John H, Clippinger, 9/10/19
PURPOSE: MUTUALISTIC COMPOUND VALUE GENERATION AND RETENTION
The designed and encoded purpose of a Reflexive Mutual Limited Liability Company (RMLLC) is to act in the best interest of all its members to generate goods, services and assets, which singly, or in combination, achieve, stable, and measurable value exchange within an exchange network to achieve mutually agreed to outcomes.
In contrast to a C corporation or a Limited Liability Company (LLC), which acquires investment capital to maximize shareholder value to achieve market liquidity, the RMLLC strives to reflexively generate value through internal liquidity and value generation within a mutual organization.
The mutual organization defines the measurable outcomes it wants to achieve for different kinds of assets and services with respect to carbon emissions, affordability/equity and resilience. RMLLCs can differ widely in their selection of assets and services, rights and permissions of members and nonmembers, as well as to relative the priority of different outcomes.
To raise external capital the RMLLC sells appreciation rights to single asset classes – such as energy, housing, 5G, food, mobility, for a competitive market rate of return, with the option to buy back those rights from external investors with a premium at the RMLLC’s discretion.
The RMLLC internally invests such capital in combinations of asset classes, such as housing + energy + mobility on a fair cost-plus basis, which in turn, yields higher rates of return (cost & time reduction) which complements value creation.
Members of the RMLLC purchase “access rights” over a period of time to different kinds of asset classes and services for a fixed price, and when such rights become fully vested, they have perpetual access to such assets and services. Members can sell such rights to other members, borrow against them to invest in other asset classes and services or upgrade to other assets/services types.
As the RMLLC achieves ownership of more and more diverse assets, it is able to collateralize a reserve basket of asset tokens and thereby, reduce the cost of capital and internally finance its acquisition of new assets.
With the increasing value of its reserve tokens, members can build financial equity and resilience over time, and at the same time increase its appeal to external appreciation rights investors. By increasing its reserves and precisely calculating member credit risk, it reduces counterparty risk and hence the cost of capital.
Over time, it is anticipated that the value of the RMLLC’s reserve token will sufficiently appreciate in value and demonstrate stability and liquidity that outside investors will choose not to liquidate their appreciation rights tokens into fiat currencies but convert into RMLCC tokens. These tokens can be thought of as a kind of more stable and secure preferred stock (a hybrid instrument that can perhaps have characteristics of both a debt and an equity instrument) or kind of debt with subordination rights (payment prioritization) designed to encourage the conversion of fiat into the tokens of the RMLLC.
By reflexively controlling the fungibility and flow of asset denominated tokens within its value exchange network, the RMLLC is able to capture, retain and leverage mutualistic value generation. This is unlike any standard C Corporation or LLC whose value is captured and controlled by major preferential shareholders whose intent is exit and liquidation. It is also in contrast to a Benefit Corporation; a portion of whose profits are allocated to a designated social purpose. The RMLLC in generatively designed from the beginning as a whole to generate and retain value around its value proposition which is realized not through an exit or liquidation but through progressive participation.
MEMBER RIGHTS AND CAPITAL/TOKEN STRUCTURE:
The RMLLC in many respects mimics traditional startup capital formation and liquidation – with the principle difference being that incentives and controls are designed and exercised to the benefit of value creation and retention for the entire mutual organization and not for the external investors.
The goal is not the exit for either the participating members – or the investing – appreciating members, but rather to build up the value, diversity, resilience and purchasing power of the mutual organization network and to attract and retain outside capital.
The RMLLC should be competitively superior to other market investments and provide greater resilience and appreciation over time – in addition to the benefits of becoming a member participant.
In this respect, the capital structure is like VC capital start-up, structure except turned on its head – where it is designed from the interest of the mutual organization rather than the outside investor. Naturally, this power equation will depend upon the actual and perceived success of the RMLLC to other side investors.
For each asset class that RMLLC purchases and uses, there is a security token issued backed by a Non-Fungible Token (NFT) title and the value assessment of the real cost of the asset plus a reasonable markup percentage (1-10 percent). A participating member purchases access rights to that asset which are vested over time with a payment schedule – similar to a car loan or mortgage for example. In the case of a default, the asset is recovered by the SMLLC reserve fund.
For each asset class, there is also an appreciation rights token that is sold to external investors with a market competitive financial instrument such as a debt-equity-convertible note.
The purchase price to the external investor is at cost plus a percentage markup – depending upon market response. The appreciation investor has a fixed period to receive dividends – interest – with a payback of principle with a coupon. There is also a shadow pricing market mechanism and exchange to price the token asset value and provide for phased liquidity.
