NRP = Network Resource Planning: operational software for open value networks and other next-economy organizations. This tutorial explains the NRP value equation functions for distributing income to contributors.
Concepts & Tutorial
The value equation is where the NRP comes full circle. Some value has been created and delivered,
and some value has been received in return. Now this can be distributed to the people whose
contributions made the original value creation possible.
Note: In the networks who are part of developing NRP, the income distributed is for now money. But
the model and system will support any sort of value as income to distribute.
The value equation fits into the NRP here...
We think Value Equations are a transformative idea...
● The contributors to a Value Network decide amongst themselves,
democratically, how income should be distributed. No boss.
● The distribution is transparent in every detail, published for all to see.
The name and the idea arose out of SENSORICA. Here's some of the history
of both. http://valuenetwork.referata.
The software implementation does not yet fulfill all of the ideas in that
document, but it will handle all of SENSORICA's plans for their first actual
income distributions, as well as those of a few other networks who plan to use
the same software.
Value Equation Concepts
The value equation gives open value networks (OVNs) the ability to distribute
income back to the contributors to the network, using a set of equations and
rules that the network collectively decides on.
Each network or project can decide its own value equation(s).
Three ways to distribute income:
1. By Agent: to a named Agent (could be person, but usually an
2. By Network or Project: to contributors to a project or organization.
3. By Value Flow: to the contributors to an order or a shipment.
Claims are calculated from contributions based on rules defined in the value equation. Claims
are the input to the distribution, which uses other value equation rules to calculate the distribution
amount for each claim.
Claims are what a contributor can expect to receive for the contribution. Claims get everything
into the same unit of value (all of the claims in the same distribution must use the same unit,
whether that be money, points, credits, or something you just made up). And the value equation
gets you from the claim to the amount for this particular distribution..
Contribution Claim Distribution
Value Equation Structure Three levels and their data:
● Defined for a Network or Project
● How the bucket percentages are handled
● Sequence of the buckets in calculation
● Percent, either of the total or of the remaining
● One person or organization who receives the
● or, the method for gathering the contributions to be
rewarded: Order, Shipment, or the whole Network or
Project by (optional) date range
● Event Type of the contribution (work, deliverable,
payment for a purchase or expense)
● Further filtering by Type of Work or Process Type or
fixed date range (optional)
● Claim type: Equity-like (can receive income forever),
Debt-like (will be paid off when complete), and One
time (one distribution only)
● Claim equation: The equation used to calculate a
claim from a contribution.
Examples of Buckets and Rules
● Different buckets for different agents: for example, this project gets 20%.
● Different buckets for different contribution selection methods: for example, 50% by order and 50% by date range
(for support work).
● Different rules for different types of work: 3D Design vs Assembly, Translation vs Editing or Captioning,
Harvesting vs Sorting or Packaging.
● Different rules for different Process Types: Initiation, Outreach, Conduct Course, Prototype, Test, or
● Different rules for different date ranges: older rather than newer contributions.
Value Equation Creation
Thinking about creating a value equation
The buckets divide up the total distribution by percentage. For each bucket, either one agent gets the whole bucket,
or a set of contributions from many agents will be used to divide up the bucket amount. If the latter, then rules are
defined to filter and select the set of contributions. Rules are also defined to calculate the amount owed for each
contribution, based on the type of contribution.
Value Equation Creation
Here is an example of a value
The first bucket gives 10% of the
amount to be distributed to the
parent network off the top.
The second bucket gives 70% of the
rest to work contributions and
expenses paid by members that
contributed directly to the shipment
or delivery item for which payment
was received. This will calculate an
amount to distribute based on all the
contributions in the value flow
leading to the final item delivered.
The third bucket gives the remaining
income to general work
contributions to the project not
related to the particular shipment.
Here is another example of a value equation
for a network with a simple value flow. This
one rewards deliverables rather than
work, in specific percentages.
The first bucket gives a straight percentage
to the network.
The second bucket gives a straight
percentage of the sale to the farmer.
The third bucket gives a straight percentage
of the sale to the harvester.
