Hack

Hack: Equity Market 4.0: A 'Central Brain' to organise community innovation, collaboration, wisdom and effort to achieve a global capital market

by Marcus Cake - "Central Brain" creator to enable Management 3.0 for organisations, industries, national and global endeavours at MarcusCake.com

July 18, 2011 at 5:04pm

4 Comments

6 Ratings:

Overall 4.565
Innovative 4.33
Detail 4.8

Contribution Summary

Summary

If you could create a “Central Brain” in 5 days to focus the effort and wisdom of 2 Billion people, what problem would you solve? What social, industrial or political endeavour would you transform?

Equity Market 4.0 is a "Central Brain" to to organise community innovation, collaboration, wisdom and effort to achieve a global capital market.

Equity Market 4.0 is a single global network for the equity market. It fuels the growth of SME’s globally, enhances accessibility (from large companies to SME’s, ventures and innovation), expands functionality (from determining price to content management and facilitating collaboration) and improves capital allocation (from a few liquid geographic clusters to a truly global market)
Equity Market 3.0 recreates what people do in the equity market everyday in Central Brain or Web 3.0 network for a country, financial centre or organisation.
Each company, adviser and investor can self-publish 20+ types of information or link to third party content to create a single, comprehensive information “storefront”. A critical mass of “storefronts” improve transparency and market efficiency.

Equity Market 4.0 simply presents a new way to organise. It is a result of evolution and the fact that the world is, or can be, connected by the internet. Why catch the train when you can fly? Why work in opaque, limited Web 1.0 channels when you can work in peer to peer, transparent and unlimited global networks?

Moonshot(s)

Problem

New structures are available!
The Web 1.0 structures of the world rely on hierarchical information channels to coordinate management and distribute information. The internet now connects more than 1 billion people. We can coordinate management and distribute information in a peer to peer network in social, industrial and political endeavours that connect everyone in the world. Company, national, regional, international structures can be replaced by a single Web 3.0 network.

Information technology evolution and adoption enables a new way to organise - Web 3.0 networks

In the last one hundred years, we have used the hierarchy and proprietary channels to connect, organise and focus the efforts of the global community. This structure offered limited community access, was opaque and resulted in less than optimal decision making. In Web 1.0, we “read” from the web as hierarchies distributed information to us. In Web 2.0, we “write” to the web and learnt the possibilities of peer to peer networks by participating in social networks. The internet has grown to connect a billion people and anyone can use it without cost or restriction. The internet enables a new transparent and accessible structure to organise and focus effort – Web 3.0, or person to person, networks. In Web 3.0, we “execute” on the web and collaborate to deliver community outcomes. Web 3.0 will connect and focus effort with the same commercial and community outcomes in open, transparent and accessible networks. They harness the Wisdom of Crowds for superior decision making and focus collective effort. In Web 4.0, we “link” or “share” to integrate social, political and industrial endeavours around the world for global community governance and execution.

Convention dictates that the hierarchy is the best way to organize and private ownership of community information and distribution channels is necessary to encourage investment and innovation. The resulting Web 1.0 structures are opaque, accessible only to Tier 1 members of the community and have resulted in outcomes which have compromised some broader community objectives.

Equity Market 1.0
Existing investment banking and equity markets are essentially a cottage industry with asymmetric information flows between potential customers, customers, advisors, brokers and sources of capital. As such they are highly ineffective and deliver bottle-neck returns to some brokers and investment bankers. Importantly, many small and medium-sized companies find it very difficult to access correct skills and capital, while the full universe of experts and potential investors is not fully utilized.

There is an enormous opportunity in re-casting the financial services markets and service delivery by applying social networking concepts to the participants in these markets. An online industry network for the equity market can bring together companies, advisors and investors in an online space where they can collaborate and distribute information to facilitate the growth of small and medium enterprises in the First World and also fuel the growth of SME's in the Third World.

Web 3.0 networks are a disruptive design that overcomes the limits of Web 1.0

The Web 3.0 network “Design” applies Web 3.0 principles to all social, industrial and political endeavours to create Web 3.0 networks or structures using a cloud-based open source content management system to tag and link the people and content within a community of common interest to facilitate information distribution, collaboration and workflow to deliver quality community outcomes. A single person can engineer a Web 3.0 network for any field of endeavour in 30-90 days!

