The legal form of SENSORICA - what are your thoughts?

The legal form is not an easy question...

Sensorica, our open enterprise, can be understood as an infrastructure of communication, coordination and collaboration, as a tool, NOT as a legal entity. We can also talk about the Sensorica group, which is a decentralized, value-based collaborative network of individuals, private organizations and academic organizations.

Members of Sensorica ARE legal entities and tax payers.

This is important in order to allow Sensorica to spread across the globe, to be fluid, and also to allow it to interface with other similar networks (communities like open source software, open manufacturing and 3D printing), which, as we are starting to understand, are very important for Sensorica to reduce the costs of our products and to insure continuity for our clients, etc.

What is important for a venture is to grow its market value, not how that value grows. We have the technology to take input from a wide base of contributors, to filter it, and to add it up coherently. Even if the input is very small, worth one hour of work, we still want it, because thousands of people are willing to give us that, and we want it all. The classical model takes in only large portions of value from a limited number of individuals, which are supposed to produce at their maximum capacity. With the new model we want to cast the net wide, to collect as much as we can. This is why Wikipedia surpassed in volume Britanica in only a few years! This model has already been demonstrated to be viable. We cannot do that if we treat every member as an employee. Members, by the hundreds, need to be able to freely come in and out of the organization, adding value to the product a bit at the time.

The internal structure of the group must be maintained flexible. Sub-groups must form dynamically around projects and they can dissolve once the work is completed, to be recycled into other soub-groups within the larger network. Because there is no formal status within the organization, this reshuffling can take place spontaneously. The internal bureaucracy must be greatly diminished.

How is the compensation handled? An independent entity takes care of billing the customer on the market side, and of distributing the income to every member in proportion to their respective contributions. Members declare their revenue in the country of their residence. The independent entity is not part of Sensorica, it only offers a service to the members of Sensorica group. We can create a non-profit to fulfill that role. If Sensorica would be a legal classical form it would be harder to solve the income tax problem, and the logistics for paying contributors distributed all over the planet will become more complex.

This independent entity can be understood as a value accounting organization. Every concrete contribution to the value of the enterprise is registered/recorded and evaluated. When products are exchanged on the market their value is actualized. The revenues generated from that exchange is redistributed to members according to a specific and explicit value sharing scheme. We could also consider an open alternative currency being used within the network, used to exchange value among members. The independent value accounting organization manages the internal flow of value.  

Individuals can incorporate themselves. Corporations can become members of Sensorica network, as any other form of organization.

Can this be implemented? I believe that our technology today, all these tools of communication, coordination and automated logistics, allows such loose and flexible structures to maintain their coherence. The key concept is self-organization, set in motion by a powerful sent of incentives, which can be created by communicating effectively and in real time the sources of value (rewords) and the system of flow of value, in and within the group.

If we want to harvest the planet this is, in my opinion, the only way around. Otherwise we go back to large chunks of value contributions from a limited number of individuals, concentrated mostly locally, and we miss the technological revolution boat.

We need legal agreements between members of some sort, firstly to grantee to contributors that they WILL BE paid (that’s where the main insensitives are) and secondly, to secure our tangible assets. Members will have to disclose their full identity.

Products would be produced and handled by member organizations, by licensed manufacturers, which can take any legal form. They would take responsibility for quality and guaranty. These manufacturers would not be partners of Sensorica, they would be PART OF Sensorica.

The meeting went... not so bad...

The scope of the meeting was to converge on a legal form/structure for our venture.

After bitting the dead horse for at least 45 minutes, i.e. talking about the corporation, we finally moved to other legal forms/structures and I presented my simple business model.

The member that had resigned was also at the meeting, strongly advocating for the corporation. In the end the resignation was reaffirmed. Another partner received my model with neutrality. The other one started to accept it and we had a very long conversation, seeking to improve it.

I still feel that my two remaining partners are not fully convinced that "open" is the way to go, but they are now moving towards my vision simply because of my central position within the venture, as the main technical person behind our prototype. I do NOT consider this a victory until my partners are not fully convinced that the open enterprise is economically viable, that it offers huge opportunities, and that it promises us all a better future.

Please feel free to comment on our starting model.

A crucial meeting - converging on a legal form and a business plan

During a recent Skype meeting, Shereef, co-founder of BetterMeans, suggested to chose my partners based on their level of acceptance of the open model. He's got a very good point, but unfortunately we don't always have this choice. Capital intensive innovation often takes place within a pre-established social context. In our case, our optical fiber sensor took shape around our physiology lab at McGill University. Moreover, when the means that lead to discovery and finally to a product are expensive, a strong interpersonal bound is needed. In this situation the choice of my partners is very limited, at least at the beginning of the venture. I cannot form a group according to my likings, I need to educate and to convince.  

I preparation for the meeting, I had a long face-to-face conversation with my new friend Sebastien Paquet. In a spark of genius, he made me realize that my proposition to my partners (to form an open enterprise) was a big piece to swallow. He used the metaphor of an emergent city to illustrate the idea of an organic, progressive growth. We concluded that I need to put forward a very simple business plan, one that promises immediate revenue and that bears the seed of an open enterprise. It will be my job to connect with other resourceful partners that will increase the value of our product, and to demonstrate the need to lower the barrier of entry, to open up, to be transparent. Gradually growing our value and our production capacity through open practices will convince my partners of the economical viability of this new business paradigm.

Thanks to Sebastien, I now have a very clear proposition to put forward at the meeting today, which will take place 2 hours from now. Stay tuned for the results...

What legal form should we chose for our venture?

This question was in our minds since the beginning, but now it's time to make a decision. In preparation for this event I tried familiarize my partners with the open enterprise concept and to harmonize our ideas on value exchange. I did my best to explain to my partners that the world is changing, that we need to use the new technology to its full potential, that today being open and transparent makes economical sense. We also discussed about the culture of open collaboration and we experimented with some tools we would need to support a large collaborative group. Despite all this preparation, when time came to decide on a legal form for our enterprise my partners unanimously voted for the f... corporation!

I obviously objected. Luckily I am the technical person behind our prototype, otherwise my opinion would not even count. So we went back to the drawing board. But in retrospective I tried to understand their reactions. My understanding is that my partners are somewhat accepting the idea that the world is changing in a fundamental way, but they think that it is going to take a very long time, and that the conditions which would make an open enterprise thrive are not there yet. My partners look at our prototype, they see value in it, and in a very pragmatic manner they decide that the best way to turn our know how into wealth is by forming a corporation, is by going the classic way, a way that is proven to work and that will continue to work for a long time to come, in their opinion. In other words, I think my partners want to make money and they think that they are taking an unnecessary risk if they embark on a venture that they do not understand.

I also tried to sell them the joy and the excitement of writing history by implementing a successful open enterprise. I tried to show them all the good that will come out of decentralization and of putting the power back into the hands of the creator/producer. It seams that non of that worked, which means that the current system still sends powerful signals and incentives to individuals to conform with it, even though people understand that something big is about to happen, even though they are convinced that the system is economically and morally bankrupt and it is in fact doomed.

I do not want to abuse of my privileged position within the group and to impose my will. I simply told them that the founder of Multitude Project CANNOT run a corporation. I tried to make them understand that this choice is beyond my limits. One of my partners resigned over my reaction. We are back to 3 members now, getting ready for another meeting in a few hours where we'll try to reach another agreement.