An Introduction to Capital Flow

Capital flow, the moving and swelling and shifting of value, is an emergent property of the interaction between humans and money. Wherever we find money, we find dynamics and properties of capital flow, or rather, how money moves. Where the concept of money is absent (as in historical pure-trade economies) there is no fundamental object of money to move, measure or analyze. So, while capital flow overlays virtually all aspects of human trade today, it fundamentally emerges from the interface between humans and money, not humans and trade. Both humans and money are required in order for capital flow, as we see it around us, to flourish. Likewise, piles of money laying around in accounts around the world after humanity has been wiped out due to climate change would not apparently express the same dynamics of capital flow. (If all that post-human capital were to be “moving around” through some system, it would also require a post-human cause ⎼ like “artificial” intelligence ⎼ and post-human infrastructure, in which case it would also carry with it non-human properties and likely a whole host of new capital flow dynamics; dynamics unconstrained by the limits of human reasoning.) Thus, capital flow, as we live with and experience it at this point in human history, carries with it base features intrinsically related to humanity and the concept of money within human psychology.  The reason it is how it is, is us

We are all the reason capital flow as we know it exists as it does today, all of us people who are living in the present time along with everyone else stretching back to antiquity. We are all complicit through historical participation in the only available economy, by default. We taught ourselves how to use trade, and then we created and taught ourselves how to use money. Therefore, our collective aim ought to be to integrate our growing understanding of human psychology and evolution into our understanding of market dynamics and capital flow. Since we cannot truly comprehend aspects of economic existence in isolation with a single equation, a theoretical phenomenon which never actually occurs in reality, we must strive to reject the entrenching rigidity of “simpletism” and adopt a learning-based approach towards our economic participation and policy-making. 

This literature on Capital Flow, along with the LOPSIII business model (pronounced: lop-see), are an opportunity to reflect on the interconnected world around us, and how it is an ongoing project. The more one learns, the more capable one is of adjusting to new circumstances as time unfolds, as it seems likely to keep doing. It doesn’t matter if one’s thinking doesn’t unfold in reality exactly as one predicts; thinking about something at all provides one with a better position to more intelligently adapt to the unpredictable flow of reality. Thinking about something is for your own good, or, in the wonderfully more succinct words of former U.S. Treasury Sec. Tim Geithner, the camera-awkward-yet-sage-like primary mover and critical intellectual foundation of the recovery plan for the ‘08 recession, “Plan beats no plan.”  

Concentration of wealth and wealth inequality are two sides of the same coin. They coexist, and they are mutually codependent; one cannot be without the other. One can find this “coin” anywhere that they can experience elements of capitalism. Countless factors and variables contribute to the economic reality of wealth inequality, and trying to measure and predict those innumerable, constantly-evolving values is an imprecise and shape-shifting practice at best, but still nonetheless a constant practice that countless millions engage in through the fields of Big Finance, Big Tech, Big Pharma, Big Oil, Big Insurance, Big Data, Big Everyone… let’s just assume; Everyone Everywhere is constantly trying to “solve” various pieces of the economic puzzle for their own economic gain and profit maximization. We are not here to nitpick or reject those individual pursuits. The problem is more infrastructural and systemic than any single or set of individual business operations. 

The problem is not with the details of any given variable, or company value, or stock price, or the aggregate supply volume of a given commodity. Trying to “fix” any of the values of those details fails to address the system and systemic conditions that produced the opportunity for those details. The problem comes from the fact that capital flow through a business has effects, and those effects are very visible and very obvious, and while everybody is paying attention to the effects, nobody is paying attention to the capital flow itself. And because “nobody is paying attention” to the natural proclivities (form, speed, tendencies) of capital flow, it occurs as it is inclined, continuously, unfettered, and pure

What does it mean for capital flow to be unfettered? Well, in this case, it means that however the flow of capital is outlined in the Operating Agreement of the company is generally how the flow of capital actually occurs, unimpeded and uncontested, assuming the owners and managers are competent enough to actually keep the company solvent and alive. To be clear, the following is how the vast majority of Operating Agreements essentially dictate the general flow of capital within the business: 

All the capital that flows into a company from sales/revenue/other passes through an oft-extensive “channel” (the accounting process) where it is picked away at by various expenses and liabilities, leaving what capital remains to flow into a catchall called something like “retained earnings”, which is basically the owners’ collective pocket. 

There are myriad variations to this formula, but essentially all of them share a commonality: everyone who works for the company gets their earnings paid out as an expense, except for Owner-level individuals, who essentially get control of everything else, and most often they also get guaranteed wages paid out of expenses. Owners’ retained earnings (including public ownership, ie: stockholders) are not an expense. In fact, expenses, in general, are counter-posed to Retained Earnings. Every dollar of capital must go to one side or the other; it either flows out or it remains within, a zero-sum game. The two distinct accounts (workers vs. owners) cannot actually share anything real. Not coincidentally, this mechanism also clearly identifies the income-circumstances of the two sides of the wealth inequality scale. 

What contemporary economic activity in the public markets illustrates can be known as capitalism-as-usual. It is the way things normally are ⎼⎼in this, the “best” of all possible “free market” economies. It is the essential way that the bulk of commercial activity has historically been done for centuries, and as such, it is the capitalism of the beforetimes. It is, and largely has been, the predominant model of global business ever since the introduction of money. The world is long overdue for a new option, a new way to navigate financial reality in the real economy, a new opportunity to healthily and sufficiently diversify the capitalist’s landscape. It is our collective imperative to start shedding the beforetimes and advance into a sustainable future. The LOPSIII model is one such option which can be modified, scaled and distributed cheaply and easily, but we fully entrust that capable minds around the world will produce many more incredible opportunities for more-ethical and sustainable economic activity from humankind on Earth.

[This introduction, collected together with all of the other sections presented here in Capital Flow, represents a 2022-current analysis of capitalism-as-usual and how it may be ethically improved upon, with one such method (the LOPSIII model) regularly incorporated into the analysis for clarity and consideration. The sections can be read in any order and all contribute to an overall comprehension; there is no centerpiece or singular point around which all others orbit. This living document will undergo further analysis, contribution and refinement as the economic environment, market forces and active participants shift and evolve over time. The two original authors behind this document and the LOPSIII model are not academics, economists, bankers, mathematicians, politicians, statisticians, or any other type of institutionalized professional. We didn’t come from wealthy, famous, or well-connected families; we have no sponsors and are beholden to no special interests. This paper was produced from our own research, conducted primarily from resources provided by the US library system, and from our own experience working as wage-labor “nobodies” in dozens of employment situations in cities around the world. Nevertheless, since we believe in the importance of financial literacy and the possibility of a more-ethical and more-sustainable future, tkscm, limited will continue to make perpetually free and available online both Capital Flow and the details of forming a LOPSIII business.]

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