July 16, 1999 8:20 PM

Network Bookkeeping System

By Dan Palanza

Final Report

F: Research Goals and Objective (from Phase I contract).


The projects long-term goal will proceed in three stages.

  1. Present the underlying mathematical model and the system of patterns used in double entry bookkeeping as a credible method capable of delivering the record keeping of economic entities in a computerized age. Document that standard double entry bookkeeping can be extended to networks as well as to hierarchical business models.

  2. Create an analysis and design in preparation for reconstructing a system that is Internet compliant, using the current prototype software developed by one of the investigators. Create this analysis by applying the bookkeeping method to real world community applications.

  3. The Phase II portion of this grant will be two fold. First, we will implement an Internet compliant bookkeeping version. Second we will incorporate essential legal language in the form of sample subject contracts between network contractors designed to preserve the free enterprise spirit.

We will draw heavily on the needs of a diversified community working to solve complex problems fundamental to collective ownership of joint ventures. Phase I will establish the theoretical soundness of the system and initiate a proof of the validity of network functionality. Phase II will extend the book- keeping system into a viable competitor to hierarchical businesses competing for ways to best solve difficult issues such as channel monopolies.

Bookkeeping: An Open Source Monopoly, Introduction to Phase I Objectives

Writing our grant proposal, one year ago, we selected a quote, below, from Lester C. Thurow as our theme for our Identification and Significance of The Problem Opportunity."

"How is a capitalistic system to function in a brainpower era when brainpower cannot be owned? Most firms that now have this characteristic (law firms, accounting firms, investment banks) are not run by absentee outside capitalistic owners. They hire, pay, promote, make decisions, and select leaders in a very different manner from the General Motors or General Electrics of the world. When firms dominated by brain-power try to bring in absentee capitalistic owners, it doesn't work. The 'rainmakers' (those who bring in the money) simply take their skills elsewhere. The capitalist can give them nothing that they need."

The Future of Capitalism, Dover Books, 1996, P. 17

We pointed out then that Thurow's fault line separates mechanical goods and intellectual services. He identifies a problem to which we see a solution in a world culture passing from a mechanical/industrial paradigm into an information/communication oriented society.

We went on to reinforce our belief that Thurow's capitalism/brainpower split has deep philosophical roots. Present beliefs about "capitalism" we now feel can be attributed to prejudiced views generated by incomplete understanding of commercial patterns. Economic trade we found is naturally complemented by an equally valid notion of intellectual property. As we studied the balancing of debts and credit in double entry bookkeeping, we found economic and intellectual aspects also playing balanced roles as natural complements in commercial trade. Balance it seems is an intrinsic ordering process found in nature.

For example, our stated goal for Phase I is to create a mathematical model for double entry bookkeeping. But instead we will be creating a grammatical model for double entry bookkeeping composed of balanced relations between mathematical/grammatical aspects typical of complementary roles played by debits/credit in a bookkeeping system.

Where, for example, mathematics differentiates the component identity of an electron to integrate electron behavior among other components in a mechanical context, grammar serves a simultaneous complementary role. While mathematics reconciles a behavior focus, grammar integrates coordinate identification of that electron into a differentiated image among other components in an informational context-an historical image identity complementary to real behavior.

Bookkeeping records a business history. A debits view differentiates change in an artifact context, then integrates such change, along with other artifact changes, as an artifact work definition. A simultaneous credit view integrates changing ownership to differentiate such change into a history of ownership assignment changes-an holistic ownership image.

We entered our Phase I feasibility study with these four stated objectives that drove the four goals reported in this final report of Phase I activity.

The common thread connecting our objectives is to document a scientifically based control language that tracks both mechanical/industrial and informational/communication aspects of a commercial culture. We document this control language in a bookkeeping system, as our topic of study. Modern bookkeeping's roots originate in medieval Italy. By the end of the thirteenth century a double entry pattern language was completely worked out and is identical to bookkeeping language in common use today. Of general interest, and germane to our study, is bookkeeping's monopoly as the control language of commerce; so far as our research revealed, double entry bookkeeping has no competitor. What's of particular interest is that no one seems to know where double entry bookkeeping gets its power to enjoy a world wide monopoly that it has enjoyed for six hundred years. We believe an explanation lies in bookkeeping language that discovered and adopts a pattern language of universal grammar. This curiosity drives our research.

Patterns in bookkeeping form binary units. Why? This report now adopts a theme from physical science to support bookkeeping's binary pattern language. In doing, we will argue that bookkeeping mocks universal patterns to which natural phenomenon itself is held accountable.

"The discovery and classification of the different radiations[sic], the proof of the identity of their nature, permitted scientists forty years ago to distinguish two distinct entities in the physical world: on one hand, matter formed of atoms, which themselves are constituted by collections of protons and electrons, i.e., the elementary grains of electricity; on the other, radiation made up of the whole scale of radiations which are identical in nature and differentiated from each other only by the value of their wave length. Matter and radiation are completely independent realities, for matter can exist without any radiation and radiation can traverse regions of space entirely empty of matter. Nevertheless, one of the essential problems of physics is the study of the interactions which occur be- tween matter and radiation when the two exist together." The Revolution in Physics, by Louis de Broglie, Noonday Press, 1953

de Broglie's use of the plural for radiation reveals a subplot worth noting. Radiation, like liability in bookkeeping, differs according to a type, where a family of types make up a composite whole-a physical picture, really. This whole age stands in contrast to matter, typical of assets in bookkeeping, where individuals form a plural aggregation that acts one when they are able to behave en masse - as physical force. Bookkeeping, more than all else, is about differtiating behavior as the physical force of assets from identity as the physical picture of liability, as singular.

Goals Report

Stated Objective:

Create a mathematical model describing traditional double entry bookkeeping and test the validity of that model by observing its predictions in real world, community based, systems.

Goal #1, Document Bookkeeping's Grammatical Basis

Bookkeeping is a binary system made up of two control patterns joined into one. While a "debit" system controls artifact production, a "credit" system controls ownership policy. One or more debit elements and one credit element, set into a binary relationship, make up a next order element of the bookkeeping language, or system, called a "transaction." We argue that twin-languages tied into binary units is an ideal solution to resolve a problem space where linear and nonlinear systems reciprocally supply complementary patterns of control. What's more, we argue, that linear/nonlinear pattern relations reflect an order typical in Nature. While debit elements define change in material space, credit elements assign meaning in radiated time. Debits and credit form binary rela- tions because the rules of order in material space change in a universal, linear pattern while the rules of order in radiated time change in unique, nonlinear patterns.

We would like to have said "mathematical group" but we are not yet able to show in a formal mathematical way that bookkeeping is a system of systems made up of Abelian (i.e. debits) and non-Abelian (i.e. credit) groups. Our sense is to use the term `system' to reflect a pattern in which a system of systems, as possibly grammatical groups, forming pattern language. We certainly encourage the so inclined to take up what we believe will be a fruitful subject of study: the relationship between mathematical groups and pattern languages in grammatical systems.

