What is your SQ?

There was IQ, then EQ, and now, SQ! SQ – spiritual intelligence quotient – is now a criterion for successful leadership.

In the wake of scientific support for meditation and other mindfulness practices, and as businesses in the social capital movement transitioned to triple bottom lines (adding social and environmental outcomes to the profit motive), so too now the paradigm for successful leadership is changing. Empathy-devoid environments are no longer acceptable.

There is a claim that the successful contemporary leader in any field has the triumvirate of intellectual intelligence, emotional intelligence, and spiritual intelligence. Part of 'Spirituality 2.0' is the act of transferring quality-of-life attributes from spiritual practice to mainstream application.

The high-SQ leader has self-mastery and behaves with wisdom and compassion while maintaining inner and outer peace, being present in an embodied way, and connecting with others both intellectually and emotionally.

Top 10 traits of high-SQ leaders:

1. Calm and centered 
2. Compassionate 
3. Courageous
4. Passionately committed 
5. Forgiving 
6. Authentic, walks-the-talk 
7. Humble 
8. Wise 
9. Peaceful, nonviolent 
10. Service-oriented

Personal principles of societal organization

In War and Peace and War: The Rise and Fall of Empire (2005), author Peter Turchin proposes a theory of history, that the rise and fall of empire can be explained by a society’s capacity for cooperation. Social capital as a prerequisite for society is further explored in other books.

The interesting point is what basis a society may have for generating social capital and cooperation. Historically, Turchin argues, societies self-defined and self-unified along meta-ethnic frontiers. In an enlightened society, presumably the definition of self/other based on ethnicity and geography recedes over time in favor of ideology. The new ideologies could be much more personal and granular than the wide-reaching religions, economic systems, and political doctrines unifying disparate peoples today.

A shift to group-identification by personal principles could be liberating at the individual level but potentially destabilizing at the societal level. One issue is optimal societal size: defense and administration suggest larger societies, but personal ideologies suggest smaller groups. Another issue is greater implicit dynamism: there are fewer natural barriers to entering and leaving groups, and at-will association would seem to be the norm. A third issue is potential conflicts between multiple associations, as a system inspired by Snow Crash franchulates with nation-states articulating value propositions to potential customers could develop.

At-will society: airsteading with the extropians over Williamsburg Brooklyn today and the immortalists in zero-G tomorrow

Economic fallacies II

Fallacy #3: The singularity is a great investment opportunity
A technological revolution like that brought about by the PC or the Internet is a great investment opportunity. Current possibilities for this kind of compound growth in technology-driven financial returns include alternative energy, genomics, personalized medicine, anti-aging therapies, 3d data manipulation tools and narrowly-applied artificial intelligence.

A technological singularity is not necessarily a great investment opportunity. A technological singularity implies change so radical and diffuse that prior models for understanding and exploiting or profiting from the world will no longer work. There is a substantial risk that financial markets as they are known today could disappear. Growth, alpha and superior financial returns may be irrelevant in a post-traditional financial markets era. Planning for the possibility of a technological singularity suggests a much broader definition of what the assets of the future may be and allocating to these areas, a substantial shift away from the traditional asset preservation and financial returns that outpace inflation in the long-run mindset of today.


Fallacy #4: Economic systems become irrelevant in a post-scarcity economy
This is the notion that economies and markets go away in a post-scarcity economy for material goods. At present, an increasing number of goods and services are becoming available for free or offered via modern business models such as the freemium. In the future, substantially all material needs may be easily met at low cost or for free in a molecular-nanotech society, but scarcity as an economic dynamic is likely to persist and economics systems in general are also likely to continue.

Scarcity would be perceived in whatever material resources were not yet plentifully available and in any finite resources such as time, ideas, attention, emotion, reputation, quality, etc. Economic system dynamics could change substantially, for example, property tax would not make sense in a world where nanotech could rapidly build or absorb structures. Unless economics and markets as the most effective means of resource distribution are superceded, they are likely to endure.


