1. Open Capital
21st
Century Financing & Funding
Chris Cook
Paris 20th
May 2015

2. “21st
Century problems cannot be solved
with 20th
Century solutions”

3. Economy 3.0 ?
Economy 1.0 – decentralised but disconnected,
physical market presence
Economy 2.0 – centralised and connected, market
presence through intermediaries
Economy 3.0 – decentralised but connected, network
market presence

4. Economy 3.0 – Value Basis
Location – Place (Land) or Space
Energy
- material - embedded in Place (eg buildings)
- immaterial - passing through Space (eg solar or wind)
Intellect
- subjective (people)
- objective (data patterns)

5. Open Capital – Credit Instrument
A Credit Instrument is a Promise
- made by an issuer to an acceptor
- issued in exchange for value received from acceptor
- returnable in payment for value provided by the issuer
A Credit Instrument is not
- Debt – acceptor cannot demand payment in money
- Derivative – acceptor cannot demand delivery
- Equity – acceptor has no right of asset ownership

6. Open Capital requires Trust
Credit instrument is a Prepay credit - “Pay it Forward”
- acceptor may use credit instrument to pay instead of $
- acceptor trusts that issuer will be good for supply
Economy 1.0 - trust in physical currency
Economy 2.0 - trust in middlemen eg Treasuries/Banks
Economy 3.0 - trust in mutual risk and production
sharing agreements or Protocols

7. Prepay – Then....and Now
Now – Drink
Prepay
Now – Talk
Prepay
Then – Tax
Prepay

8. Tax Prepay
Tax Prepay – credit returnable in payment of taxes
Tax Return – 'stock' part of tally stick returned to Treasury
Rate of Return - rate over time at which stock is returnable
for cancellation
eg Prepay £8 for £10 tax - £2 profit 25% pa rate of return
- not fixed - depends on existence & quantity of flow

9. Protocols and Prepay
Asset-based (Peer to Asset) Prepay Credit
– Capital Partnership production sharing agreement
People-based (Peer to Peer) Prepay Credit
- Guarantee Society risk sharing agreement
These agreements are associative two-way & interactive
protocols: social contracts or Contrats de Société

10. Capital Partnership – Peer to Asset Credit
Location – credit returnable in payment for usufruct ie
rental of land/location or production from land
Energy – credit returnable in payment for energy use
Intellect – credit returnable in payment for use of
intellectual property eg knowledge, software, video

11. Capital Partnership
Capital Partnership is a social contract or trust
framework for sharing usufruct of a productive asset
A proportion of production is allocated to the developer
or manager
The balance of production is available to be issued to
Investors in the form of Peer to Asset prepay credit

12. Capital Partnership – Land/Location
Custodian
(Community)
Custodian
(Community)
InvestorInvestor
OccupierOccupier
Rental
Prepay
%
%
ManagerManager
Rental

13. Land Prepay – Value Proposition
Community
- sells rentals forward at a discount and locks in price
- receives an interest-free land loan until rental credits
are returned in payment for land use
Occupier
- prepays rental and locks in price

14. Land Prepay – the Value Proposition
Investor
- direct 'inflation hedge' investment in land
- Occupiers buy rental credits from Investors at best
price below issue price & return in payment for land use
Manager
- shares in gross rentals or production
- interests aligned with Investor
- no 'Principal/Agency' problem

15. Land Partnership - Outcomes
Housing as a Service - relationship-based not transaction-
based model - costs transformed to revenue shares
Neutral – transcends ego and politics
Collaborative - stakeholder interests aligned
Sustainable - all have interest in minimising cost over time

16. Capital Partnership - Energy
Custodian
(Community)
Custodian
(Community)
InvestorInvestor
ConsumerConsumer
Prepay %
%
ManagerManager
Payment

17. Energy Prepay – Value Proposition
Community
- sells energy forward and locks in price
- receives an interest-free energy loan until energy
credits are returned in payment for supply
Consumer
- prepays for energy and locks in price

18. Energy Prepay – the Value Proposition
Investor
- direct 'inflation hedge' investment in energy
- Consumers buy credits from Investors at best price
below physical energy price & return against supply
Manager
- shares in gross revenues or production
- interests aligned with Investor
- no 'Principal/Agency' problem

19. Energy Partnership - Outcomes
Energy as a Service - relationship-based not transaction-
based; costs transformed to revenue shares
Neutrality – transcends ego, borders and politics
Collaborative - stakeholder interests aligned
Sustainable - all have interest in minimising cost over time

20. Currency is an outcome of Investment
Currency is defined as generally acceptable credit
- Land-based credit – currency local by definition
- Energy-based credit – currency universally acceptable

21. It'll Never Work
For thousands of years people gave credit to those they
trusted: others paid in currency eg gold, silver, salt
For thousands of years Capital Partnerships have
existed: Islam calls Capital Partnership 'musharakah'

22. Guarantee Society - People-based Credit
Guarantee Society is a social contract within which
Peer to Peer credit risk is shared
Sellers and Buyers pay a guarantee charge, share
costs of operation & make good any failure to perform
Manager allocates guarantee limits, manages platform,
ensures transparency, manages non-perfomance risk

23. Guarantee Society - Seller accepts Buyer's IOU
Seller Buyer
IOU
Value

24. IOU is guaranteed by Sellers & Buyers mutually
Seller Buyer
IOU
Value
Pool
GuaranteeGuarantee

25. Seller & Buyer pay guarantee charge into Pool held
by Custodian
Seller Buyer
IOU
Value
Pool GuaranteeGuarantee
Fee Fee

26. Buyer settles credit in € or '€'s worth' eg energy-
based or land-based currency
Seller Buyer
Value
Pool GuaranteeGuarantee
Fee Fee

27. If Buyer defaults: system pays sellers and collects
from buyer if possible
Seller A Buyer
Default
Pool
Collects
Pays
Seller B
Default
Pays

28. Service provider sets guarantee limits, handles
defaults & manages system
Seller Buyer
IOU
Value
Pool GuaranteeGuarantee
Fee Fee
Manager
FeeService

29. Clearing Union
Producer Consumer
Pool GuaranteeGuarantee
Fee Fee
Manager
FeeService

30. Outcome – the Community is the Currency
Mutual assurance of direct (P2P) credit risk
Banking as a Service
We need Banking....but we don't need banks

31. It'll Never Work
For 140 years, Protection & Indemnity (P&I) Clubs have
mutually guaranteed risks Lloyds of London won't cover
For 125 years P& I Clubs have been managed by
Thomas Miller

32. Open Capital – the Co-operative Advantage
Co-operative Advantage
- Open Capital does not give 'something for nothing'
return to landlords or shareholders
- Open Capital provides financing & funding with which
conventional capital cannot compete
- Middlemen will transition to service provision or fail
Maybe Ethical is Optimal?

33. 21st
Century problems cannot be solved with 20th
century solutions.........

34. …....21st
century solutions pre-date modern finance