Debits/credit relations are balanced by (1) artifacts trading energy be- tween material components in space requiring sequential, linear interpretation and (2) ownership trading energy between radiant coordinates in time requiring holistic, nonlinear interpretations-the intellectual switch by which mean- ing changes instantly, with little regard for mechanical consequences tied to an intellectually switched decision. Commerce must relate eco- nomic resource production, as fact, to intellectual historical policy, as inter- pretation-the story image. Traditional double entry bookkeeping, we will ar- gue, reports paradoxical linear/nonlinear changes as artifact/ownership in a binary relation where balance yields a value basis as "capital." Capital sets ar- tifact equal to ownership regardless of which, in any particular context, changes.

Working out an underlying model to serve as bookkeeping's framework has two goals in mind. The first is to extend bookkeeping language to include a network compliant business model. The second is to resolve philosophic confusion relative to intellectual property. Today's preponderant cultural philosophy is still set by scientific experience over the past 500 years in which linear systems were thought to be "Science"-even though quantum physics, whose validity few scientists doubt, approaches its 100th birthday. Philosophy seems last to change.

Our bookkeeping research has reinforced our idea that commerce creates maximum cultural value when trade balances complementary linear/nonlinear relations. A computer program is a nonlinear digital switching device that affects such balance. Computers changing cultural balance manifests itself in a new type of intellectual property that calls for a need to implement the balancing relation. Bookkeeping language itself sheds new light upon digital switching in the way debits and credit resolve artifact and ownership refined to track intellectual property contracts. Although we now argue that bookkeeping language is not mathematically based, we do believe that its primary grammatical base contains complementary mathematical language.

Generally speaking bookkeeping's debits/credit system demonstrates that mathematics itself is a pattern of modeling mechanical facts, while simultaneous grammatical patterns model informational interpretation. We will identify what we believe forms the break point in logical types between the pattern languages of mathematical fact and grammatical interpretation.

But to change a mindset balance entrenched in mechanical/mathematical superiority, requires equally powerful reasons to change. Our study suggests that a need to effectively manage ownership of computerized, commercial communication networks is that reason. Bookkeeping that commercialized artifacts, in an industrial age, we argue, must now be extended to commercialize ownership of intellectual property in a communication age. Bookkeepers know how to account for economic production. We must learn to account for complex communication policy.

Our model suggests that where artifacts give rise to economic production, ownership gives rise to an intellectual policy. Where economic artifacts are individual products, intellectual ownership is rooted in common law. Artifacts primarily form linear systems; ownership primarily forms a nonlinear system. Bookkeeping tracks the two in a binary pattern system in which linear/ nonlinear languages play complementary roles in primary/secondary relations. This solution argues that to focus one element of a simultaneous binary pair, one chooses the linear or the nonlinear system to receive one's focal interest. "Primary focus" is the concept "context" recognized in pattern study . Am I, one must ask, looking at this transaction as artifact in the debit system, or, am I looking at this transaction as ownership in the credit system? The binary nature of primary/secondary relations, we show, use a fractal focal image. Recursive fractal images, as context types within context types, enable interpretation to whatever degree of precision one wishes to invest in analytical analysis of a particular recursive context pattern.

Binary systems are confusing to follow. And in fact our goal is to study them, build them into tightly working applications, and then live the pleasure of letting them be, which, for most of us, a computerized culture makes possible. To communicate within a binary reasoning paradigm, we introduce a logographic language developed by the Chinese 3000+ years ago. The I Ching language fits a model of change that is both binary and covariant. Content and context, as binary relations, can be either linear or nonlinear systems. Chinese literature calls the binary types "The Yielding" and "The Firm." Later these came to be known as "Yin" and "Yang." Translating the symbols to bookkeep- ing, yin is the debt system, yang is the credit system.

The I Ching logogram, we argue, is based upon complementary relations within a unit entity-family, for example, may be structured by a complementary marital relation between female/male, as wife/husband. A contract binds unit members into a complementary set forming a unit whole. Each member of the set can vary independently of the complementary member in the set. We name this open relation a covariant system-in contrast to invariant system members, such as occurs in classical mechanical change, the complementary reference frame is fixed.

Fractional numbering demonstrates a pattern of a binary unit. In a fractions denominator and numerator, each value can vary independent of the other. While each aspect varies, a binary mathematical relation sets unit value. Bookkeeping reverses the pattern of binary logic by setting 'unit value' to one-numerator equals denominator. This pattern of forced equality forms a breakpoint separating mathematical and grammatical language into analogue and digital types of logical patterns. Analogue logic changes in linear-sequential-order, working from the bottom up; digital logic changes in nonlinear-holistic-order, working from the top down-setting unit value, resets subordinate values in a holistic order of change among a membership hierarchy. Analogue logic treats space value as unique and time value as universal; digital logic treats space value as universal and time value as unique. And, finally, we argue that digital grammar works because polar balance is itself a natural order-energy structure balanced into matter and radiation. The I Ching's graphic language ideally expresses symbols in "top down" digital implementation of grammatically controlled language.

Our version of I Ching's logographic language has just five characters, all of which play a role in the logogram expressing a fractional number: The differentiated meaning of the five logographic characters in the language are described in the graphic image below:

The five graphic characters symbolize:

Mathematics and grammar each contain analogue and digital applications: the English language, for example, sets its characters in sequential, analogue relations to assign meaning onto unique symbols. Content is defined while context is assigned. Scripting grammar is extremely flexible bottom up language. Graphic grammar is equally valuable digital logic expressing timeless, context driven images. Graphic applications, such as I Ching, refines a character set that describes relations as they occur in a universal order. Script generates grammar that is ideal to interpret cause and effect description; graphics describes grammar that is ideal to interpret whole images as a tag system administering recursive context. Bookkeeping grammar integrates commercial profit into differentiated balances essential to create a whole image of ownership value.

Our grammatical model will work its way through an ideal bookkeeping system to demonstrate how a natural formation of complementary languages, outlined above, serve to express how artifact behavior and ownership identity is reconciled in trade.

Grammatical Model

Bookkeeping records work/image changes. The bookkeeper is charged with recording simultaneous `economic' and `intellectual' history, as an entity conducts business.

We modify "work" by the term real to distinguish resource production defined into artifacts as functions of mechanical behavior. "Real" is artifact as material energy-fact. Bookkeeping's debits define real `work' as a value/identity pair. "Work" also ties artifact to component individuals qualified to supply differentiated "work" behavior skills.

We modify "Image" by the term "abstract" to distinguish historical policy assigned to ownership as a method of informational identification. "Image" expresses ownership as radiant energy-interpretation. Bookkeeping's credit assigns "image" identification/value. "Image" in this way tells the story of owner- ship in abstract coordinates where any grammatically ordered physical marker system can serve to distinguish such ownership. Of course, from a user con- text, that "image" marker must be economically generative, as shown in the logogram below:

Where "entity as artifact" is receiving `generative behavior' assigned to "work", "user as owner' creates "descriptive identification" to define "work". Twin views of context need explanation. `Work' is simultaneous to two views-focal images. User and entity "work" interests differ, telling why double entry book- keeping must be entered double-once for each interest.

