Locus Analytics is a data analytics company focused on developing an underlying framework and technology to organize and integrate all business, finance, and economic data within a single unified global economic information system.
Business, finance, and economic data are more readily available than ever, but the classification systems describing these entities remain disjointed across the various scales, geographies, and types of economic entities. They are non-standardized and inflexible legacy systems that were created to capture point-in-time conditions of local- or industry-level economies. As such, they become outdated quickly. This is the problem that Locus Analytics is addressing.
The foundation of the work at Locus Analytics has been the development of the Locus Model™: a multi-dimensional, coordinate-based model that locates the parts of economic systems by their functions. This endogenous model enables each individual functional component of an economic system to be located on a coordinate-based Locus Map. In the Locus Model, every economic component, whether it be a job, product, business, government, or a community, is linked in a uniform functional tagging system called a Functional Information System™ (or, FIS™). Together the Locus Model and FIS serve as a globally uniform classification system for business and economics. A common language with which to organize, model and compare the disparate parts of our global economy within one integrated economic data system.
Just like a geographic map uses geo-coordinates to order spatial data, a Locus Map uses functional coordinates to order economic data. Geographic maps take a model of the spherical globe and define coordinates so that every location in the world can be specified by a set of these coordinates: longitude and latitude. The Gregorian calendar takes a model of the repeating solar cycles and defines coordinates so that every temporal location (period) in a year can be specified by a set of these coordinates: month, day, hour, minute, second. Similarly, the Locus Model takes a model of the repeating sequential functional activities and resources that comprise an economic system and defines coordinates so that every functional location in a cycle of functional activities can be specified by a set of coordinates.
Maps.Locus lets the user see and map the relationship between economics, geography, and time. This first site of our upper level domain Dot.Locus starts with a simple locus map of the businesses located in the United States. It allows the user to choose any number of geographic regions of the US and compare the locus maps of their businesses. Soon maps.locus will show locus maps of jobs. We are also working on locus maps of China and parts of Europe toward our vision of a global locus map. In the future, maps.locus will also present historical data so that users can study how the functional components of any geographic area change over time with changes in the underlying economy or technology.
This is the promise of the Locus Model: economic information associated with different aspects of our global economy ordered, organized, and presented using a common coordinate-based language. All economic activity can be identified using these functional markers. We believe you will find maps.locus, its functional coordinates and locus maps easy to understand and navigate. You will quickly be able study and compare different communities with which you are familiar from a completely different and useful perspective!
Locus maps paint a picture of the underlying economic functions in a given geographic area. Following the Locus Model, a locus map splits economic loci across two different axes: the activity axis and the resource axis. The squares on the map represent functional locations, or products, in the economy. Each specific location is defined by its associated value on each axis on the locus map. Importantly, every participant in the economy can be located on a locus map.
The squares in each functional location can be sized relative to one another on any number of parameters associated with the entities populating it, like number of companies, total revenue, and number of employees. Locus maps are an easy tool with which to compare the economic activity of places, no matter their scale. This snapshot of the economy is useful when trying to understand how one community is functionally different (or similar) from another. On maps.locus, the squares on the locus map are sized by the number of businesses at that location.
Each locus map tells a unique story. Areas with large 2.2 boxes are places where production is still prevalent in America. Troy, MI (48084) has a 2.2 Equipment box that is relatively larger than the rest of the boxes, while North Dakota, South Dakota, and Nebraska have large 2.2 Fuel boxes. Exploring the map, economic patterns become obvious and clearer than before.
The Red and Green areas are one such example of patterns we have found exploring locus maps. The Green Area highlights businesses that are generally associated with the local economy. This is one of the many universal aspects of all economic systems. The local economy supports local residents. These are businesses that traditionally have economic reasons to be located in geographic proximity to their customers: businesses such as construction, personal services, schools, hospitals and retail stores. The Red Area contains a mix of local and trade associated businesses who, for various reasons, do not require geographic proximity to be competitive as they typically rely customers outside of the geographic area.
We believe that much like the breakthroughs afforded by the complete mapping of the human genome, mapping all the functions and activities in the economy will enable us to study the basic elements shared by every economy. To understand more about the components of a locus map, we provide a background on the Locus Model below.
