- Post-crash, investing in a better world
- European Summit: A Plan with No Details
- Why Startups Fail
- A Historical Perspective of Recessions and Bear Markets
- How Stellar Novae Get All Mixed Up
- 10 Weekend Reads
- BusinessWeek is Wrong: Small Businesses Create Most Net New Jobs
- Most Tablet Users Are Educated, Employed, Not Young
Posted: 29 Oct 2011 04:00 PM PDT
As we reboot the world’s economy, Geoff Mulgan poses a question: Instead of sending bailout money to doomed old industries, why not use stimulus funds to bootstrap some new, socially responsible companies — and make the world a little bit better?
It’s hard to believe that it’s less than a year since the extraordinary moment when the finance, the credit, which drives our economies froze. A massive cardiac arrest. The effect, the payback, perhaps, for years of vampire predators like Bernie Madoff, whom we saw earlier. Abuse of steroids, binging and so on. And it’s only a few months since governments injected enormous sums of money to try and keep the whole system afloat. And we’re now in a very strange, sort of twilight zone where no one quite knows what’s worked, or what doesn’t. We don’t have any very clear maps, any compass to guide us. We don’t know which experts to believe anymore.
What I’m going to try and do is to give some pointers to what I think is the landscape on the other side of the crisis, what things we should be looking out for and how we can actually use the crisis. There’s a definition of leadership which says, “is the ability to use the smallest possible crisis for the biggest possible effect.” And I want to talk about how we ensure that this crisis, which is by no means small, really is used to the full.
I want to start just by saying a bit about where I’m coming from. I’ve got a very confused background which perhaps makes me appropriate for confused times. I’ve got a Ph.D. in telecoms, as you can see. I trained briefly as a Buddhist monk under this guy. I’ve been a civil servant, and I’ve been in charge of policy for this guy as well.
But what I want to talk about begins when I was at this city, this university, as a student. And then as now, it was a beautiful place of balls and punts, beautiful people, many of whom took to heart Ronald Reagan’s comment that, “even if they say hard work doesn’t do you any harm, why risk it?”
But when I was here, a lot of my fellow teenagers were in a very different situation, leaving school at a time then of rapidly growing youth unemployment, and essentially hitting a brick wall in terms of their opportunities. And I spent quite a lot of time with them rather than in punts. And they were people who were not short of wit, or grace or energy, but they had no hope, no jobs, no prospects. And when people aren’t allowed to be useful, they soon think that they’re useless. And although that was great for the music business at the time, it wasn’t much good for anything else. And ever since then, I’ve wondered why it is that capitalism is so amazingly efficient at some things, but so inefficient at others, why it’s so innovative in some ways and so uninnovative in others.
Now, since that time, we’ve actually been through an extraordinary boom, the longest boom ever in the history of this country. Unprecedented wealth and prosperity, but that growth hasn’t always delivered what we needed. H.L. Mencken once said that, “to every complex problem, there is a simple solution and it’s wrong.” But I’m not saying growth is wrong, but it’s very striking throughout the years of growth, many things didn’t get better. Rates of depression carried on up, right across the Western world. If you look at America, the proportion of Americans with no one to talk to about important things went up from a tenth to a quarter. We commuted longer to work, but as you can see from this graph, the longer you commute the less happy you’re likely to be. And it became ever clearer that economic growth doesn’t automatically translate into social growth, or human growth.
We’re now at another moment when another wave of teenagers are entering a cruel job market. There will be a million unemployed young people here by the end of the year. Thousands losing their jobs everyday in America. We’ve got to do whatever we can to help them, but we’ve also got to ask, I think, a more profound question of whether we use this crisis to jump forward to a different kind of economy that’s more suited to human needs, to a better balance of economy and society.
And I think one of the lessons of history is that even the deepest crises can be moments of opportunity. They bring ideas from the margins into the mainstream. They often lead to the acceleration of much needed reforms. And you saw that in the Thirties, when the Great Depression paved the way for Bretton Woods, welfare states and so on. And I think you can see around us now, some of the green shoots of a very different kind of economy and capitalism which could grow. You can see it in daily life. When times are hard, people have to do things for themselves, and right across the world, Oxford, Omaha, Omsk, you can see an extraordinary explosion of urban farming, people taking over land, taking over roofs, turning barges into temporary farms.
And I’m a very small part of this. I have 60,000 of these things in my garden. A few of these. This is Atilla the hen. And I’m a very small part of a very large movement, which for some people is about survival, but is also about values, about a different kind of economy, which isn’t so much about consumption and credit, but about things which matter to us. And everywhere too you can see a proliferation of time banks and parallel currencies, people using smart technologies to link up all the resources freed up by the market, people, buildings, land and linking them to whoever has got the most compelling needs.
There’s a similar story, I think, for governments. Ronald Reagan, again, said the two funniest sentences in the English language are, “I’m from the government. And I’m here to help.” But I think last year when governments did step in, people were quite glad that they were there, that they did act. But now, a few months on, however good politicians are at swallowing frogs without pulling a face, as someone once put it, they can’t hide their uncertainty. Because it’s already clear how much of the enormous amount of money they put into the economy, really went to fixing the past, bailing out the banks, the car companies, not preparing us for the future. How much of the money is going into concrete and boosting consumption, not into solving the really profound problems we have to solve.