"User" obviously supplies mechanical "behavior" to improve artifact as "work". But the "user/artifact" contract is interested in "user" skill-uniquely coded to control behavior. We don't hire carpenters to repair watches. We hire differentiated `behavior' specific to "work". Therefore the "artifact" context receives "work" in the form of "generative behavior" while the "owner" context creates "work" in the form of "descriptive identification" - code instructing behavior skills.

Focal patterns also take place in the payment of services. "Entity" creates a value as "descriptive identification" - an "image" marker. "User", in turn, is looking for "generative behavior" from this image marker-will it spend in the marketplace? The system in both "work" and "image" contexts must track user differently from tracking entity, hence the need to double enter transactions according to reasoning unique to members within a context of their binary contract.

The logogram tells us that binary "focus" is an "artifact/owner" relation as members of one context-owner increased intelligent behavior in artifact-simultaneously, an orthogonal "work/image", as real/abstract relations, serves to transform the descriptive identification of ownership markers in one context into generative economic behavior in future contexts.

I "receive" wealth when I supply work to produce an artifact. For example, I "create" an artifact to contain my morning coffee. I identify my artifact "CUP". "CUP" refines the behavior of "ME" - drinking my morning coffee is improved. Simultaneously, I have created ownership capital by receiving an legal assignment of value by virtue of the commercial rules of my culture. "MY" cup. "CUP" is now an economically defined artifact assigned to "MY" abstract image, as owner. If I trade my artifact "CUP" with you, "MY" cup becomes "YOUR" cup. The artifact "CUP" is now within "YOUR" abstract image, as owner. You may now decide to improve your "CUP", for example, by applying a silver plating. You may also trade property rights to "YOUR" cup that you may have improved. You may even trade at a profit, or loss, even if you neither improve nor damaged "CUP". Improving artifacts and trading property rights are image complements each of which can affect unit value.

Bookkeeping defines artifacts, such as "CUP", by tracking expense/revenue change into that artifact as import/export values. The sum of import/export tells me if I am trading artifacts profitably or not. As artifacts are improved, or traded, the bookkeeper assigns balancing ownership rights/obligations as individual property. In bookkeeping language, on one hand "CUP", as artifact, is defined by the contributed value of real work, while simultaneously on the other hand, `PROPERTY', as ownership, is assigned equal value as recorded abstract images.

Double-entry bookkeeping uses a binary define/assign pattern. Bookkeeping's binary pattern language resolves a paradoxical "covariance" between real work and abstract image.

By "covariance" we mean: a binary relationship between variable complementary members that make up the set of a binary unit.

A typical unit entity is a family contract-a household structured by complementary marital relations between female/male, as wife/husband. In general terms, a contract in which complementary roles are played as member-contributors to a unit whole. Within the contract each member-contributor in the complementary set-female/male-that form the unit entity, can each vary independently of the complementary member making up the unit whole. "Covariant" relations contrast with an "invariant" relation. Force, for example, measures component change in mechanical coordinate systems. As component behavior joins giving rise to force, the reference frame in the context of mechanical interpretation remains fixed .

Binary relations within bookkeeping's digital grammar are always covariant. Any change defining value in an artifact must be reflected in an assignment to ownership. A business entity manages "subject" resource/production by which artifacts are defined. Simultaneously, a business community controls "object" historical/policy by which ownership is assigned.

Bookkeeping models a data history on this pattern of individual "subject" management and common "object" leadership, by separating a system of assets from a system of liability. Asset/liability systems are also, of course, a binary relation. In fact, bookkeeping follows a universal pattern language built up of `recursive' binary relations.

Subject/object is an example of "recursive" binary relations. Artifacts are defined by contributions to real subjects. Ownership is assigned by documenting an image object. Subject/object are themselves contexts using the same subject/object pattern . Subject is a work component element contributed to artifact. Object is an image coordinate element distributed to ownership. This recursive pattern of subject/object will go to three levels in double entry bookkeeping.

This logogram depicts artifact "import" as subject, and "export" as "object". "Import", as context, has subject/object attitudes where "resource" import defines artifact value, while `payment' import assigns artifact identity. Likewise, artifact's "export" attitudes can either `payout' assigned ownership in return for improvement or the artifact can "export" ownership as "product". Artifact change in bookkeeping is a debit system. The balancing ownership changes-credit system-will be described next.

To express balancing credit activity permutations our logogram becomes an eight channel system. For every artifact change generating a debit, the ownership system must describe a balancing credit. `Ownership' credit goes either to entity as `individual' or to `common' use. In network accounting, commerce focuses a combination of individual management and common leadership. Banking, government, and other community entities are a part of the commercial picture, working in common. When an "artifact" transaction is an "import", "ownership" must either pay, or promise to pay in the future, for that "import". If receipt is a `payment' in the form of a check, then "ownership" as "individual" increases "liquidity" by that amount. The same set of patterns apply to the export attitude. An "artifact" "export" "product" can be goods or services, stock in the company, payment of a debt, and etc. Where "artifact" "exported" "product" is exchanged for cash, "liquidity" increases; stock sold for cash increases "investment".

Each contextual type in the transaction system is identified by a binary code as shown in the diagram on the right. The value `0' represents an artifact. "0" tells us that this is a level one subject context within transaction as context. A value "1" represents ownership. "1" tells that this is a level one object context within transaction context. The appearance of "0" and "1" later in the hierarchy tell us where the ownership object emerges within artifact, and where artifact subjects emerge within ownership. Money, for example, can be a subject artifact, yet can, in a different context, be an object image. This binary solution to identify archetypal contexts within a complex system leads to effective machine readable systems where binary and recursive context recurs within context.

Transaction types are defined by channels in the diagram-eight trade categories-to be recorded into the journal. The journal is then posted to a ledger. We will pass through this process now, to show how traditional bookkeeping adopted a pattern that strays from a disciplined grammatical/ mathematical model. When we post transaction information from journal to ledger, journal values are assigned plus and minus operators according to an algorithm that serves to add a great deal of useful information in the context of the ledger. Plus and minus signs are unique to ledger object structure, however, and have no place in journal data itself.

Posting The Journal and The ledger The "journal" continues the pattern of binary and complementary control. The "debit" and "credit" define/assign artifact/ownership. Both debits and credit are systems of "identity/value" pairs. But, importantly, following the subject/object pattern, where "value" is the subject of "debit", "value" is object of "credit". Subject logic is analogue; object logic is digital. Real components defined by hard boundaries, as artifact; abstract coordinates assign a soft boundary, as ownership-a marker system that will spend.

When the "journal" records a debit "value" that value represents the action of physically real change in the artifact-money paid out for work-while the debit "identity" differentiates the image of the artifact within a system of artifacts. The credit is different. Credit `identity' defines a physical boundary within a picture image-a message where meaning is carried by a real vehicle, as medium-representing such meaning. I can combine debits in this transaction and call them "groceries" totaling $13.38. I can do this because the debit identity represents an aggregation of parts that behave universally. I cannot do this with credit because credit identity is a composite image, a picture, in which each part contributes unique meaning to the image as a whole. Credit "value" identifies economic worth within a boundary, among boundaries of the system as a whole. "Credit" value, on the other hand, can be combined to determine the image call value.

