Tagged: ownership

scalable revenues

My intention has always been to phase revenue distribution to SQ ratio distributions. So, Ecosquared won’t take a cut from whatever is directed at the originator (musician, author, blog-post writer, giff-creator, etc), they are thanked by them using the app itself, and this means a natural distribution of money. It’s all about moneyflows. I’d hoped it will be anywhere between 2-10%, but it could be a hell of a lot lower or even higher. Very difficult to tell at this moment.

At this stage, investors want something more concrete, hence I established a clean % rate. Initially I thought 2%, but this is only operational if we get enough people using it. So, I could charge say 25% (still less than eg iTunes or Appstore). But what would be the incentive of attracting a company to soft-launch with us if later, this figure reduces down to 10% or even 2%? If I was a company, I’d wait until soft-launch was over, and the standard rate of 2% appeared. It’s a no-brainer. So, Ecosquared has to offer 2% right from the start, doesn’t it?

and thus, the inevitable complication around money arises…

Here’s a viable solution: charge people based on the number of people using our app.
  • 32% for up to 10,000 users
  • 16% for up to 100,000 users
  • 8% for up to 1,000,000 users
  • 4% for up to 10,000,000 users
  • 2% for up to 100,000,000 users
  • …etc

Or some such scaling system. Now, is this too complicated?

I don’t mind how much we make, because the more we make, the more we will be able to give for the adoption of the next iteration — ‘marketing’. That is, if we clear £100,000 say, we can distribute this according to how ‘influential’ certain people are. For instance, we can gift a socially important player £10,000 when we give them an update to the app. They can keep the money (like a payment for their proven influence), or gift it forwards as usual. And the chances are — they will! Why? Because they are influential. It’s a virtuous cycle, all positive. The more influential they are, the more money they get. Obvious really.

no to tax — and yes to revenue distribution

It makes me think about how TV programmes were free for viewers because of advertisers. “Soap operas” because the highly dramatic shows (“operas”) were paid for by cleaning products (“soaps”). Facebook operates similarly. It offers a free channel of social content (people engaging each other rather than watching shows), and advertisers are willing to pay for eyeballs (companies, or any individual who wants to pay for promoting a post). Facebook is a “soap social-media”.

A cut of revenue is simply a tax. A forced costing. I have never liked this. It’s the wrong attitude. I shouldn’t be forced to pay for something which is obviously good, eg NHS. It’s because it is wrapped up with things like paying for defence, which is inherently morally arguable.

So, no tax, means voluntary gifting. Hence tracking gratitude, and SQ. That all makes sense.

I guess the thing that differentiates Ecosquared equity from standard equity, is that it determines the distribution of revenue. Profits are distributed to owners according to %-distribution of equity share of the company. The company has to be in profit for the owners to make money.

(A necessary aside. I was disgusted earlier this week because I saw the news — rare I know — about the power company Centrica which is closing down power-stations (and thus depriving people of jobs) because their profits have fallen. Their profits. So, it is a perfectly healthy company, everyone doing what they are meant to be doing, it’s going well — but because the owners are not getting as much as they did last year, they are going to cut the company. This… doesn’t… make… sense. I sat in front of the TV, irritated. The anchor was interviewing one of their specialist business journalist, and I just couldn’t believe no-one drew attention to this glaring injustice. They talked with moral weight about the potential loss of jobs, sympathetic for those who will lose their jobs, as well as the CEO who had to make such a weighty — but necessary — decision. I expect Russell Brand will be pointing this out in a more entertaining fashion, if he hasn’t already.)

Ecosquared equity (equity^2) distributes revenue. Front-wheel drive, as it were. And so, such owners can simply starve the company by keeping the money, or they can re-invest it in the company for it to continue working well. That is, they are responsible for the health of the company, rather than just feeding off its profits. Does this make sense?

ownership and usership

I suspect it does make sense, if we shift our thinking away from ownership, towards usership. That is, it is the users who determine the moneyflow through an organisation. Makes sense. But we don’t have the skills currently to make such decisions, other than those made people in positions, who are in a more or less static structure, whose salaries are generally hierarchical ordered. We need a more fluid dynamic system, with multiple moneyflow channels, which generate a more flexible decision-making consensus. But that is years ahead from our current social skills.