The Web 3.0 network offers the following benefits over Web 1.0 structures:

Deepens participation: Participation reaches lower tiers by using a Web application to connect all participants in community of common interest in a P2P network.
Expands features or functionality: The network reproduces what people do everyday online allowing new features and functionality to be added by simply adding new software functionality from open source software communities. Features include market prices, content management, ratings or meritocracy, prioritisation, collaboration, applications and workflow.
Integrates separate groups or countries: Integration occurs as transparent open web networks transcend, complement or replace proprietary limited information channels needed before the internet. They aggregate the Wisdom of Crowds for superior decision making and focus collective effort on prioritised outcomes.

Solution

Central Brain

Every social, political or industrial endeavour or needs a “Central Brain” to coordinate community innovation, collaboration, workflow, wisdom and effort toward valuable outcomes.

Features of a Central Brain

Transparent – Knows everyone and their intention: Profiles are self published using community specific tags. People can find each other using tag based search which describes “who they are”, “what they are doing” and “what they are interested in doing?”
Comprehensive – knows everything about a specific community and shares it: information specific to the community can be published by anyone in a single location
Meritocracy – better decisions: A “helicopter view” and the “Wisdom of Crowds” means better, merit based decisions
Knowledgeable with community based linking of information to provide a “helicopter view” of each member and the community or ecosystem
Efficient – simply reproduces what people do everyday in an online community
Simple, standard processes – standardised business processes and managed workflows
Pervasive – reaches people within existing structures to align organisation and community goals
Universal – enhances existing organisational structures or a new structure
Effective – effectively allocates resources amongst competing consumption and investment options
Interoperable – tag based data can be freely shared with search engines and other central brains
Respectful – each user can freely choose to participate, contribute, share (or link) or maintain their privacy (or anonymity)
Focused on valuable outcomes: members can influence outcomes with ratings, voting on priorities and incentives provided by members
Adaptable and learns with new features and innovations provided instantly by open source communities
Ubiquitous: can coordinate the effort and wisdom of two billion people using web applications and the reach of the internet

We need to build the Web 3.0 online social, political and industrial networks on the path to Web 4.0 and pull in the next stage of economic development, environmental sustainability, awareness, life, work and global governance. The global integration of these Web 3.0 online networks may be considered Web 4.0.

What is Equity Market 4.0?

Equity Market 4.0 is a single global network for the equity market. It fuels the growth of SME’s globally, enhances accessibility (from large companies to SME’s, ventures and innovation), expands functionality (from determining price to content management and facilitating collaboration) and improves capital allocation (from a few liquid geographic clusters to a truly global market)
Equity Market 3.0 recreates what people do in the equity market everyday in Central Brain or Web 3.0 network for a country, financial centre or organisation.
Each company, adviser and investor can self-publish 20+ types of information or link to third party content to create a single, comprehensive information “storefront”. A critical mass of “storefronts” improve transparency and market efficiency.

Company, adviser and investor "Storefronts"
Equity Market 4.0 simply reproduces what people do everyday in the equity market in an open, transparent internet platform. It is a "facebook" for the equity market. Equity Market 4.0 uses a cloud-based open source content management system to tag and link the companies, advisers and investors.

It allows companies, advisers and investors to see straight through the market and collectively self-publish, find, match producers of information with consumers, rate and review 20+ types of equity market content in hours (not months). It is a platform for a global market to distribute information, enable collaboration and facilitate (collaborative) transactions.

Content includes Profiles (companies, advisers and investors, countries, industries), Classifieds (Research, M&A, Investment, Employment, Project, IPO / Bookbuild, Events) and News (Audio, Video, Blog, Article, Announcement, Report, Pictures).

Each company, adviser or investor can publish their own content. This content can be published through their own storefront or in other storefronts where they agree to link their content. A single piece of content could appear on many storefronts subject to the links proposed and agreed by each member. Each storefront provides a comprehensive single view of each company, adviser or investor and how they are linked to other content. A "storefront" can be used by institutions as well and is likely to be complementary. It provides a means to service companies, advisers and investors currently below the radar the SME, venture and innovation tiers.