Journal and ledgers are binary partners. Where a journal gathers working data, a ledger expresses that working data in abstract images - tells the ownership story. The "ledger" naturally follows the binary logic in the I Ching logogram above. South/north hemispheres differentiate "artifacts" from "ownership", as debits and credit systems, while orthogonal east/west hemispheres differentiate "assets" and "liability", as the hard/soft boundaries of artifact/ownership.

Crossing hemispheres create quadrants as "import/export" debits and "individual/common" credit. You recall that there are no plus or minus signs in journal data. Journal data is as it occurs in world of experience. Plus and minus sign assignments in bookkeeping are a function of ledger reports and not a function of journal values. Both paper and computerized bookkeepers commonly make the mistake of (1) putting ledger operators into the journal, or (2) associating plus and minus signs with the debit and credit value columns.

See http://www.saldosystem.se/ for an illustrative example of traditional bookkeeping practices followed today. Peter Reivall, MBA, states: "The double entry bookkeeping originates from Italy. A monk by the name of Pacioli recorded it as an appendix to a scientific work in 1494. The reason why one chose to illustrate debit/credit with left/right in those days is probably, because calculators and computers were not yet invented. People had the use of the quill and a standing desk and the old (traditional) system was the easiest way to add manually.

But why has it taken such a long time before the adaptation to the obviously much simpler plus/minus? . [we define] debit as a positive amount, and credit as a negative one; this definition yields simple columns which directly show the current balances. The ledger journal separates the four different kinds of accounts (assets, debts/equity, revenues, and costs), and each type of account is concluded by an "other" column. This result in the balance line (the total of the columns) forming the balance-sheet and the income-statement. The check-up (the tape of the calculator) that plus = minus becomes the final accounts when the balance accounts and the income (profit & loss) accounts are calculated separately. The profit/loss, appears in both summations but with different signs, as the sum total becomes nought/zero. All programs for computerized bookkeeping work this way."

It is both true that (1) all computerized bookkeeping systems, so far as our research revealed, work in a variation on the method Reivall describes, and that (2) one can produce a general ledger in this fashion from which one can derive Statements of Balances and Profit [Loss]. It is fascinating to hear modern double entry users assume that medieval scholars who, refined double entry bookkeeping, did not have deeper reasons to differentiate debits from credit, other than to separate plus values from minus values into two columns. Nonetheless, there are fatal system costs when associating debits with plus signs and credit with minus signs in the journal data. Most importantly data that would classify work defining artifacts is completely mixed in with data classifying boundary ownership. And so all hope of doing cost accounting to anything more detailed than department, or what is traditionally called a "cost center," is completely lost. More importantly, if we are to build a network com- pliant bookkeeping system, one that tracks intellectual contributions, we must factor into our bookkeeping an element of time. If work definition is mixed in with boundary assignments, how will we ever know what image to assign the recorded time contributions to?

But more important yet, there is the compelling reason to extend bookkeeping architecture to include network business models. And so we now move on to the commercial relationship between entity and user. In doing we will demonstrate how a journal is recorded from the perspective of "entity", yet, simultaneously, can be read from the perspective of `user' when the user itself needs to report its own activity as an entity. The difference between entity and user, therefore, is the focal attitude as the context in which bookkeeping is recording transactions.

For example, when an entity buys supplies, the bookkeeper records a resource purchase. The vendor's bookkeeper, in turn, records that same transaction as a product sale. In this way, when bookkeepers following tradition, take a perspective of entity. But all transactions that give rise to that entity involve a user of that entity. The perspective of entity and the perspective of a user community give rise to complementary systems. Where the entity perspectives fits a hierarchy, a user perspective forms a network. Each user in a network, from an individual perspective, is the hierarchical center of its own universe. Perspective is the way one sees the world. The bookkeeper uses one of two perspectives: individual subject entity and common object users.

Entity as Pattern Langauge

A commercial subject entity is the sum total of all the transactions it experienced from day of birth. So in effect when we use the I Ching diagram to depict "entity" the logogram defines a pattern language shaped by the sum total of transaction types `entity' has experienced. But each transaction type, whether used to buy stock in the company, or work as manager of operations, or sell product, or buy services are each and every one in collaboration with a "user" of "entity" who is a member of a community interacting with that "entity". The diagram for this phenomenon is shown below:

Once all work contributions supplied by individuals along with ownership distributions valid in the community are accountably defined and assigned, the pattern of trade in our commercial system duplicates the pattern of cause and effect in any system of exchange, including a physical system fol- lowing the laws of natural science, where for every action there is an equal and opposite reaction. When trade occurs between entity and user, subject change takes a plus sign while object change takes a minus sign. Note that because subject and object are reversed in our `user' diagram at the point of trade, when `entity' posts a plus sign `user' posts a minus sign. Of course, if `entity' posts a `purchase', `user' will post a complement which in this context is a `sale'. And therein the system maintains balance.

When network bookkeeping is properly set, any change of value in assets, experienced by a commercial entity, is complemented by a change of value in liability, experienced by a community user. Double-entry is rooted in this pattern of action/reaction between individual entity components and a rela- tional environmental coordination described in a universal contract language. The above is a complex example of the fractional unit value pattern, typi- cal of the example with which we began our presentation of the Grammatical Model. Individual entity, as artifact, is a real work example of the denominator. Common users as owners is an abstract image as numerator. Because the lan- guage of interpretation uses digital control grammar in bookkeeping, each member-denominator as subject and numerator as object-set to a unit value of one in each transaction change, is continually adjusted for the covari- ant activity of the complementary member in the binary unit contract.

Once a binary pattern is set and codes are assigned to each archetypal context of change through which transactions can flow, routine coding can cre- ate a single journal of transactions capable of reporting ledgers for an entity, or for users of that common entity. (Recording intellectual change among users is new to bookkeeping.) Once community level accounting is in place new com- mercial capabilities can be enabled. For example, ownership of a rules based software system, used by the entire community, can be distributed on a merit basis to the actual contributor members of that particular software system in that particular community. This works because debits and credit interpreta- tion, focusing context within context, can be applied to any level of detail users of the system are willing to invest to know their individual contributions. A community of owners can be made up of many entity types. For ex- ample, the ability of a bookkeeping system to extend commercial influence into a culture requires a governing entity to make and enforce rules of ownership.

This, to date, is done by government. But we will argue in Goal #2 that gov- ernment control is not a practical solution for large software systems. Other important entities are banks and brokerage houses. There are also manufacturing, wholesale and retail entities. In fact, artifacts may have a great number of overlapping ownership stake holders as raw resources move into products circulating in the marketplace. A house, for example, may be owned by a landlord. The use of the space within the house may belong to a tenant by virtue of a lease agreement. There are countless examples of such overlapping ownership boundaries that a Network Compliant Bookkeeping System is capable of serving to distribute the power to make and enforce com- mercial rules.

But few commercial entities are more important to current cultural inter- ests than entities able to control common contract language of a commercial communication network itself. This, in effect, is what rules based software systems, such as operating systems, in fact do. Owning the intellectual rights to commercial communication systems is to own the power to `legislate' rules that such a commercial system will enforce within a community of professional users.