Right now, I am pulling together the business plan for Ecosquared which contains financial projections which are attractive to investors. Investors want ownership. Simple as that. I had hoped to introduce them to %-equity of the revenue. If the app goes viral, they could make 16% of £1,000,000+. No strings. Not a cut of the profits, but of revenue. But, at this stage, my very capable of experienced business advisor and no doubt the accountant will see this as a non-viable business proposal for investors. So, we must stick to ownership, and so they will be limited to profit. And the chase for profit means a squeezing of costs and that old game…

Honestly, if we are producing a value-tracking engine, we really do need an investor of quality. I have been saying that we are looking for high net-worth individuals. Perhaps I should rephrase it? We are looking for high net-value individuals.

It will be in all of our interests, as users of the app, to generate sufficient funds so that these investors will be more than happy to be bought out at say 10x their investment, ie £600,000. We can then phase to a gratitude distribution system — including the very same traditional “professional” investors!

Without investors, Ecosquared will struggle, so I shall no doubt be indebted to them — personally — for the rest of my life, just as I am indebted to Colin who coded the back-end SQ-calculator, and to Kevin who has taken me further business-wise than I could have gone alone. I am tracking their value with the app, of course, and they shall be receiving a percentage of everything I get until the day I die. And so does anyone else who helps.

there’s nothing to it

Just now, that’s zero. I guess that’s why people haven’t quite cottoned on to the power of this thing.

Well… if I get it all lined up, pertinent players have the heads up (like lawyers, accountants, app developers, marketing directors, musicians, authors, etc) — when we launch, we have a chance to take this globally. A parallel economic system, free from ownership and ‘negative’ money. And then it is for us, each one of us, to make our decision as to how we operate economically. With the app in our hands, and our personal network of relationships… it will take years…

how much does running a car cost?

I’m returning to education, and because of the rural area in which I live, I shall need a car to get to schools to do supply on a daily basis. So, I shall have to ‘buy’ a car. Which brings into question how much a car costs to run, the issue of ownership, petrol costs, taxes, and so on. Also, a brief look at current ‘alternative’ solutions like Zipcar and a local car-trader down the road who is trying to compete with a low-tech solution, and then we’ll look at how an ecosquared car use may be financed. And if cars don’t rock your boat, we’ll look at other applications of the same math such as with health, revealing a fundamental core to economics: the relationship between capital (a static fund) and regular payments.

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everyday running costs of ownership

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These costs are ‘reasonable’ for running an average car; with new cars devalue, replace the ‘maintenance’ costs with devaluation. ‘Upgrade’ is the amount of money that is put aside to pay for a new car; eg sell a car at a loss of £500 over the year will mean that the new one will be bought to re-coupe that loss; that is, it will cost £50/month to just stay ‘level’.

Still, if you have a car, these costs are reasonable. That’s £3000 to £5000 a year! Cars burn money…

running costs of rental

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Roughly £400, which is £250/£100 more than ownership. No head-aches of ownership. New car. Surely there should be a non-new rental deal out there? There was, but more of that later. Let’s look an a new ‘alternative’ to rent/buy.

‘alternatives’ like zipcar

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 Based on a trip daily to work and back, clearly Zipcar isn’t the right solution. Another one is Uber, but that’s beyond the horizon at the moment; it’s touted to do to logistics what Amazon did to book-selling, and everything else-selling, kinda. It’s what ecosquared will be competing with a few years down the line, if we’re not clever.

a guy down the road called Darren…

I spoke with a guy last night, Darren Sharpe, an interesting guy. He was ahead of the curve and came up with ‘rent-a-banger‘, basically renting out non-new cars. He ran this for 15 years, but the insurance was a real head-ache, and people abused the system; as we know people take care of things they own, and tend to trash or neglect rented cars, flats, tools — a mentality shift which is critical for longer term sharing solutions.