The Locus Model was developed through the study of the components universal to all economic systems Universals in any system often exist because they are an essential part of the system itself. Locus posits that universal essential parts should also exist for all economic systems. Locus went on to identify these patterns by both cataloging them and identifying why they existed - the functional role that a specific part or activity plays in the operation of an economy. In this model, every company, job, product or community can be associated with a specific functional identity and ordered and mapped in relation to one another.
Because of this, all economic entities can be fitted to the Locus Model, assigned functional coordinates, and plotted on locus maps. At the heart of the Locus Model are Locus’s functional coordinates that specify every functional location in an economy by a set of numbers and letters. These ordered functional coordinates derive from the parts of the Locus Model.
All systems models consist of basic representations of an underlying system that identify and relate the parts that make up the system. Each part has a specific functional role in the operation of the whole. This is true of human anatomical models, architectural plans for a building, engineering plans for a car, or complex organization of plants or ports. Each model has represented structures we are all familiar with, detailing functional parts that form functional wholes.
The Locus Model, which describes economic systems, is no different. An economic system is any system that produces a product, and the Locus Model is a systems model of the functional activities and resources associated with producing or providing that product. Every butcher, banker, school, insurance brokerage or consumer-facing industry has a functional role associated with one of these activities regardless of the scale or scope of the activity. Each role can be located on a locus map.
The first assertion of the Locus Model is that a single system, regardless of its scale or product, is comprised of a set of resources that performs a sequence of activities to produce a product. Below is a representation of a single system comprised of resources (triangles) and activities (circles).
This distinction of activities and resources in the Locus Model is common in natural science systems models. In human anatomy, we represent and relate both the morphology (resources) and the physiology (activities) of the human body. To understand the system, you need to understand both the functional activities required, as well as, the parts that each activity uses to fulfill its function. Below we provide a background on how resources and activities are mapped in the Locus Model.
All economic systems are made up of sets of resources that together perform the systems’ activities. Within every system, these resources fall into two resource families: the structural resources that do the work and enabling resources that support the work of producing a product. Each resource family further is made up of three resource categories that uniquely contribute to the production of a product.
In addition to being comprised of resources, economic systems also share the property of acting on external resources in the production of their product as well as producing resources to be used by other systems. For example, construction companies act on real estate resources while doctors act on people. Car manufacturers produce cars and software developers produce software. Resources from each of the categories are used, acted on, and produced by economic systems.
Economic systems share the fundamental property that they all acquire resources, produce their product, exchange that product for compensation, and manage their assets and activities on an ongoing basis, allowing them to invest in the acquisition of more resources: they perform an activity cycle. The Locus Model partitions the activity cycle so that economic activities of real economic systems can be mapped and related in a standardized way. These partitions begin by breaking the activity cycle into four broad phases. Each of the four phases can be further split out into three parts that describe the planning (pre-), doing, and reviewing (post-) aspects of that activity.
Geographic Information Systems (GIS) have revolutionized the study of entities with geo-spatial attributes. Every entity in a GIS is tagged with geographic coordinates so that geography can be used as an index not only to relate non-geographic attributes across entities, but also to measure physical proximities and other spatial phenomena across the data. What’s more, because geographic coordinates are comprehensive, we can spot “blank” places on a map where we expect data to exist, prompting further research.
Locus’s Functional Information System (FIS) offers much the same advances as GIS for the study of economic data. FIS is built on the notion of a locus, a functional location in an economic system that has an ordered functional relationship with every other Locus or location in the system. What’s more, because functional coordinates are comprehensive, we can spot “blank” places on a map where we expect data to exist, prompting further research. In an FIS, every data entity is tagged to one or more loci, and each locus is defined by a set of coordinates derived from the Locus Model. Economic entities are plotted onto locus maps according to two attributes: activity and resource acted upon by the activity.
The Locus Model can be used to map the internal parts that comprise a system, as well as locate whole entities within a larger system. Specifically, an entity’s functional location in the economy, its locus, is determined by the functional role its product plays within the system that uses the product. This extension of the Locus Model to multiple economic systems begins by recognizing that the parts of economic systems are themselves products of other economic systems. What’s more, the product of these systems will become parts of other systems. In this way, the Locus Model captures how economic systems are interconnected. This is self-evident when we consider supply chains. For example, machines bought to produce cotton t-shirts do not cease to be relevant once bought, but rather become critical to the t-shirt production company as an essential resource for producing its product. The function of the product differentiates the economic system that produced it and the functional location of the product is the functional location of the system as a whole.