In an industrial age, rules governing communication's commercial owners could be reasonably managed by government regulation. Witness the FCC, SEC and any number of others. But, again, software changes both the book- keeping requirements and the question of where commercial rules and laws are best regulated. Software lives in a different dimension than does the economic artifact of a mechanical/industrial age. We will study this argument in more detail in Goal #2, Creating a Network Compliant Bookkeeping System. Summary of The Grammatical Model:

Bookkeeping traditionally accomplishes its record keeping fete in a re- cursive pattern of binary relations where the measure of wealth is a balance set by individual assets and common liability. Bookkeeping grammar uses a four part strategy of `capital', `debits', and `credit', where capital is of two types. As- set capital generates the economic value recorded in debits, defined by work contributed to artifacts. Liability capital describes the intellectual identity re- corded in credit assigned into images as distributed ownership. Using a basis pattern to measure covariant binary relations is different in principle, for example, from using force to measure mechanical change. Force, as a sequential measure of mechanical change asks an observer to maintain units of measure such as foot/pounds, or feet per second, depending upon the content of context, of which there are many possible types of units.

Using equality as a basis of unity in binary relations, the bookkeeper draws upon an order in nature where living systems become whole as functions of complementary balance, typical, for example, of female/male in a cultural order, or gravity/electrodynamics in a natural order. By establishing capital as debits/credit value in complementary pairs, the bookkeeper can easily advise the business entity as to whether capital is in growth or decay, for that entity. This simple pattern may explain bookkeeping's monopoly as the business con- trol language of choice.

The question bookkeeping theory now asks-the foundation of covariant logical relations-"is debits and credit, tracking economic artifacts and intellectual ownership, a convenient bookkeeping construct, or is there a distinction inherent in complementary orders of natural phenomenon?" By arguing for a grammatical basis for bookkeeping systems, we are, of course, arguing that an economic and intellectual relation is in the nature of trade as a natural phenomenon. Therefore, patterns of study in common mathematical use, that regularly solve problems where `energy' is a basis to measure natural change, ought to work equally well to solve problems where `capital' is a basis to measure commercial change.

The pattern of equivalence where gravity/inertia are translated into energy is typical of a pattern of equivalence of debits/credit translated into capital. By establishing bookkeeping's covariance, future bookkeepers may draw upon a wealth of scientific study already worked out relative to covariance. Simultane- ously, mathematicians can use bookkeeping logic to establish a pattern of grammar to classify context in complex problems of analysis. One area that we expect will be particularly fruitful is Group Theory.

All of the bookkeeping practices offered in the above grammatical model have been coded into a prototype bookkeeping system. What's more, all argu- ments have been tested with real world data. We find nothing to stop this level of bookkeeping from being implemented at the Internet level. In fact, the major difficulty to be overcome is not its technical barriers, it is its cultural barriers. Cultural patterns that voluntarily accept a network business model promise to be a tough sell. They ask us to extend an imagined philosophy we did not cre- ate. Yet such cultural change is essential to balance control language change presently strained by the proliferation of software network monopolies. And the corrections, of course, must occur in a free market. We study the free market perspective, as a binary system, in Goal # 2.

"I think the connection between information theory and thermodynamics will hold up in the long run, but it has not been fully explored and understood. There is more there than we know at present. Scientists have been investigating the atom for about a hundred years and they are continually finding more and more depth, more and more understanding. It may be that the same will be true of the relationship we are speaking about." Claude Shannon, as told to Jeremy Campbell, Grammatical Man, pg. 52, Jeremy Campbell, Simon and Schuster, 1982.

Stated Objective: Write, in pattern form, bookkeeping's pattern of integ- rity, when compared to patterns in mathematical form and patterns in thermodynamic energy transformations.

Goal #2, Create a Network Compliant Bookkeeping System.


How do complementary logical patterns manifest themselves in a market place?

Goal # 2 presents a thermodynamic model of heat exchange as a binary pattern of marketplace types. We will argue, based upon the grammatical model in Goal # 1, that the commercial marketplace brings to life "hard" boundary types typical of analogue logic defining artifacts and "soft" boundary types typical of digital logic assigning ownership. We then argue that comple- mentary hard/soft boundaries give rise to complementary open/closed market- places. "Open" markets find artifacts in head to head mechanical competition. "Closed" markets find owners optimizing intellectual property. To paraphrase Eric Raymond: , open markets form a "bazaar" where artifacts are defined; closed market form a "cathedral" where ownership is assigned. Where the open markets play a zero sum game, closed markets practice a win/win profession, intellectually optimizing a digital control language, hopefully, to the benefit of an entire community.

Closed markets are driven by a need to refine the language of a common, digital control language. But who should own this refinement process of com- mon language? Intellectual accountability is a source of great confusion in the commercialization of intellectual property. But software, we will demonstrate, is not the first type of intellectual property to be traded in a closed market. We argue that science, religion, and government use closed markets. The hallmark of the closed commercial market is a single solution optimization of a control language. This holds for all common control language types, including science, religion, commerce, and government.

Network Compliant Bookkeeping

Network bookkeeping is a valuable tool with which to govern a professional community seeking to refine a control language owned in common. Such a control language, typically, is intellectual property within a particular profession. Building architecture, the law, or software development, for example. Network bookkeeping lets a common user community define work contributions and assign image distributions even when an artifact is an intellectual document.

Two time honored cultural patterns drive our need for network compliant bookkeeping systems. We wish to (1) define work to the level of individual contributor-each of us want a fair accounting of property ownership. And we wish to (2) assign rules governing intellectual property rights in a system openly decided by contributing community members-each of us wants a voice in distributing intellectual property rights.

An important case in point is the present practice in the United States of assigning patent rights for an algorithm. An algorithm is a fundamental lan- guage construct. Like a pattern, it can be used to serve countless linguistic structural needs. By allowing an exclusive patent to be assigned to an owner of an algorithm, the user community forfeits an entire segment of their freedom of expression. One certainly wonders if such a commercial policy is in keeping with the first amendment of The US Constitution. But to properly judge such a matter, a judge must understand the underlying technology. Presently, this is a tough call for non-users of technological pattern languages; there is not yet a translation language. Without a deeply worked out pattern language, the inter- pretation of complex intellectual issues, in a particular technology discipline, can only be resolved in fair and egalitarian ways when the judgement is com- posed by user/ contributors in that community. Should such a contract be controlled by a dictator owner, the plurality of decision makers with unbiased voices relative to fair practices become dangerously thin.

Hard and Soft Boundaries, Open and Closed Markets

Our grammatical model argues for artifact and ownership as complements in a covariant system. Now we apply covariance to a thermodynamic model of energy exchange. Two types of commercial transformation yield two types of thermal boundaries, hard and soft. Where artifact boundary patterns form aggregated states, as real subject components, ownership boundary patterns form differentiated compositions, as abstract object coordinates . Where an artifact state change is defined as real work, ownership compositional change is assigned to abstract images. A transforming artifact carries the meaning of energy expended; transforming ownership carries the meaning of energy distributed. The distinction we are making here, for example, is work that builds a house that defines `house' as artifact. A complementary image system tracks the exchange of work energy by assignment of ownership to an image of `house' according to work value contributors. Analogue subject and digital object energy as `house' are vastly different systems. Subject matter is analogue heat defining real energy `crossing' a hard boundary fact. Object ra- diation is digital heat assigning abstract energy to `call' soft boundary interpre- tation ,.