Now, Darren sells five-year old cars for £2k, and guarantees buy-back at £50/week. So, if you want to return the car say 10 weeks down the road, he will buy it back for £1,500. Thus, cost of use is £200/month PLUS £100/£200 ownership costs. That is, using Darren’s system you need £2k capital, and it costs £150/month more than ownership.

summary of current offerings out there at the time of writing

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Looks like ownership is still the cheapest way to run a car, with all the head-aches that ownership entails. Basically there is a financial separation between the players: the owner of the car, those who build the roads and the insurers, the car-mechanics who maintain it, and the company employees who supply the petrol. They are all working together, using the same economic system, with the belief that competition provides us with the best service at the lowest cost.

ecosquared?

Well, it depends on what scale the ecology is at. Let’s say it we have levels of social saturation, which I’ve used before, but in reverse order this time, from the ‘fantastic’ to the realistic, me now looking for a car:

  • Yellow Saturation with massive game-changing coverage
  • Blue Network where a wide sector of people are sharing within ecosquared protocols
  • Green Team of a few people connected and using the protocols
  • Red Solo just starting with only you using the protocols

Yellow Saturation

A world where there are enough people in the network to own Esso; where the users and employees of the petrol stations are the shareholders, have %-equity. Nobody is making a profit from the petrol you get at the station. You drive up, fill up the tank, resource use is tabulated, you drive away. No money transaction. Of course, your petrol use may be higher or lower than others, and this is related to how often you use the car. Remember, none of it is yours: its an economy of use, not possession.

(By the way, Esso is evaluated at $300b. 100million people putting in £3000 each (the cost of petrol for a year for some folk) could buy Esso outright. That’s something to think about. An FTP open moneystream of $300b; that’s everyone on the planet contributed $40 each. Will we ever reach this ‘fantastic’ situation? Well, we have the protocols. We have the intention and love and trust between us as friends and family… we just lack the trust in their operation. We are trapped by our traditional mechanics.)

And the cost of petrol is much lower in certain countries, those which have decentralised their government. Just like Esso is %-equity crowd-shared, so is ‘government’. A double win for the folk who manage that first!

Blue Network

A car-pool where insurance is brought within the fold. That is, a crowd-owned insurance company. Again, no-one is making money out of us. When an accident occurs, it is covered by FTP. Of course, it comes down to trusting people to drive cars around. Do you give a super-dooper car to a young man? Only if he proves he can drive well. Insurance companies have the math worked out in terms of rates of injury etc. We should be using this math to simply reduce costs of premium, or in our case FTP contribution towards this BitCar project. Money is not put into the organisation competing with other organisations, a massive marketing and advertising game, both externally and internally.

Screen Shot 2014-01-05 at 19.00.08

This is from Direct Line’s 2012 Annual Report (p98).Operating costs 25% of revenue, over a £1billion. That’s a lot of ‘financial’ machinery being paid for.

In terms of ecosquared, we don’t want an insurance company; in fact, we don’t want any company for that matter. We simply use the assurance we have between us: MTTP for p2p, and FTP for one to many. If some network of people give a flash car to one of their group, and they don’t have the resources locally to cover it if things go wrong, then they will require other networks to subsidise them. This is the typical fission-fusion and 1:5 grouping that all kids are familiar with by the age of 11. Not complicated. Fractally complex, but essentially — mathematically and psycho-socially — simple.

Green Team

For this to work, the team has to be concentrated. That is, people who live close by, who share the same garage for example. Each participant ‘owns’ their car in the sense of paying for Road Tax and Insurance (£50-£100/month). Instead of paying for when the car breaks down, a contribution is made to keep the car running smoothly. How much? Depends on how many cars are in the network and the size of the garage, but let’s say around £50/month. They may need to take more people on during periods of stress, or pass cars on to other garages if the demand is too high, as occurs nowadays. And when things are slow, cars are invited in to upgrade them. The objective is to keep cars healthy, so that they do not ‘lose’ their value. Courses are put on to invite owners to be involved in the maintenance of their cars.

Instead of saving funds in private banks, or accessing credit, participants GIFT(£50/month) for the use of the car, FTP{Bitcar}. This accumulated FTP (within a year, 10 car-owners accumulate £6000) not only attracts other car-owners to the network, but can operate like insurance, and to buy in new car, perhaps when a member of the community gets to driving age.