Locus's functional coordinates provide relative information about the entities placed in a given location. For example, economic entities whose functional location falls in Phase 2 of the activity cycle will share certain functional properties, as will economic entities that act on information. What’s more, we can look at universes of economic entities like cities and states and understand how entities distribute functionally by laying them along the coordinate axes of locus maps. Derived from the locus model, functional coordinates power standardized, scale-agnostic analytics of economic data entities.
We can use the Locus Model more broadly than a single locus to tag, characterize and relate function across an economy. When entities are tagged with Locus coordinates, we take into consideration many types of functional information associated with an entity. We take this broad set of functional information and record it in a Functional Barcode™. The functional barcode is a snippet of the complex network of economic interactions oriented around a given economic entity and as a result is a useful tool to identify and understand economic agents and their role within the economy. An important attribute captured in the barcode for a company is the customer. On a barcode, customers are tagged with the Locus code that describes their specific role in the economy, just as the functional role of the enterprise is tagged. These multiple functional tags organized on a functional barcode associate the many ways in which parts of an economy are related. In so doing, they provide the context for each part.
An important utility of the functional barcode is the notion of “related economic risks.” Related economic risk occurs when two or more economic entities are affected by the same fundamental drivers. Loci, Functional Coordinates and Functional Barcodes are markers of related economic risks. All economic entities at a specific functional location shares “related economic risks” associated with that location.
The use of Locus’s functional barcode as a tool to identify, group and manage economic risks has been one of the first commercial uses of the Locus Model. Syntax, a division of Locus, uses Locus’s functional barcode to identify, group and diversify “related business risk” in a portfolio of investment securities. Inadvertent overweighting of companies that share related business risks regularly occurs in the traditional capitalization-weight or equal-weight indices. Syntax Stratified-weight Indices use functional barcodes associated with related business risks to address this problem. There are currently Syntax Stratified-weight versions of many of important equity indices including the S&P 500 and the S&P 400.
The Locus Model and the new tools developed with the Locus Model enable a new approach to economic analysis. It takes a systems approach that provides a framework to divide and subdivide economic systems into their functional components and locations. The development of loci, Functional Coordinates, Functional Barcodes and Locus Maps provide important new tools to integrate and organize large sets of economic information. In so doing, Locus provides new tools to study economic structures, track changes and build better indicators of economic health or homeostasis.
By functionally mapping both businesses and jobs in communities, cities and states, we are gaining insights into the fundamental nature of economic systems. We are finding that different types of economic systems have both common concentrations of jobs and business, as well as different concentrations based on the functional orientation of the community or economic system. Common systems have common structures and attributes. Importantly, locus maps enable us to ask where we can properly and precisely intervene and by what functional metrics we should judge the health and performance of the underlying system.
The work done to date by Syntax is another example of using the Locus Model to approach an old problem in a new way. In this case, the problem was classifying businesses in a way that would facilitate diversification of related business risks. Syntax functionally mapped over 60,000 global public equity securities using the Locus Model. Functionally mapping these securities enabled Syntax to identify and group companies that shared related business risks. Syntax found that by diversifying these functional risks using a statistical method called stratification, they could mitigate the negative impacts of related business risks without adversely impacting the expected upside performance. The performance benefit of Syntax’s stratified-weighting method has been shown to be consistent across a wide array of performance metrics when measured against the traditional cap-weight and equal-weight versions of identical indices such as the S&P 500 and the S&P 400. Syntax applies this strategy to a family of equity indices. For more information about Syntax, please visit www.syntaxindices.com.
Maps.Locus provides another example of the power and use of the Locus Model. A user can select zip codes, states or standardized statistical areas of the census. For every geographic selection, maps.locus presents a Locus locus map of the businesses in the specific geographic area. As the utility of maps.locus expands, users will soon be able to see:
As maps.locus evolves and users have this continually expanding analytic capacity, users will start to better understand the power and utility of the Locus Model and its locus maps. As we expand globally, we will start to develop country and regional sites like: UnitedStates.Locus; Europe.Locus; China.Locus; Asia.Locus; LatinAmerica.Locus; or Africa.Locus. These sites will specialize in Locus Maps and associated economic data from these areas. We hope you will continue to follow us as we start to make the global economic system more understandable and transparent. Enjoy!