The RMLLC would have the right to pay off a note or repurchase equity if certain trigger liquidity events occurred – such as a rapid appreciation to the point of payout of principal and coupon. In this way, the RMLLC would be able to capture the further appreciation value in its reserve tokens.
EARNED SECURITIES AND TOKENS
Members should be able to earn tokens in exchange for work that they created that was determined to be of value to the community. These tokens could be used to pay down loans for assets or purchase in-network services such as mobility – food etc.
The RMLLC will be governed by a Governance Council (GC) of members representing the different asset classes and participating members in a manner similar to the way a mutual organization for insurance, investment, purchasing, credit, ownership, land and real estate.
This council will set the goals and outcomes for the overall RMCC on a quarterly basis and It would determine “micro-monetary policy” for the issuing, fungibility, and supply of different asset/token types.
It is the duty of the GC to ensure the privacy, security and greatest opportunity for value preservation and generation and access to the assets and services provided by the RMLLC exchange network and to minimize operational costs. It also has the duty to provide oversight for the Management Unit, (see below), hire and fire its officers, and contract with third-party services through routine Service Level Agreements (SLAs) for the management and execution of its policies.
VOTING AND SELECTION OF GOVERNANCE COUNCIL MEMBERS
The Governance Council will be formed through a process whereby members establish their standing as determined by their ownership of different assets tokens and their reputation or expertise in relevant areas.
It‘s intended that a pool of candidates with the requisite standing and reputation credentials are then voted on.
It‘s also expected that a certain portion of the council would be randomly selected from a pool of candidates. Council members would be compensated for their work in tokens and be subject to term limits. There would be an Executive Chairman, Financial & Monetary Chairman and an Operations Office These could be rotating positions to ensure accountability and shared understanding.
The goal is to have a highly trained management group that is effective in executing the policies of the council.
There would be CEO who would have principle contact with the Governance Council and a Community Officer with ties to the overall community. There would also be a CTO, CFO and Chief Monetary Officer who would analyze and model token flows – asset values – liquidation and exchanges.
The operating intent of the RMLLC is to attain resilient value generation outcomes to the mutual benefit of its members. In order for this to be achieved, the following rules and operations need to be put into practice. The first order of operations is the formation of a provisional Governance Council which in turn, forms and contracts with a Management Unit.
As a duty of the Governance Council (GC) is to minimize costs preserve value, it will create a basket of reserve assets collateralized by tangible assets to reduce reserve and equity requirements for the RMLLC.
It is also the duty of the GC to set and oversee policies that achieve the definitional outcomes for the RMLLC, and thereby form, oversee and contract with the Management Unit to achieve results as cost-effectively as practically possible. Whenever possible, contracted processes, rules would be algorithmic, secure and independently auditable by an independent third party. The intent is to reduce costs and increase revenues through the use of service templates and API services.
- Formation of a Provisional Governance Council: Minimum of 3 members with the election of the full council one year upon full financing of the initial project.
- Formation of Provisional Management Unit. The contract for services for an initial Management Unit with enough staff to execute a performance contract as agreed to by the Governance Council. With the completion of project financing, full SLA with Management Unit either with the third party or retained management and staff.
The recurring duties on a project by project basis of the Governance Council in concert with the Management Unit are:
- Identify target populations – location – member criteria – people and entities.
- Identity outcome priorities – carbon reduction – affordability levels – equity – other
- Identify asset classes and attributes – behaviors.
- Identify relationships – flows and spatial contracts between asset classes.
- Identity costing methods for different asset classes.
- Set Access rights, proportions, terms and conditions for different assets for participating members.
- Set Appreciation Rights – terms and conditions – (instruments) for investors for specific asset classes.
- Model cash flows and payments streams and processes for the asset class and token circulation, fungibility and liquidation.
- Develop Pro Forma Model for Project Financing of Assets for access and appreciation.
- Construct Token Governance Policy (Model) for Project.
- Identify and contract with potential service providers, partners and developers –
- List the Project and financial instruments on the platform.
- The execution of the initial project, timely pay off of debt/ repurchase of equity and ownership of assets by the RMLLC for appreciation rights investors.
- Issuance of asset reserve tokens for project asset classes.
- Identify new asset classes and combinations for purchase to extend the diversity and liquidity of services for members.
- Identify activities and behaviors for which participating members can earn tokens convertible into additional services and reserve tokens.
- Identify other RMLLCs to achieve interoperable services and token exchanges, MORE COMING SOON.