Red Solo

Difficult. Two things possible: hack ownership, and share %-equity in the income enabled by car-use.

hacking ownership

Let’s say I manage to generate the funds to ‘own’ a car at £2k. Let’s say I give-it(car)-forwards-to the ‘BitCar’ project. I also give-it(£50)-forwards-to FTP. Which means I have 100%-equity in all three ecosquare value vectors, Vp Vk Vi, namely the Aggregate (ie the car), FTP or Moneystream (which will be £300 by summer), and SEA.

Who knows how I can leverage this in the future? Perhaps attracting others to the Bitcar project? Perhaps someone may wish to GIFT(car)(£50). Perhaps, I will be able to give my car to someone (rather than selling it), and produce the dynamics described in the Green Team? Either because I leave the country and don’t need the car, or I buy a new car. Perhaps I can use the FTP to buy a new car, and thus include the car within the BitCar network?

So, running costs are identical to ‘ownership’, only difference is, the money that normally goes into the ‘bank’ (for whatever nefarious purposes they put it to) when saving up is replaced with FTP, an open-money-stream:

Screen Shot 2014-01-05 at 16.38.51

invest in people, not things — we are the ones ‘making’ the money anyway

Secondly, an alternative way of thinking about this, is to think what the car enables. I will be able to teach, making around £80/day after tax. The car enables this. Without the car, I can’t get to school. So, in a way, the person who gives me the car, is enabling me — they deserve some %-equity in my income. If I make £1600/month, what %-equity would they want? Same goes for the garage mechanic — how much %-equity do they deserve?

Whoever has contributed the car (£2k), the mechanics at the garage (£50/month), I still have to pay for insurance and road tax (£50/month). Based on a plan which is half-way between rent and ownership, at around £250/month, those who supply the car should get around £200/month, which is 12.5%-equity of my income stream.

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After one year, the ‘owner’ has recouped their investment, and the garage has made £323.99, regardless of the repairs. Total, £2400 to use the car.

Now, with this kind of relationship, if I kept using the car by the end of the second year, the car-gifter will have made £1722.78 ‘profit’, and the garage another £750 from the second year to cover the costs of maintenance. Total, £4800 to use the car over two years.

A few questions may come to mind, about what the gifter of the car may do — perhaps offer a better one, and if so, what is the rate now? And does the garage-mechanic keep getting more and more until they are taking all of the 12.5% equity reserved for car use? Well, funnily enough, no. It tends to a number. After 10 years, for example, the car-gift owner will be getting £50/month and the garage-mechanic £150/month. Perhaps the car will require that amount of maintenance, but probably not.

the core of economics: numbers and time

Whatever your interest is in cars, the math pattern deserves attention. Why? Because it shows the relationship between capital and regular investment. Think about this in a completely different field — health. Do you pay for health treatment when something goes wrong (capital), or should you be paying a regular investment for health (regular)?

This relationship is at the heart of all our finances: the difference between a static lump sum and regular payment.

FTP, the accumulation of money as an index of trust within a network, combines both: regular payments to a static ‘standing wave’ of money. Where is this money? Well, it is like a bank, but unlike a bank, accumulated FTP does not get used. Like MTTP guarantee, it remains in escrow between the parties. So, FTP acts more like a guarantee, to be released if not enough revenue is generated from what is co-created; to ‘buy out’ those who do not wish to have %-equity in the co-created product.

The thing to get your head around is that %-equity is at the base of new economics, ecosquared or otherwise. Moneyflow is secondary.

And there is a race going on: as capitalism gets finer and finer in resolution, turning everyone and his dog into a capitalist, versus the sharing economy, where we are all part of a greater whole, a collaborative commons, where we share everything. Capitalism has massive momentum, institutionally, mechanically (financially), and psychologically. The internet has cracked open a massive opportunity in the form of open-source and it rejuvenated the commons and after a decade a massive sharing meme. But are the proponents of the sharing economy fooled by their relative luxury, royalty within the citadel playing games because they live in a world of material abundance?

It’s a tough call, and we each have to make it. We do so in our daily actions. We do so with every single financial transaction. I for one, am not convinced, as I turn to ‘buying’ a car, filling it with petrol regularly, and fueling the current system which is so destructive to our environment, and our collective soul.