The fourth bucket gives a straight
percentage of the sale to the drying facility
Note: all value equations can be flagged as
test or live. Only live value equations can be
used to actually distribute income. Test
value equations give the opportunity for all
members to experiment with how it works
and show the results of their experiment.
Value Equation Creation
Value Equation Creation - Definitions & Guidelines (1 of 2)
Value Equation Percentage Behavior:
● Remaining Percentage takes the percent of the remaining distribution amount after each bucket is processed. The last
bucket should be 100%. This option distributes only as much as is defined by the claims affected by the bucket. There
may be a leftover amount, which will become part of the next bucket in the sequence.
● Straight Percentage divides up the total into the defined percentages. The bucket percentages should add up to 100%.
This option distributes the entire amount included in the bucket percentage of the total. Recipients may receive more
than their claim amount. There will be no leftover.
Value Equation Agent or Filter:
● Choose an agent for direct distribution or…
● Choose a filter method.
Bucket Filter Method:
● Order allows selection of one or more orders when the value equation is used. They can be customer orders or work
orders. Work orders can provide a way to group contributions for distribution as well as to organize work.
● Shipment allows selection of one or more shipments or deliveries of products or services. Both Shipment and Order
find all contributions in the value flow tree that created the product or service.
● Network or Project is the only method that doesn’t use the value flow method to find the contributions to be rewarded.
So it is the method to use if the data does not form value flows of input-process-output chains. It allows selection of a
date range (optionally) at the time of distribution.
Value Equation Creation - Definitions & Guidelines (2 of 2)
Rule Event Type:
● Rules are created by Event Type of the contribution (work, deliverable, payment for a purchase or expense, cash
contribution). This gives the opportunity for different claim calculation equations based on event type, and for recording
contributions as work or as deliverables.
Rule Resource Type or Process Type Filter:
● Resource Type allows further filtering by either type of work (usually) or type of deliverable.
● Process Type allows further filtering by the type of activity when this is not defined by the type of work. This will work
best for networks who log contributions by deliverable rather than time contributions.
Rule Claim Type:
● Forever (equity-like) gives income distribution as long as the contributions are part of the filter.
● Until Paid Off (debt-like) decrements the claim with each distribution until it is zero, and then won’t be paid any more.
● One Distribution pays one time and then is complete.
Rule Claim Equation:
● The equation used to calculate a claim from a contribution. Common uses are to define amount per time of work (this
will override the definition on the resource type of work), or to add interest or risk factor.
Value Equation Sandbox
The Value Equation Sandbox gives
people a place to experiment with how
a value equation will work. It also
might give insight into what the state of
the contribution events that have been
logged - what is missing, what is not
Choose the value equation and amount
to distribute, and enter the filters
required for each bucket.
The Value Equation Sandbox
will calculate the expected
distribution by person or
organization based on the
value equation definition and
the parameters entered.
It will also provide a detailed
look at what contribution
events went into the
distribution and why the
amounts calculated to
distribute are what they are.
Use these to debug the value
equation and to correct the
data as needed.
This is an example of a value flow for
one product (resource) that was
shipped. Value flows are among the
more difficult aspects of value
equations to understand.
A value flow basically traces all inputs
to the one product by travelling
backwards through the input-process-
output branches to its beginnings.
Inputs can be, for example:
● Time worked
● Components consumed
● Resources to be changed
● Equipment or tools used
● Designs or ideas cited
Value flow calculations are used for
distributions using a value equation -
but also can be useful for
understanding costs of products or
...are not necessarily intuitive (depending on your intuition).
Value Flow Calculations...
● If I contribute $40 worth of work… to a process that created 4 deliverables… then I added $10 of value to each
● If 2 of them were sold on an order, I added $20 of value to the order.
● When do I get my other $20? When the other 2 are sold. Maybe. Might depend on the other buckets in the Value
● If I buy 100 meters of optical fiber for $200, the value per unit is $2.
● If a process uses 15 meters, and produces 4 deliverables, that’s $7.50 of optical fiber per unit.