Bookkeeping systems, to date, traditionally focus hard boundary systems where a business entity treats self as artifact. This is likely driven by hard boundaries being primarily a linear aspect of commerce. Software, by contrast, is a nonlinear grammatical control language. Bookkeeping for a software com- munity, therefore, is forced to serve a business entity that must see self as ownership. Using thermodynamic patterns of heat exchange, software is pri- marily an abstract image, but indeed, such software has the power to decide its own pattern of call values. Such power is prone to conflicting interest. This gives rise to intellectual property rights questions new to our culture. Intellec- tual property rights were relatively easy to administer before software became a predominate cultural issue. Presently, software property is treated as hard boundary artifacts owned by individual entities. But this stretches thin tradi- tional copyright laws, and patents, it seems to us, are simply wrong, if not ac- tually unconstitutional. The solution is a bookkeeping system that extends business model focus to include soft boundary systems.

There has, of course, always been ownership of intellectual property. Music, books, and works of art, for example. But typical of economic artifacts, in most mediums, copyrighted art works still compete head to head for eco- nomic survival in a free enterprise marketplace. And so while the artist is pro- tected, one's collection of artifacts among artists enters into a free enterprise competition with other artists. Software is different. Treated as artifact, soft- ware resembles a governing system. A large software program, like an operat- ing system, once in use, finds it effective, for a host of cultural reasons, for that program to be protected, rather than to force a head to head competitive chal- lenge, as occurs in open markets. In other words, software needs a free enter- prise solution that focuses the soft boundary model, typical of ownership, and not the hard boundary model typical of artifact production.

We therefore propose an argument that would let two types of marketplace naturally form two types of free enterprise systems. "Open" markets where artifact owners trade goods and services in full head to head competition. "Closed" markets where ownership contributors trade intellectual property in synchronous professional coordination-competition for roles. Take govern- ment, for example. We have no intention of putting the US Constitution in head to head competition with a competing ruling contract. But we do vigorously compete among professional political types for roles that would refine The Constitution. Publicly funded scientific study is very much in this market paradigm. And so is a religious system, with its rules based scripture and professional theological interpretation. Large software programs are that sort of system. And in most cases it is imperative that such rules based systems do have the protection of a closed marketplace. Network bookkeeping enables such closed markets because it has the power to track the owner/contributors in order to determine whose voice in the legislative process is essential to these big systems. Naturally, typical of political competition, professionals will compete for ownership roles in constitutionally based, open software contracts.

There are many reasons for the imperative support of a closed market for an operating system. One example is the secondary economic service industry that a large software program feeds. Many businesses, both public and private, work for years to build products that are wholly dependent upon the survival of a hierarchically super-ordinate rules based system, such as an operating sys- tem. If an operating system is wiped out by head to head competition, the in- nocent contributors in the secondary support market are wiped out along with the primary system This is too much for a cultural group to lose, commercially. An effective solution is for user/contributors to own the super-ordinate contract on an internally competitive basis. In other words, a user community competes to optimize the operating system for the benefit of the entire commu- nity. Again, we use the analogy to government. Even though a government is, as an individual entity, a monopoly, free and open government that we enjoy in the United States is indeed a richly competitive system. Instead of competition between governing systems in an open market fashion, we compete to play roles changing the language-The Constitution-within a closed market. Our goal in this exercise is to optimize language. Every politician that runs for elective office understands the effectiveness of this type of competitive paradigm. Inter- nal competition that occurs within closed markets, we argue, is equally as ef- fective as external competition that occurs within open markets. External verses internal competition, as open and closed markets, is in fact a natural re- finement pattern that has always existed and is capable of sustaining valuable free market forces within emerging software communities.

But it is important to note that government and commerce, though they may use one same closed market pattern, are in fact two different systems. To govern a political body and to govern a commercial body is to serve different cultural needs and desires. Practically speaking, commercial boundaries and political boundaries tend to not coincide. Politics favors geographic limits. A commercial body, like scientific and religious bodies, need to transcend fixed geographic boundaries. Commerce, driven by people's need and desire for di- verse products and service, equally naturally enjoys crossing geographic boundaries so naturally important to a political body. Where politics defends the hard boundary, as estate, commerce extends soft boundaries, as a free en- terprise markets. And so, the essential geography of politically free markets, which we so effectively divide into nation, state, county, city or town to define political interests within a political body as a whole, tend not to define the in- terests of a simultaneous commercial body. Yet, just as the citizens of the United States own the United States, rules based software systems, as closed markets, must also be owned by someone-must have rules defining the con- tract by which ownership rights can legally be assigned and reassigned within the soft boundaries of an intellectual unity.

Dictatorship Verses Constitutional Control

Governing intellectual rules based property, like governing political rules based property, we have two types of organizational possibilities. The owner may be an individual, as hierarchical artifact, in which the governing entity is essentially a dictatorship, or ownership can be in common, as network owner- ship-a constitutionally based pattern. Typical of a free government, the body of owners of the open contract ought to be made up of the community of con- tributors we call "users," where `user' includes both primary and secondary beneficiaries of the commercial software system itself. To have a well ordered network ownership, bookkeeping systems of the future must be extended to in- corporate the pattern language presented in Goal #1.

Consider an operating system subject to community control. That community will want to be competitive even in a closed market. Maintenance contracts and iterative refinements can then be defined and assigned. Who, within the community, will have that authority" Within a closed market community there will have to be a commercial open contract in the image of a shared politi- cal contract as, for example, in the US Constitution. The control voice in the US Constitution is the US citizen-one voice, one vote. But democracy will not work for shared commercial contracts. Merit is the basis of commercial trade; how could it be any other way? The network compliant bookkeeping system must be capable of accounting for merit. If a shared commercial contract is to be a closed market, internally competitive, meritorious voices within the con- tract community must decide the rules of ownership for that community. Like all control languages, this power cannot be inherited. It must be earned anew with each generation.

A free market software solution stands in contrast, for example, to a product like Microsoft Windowsc. The Windows operating system is owned as if it were an artifact by a single entity, Microsoft, Inc. Even though the Windows architecture has a huge number of contributor/owners who are intellectual stake holders in the Windows environment, the rules and laws governing Windows, as operating system - the application program interface-is in complete dictatorial control of the single entity, Microsoft, Inc. Therefore, contributors who place their economic survival within the Windows's ownership image, do so at the risk of being legislated out of existence by future decree from Microsoft, with no voice in such legislation. And this risk is fact whether one is a software contributor or a business user, such as a travel agent. Company owned pattern languages, typical of Microsoft Windows-there are pres- ently many such monopolies-are ideally positioned to take over any business subject to their control. The dictator, by the nature of the market pattern, is in control. Such a model-professional user/contributors pinned under a lion's paw-when more clearly understood by the professionals working subject to such a hierarchy, may find themselves in search of more egalitarian alterna- tives.

