Value Accounting System

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Discussion

1. by Tiberius Brastaviceanu:

"We need to make the distinction between co-creation of value and value exchange. These are two important processes but very distinct ones. Sensoricans [members of Sensorica ] are working hard to solve the value accounting problem, which is meant to support large scale co-creation of value. The value accounting is a way to capture individual contributions that blend into a unique product, to evaluate these contributions, and to compute equity in the end product, i.e. a % for every contributor.

NOTE the value accounting system is NOT a system that objectifies value and it is not a bean counting system! It is a social contract, a method for calculating equity to which all contributors adhere, to reassure every contributor about how the future revenue will be redistributed. That's it! It preserves the subjective nature of value, it can take, in theory, into consideration all types of value, tangible and intangible.

Once the product is made, it can be exchanged, and this is where we need currencies, or systems of value exchange.

Value accounting (for co-creation of value) and value exchange are two different things. These two systems must interact with each other, but we need to see them as separate. One is designed to manage the amalgamation of value from different agents into one product, the other one is designed to facilitate value exchange between different agents, with no value added in the process." (from email November 2012)


2.

"First, we need to make a distinction between a value accounting system and a value exchange system.

Suppose we have 3 individuals picking cherries in the same basket. The value accounting system keeps track of how many cherries everyone puts in the basket, so that when they sell it on the market they know how to distribute the money, in proportion to everyone's work. It describes how value added by multiple contributors amalgamates during co-creation processes.

Once exchange value is created, i.e. once the basket is full and ready to go to market, it can be exchanged using a value exchange system: barter, currency, etc.

So the value accounting system is not a currency. It doesn't refer to a transaction, to an exchange. Our 3 individuals picking cherries are not exchanging anything among themselves or with another entity while they are picking the cherries. They are just adding stuff into the same basket. The exchange might come later, once their product is ready for the market.

A value creation process that requires more than one individual can be based on following 3 arrangements or a combination of those: stigmergic 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. 3 individuals picking cherries, 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 transfers risk from the workers 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 stigmergic 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.

...

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. 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 maximum 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 in this context. First, because the process of value creation is very dynamic and relations of production cannot be contract-based. Second, the process involves a great number of individuals that are distributed all over the planet, therefore it is impossible to do time management. There is no instituted power structure, therefore no one can force anyone else to work more. In this case, an algorithm is needed to turn contributions into equity, as contributions are added to the project. Moreover, 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 p2p, co-creation processes.

For example, the value equation takes into consideration the formal reputation of contributors. A higher reputation results in higher equity, all other things being equal, and vice versa. This acts as a stick and a carrot, and regulates behaviour. Moreover, the value equation contains parameters to incentivise periodic and frequent contributions. Other factors relate to the quality of execution or of deliverables, and to the priority level of tasks." (http://multitudeproject.blogspot.ca/2014/01/why-do-we-need-value-accounting-system.html)

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