Higher Average Revenue per user
A transparent peer to peer network that provides a single reference point for all a companies, advisers or investors would be highly valued. The average revenue per user (ARPU) or participant could be very high. Equity Market 4.0 applies social networking principles, but has a much higher ARPU because it manages valuable information in a specific industry.

Differential pricing
The current system can charge different prices for profiles (companies, advisers and investors) in different geographies and sizes. For example, a "large" UK publicly listed company could be charged GBP10,000 per annum. A corporate adviser in China could be charged USD500 per annum. The system can also offer specials. A special could offer 5,000 free "equity analyst" profiles in "India". Another special could be 1,000 "UK" "SME's" can join for GBP10. These specials could be used to populate Equity Market 4.0 after launch.

"Mobile"
The tagging of content within a Equity Market introduce some interesting possibilities. A user can now register their interest in specific content. If it changes they get notified on their mobile. This might include new jobs, projects, announcements or other content posted by an company, adviser or investor on the watchlist.

Work process
After an initial stage of building a community, Equity Market 4.0 could use its in-built workflow module to manage business processes on behalf of market participants. This might include job applications, venture capital deal flow and bookbuilds.

The "Central Brain" adapts quickly by leveraging the collective innovation of Open source software communities

The "Central Brain" is built on one of the leading open source content management systems in the world and has been downloaded millions of times. It is a framework that can be anything (social network, document management, blogging and enterprise content management). It has thousands of extensions that can be downloaded in minutes, configured within hours and available to users within days. The timeframe to make new features available to users is dramatically reduced using open source software. New features do not need to be built or licensed from the private sector.

The "Central Brain" may be created in five days. However, the functionality can be changed within days (although I set aside 30-90 days) to meet specific requirements. The library of 4,00 extensions means that it can become anything and integrate with anything.

Practical Impact

Equity Market 4.0 benefits

tag based search reduces the time to find people and content: the community can find all market participants and content quickly through tag based search
capital effectiveness: investors can apply capital quickly and diligently across competing markets and companies
accessibility: effectively service SME’s below the radar in major financial centres (Collaborative Macroexchange 3.0)
market expansion: increase the community of companies, advisers and investors active using a virtual platform for financial centres with small populations (Collaborative Microexchange 3.0)
productivity: increase the utilisation of advisers and facilitate their contribution to SME’s remotely
global market: companies advisers and investors can participate in a global capital and labour market
reduce poverty in the Third World by fueling the growth of SME’s in the Third World and earn income from remote services (Microequity 3.0)
enhance cross-border competition between financial centres
expand labour pool: deliver surplus labour in the Third World to satisfy a shortage of labour in the First World
significantly reduce the cost of doing business: The cost of finding market participants in significantly reduced with tag based search. Finding content or people is reduced to a tag based search. Show me all "Hong Kong", "private equity", "investors" that can invest "USD5-10m" and have an interest in "retail". Each storefront contains comprehensive information direct from the source. This reduces the cost and time of assembling comprehensive information on a specific market participant.
produce economic growth and jobs: Equity Market 4.0 fuels the growth of SME's by extending services delivery to under-serviced SME’s using remote advisers, increases the utilisation of the available pool of expert advisers and improved capital allocation. This would be a global market with implications for the developed and developing world.
Empowers individual market participants with "distribution": Each company, adviser and investor is given an open distribution channel to other participants. This has profound implications for the global capital market.
Access to information could increase capital flows: A single "storefront" that provides a single transparent location means that a company can move beyond navigating opaque channels to find capital. A company can search for investors using tag based search. An investor can search for a company using tag based search. The market participants can be anywhere in the world which means increased capital flows to SME's ventures and innovation outside the major financial centres.
Rapid growth: A global cloud based application can service millions of customers. It is not unusual for social networks to acquire millions of customers in a very short period of time.
Open: Any company, adviser or investor can self-publish their own content. There are mechanisms and other business models that can address concerns regarding market integrity and reputation risk.
Innovation: Equity Market 4.0 overcomes the design limitations of Web 1.0 hierarchies and channels with a peer to peer network. Equity Market 4.0 simply reproduces what people do in the equity market every day in an online network. It is how the equity market operates in a world where every individual in the financial market is connected by the internet.
Transparency: Each company, adviser and investor publishes their own content and can link to third party content. This creates global knowledge and transparency because the global market can see how each piece of content (company, adviser or investor) is linked to others. This means each market participant has a single, comprehensive storefront of their information that "connects decision makers in business, finance and government to a broad and dynamic network of information, news, people and ideas that enables faster, more effective decisions". Each storefront can be found through tag based (or semantic) search.
Market knowledge leads to quicker and better decisions by market participants: The community builds links between content. This creates market "knowledge" available at a single location upon which action can be taken.