Fallacy #5: Social capital markets need not deliver competitive returns
The conventional notion is that it is acceptable for social capital market investments to deliver lower returns than traditional financial instruments. Social capital market investment products include SRI equity funds, corporate governance initiatives, social capital venturing (private equity), fair trade coffee and organic products. On average, consumers are willing to spend 5% more for attribute products (products with affinity attributes such as fair trade, local, organic, etc.) and investors have been willing to sacrifice 5% or more in financial return for socially responsible investments.

However, after some implementation time lag, social capital could have equal or higher returns. Sustainable socially responsible businesses should be more profitable not less. Both direct tangible economic benefits can accrue as well as the indirect benefits of marketing and market-knowledge that the business is more principled and sustainable. Corporate governance and other green or social initiatives should benefit the bottom line, not penalize it. The notion that return and social good are mutually exclusive is a fallacy.

The article with all nine fallacies is available here

Future of entrepreneurialism

The traditional definition of entrepreneurship is expanding to include more creative ways of approaching business, applying business disciplines to social problems and establishing a wider range of success metrics. Four key trends are coming together to facilitate this new era of entrepreneurship: a shift in social consciousness, the democratization of capital, innovative responses to traditional financial systems and the low cost of starting a startup in the globalized world.

Shift in social consciousness
There is a great attitude shift underway towards sustainability and social responsibility. Al Gore, Paul Hawken and others have helped to put global warming, carbon neutrality, poverty and equity firmly on the international agenda. Part of the new social consciousness is also about effectiveness and accountability. Cycling the bottom of the pyramid out of poverty requires getting target populations actively involved. Loans are better than aid.

Democratization of capital
The ability to have more granular attribute knowledge about all economic transactions has triggered the demand to direct capital and consumption based on these affinity attributes. People are willing to pay on average 5-10% more for their attribute choices, for fair-trade, organic and local items, for hybrid cars and for blended value or double/triple bottom line financial returns.

Innovations to the traditional financial system
The shortcomings of traditional financial systems, their hierarchical nature, the lack of universal access and cyclic failures like the current mortgage crisis are triggering innovative solutions such as…

• Microfinance and P2P finance (for example, Kiva is currently active in 40 countries and lending about $750,000 per week)
• Socially Responsible Investing and social capital markets including social venture capital as offered by GoodCap
• Timebanks, gift economies and other non-monetary currency solutions
• Alternative payment mechanisms like developing country cell phone networks as money transfer systems

Low cost of starting a startup in the globalized world
The increasingly low cost of starting a startup makes a whole new tier of businesses possible: the LAMP software bundle provides free technology infrastructure, APIs replace business development and blogs and community interaction replace marketing (social networks become an overlay, a property of every website) and virtual world interactions replace face-to-face meetings.

Future of market mechanisms

Information is increasingly free. This is causing well-established economic paradigms to reshape, expand and be supplemented to reflect this shift. One example of a new market norm is the open-source software model of free software and fee-based services to implement and maintain the software.

Free access to information pushes the bottleneck higher up the scale to a less entropic, higher resolution value point. What is now valuable is how information is used, and the creation of new information.

Value Creation
An increasing level of productive activity is coming from the many activities people do that have value but are unrelated to their compensated activities. This productive activity is starting to impact and deliver value to others in unprecedented ways. It has not been measured and is outside of the traditional economy. How can these activities be explicitly valued and exchanged via monetary or non-monetary currencies?

Complementary Market Mechanisms
Non-monetary currencies for attributing value initially started with reputation. Now they are becoming more rigorous in their assessment of value and are being used for exchange. Some of the new market mechanisms include attention economies, open money (related event: unMoney Convergence), time banks, social capital markets (related event: Social Capital Markets), open capital and prediction markets.

Transition to a post-scarcity economy (PSE)
A rich pathway to the future involves creating a multi-currency culture to support the different areas in which value is and will be created: finance, ideas, time, information, action, etc. Financial or non-monetary derivatives could be created on top of the new currencies. Imagine a call spread on community cleanup time!

Having multiple currencies would not only reflect the current and near-future state of the world more accurately but would also be good defensive positioning for future volatility and uncertainty regarding technological development and adoption.

Evolving to a multi-currency culture could ease any potential future transition to a post-scarcity economy (PSE) as traditional money will be only one recognized store of value.

