Open Value Accounting

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This concept is used by Sensorica's Open Value Network.

See here for more detail.


Discussion

Tiberius Brastaviceanu on Why We Need a Open Value Accounting System

Tiberius Brastaviceanu:

"Why do we need a value accounting system?

A value creation process that requires more than one individual can be based on following 3 arrangements or a combination of those:

  • coordination - Ex. Wikipedia, where contributors don't have aligned goals, don't maintain a relationship other than being contributing members to Wikipedia
  • cooperation - Ex. any corporation, where very often the goals and interests of employees are not aligned with the owners.
  • collaboration - Ex. two kids going door-to-door selling chocolate, requires a large degree of alignment in goals.

The traditional capitalist economy is mostly about cooperation, which doesn't require an alignment in interests. Value creation is sustained through an exchange process, where workers exchange time spent on different tasks against wages. The exchange process alleviates the risk from the workers and transfers it to the owner of capital, but at the same time, the workers are stripped of their rights to the output of their labor. Workers cooperate (despite some inconveniences and misalignment in interests and goals) with the owners of capital in value creation processes because there exists an economic dependency between the two groups. Worker need money, which is turn is a predominant means of acquisition of basic necessities. On the other side, owners of capital need labor to generate more wealth. The problem is that this economic dependency is not symmetrical.

The Open Value Network (OVN) model describes a blend between the 3 arrangements mentioned above, mostly coordination and some collaboration. No one works for anyone else. All labor is transferred into fluid equity through a value accounting system, which grants ownership to the participant member to a percentage of the future revenue generated for the lifetime of the product created, if a product is the goal of the project, and if the project reaches maturity. At the same time, we also need to understand that risk is shared among all contributors, which is not a bad arrangement if it is distributed on a wide basis and diversified. The value equation is the algorithm used to assign fluid equity to every participant based on contributions.

In the traditional capitalist economy wages should be regulated by the free labor market, if we make abstraction of all sorts of mechanisms through which this market can be biased (labor unions and governmental intervention included). This forms the rationale behind the difference in salary between an engineer and a clerk. The notion of job implies that the salary is predetermined before the worker starts working (with possibility to increase salary to based on performance, to stimulate good performance). Since the amount of $/hours of work is pre-established, the capital owner needs to make sure that the worker produces value during the work hours. Therefore a new role is needed within the organization to guarantee that, the beloved project manager. Traditional organizations spend a lot of energy doing time management, because usually the interest of the worker is not perfectly aligned with the interest of the capital owner. The worker only cooperates with the owner of capital. Thus, classical organizations operate on the normal mode of production (from the normal curve or bell curve), where the number of workers is minimized, most workers produce the maximum of value and those who produce maximum value produce in fact most of the value.

An open enterprise is open to participation, which means that anyone can add value. Moreover, it is decentralized in terms of allocation of resources and uses a horizontal governance system. There is no power structure, therefore no one can force anyone else to work more. An OVN operates on the log tail mode of production, which means that a very large number of individuals are responsible of value creation, only a very small percentage of those create a lot of value, the great majority of them create very little value, and most of the value is created by those who contribute very little. A prearrangement on revenue is impossible, first because the process of value creation is very dynamic. Second, the process involves a great number of individuals that are distributed all over the planet, therefore it is impossible to do time management. In this case, an algorithm is needed to turn contributions into equity, as contributions are added to the project. The value equation embodies positive and negative (intrinsic) incentives. In some sense, the value equation is a distributed solution to time management, which can be applied in large scale collaboration. " (http://multitudeproject.blogspot.ca/2014/01/why-do-we-need-value-accounting-system.html)


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