness of the process, that value is permanently available for use and also available for expanding it too.

Most of software that is produced by concepts of freedom and openness either has greater value than proprietary software, it is more cost effective or combination of both.

There is now open source hardware for farming and civilisation too,  open source for architecture, books and much, much more.

Next topic I want to talk about is: individual and collective prosperity - how to get there and what are the obstacles.


EDIT:  30.9.2011 
I completely forgot to mention the big sponsors. Those are the companies that support open and collaborative development for higher quality and lower costs of tools and products. As an example here are links to sponsors pages of linuxfoundation.org, sponsors of apache.org and sponsors of eclipse.org .

Sorry about that.

It is time to grow up

I have been watching news regarding the movement named occupy wall street. Those people are angry. I can perfectly understand why they are angry and I am too, but what is their goal, what do they propose?

People don't like the current state that the world is in but they rely on ma's and pa's - the government, the banks and whoever to solve their problems. I am sorry to tell you, but it is not going to work.

We have to have goals, a plan how to reach that goal and of course make it happen!


Why the government or banks or wall street can not help us?

Transferring the ability to manage our lives to institutions of government and banks creates concentration of power. Those institutions then start to calculate various statistics that de-humanize the society. What % of people without health insurance is acceptable? What is the acceptable child mortality rate? (US dropped from 26th position to 41st position in the world in child mortality according to WHO.) Such concentration of power and de-humanization are preconditions for systematic abuse of weaker parts of society. It is not corrupt individuals (stop dreaming of an honest politician or empathic banker) - the abuse is systematic.It happened in soviet Russia, in dictatorships like Egypt or Libya and in capitalistic US. A psychologist does explain this far better then I, so please take time and watch that video:



We do not need banks and politics to decide what we can or want to do. We can do it right now without asking those guys.

This blog is a start of my project of improving the way we trade and fix some of the aspects of the money system. Please do read the post about the goals and do contribute and help out.

Next I am writing a post about economics of open source projects which is almost done. The fight for software freedom has been a huge influence on me and I do consider projects like Wikipedia, Linux and Apache as incredible proof of concepts.

Wednesday, September 28, 2011

The goals of the new value system

Let us look at what money is, how does it work, what are its shortcomings and list goals of a new system of value exchange.

In short money is an abstraction of value, effort, resources and influence.

Money is a very useful invention:

  • by mechanism of abstraction it enables trade between people who otherwise would not be able to trade
  • it allows to store value for later use
  • it is a mechanism to influence people to do, what they normally would not do
  • it is an approximation of direct democracy (each dollar counts)

The problems of the current monetary system:

  • supply of money is limited and thus represents an artificial barrier to trade
  • people who have no money, have no influence on the society (exclusivity)
  • people do terrible things for money
  • money is hard to trace

That is why I set myself on a mission to create a software that will improve the current monetary system.
My goals are:

  • the value in the new system has to be unlimited, but it also has to retain value
  • the new system has to be inclusive, it has to let anybody to participate
  • the new transactions will always be traceable, thus easing crime and abuse detection
  • the value in new system has to be immune to stealing
  • the new system has to prevent unnecessary global financial turbulences
  • the new system has to increase personal freedom of participants
  • the new system has to reduce systematic abuse by enforcing direct and personal responsibility

You will say: this sounds nice, but such a system is impossible. 20 years ago I would have agreed with you, but I do believe the computing and communication technologies have advanced so much, that such a system is possible today.

I have found many enabling technologies on the web, that allow us to build a better economic systems. But those are scattered amongst  many projects. So my task is to integrate those technologies into a working system. Let me name some of those concepts and technologies: the economics of open source projects, time banks, ripple pay distributed currency, social networks, and others.

The discussion on all of these points will follow soon.