Challenges

Web 3.0 networks are disruptive. Organisations and people that derive benefits from opaque structures may be reluctant to inspire their adoption.

Waiting for the private sector to innovate?
Equity Market 4.0 simply uses Web 3.0 networks as a new way to organise. They can created in 5 days and customised for a specific use in 90 days. They are simply a result of information technology evolution and the fact that the world is, or can be, connected by the internet. Why catch the train when you can fly? Why work in opaque channels in specific countries when you can work in peer to peer global networks?

If we can create quick and solutions to specific issues, we do not need to grant proprietary rights to Equity Market 4.0 networks networks to private companies to create them. We should seize the initiative and build them rather than wait for the private sector. The community can build them.

The existing investment banking industry is unlikely to introduce this hack given its material impact upon profitability that relies upon opaque Web 1.0 channels.

Catalysts for Equity Market 4.0
We can create the Web 3.0 networks on the Critical Path to Economic Development 4.0 and Equity Market 4.0 in 90 days. The key challenge is consumer adoption. We will need the world’s entrepreneurs, philanthropists and statesmen to inspire their adoption.

We need an organisation to be the catalyst. An example is provided below.

Engineering
Google.org could engineer the Web 3.0 networks of Equity Market 4.0. It has a stated objective of fueling SME in the developing world. However, Equity Market 4.0 could fuel the growth of SME's in the developing and developed world. My Open Letters outline other potential partners that form part of the Equity Market 4.0 and Economic Development 4.0 puzzle .

First Steps

This M-Prize application will be dynamic. It will include two Slideshare presentations and additional content at www.marcuscake.com. I will also be writing a series of open letters to organisations with a likely interest in a Web 3.0 network offering to implement the Hack. Fortuitously, this McKinsey application was the first open letter. Please join me on my social networks and help me crowdcreate this years hack into next years story.

We can create the Web 3.0 networks on the Critical Path to Economic Development 4.0 in 90 days (including Equity Market 4.0).

Entrepreneurs, philanthropists and statesmen need to provide the inspiration to create Equity Market 4.0 and inspire consumer adoption of its underlying networks. How many entrepreneurs do we need? We need 5-10. Open Letters are a means to contact people and organisations on the critical path to adopt or align their objectives with the pursuit of Equity Market 4.0.

Initial Open Letters will focus on people that may be interested in more than one Web 3.0 network.

And, ofcourse, promoting the idea through the Management Innovation Exchange!

I aim to crowdcreate Equity Market 3.0 in 20+ financial centres and ignite Economic Development 4.0 by June 2012. I will deliver a 5 day “Lightning Strike” workshop to ignite Equity Market 3.0 in each country. The crowd will provide the capital, management team and execution for Equity Market 3.0 within each country.

There is a significant incentive for Web 1.0 organisations to seriously consider adopting Equity Market 3.0. It may have taken 100 years for a financial institution to build a hierarchy and multi-national presence. An Equity Market 3.0 network could achieve the same outcome in a fraction of the time. The status quo will be confronted with the possibility of anyone implementing Equity Market 3.0 in any market which would reduce geographical barriers. The new entrants could possess sustainable competitive advantage from memorable domain names. The Equity Market 4.0 community could be created within 1-2 years.

Credits

This Hack was developed by Marcus Cake. Additional information is available from www.marcuscake.com

Input

Comments

Frank Hung

July 28, 2011 at 4:55am

What a great concept and wonder why the exchanges are not doing this....

Karl Laird

July 27, 2011 at 4:16pm

The disintermediation away from centralised institutions is a great idea - any thing along these lines tends to help more efficient allocations and distributions.

However I would contend against the "Meritocracy - Wisdom of Crowds" always being a positive and accurate movement. In particular crowd wisdom has been shown to be particularly weak in the analysis of very high and very low probability events.