One such alternative, we believe, is enabled by a network compliant bookkeeping system. We know that we cannot manage what we cannot measure. The lack of a community based bookkeeping system leaves the present commercial culture no alternative but to use the tools at hand. The result is that many network systems, following a model identical to Windows, treat a network's own control language, as an individually owned artifact. A network compliant bookkeeping system offers a level of accountability to balance traditional head to head competition in an open market with a competition directed to refinement in a closed market where competition for change determines ownership itself. This is a fundamental role in an object community.

In conclusion, relative to marketplace types, we believe that cultural patterns are fueled by culture's language system. And where the cultural lan- guage system, by long standing tradition, has been implicitly owned by its community of users, software is changing that tradition. Software development is creating language systems that are explicitly owned by individuals. This raises a question of legislative rights relative to these languages. Given the choice, we would certainly opt for a free market decision process in such an important commercial system.

By extending the bookkeeping language to enable a community of users to decide fundamental language rules in culture, and combining that legislative process with free enterprise initiatives, like the open contract in a closed mar- ketplace, we can maximize our chances of maintaining a plurality of voices who will share our values and make rules that will inspire the maintenance of free enterprise commercial patterns we all cherish. That, without losing the rich and positive value software brings to culture

Stated Objective: create an analysis and design of a working model based upon the prototype model previously worked out by one of our own senior investigators.

Goal #3 Rebuild The Prototype System as Proof of Theory.

The bookkeeping prototype system was worked out by Dan Palanza. He designed an approach to bookkeeping that would organize a community of building contractors and subcontractors united by a common goal to build finer homes. This goal needed a way to enforce community based rules that would transcend individual building contracts. Regardless of which plumber, electrician, or finish carpenter, for example, won a particular subcontract bid, certain community based rules, Dan found in practical experience, needed to be included in a community based open contract. This open contract, he believed, will benefit both the buyer and seller within the primary building contract. One such rule might cover the cost of training apprentices. Another might cover the cost of leadership contributions to the community itself. Another expressed a need for third party bookkeeping. Community based rules are particularly im- portant when technology is incorporated into the small business contractor paradigm. Shared technology to administer building contracts is an example of soft boundaries forming a closed market. But no such ownership network, to his knowledge, had ever been formalized into a bookkeeping system.

Since there would be many simultaneous building contracts in which the body of contributors to each contract would vary according to their success in bidding for both prime and subcontract work. A more capable bookkeeping method must determine the voice of users in the community qualified to decide a common policy. A prototype system, used by a small community of 5-15 users, for about ten years, was able to demonstrate that the accounting of intellectual property in the form of a community based pattern language was indeed feasible. Phase I research has extended that earlier work in a number of ways.

Bookkeeping records a business history by building a journal of events. That history is reported in a series of ledgers, the General Ledger being the most prominent. Journal data differs from ledger reports following the work/image underpinnings of the bookkeeping pattern language described in Goal #1. The journal consists of analogue sequential elements of artifact definition and ownership assignment. Journal data is an aggregate list of transactions in real form while the ledger composes an image of that experience in normal form. By "real" and "normal" we mean that in journal transactions a sys- tem of identity/value pairs report each transaction. In practice this results in multiple instances of a single identity. The ledger report of the journal identity/ value pairs are condensed according to the need of a particular ledger report.

For example if an account identity/value pair has changed ten times within the journal, the account name may appear ten times in that journal, but will appear only once in the ledger. Once listed, the account value will change according to assigned value in subsequent journal occurrences.

A journal, by tradition, is a listing of transactions for a single business entity. The prototype bookkeeping system is able to demonstrate that indeed a single entity limit for a journal is only a tradition and not a limit of double-entry's pattern language. Though the problems in this approach were theoretically worked out in the earlier prototype, during Phase I that prototype was reworked and a working journal based upon multiple entities is now a working system . That system will serve as the analysis and design artifact to be used to translate those capabilities to Internet capable code.

Business Model Patterns

Throughout Phase I we held pattern study group meetings both on Cape Cod and in Somerville - a suburb of Boston. The major work of the study groups discussed the patterns in real world experience, as they drove the design of an eight channel bookkeeping application. Where the Cape Group met with people from a wide variety of disciplines, the Somerville group met with people expert in Design Patterns used in object oriented software applications. The Cape group studied pattern issues of a universal nature, such as types of documentation, as they related to types in the business model. The Somerville group did a comparative analysis of patterns such as State, Strategy, Composite, and Singleton as they occur in the built world and as they occur in systems such as object oriented programming. The logogram below depicts "subject as artifact" as a system of defined "state as resource" patterns. "Subject as artifact", in its object attitude, depicts "strategy as product" by which defined resources are substituted into product algorithms. Simultaneously, "object as ownership" as a system assigns `com- posite as history'. Again, simultaneously, "object as ownership", in its object attitude, depicts "singleton as policy".

Patterns and pattern languages work for the same reason debits and credit works. They separate the study of analogue components from the study of digital coordinates. The pattern format introduced by Alexander, and followed by the object oriented programming community, fits the subject/object pattern quite naturally. Alexander describes a pattern as a context in which a set of forces is to be resolved by a solution. We agree with Alexander's finding but offer an extended terminology that fits a binary grammar, as a primarily digital system described in Goal #1. We therefore continue to argue that subject work is a system of components - an aggregate group-coordinated by an object image composing a solution.

We will now apply the same recursive binary system to pattern structure that we applied to bookkeeping structure. This calls our attention once more to the binary pattern in the pattern form itself. Patterns work because there is a set of physically real components to be resolved through the use of a common interface, or solution, made up of physically abstract coordinates. Therefore we can look at the business structure itself, the bookkeeping format, as a pattern language based upon a set of universals that ought to work for any structural entity that takes on the characteristic of having life over time-the power to reverse entropy.

An Eight Channel Bookkeeping System

The analysis, design, and coding of an extended prototype system took place throughout the grant period. In my research from 1994 - 1998 Dan developed a deeper understanding of the binary pattern language worked out by the Chinese in I Ching. Concurrently, Dan is deeply involved in the software patterns community, where the role of patterns is focused upon object oriented software. Dan attended five patterns conferences over the years from 1994 to 1997 and regularly attended pattern study groups in both New York, Boston, and Cape Cod.

His prototype bookkeeping system at that time was based upon a four channel design. The four channels differentiated four types of transaction: purchase, sale, receipt, and disbursement. But creating working transactions in that system involved too many exceptions that indicated a need for a more adequate underlying framework for the bookkeeping system. In that research period, prior to Phase I of the present grant period, he concluded a need to redesign his prototype model into an eight channel system.

He began the analysis phase of the prototype rewrite one month before the Phase I grant period began. That analysis was completed in the second week of Phase I which began in January of this year. In the first two month period of Phase I, He worked out what would become the grammatical model described in Goal # 1. In the second two month period of Phase I, He coded the eight channel pattern language into the prototype system as it now stands. The final two months were spent testing the system in real world bookkeeping situations.

