Investment system

[orthecreedence]

Basis has the concept of blocs, each having an "allocation" (the maximum amount of costs that bloc can assume within the protocol).

How is this initial allocation decided?

Here are the properties for an investment system I think would make sense:

1. Ability for participants to direct production either directly or indirectly (ie, delegate their investment through another agent/bloc like a bank)
2. Investment is incentivized. The idea here is that you want people to invest and there's some payoff for doing so.
3. Investment should carry some weight of responsibility. If I can create a bloc with a high allocation but it costs me nothing personally, then I can just order a lambo and peace out or if I go bankrupt there would be a bunch of materials sitting around collecting dust. The workers (and investors) should be responsible for the costs of their bloc, or else you'd get a lot of "lol wuldn't it be kewl if..." vs "I think we need this...here's an analysis of demand for it blah blah." In other words, allocation would need to come from some tangible resource put up as collateral.
4. Speculation is at least limited. People should invest because it fulfills a need, not because they can DOUBLE THEIR CA$H WITH THIS ONE SIMPLE TRICK!!!!!!1
5. The system is general enough to be emergent and not tied to one specific model of investment.
6. The system should avoid incentivizing "manufacturing demand" (ie, avoid rewarding sales as opposed to meeting a need).

Modeling attribute 1 seems fairly straightforward, however 2 & 3 as well as 2 & 4 are somewhat at odds. If 1 is implemented correctly, the risk from 3 can be spread out (much like interest from banks). However, some delicate balance between 2 and 4 seems prudent.

Here are some previously discussed ideas/mechanisms:

• Credits as allocation - Anybody can take their hard-earned credits and convert them 1:1 into an investment voucher that directly increases the allocation of any bloc of their choosing by 1₡. Investment vouchers can be delegated to another agent/bloc to invest on your behalf. Increases/decreases to the allocation via the cybernetics system would change the share of the investment voucher by the proportional percentage the allocation was changed. Investment vouchers can be withdrawn (decreasing the allocation on withdraw at the same value the voucher is) and converted back to credits.
  • Pro - All the risk is assumed.
  • Pro - Incentivizes investing in blocs that have a good track record, as they are likely to continue to get increases in allocation.
  • Con - Those with the most credits get the most say in production. The age-old problem! However, given that credits are earned only through labor in a co-op, salaries would effectively be somewhat equalized.
  • Con - Disabled/retired/sick/yada yada people can't invest. Perhaps we have some kind of investment voucher UBI?
  • Note - Withdrawal of investment vouchers must take into account the bloc's costs. If the bloc has an allocation of 100 and costs of 50 and I invest 50 vouchers, the bloc would have an allocation of 150 and costs of 50. If their costs went up by another 50 (100 total), what value would my vouchers have?
  • Note - Adjustments to value of vouchers must only be made proportionally to adjustments by the cybernetics system. Investments by others would not affect the value of my vouchers. This encourages investment via allocation adjustments and completely eliminates pump-and-dump speculation.
  • Note - Would increases in investment vouchers that are redeemed be converted back to credits (₡) or UBI? Converting to credits makes them transferable (and redeemable when plugged into a market system) and UBI makes them non-transferable and only spendable on consumer goods. What are the pros/cons here?
• Pre-sales/crowdsourcing - A worker can create a new bloc and put up a product marked for pre-sale that doesn't exist yet marked. The orders that come in for that product would set the allocation for the bloc. For instance, if they pre-sell 980 widgets at a projected cost of 10₡ each, the allocation would be 9800₡.
  • Pro - A somewhat organic method of sensing demand and providing allocation to meet that demand.
  • Pro - All the risk is assumed.
  • Con - Incentivizes "manufacturing demand." If pre-sales can directly affect allocation, I'm incentivized to sell, sell, sell as opposed to meet a need.
  • Con - All the risk is assumed by the customers, leaving them on the hook for the workers' blunders. Perhaps the per-pre-sale allocation increase is a multiplier of some function of existing allocation and projected cost per-unit, making it harder to manufacture demand as well as pushing all risk on customers.
  • Note - Requires setting boundaries on how pre-sales are canceled/refunded/etc. A pre-sale is a commitment both by the producer and consumer, and having some ability for them to back out would be useful.
  • Note - If I want to (maliciously) raise allocation for an existing company, I can just mark an existing production item for pre-sale and any incoming orders for it increase allocation. What mechanisms stop this from happening?
  • Note - There needs to be some method of adjusting per-pre-sale costs based on the delta between the actual costs and the projected costs. If I projected the widget costs 10₡ but it costs 15₡ to make, what happens? If the projected cost is 10₡ but the actual is 5₡ what happens?
  • Note - The more I think about this, the more I'm realizing this falls under the purview of the cybernetics system rather than the investment system.

[orthecreedence]

Need to be careful here.