Capital markets 2.0

In the last few years, a variety of innovative capital markets have arisen to supplement and extend traditional large institutional capital markets. The new markets fill niches of demand for capital and investment, and allow greater granularity of investment information and capital direction. The currency may be money, reputation, ideas, social good or any combination of these. Some of the new capital market vehicles include:

• Virtual World Economies (Second Life, There, Entropia Universe, World of Warcraft),
• Peer-to-Peer Lending (Prosper, Zopa, Lending Club),
  
• Micro-Lending (Kiva, Grameen Bank, Accion),
• Social Capital Markets and Venture Philanthropy (GoodCap, Blended Value, New Profit),
• Ideagoras (Innocentive, The Point, Zooq) and
• Prediction Markets (Iowa Electronic Markets, Intrade, ZiiTrend).

The first category, virtual world economies, is burgeoning and complex and provokes an interesting debate about how these new market vehicles should evolve and integrate with traditional economies. The virtual worlds There and Entropia Universe have had a hands-on approach to economic regulation, for example approving parties for in-world banking licenses. On the other hand, the virtual world Second Life has been more laissez-faire at the outset but then stepped in with prohibitions where self-regulation has been inadequate. Gambling was outlawed in July 2007 and now banking activity has been effectively outlawed:

"As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment ... without proof of an applicable government registration statement or financial institution charter. (Full text here)"

Risk, Cost of Capital and Acceptable Return
One value of the new markets is that they provide capital in cases that are less attractive or irrelevant to traditional financing entities. These situations often have dramatically different risk, growth and timescale profiles than traditional investments and are conceptually similar in many ways to doing business in a high risk country.

The risk is higher, so the return too must be higher in compensation. Looking at annualized interest rates may not make sense in the accelerated time environment of virtual worlds where the economy (as measured by land and money supply) is currently growing 6% per month in Second Life.

What is an appropriate cost of capital? Anecdotal interest rates on Second Life loans have ranged from 7% per month to nearly 50% per month, and experienced a 20-30% default rate. This is the cost of capital for people who do not want to declare their physical identity details or seek other means of capital. In the physical world, it is not unusual for payday lenders to charge 300%+ per year to cover their high default rates. Peer-to-peer lender Prosper found that U.S. state-based usury laws did not allow the site to charge enough interest to cover subprime borrower defaults.

Virtual economies are chided for not having sustainable interest rates at the same time as the subprime lending crisis is crescendoing through physical world capital markets, itself a reprise of the 1980s RTC crisis.

Law, Regulation and Jurisdiction
The appropriate norm is to comply with traditional governing entity rules and laws, including being flexible with business models in order to do so. Peer-to-peer lenders had to structure their businesses in specific ways to obtain licensing and comply with U.S. usury laws which vary by state.

Virtual world economies will likely need to be even more innovative to receive physical world approvals. The pervasively global and anonymous virtual world medium suggests that geographically-based physical world regulation will be challenging to apply in reasonable and effective ways. However, anonymity is probably less important as an attribute for virtual capital seekers, as when a benefit is conferred, people are generally willing to give up anonymity. For example, peer-to-peer lenders found that people are perfectly willing to have their credit reports posted publicly on the Internet in return for the ease of potentially obtaining a loan.

In addition to traditional law and regulation, new capital markets may face another layer of compliance in the form of specific in-medium practices that develop. Complying with in-medium practices is important both reputationally and in the instance of in-medium adjudication and dispute resolution mechanisms.

Second Life Meta-Me

The experience of identity is often heavily influenced by physicality (race, gender, height, nose size, etc.). Virtual worlds such as Second Life offer freedom from physicality via unlimited self re-presentation opportunities.

So far, merely the surface of human creativity has been scratched as the majority of avatars are tall, fit, young and attractive which underlines both physical world inferiority sentiments and an unproductive focus on superficial aesthetics.

Meta-me
Virtual worlds could be used to visually represent another more abstract layer beyond physical appearance, the more important and meaningful parts of individuals such as values, actions, ideas and creativity. This could be facilitated by bringing existing Internet-based information into virtual worlds. Visual representations could be executed with shapes, size, coloring, accentuations, vibrations, etc., for example, the bigger the glow around the avatar, the higher the social capital. People might even want to represent themselves in the physical world based on some of these ideas.