● If one of those 4 deliverables was consumed in creating a purchased product, that’s $1.875 per purchased
● Might be awhile till I get my $200 back, but I am a patient person. And the value equation says I will get 20% extra
for my patience. So that’s $2.25 from this distribution.
Contributions can be recorded using work or using deliverables. Usually a network or project will decide to do it all one
way or the other for its products and services. Then maybe use work time for activities that aren’t about creating
deliverables, and will be spread over many deliverables, what some people call “overhead”. All of these can be
separated in the value equation using buckets and rules.
Citations are used to credit something that was not actively used or used up in a process, like designs or ideas.
(Citation rewards are a unique feature of OVNs, but why doesn’t everybody do them?) Citations are different in that the
person citing gets to decide what they are worth. For example you might have worked for 6 months on something that
was a little helpful to me. Or you might have spent 10 seconds giving me an idea that made all the difference in my
work. Two ways to handle them:
1. By percent: give a citation a percentage of the value of all the other inputs to a process, meaning, this design (or
idea, or whatever) helped x%.
2. By quantity of the unit of value of the value equation, for example, $20, or 20 points, or 20 peanuts.
Equipment or tools or space have different units of inventory and units of use. For example the unit of inventory for
microscopes might be Each and the unit of use might be Hours. In these cases, the unit of use is used in the value
flow, for example I used this microscope for 3 hours at $5/hour.
Some Value Flow Calculations Thoughts and Guidelines
Once the value equation has
been agreed upon and tested,
you can distribute income
based on the contributions
made (time, deliverables, cash,
If you have recorded receipt(s)
from a sale, you can use that to
distribute. Otherwise, you can
choose an amount to distribute
from an account.
The calculation will result in
distribution events to the people
and/or organizations who have
Here are results from a distribution.
The distribution process has taken
funds (money or whatever) from
the account that contained the
income received, and put that into
accounts for the contributors,
based on the value equation.
When a person receives a
distribution, they are notified by
Funds are distributed from and to
Virtual accounts allow a bank account to be split up
into accounts for each person or organization who
owns part of that bank account. They allow a person
to accumulate distributions until they want to receive
them in a payout. They also give the network a way
to “earmark” incoming funds for a particular purpose.
In the NRP, virtual accounts are created as
Resources. They should be of a Resource Type
such as “Virtual Account”, “XYZ Bank Account”, or
Each virtual account must have an owner, that is be associated with an agent (person or organization)
in a role designated as “owner”. (More information can be found in the NRP setup tutorials.)
If someone receiving a distribution does not have a virtual account, one will be created automatically for
Payout from Virtual Account
When a person has accumulated money in their virtual account, they can request a payout. This allows
accumulation of distributions until it is worth withdrawing the funds.
Note: We are aware, of course, of Faircoin and Bitcoin and Paypal and various other methods of doing
the income distribution electronically and just putting the money directly into people’s wallets or
accounts. The networks we are currently working with do not want to do that yet. But we expect that to
arise in the future.
Reporting can be provided both at the individual and the network level. The following is an example.
...but but but why is this stuff so complicated?
What a good question!
If we lived in a system where everybody just got what they needed without
money (“to each according to their needs”), we would not even want to do all of
this value accounting.
But we don’t. We’re in this transition. So people and projects need money and
other resources. And they have expectations of fairness, as in, “to each
according to their contributions”. So value networks want to figure out their own
rules about how to distribute income to contributors. It’s better than the boss
And we want to help them do what they want to do, however they want to do it.
Until we graduate to the next economy...
But you can make your own rules simple...
● All work gets $X per hour.
● All translation work gets $X per word.
● All harvesting gets X% of the sold price.
● Everybody gets $X per week.
● The network provides all of the necessities of life, take
what you need.
● See slide 7 for an example of a simple value equation.
We are trying to design value equation software that can
handle a wide range of ideas about how to distribute
income according to contributions: all the ways that the
value networks we know about want to try.
It’s an ongoing set of experiments. The good ideas will
survive (we hope).
If we did not handle your ideas, please let us know.