This works in a money system because when you invest in something you are incentivized by a return of some sort. Obviously this isn't always the case, but it's a general trend. If we do define an investment system, there needs to be some incentive for picking "winners" (in the sense of companies that end up meeting a need). Perhaps a token system with gamified returns would work.

For instance, I invest in Widgets Plus, which bumps up their max costs. They use this bump to ramp up production, and and up doubling their throughput to handle their order backlog. By meeting more needs, perhaps the system adjusts their max costs upwards (effectively prints investment tokens) and as a result, I'm entitled to some portion of this increase, which I can then use to invest in other companies. This model could also work for banks, although do you invest in the bank directly, and then the bank forwards those tokens to other companies? Can a company pledge a portion of its invest tokens in another company?

We also have to balance this out such that we don't exhaust the supply of these tokens or print them endlessly. Also, how do I recoup my investment? By recalling my tokens? That could bankrupt a company. There needs to be a lot of careful thought put into this, and I'm inclined to have some sort of traditional community bank setup instead of trying to democratize this fully on the first round. That said, I think it's important to build with the idea of democratized investment in mind, and in a general enough way that it allows for emergence.

Also keep complexity in mind. Do we really need 16 different currencies floating around? I mean at what point is this such a complicated beast that it's inexplicable to anybody? Need to be careful here. Effectively this is using a currency to replace what would otherwise be a democratic, planned process. Which I think is a decent goal because democratic planning would be slow and brittle. People need to be free to produce without constraints and without permission from the collective.

This needs more thought, but it's good to get these ideas down.

[orthecreedence]

Another thought: just use credits.

Implement some form of decay (aka inflation) on credits: 1% per year (possibly adjustable regionally or globall) that makes your credit value decay over time unless pledged to a company. The company wouldn't be able to spend the credits, but it would really just act as an increase to their allocation.

This is very similar to the liquid democracy idea, in that you could "recall" your credits, maybe with some locking period.

The only problem here is we return to the capitalist model of whoever commands the most money holds the most control over the economy. This isn't my favorite mechanism, especially if using supply and demand for labor markets (which Basis does in its current form).

That said, good to keep things like this in the back pocket. At some point, you do need an investment system and it needs to be understandable.

[orthecreedence]

Another interesting idea following discussions on the Basis matrix channel: using (pre-)orders as a mechanism for setting the allocation for a new company. This requires some devils-in-the-details unwinding, but the general unpolished idea is that you estimate the cost per-unit, and each order is a commitment to buy that unit at that cost, which factors into your initial allocation.

I'm not sure how number of orders and cost-per-unit would translate into a final number. And this would only solve things for direct consumption, not b2b. How would this work for a company that supplies materials solely to other companies? I suppose the same mechanism could work: you convince them to pre-order at some cost, then go from there.

This needs more thought but is a promising way of using the order system (really a demand signal) for setting initial "investment" in a company. And from there, the cybernetics system would adjust allocation afterwards.

EDIT: updating with some notes: pre-orders would be a full commitment to buy (the credits or "costs" would be treated as spent and locked in "escrow," but the pre-order could be cancelled at any time which returns the credits/costs to the orderer.

[orthecreedence]

Been mulling this over for quite a while.

Something that has really stuck out to me is the idea of banking. It's a really old concept and a tried and true model. However, defining bank entities in Basis and determining all the actions/interest rates/etc they control seems painfully rigid. What I want is something generalized that a system of banking could emerge from but that also doesn't restrict other forms of investment.

Another thing I'm thinking about is costs and responsibility. It doesn't make sense that people who start a company would get command of resources but not ultimately be responsible for them. So I like the idea of using credits as a method of upping allocation, because a) if the bloc does poorly then the allocation decreases and b) the bloc members are incentivized to liquidate the resources in the bloc before terminating the bloc.

Tying this together (maybe) I had the idea for converting credits (not UBI, but actual labor credits) into "allocation vouchers/tokens" and using these to increase allocation for blocs. These could be "invested" into any bloc (not just blocs you're a member of) as a method of economic stimulus. If a bloc's allocation is adjusted upwards, the allocation token share increases by the overall percentage, so if/when it is withdrawn it's worth more. Keeping in mind, this investment would not buy a controlling share since we're trying to eliminate absentee ownership.

In regards to banking, I haven't figured out exactly how this would work. If I invest my allocation tokens into a bank, the idea is that the bank would need to be able to pool them and pay themselves for their labor out of any gains, so whatever system of delegation is created would need to enable something like this.

Need to think about this more. I've come up with like five half-ideas now.

[orthecreedence]

Note to self: if we're measuring increase in allocation as the converted credit amount when withdrawing, then this would allow for things like speculative investment in blocs/pump and dump/etc. This could probably be easily curtailed via contract or other mechanisms, but worth noting.