Reality filters
Not only could there be a deeper granularity of self-representation but also filters for viewing others. Filters could be based on preference, literally blocking those with unattractive value systems, efficiency, seeing only those other avatars who also wanted to interact regarding certain topics like education, business, sex, singularity, science, etc., or other attributes.

Below are some suggestions for new ways of avatorial representation:

1. Profile-based avatars
Avatars are a visual expression of their profile tags, for example an extropian transhumanist singularitarian might look different from a vegan sustainable development social worker from a politically conservative attorney, but maybe not. Interest indicators could be amalgamated or cycled through in kaleidoscope fashion. The assumption is that social interaction could be enhanced with overt interest-signaling.

2. Reputation-based avatars
Avatars are an expression of how others see them, a visual representation of how they have been rated by others, in-world or as a consolidation of Internet reputation mechanisms such as eBay, Amazon, LinkedIn, Yelp, etc.

3. Idea-based avatars
Avatars are visual representations of the degree and quality of the person's ideas. This may not be able to be rendered until the underlying information is more explicitly captured, either self-evaluated or as another level of reputation. Amazon asks "Was this review helpful?" and a creativity evaluator could inquire "Were innovative and good ideas described here?"

4. Value system-based avatars
Avatars are a visual representation of a person's values. Value systems can be elicited in a variety of ways including as specified directly in a profile, determined from a set of questions, deducted from a log of Internet-based activities or abstracted from physical world activities such as purchasing, recycling, volunteering, exercising, etc. A means of obejective data collection would be important, barcodes/rfid would work in the case of purchases. Would this be tyranny or freedom? Certainly it would be optional and some people would choose to increase their social capital by broadcasting high-congruity lifestyles.

5. Presence-based avatars
RSS presence feeds are streamed into Second Life and aggregated into a visual representation of facebook, jaiku, pownce, twitter, wakoopa, blogging, emailing, texting, social music listening (pandora, last.fm, etc.) and other lifecasting activities. How close a representation of self would people perceive this to be? The essence of individuality is increasingly available on the Internet.

6. Real life Sims Online avatars
Extending the Sims Online game, in-world avatars could follow the same percentages of time spent on activities that humans do in the physical world, working, exercising, relaxing, socializing, eating, sleeping, etc. An invaluable tool for extrospection, the sim could be sped up to show the natural end states of one's current activities, and altered to see different outcomes (e.g.; a 1% increase in exercise leads to greater longevity).

Prosper P2P Finance Update

A year after launching, Prosper, the eBay of loans, has seen more than $27 million in fundings at its P2P finance site. The firm is celebrating with a user conference confab modeled after eBay Live - Prosper Days - next week in San Francisco. The event is sold out but interested parties can attend the pre-conference cocktail on Sunday evening.

As of February 1, 2007, $27 million was extended in 5,427 loans at an average loan size of $5,000. The average loan size has declined from $6,000 as of November 1, 2006 when $20 million had been extended in 3,372 loans. The mix of loans across credit tiers is generally the same, with C, D, E, HR (high risk) and NC (no credit) categories garnering more listings and fundings than AA, A and B tiers but all tiers are growing.

Continuing to answer the question "Does P2P microcredit work?" the chart below shows how Prosper loans have been performing. The pink and turquoise lines represent Prosper defaults, loans 3+ months late, as of November 1, 2006 and February 1, 2007. Prosper defaults are still stabilizing into a consistent level but have remained lower than Experian defaults, strangely in all but the top credit tiers. One year into the P2P lending business is too early to conclusively determine that P2P lending is lower risk than traditional unsecured lending but the initial signs are good. Low defaults in addition to the favorable interest rates available on the site should entice more investors to lend capital on the Prosper platform.

Another important question is “Does group lending work?” that is, does the social pressure of being a group member increase the likelihood of repayment? Prosper claims that being a group member aids funding and improves repayment but has implemented their group program more like a multi-level marketing program than a true Grameen-style borrower peer group program. The chart below depicts the performance of Prosper group member loans vs. all loans and shows that in the lower credit tiers, C, D, E and HR, the main areas of Prosper borrowing, group loans perform worse than non-group loans.