John Kenneth Galbraith’s 1955 book The Great Crash, 1929 is apparently a great read right about now. It’s among Amazon’s bestsellers and was among those featured in this week’s Economist. I haven’t read it yet (I will), but the decade-plus of reviews on Amazon were worth a read in themselves as the US economy has hit its troughs and heights. From what I have read, the central thesis is that speculating for speculation’s sake is what led to to the 1929 crash (and subsequent depression) – which is no doubt why it’s resonating with so many folks currently.
Stepping back to take a neutral view of the components of our current economic system, I see that the very thing that makes the creation of value possible within the system is the same thing that destroys it. It’s like a group of music lovers that get so focused on creating more intricate instruments with which to play better and better music. Eventually they spend so much of their time and expertise eeking every improvement out of each instrument, they forget what the instruments are used for in the first place and start hording the instruments themselves.
Credit instruments within the economic system are perhaps similar. It’s a good thing to have credit. Credit allows entrepreneurs to start a business that can add value to the marketplace. Credit gives people the opportunity to purchase a home so they have a secure base from which to become contributing citizens. When the drive for eeking every improvement out of each financial instrument gets to the point where it’s an end in itself, however, we’ve forgotten what the system was supposed to accomplish in the first place.
It’s the nature of all established systems. By the time I became a Philosophy undergrad, the system had perfected itself to the point where logic – in and of itself – was the standard by which to assign value. A PhD star student teacher who had made her way up the academic ranks quickly enough to be getting her doctorate in her late teens, authored a much-praised paper on why it is always immoral to have children. It’s a good thing to use logic. Logic is a useful instrument to test assumptions and help tease out the details of an argument. But when logic becomes an end in itself, we’ve lost the value of philosophical enquiry and end up with conclusions that fail to make much of a meaningful contribution outside the system itself.
So, is it fated that all systems carry within them the seeds of their own demise? Yes and no. The beauty of the world we live in now is we have the means to create a system from the get-go that acknowledges things will fall apart, and reassemble and fall apart again before we get so invested in a system that its demise is tragic. A dynamic, emergent system lets us leave a system that’s not working before it gets to a state where whoever gathers the most intricate musical instruments wins, and those who still know how to play music no longer have the means to do so.
Catching up on NPR’s Planet Money podcasts while climbing Telegraph Hill early this morning, I was struck by how much energy the producers put into normalizing the extraordinary economic events we’re currently experiencing. Each episode doggedly tracks the TED spread, explains the structure of bailouts and asks the leading economist du jour innocent-sounding questions like “where is all the money?”
The kind of thinking that drives Planet Money interviewers to seek out established economists, bankers, politicians is process-oriented thinking to preserve some existing life context. The unspoken driver of the discussions is to figure out ways to normalize extraordinary economic events, so we the audience don’t have to face the unimaginable alternative of economic collapse. SciFi author and social commentator Bruce Sterling had a great quote in
a post on the state of the world in 2009: “When you can’t image how
things are going to change, that doesn’t mean nothing will change. It
means things will change in ways that are unimaginable.”
We are currently facing extraordinary economic circumstances. Process-oriented thinking – deductive and inductive reasoning – is helpful in the short run as we figure out how to make the existing engine run as well as possible for as long as it lasts. Deductive and inductive thinking won’t, however, be sufficient to solve for what comes next. Solving for what comes next is a creative endeavor that requires generative thinking. Generative thinking takes a step back from the existing context and asks what are its basic elements and how might they be put together in a way that works better. It requires looking at the components of the existing economic reality as raw materials to be worked with, rather than as part of an existing system that must be held together.
Stephen Colbert was dryly amusing as usual lampooning Lawrence Lessing on the Colbert Report the other night. If you’re not familiar with Lessing, he is the leading advocate of abolishing outdated aspects of current copyright laws in favor of Creative Commons licensing in light of the detachable, portable and remixable reality of the online world and people’s creative motivation to participate in it. Colbert’s rapid-debate schtick gets Lessing to explain that the economics of the creative commons are people want to contribute to sites like Flickr for free and Flickr makes money by selling ads to them. Lessing calls this an aspect of the “hybrid economy.”
What Lessing gets right with his “hybrid economy” notion is that there is an intrinsic motivation for creativity and generating something new among people. There is a satisfaction contributors to open-source software get when they figure out a bug fix and share it with others. The endless YouTube video creations wouldn’t exist if their filmers didn’t get pleasure from creating and posting for everyone to see. The twin joys of creative expression and popular recognition are part of the power that is effectively harnessed online.
It is too much of a leap, however, to call providing a platform for creative expression and recognition and then selling advertising or service upgrades a “hybrid economy.” The notion Lessing describes creates a non-necessary dependence between two economies running in parallel. Strictly speaking, Lessing’s freeconomy needs the traditional economy to survive, whereas the traditional economy has no need of the freeconomy. Rather than a hybrid, it’s more of a parasitic relationship. To create a truly hybrid economy, there has to be more of an interdependence between the freeconomy and the traditional economy.
So, how do we harness the economic power of the decentralized, emergent networks the web has now enabled – while acknowledging that most of us will have to engage the established economy for some period of time in order to live?
We need a true hybrid economic model to get the ball rolling. An economic model that is parasitic on the established economy will lose its base when the old economy finally decomposes. If you have thoughts or questions of your own, I invite you to post them in the comments section.
2008 will be remembered as the year when the world, especially Americans and Europeans, got the 411 on how the global economic system really works – well, kind of. In reality, financial instruments and ways of keeping track of them have become so convoluted that I’m not sure anyone can make sense of it all. I am sure, however, that the current economic system isn’t fixable at this point – it’s just a question of time before it completely unravels. The good news is that the system was really only working for a small percentage of the population, anyway. We have the chance to challenge our assumptions about the goals of an economic system and create one that works better.
The online marketplace doesn’t require that we figure this out in advance. It doesn’t follow linear rules of order or a top-down, command-central process. It behaves more like a self-organizing organism where ideas, interests, people and production hold together as long as they find synergies and move apart as those synergies dissipate. When the right elements come together, something new is created that could not have been fully realized by simply looking at its disparate parts. Its inherent structure is dynamic and the material costs of trying things out are insignificant, which makes finding solutions more a game of creative imagination rather than work.
My hope is that Massively Networked will be one of the hubs in that process by bringing together forward-thinking entrepeneurs from around the world who can find synergies among businesses and have access to resources to create business success in the emerging interactive marketplace.