Goal # 3 divides into two major challenges.

  1. One is to build an eight channel bookkeeping system.

  2. The other is the generate a journal that identified both the entity and the user in each transaction.

With the entity and the user identified, Dan felt that he could describe ledger reports for (1) the transactions of different entities recorded within the one journal would enable the system to describe a ledger for all entities, or for any one entity member and (2) the flipping of identity channel codes would enable the system to describe ledger reports for any one of the users, as if that user were an entity in the system. Naturally the second feature included cases where the entity in one transaction may appear as a user in other transactions.

The goal of a community based journal system was accomplished well beyond expectations, proving the worth of the I Ching pattern system upon which the work was based.

Stated Objective: Use our prototype software to administer our own grant expenditures, to further create a community based joint venture in the image of the network business model being build.

Goal # 4 Build a Network User Community

This goal has been the most difficult part of our Phase I work. Yet in many ways building network user communities holds the greatest promise for our research. The difficulty is cultural. The hierarchical business model has been an exclusive tradition in the West since double-entry bookkeeping was worked out in medieval Italy in the fourteenth century.

Double-entry bookkeeping supplied a common "Language of Business." That language was easily adapted to the hierarchy traditionally applied to a military model of business management. With communication technology as our driving force, today's culture must look to apply bookkeeping's effective binary language to an equally valid business model that uses a network business architecture.

Our goal is not to replace the hierarchical business model.

Our goal is to complement the hierarchical pattern with a network pattern.

Conducting business in a closed market, where competition is for refinement of intellectual property, is a new idea. Two schools of commercial architecture would offer two types of competitive business model to choose from. The context type - open or closed-applied in a free enterprise market, will then decide which architecture of the two choices ought to be applied. In any given context, the two are complements, so in effect they both are winning. Nonetheless, by properly applying each winning architecture, free market forces of open and closed economic competition, according to context, free enterprise will always be applied within the architecture of focus by a particular group.

Using the Phase I grant expenditure to create a community based joint venture following the architecture of a network business model did not meet its goal. Nonetheless, much has been learned toward that end. We have found that a community based architecture is language driven, as opposed to the individual based hierarchical architecture that is behavior driven - remember the hierarchical paradigm has roots in the bullwhip. What's more, to drive language community systems the language must be sufficiently complete in order to be generative. Whereas behavior that supports a hierarchy is more immediately generative, at least on an individual basis.

At the same time we have laid a proper groundwork for the future. The first item on our agenda was to set up a server on the Internet. Pattern-Study.Com, OnCapeCod.Com, DistributedSystems.Com are all a part of our goal for building the community based joint venture. Though the goal of the server began as a need to supply local business people with the services essential to a network business model, the server has done its real work in connecting people in the open source community later in the grant period.

We have found potential users who are attracted to network business architecture. And we have worked vigorously with these individuals to demonstrate the value to themselves, their families, and their community of conducting some portion of their business goals in a network compliant business model. The challenge to solving this culturally complex problem has led us to a new strategy. We call it "productization."

Our original Phase II goal called for building a bookkeeping product.

Now, in fact, we find a more compelling product is a management system that would form a network structure that will use the open commercial contract approach. This can be done using the existing prototype software. Once the language of the open commercial contract is refined and documented, the construction of a large scale Internet application of network compliant bookkeeping will be quite straight forward to design and implement. In essence, what Phase I has taught us is to put the people first. Network architecture is not built in theory, it is built in fact-people. It requires real people and real artifacts to work out its abstractions. The subject network needs its parts in place in order to function in an intellectually driven paradigm. This calls for too many desperate parts to begin with a theoretically whole object. Hierarchy can be theoretically formed; networks, we now believe, are experientially formed.

Our Phase II product, therefore, is to administer a business small enough to manage, yet large enough to form a complete network structure. Once the critical roles of such an enterprise are well documented the architecture can be applied to greater and greater business challenges.

A challenge within the problem space of cultural change is the notion of simultaneous complementary systems that force upon the culture of the future a binary language, just as a binary language has been forced, by its effective- ness, upon software development. When one is a buyer in a commercial trade, one has enough to think about being the buyer without simultaneously speculating about issues of concern for the complementary seller. This pattern carries over to every context in life. A partner in a relationship rarely fully identifies with the issues of a simultaneous partner in that unit relationship.

This level of communication among people in binary relations is a critical goal if the new bookkeeping extensions are going to bring positive value to culture. Without this level of binary awareness, on the part of users, network bookkeeping shows little prospect of becoming a useful product. But with binary acknowledgement the product market is almost without limit. When one studies such issues, as we have, one finds that there is ample time to reflect upon issues of complementary reasoning, not subject to one's conscious focal plane in a particular context. And both this capability and this desire on the part of people in a culture is of fundamental concern to a culture that would refine its pattern languages.

Cassius J. Keyser, in an essay titled, The Group Concept, has this to say about systems relative to mathematical group theory: .it is convenient to use the term `system'...the term system means some definite class of things together with some definite rule, or way, in accordance with which any member of the class can be combined with any member of it (either with itself or any other member). You should note that there are only three respects in which two systems can differ: by having different classes, by having different rules of combination, and by differing in both of these ways. The World of Mathematics, V2, pg. 1538 James R. Newman, Editor, Simon and Schuster, New York, 1956

See The Timeless Way of Building and A Pattern Language, Christopher Alexander, Oxford University Press, 1977.

I Ching, or Chinese Book of Changes. See translation by Richard Wilhelm/Cary F. Baynes, Princeton University Press, 1950.

We expected a mathematical model. But in double entry bookkeeping, we found, mathematics is subject to grammar.

"The Bookkeeper" refers to the "ideal bookkeeper." Our ideal bookkeeper is developing a machine readable language to increase the scope of bookkeeping capability. This calls for both time tested terminology, as well as introducing terms to define levels of structural differentiation not essential in economic bookkeeping applications.

Introduction to The Theory of Relativity, Peter G. Bergmann, Dover Publications, Inc. New York, 1976

See A Timeless Way of Building and A Pattern Language, Christopher Alexander, Oxford University Press, 1977.

See See http://sagan.earthspace.net/~esr/writings/cathedral-bazaar/

An important distinction is that where differentiated aggregate states live in real space, integrated data composition, as image values, can be generated on an as needed basis in imaginary time. Generating ownership images in imaginary time is a fundamental role of computer systems and the source of interest in who shall own this intellectual property.

For work on the distinction between `crossing' and `call' see The Laws of Form, G. Spencer Brown.

For work on the distinction between definition and assignment that clearly explains the role of time in distinguishing between immutable and mutable objects (what we are establishing above as subject and object) see Structure and Inter- pretation of Computer Programs, by Harold Abelson, et al, MIT Press, Cambridge MA, 1996.

When we say "working system" we are referring to a prototype written in a obscure language call "Fred." The `Fred' language is not scalable to internet based solutions that we now have in mind. However, bookkeeping principles true for the prototype will also be true for a full system and will serve as a specification when that system is built.

See Design Patterns, Gamma, et al, Addison Wesley, 1995 Page 5 of 1 pages