And everywhere, as people think about unprecedented sums which are being spent of our money and our children’s money, now, in the depth of this crisis, they’re asking: Surely, we should be using with a longer term vision to accelerate the shift to a green economy, to prepare for aging, to deal with some of the inequalities which scar countries like this and the United States rather than just giving the money to the incumbents? Surely, we should be giving the money to entrepreneurs, to civil society, for people able to create the new, not to the big, well-connected companies, big, clunky government programs. And, after all this, the great Chinese sage Lao Tzu said, “Governing a great country is like cooking a small fish. Don’t overdo it.”
And I think more and more people are also asking: Why boost consumption, rather than change what we consume? Like the mayor of São Paulo who’s banned advertising billboards, or the many cities like San Francisco putting in infrastructures for electric cars. You can see a bit of the same thing happening in the business world. Some, I think some of the bankers who have appear to have learned nothing and forgotten nothing. But ask yourselves: What will be the biggest sectors of the economy in 10, 20, 30 years time? It won’t be the ones lining up for handouts like cars and aerospace and so on.
The biggest sector, by far, will be health — already 18 percent of the American economy, predicted to grow to 30 even 40 percent by mid-century. Elder care, child care, already much bigger employers than cars. Education, six, seven, eight percent of the economy and growing. Environmental services, energy services, the myriad of green jobs, they’re all pointing to a very different kind of economy which isn’t just about products, but is using distributed networks and it’s founded above all on care, on relationships, on what people do to other people, often one to one, rather than simply selling them a product.
And I think that what connects the challenge for civil society, the challenge for governments and the challenge for business now is in a way a very simple one, but quite a difficult one. We know our societies have to radically change. We know we can’t go back to where we were before the crisis. But we also know it’s only through experiment that we’ll discover exactly how to run a low carbon city, how to care for a much older population, how to deal with drug addiction and so on.
And here’s the problem. In science, we do experiments systematically. Our societies now spend two, three, four percent of GDP to invest systematically in new discovery, in science, in technology, to fuel the pipeline of brilliant inventions which illuminate gatherings like this. It’s not that our scientists are necessarily much smarter than they were a hundred years ago, maybe they are, but they have a hell of a lot more backing than they ever did. And what’s striking though, is that in society there’s almost nothing comparable, no comparable investment, no systematic experiment in the things capitalism isn’t very good at, like compassion, or empathy, or relationships, or care.
Now, I didn’t really understand that until I met this guy who was then an 80-year-old, slightly shambolic man who lived on tomato soup and thought ironing was very overrated. He had helped shape Britain’s post-war institutions, its welfare state, its economy, but sort of reinvented himself as a social entrepreneur, became an inventor of many, many different organizations. Some famous ones like the Open University which has 110,000 students, the University of the Third Age which has nearly half a million older people teaching other older people, as well as strange things like DIY garages and language lines and schools for social entrepreneurs. And he ended his life selling companies to venture capitalists.
He believed if you see a problem, you shouldn’t tell someone to act, you should act on it yourself, and he lived long enough and saw enough of his ideas first scorned and then succeed, that he said you should always take no as a question and not as an answer. And his life was a systematic experiment to find better social answers, not from a theory, but from experiment, and experiment involving the people with the best intelligence on social needs, which were usually the people living with those needs. And he believed we live with others, we share the world with others and therefore our innovation must be done with others too, not doing things at people, for them, and so on.
Now, what he did didn’t used to have a name, but I think it’s rapidly becoming quite mainstream. It’s what we do in the organization named after him where we try and invent, create, launch new ventures, whether it’s schools, web companies, health organizations and so on. And we find ourselves part of a very rapidly growing global movement of institutions working on social innovation, using ideas from design or technology or community organizing to develop the germs of a future world, but through practice and through demonstration and not through theory. And they’re spreading from Korea to Brazil to India to the U.S.A. and across Europe. And they’ve been given new momentum by the crisis, by the need for better answers to joblessness, community breakdown and so on.
Some of the ideas are strange. These are complaints choirs. People come together to sing about the things that really bug them. (Laughter) Others are much more pragmatic, health coaches, learning mentals, job clubs. And some are quite structural like social impact bonds where you raise money to invest in diverting teenagers from crime or helping old people keep out of hospital, and you get paid back according to how successful your projects are.
Now, the idea that all of this represents, I think, is rapidly becoming a common sense and part of how we respond to the crisis, recognizing the need to invest in innovation for social progress as well as technological progress. There were big health innovation funds launched earlier this year in this country as well as a public service innovation lab. Across northern Europe many governments now have innovation laboratories within them. And just a few months ago, president Obama launched the Office of Social Innovation in the White House.
And what people are beginning to ask is: Surely, just as we invest in in R and D, two, three, four percent, of our GDP, of our economy, what if we put, let’s say, one percent of public spending into social innovation, into elder care, no kinds of education, new ways of helping the disabled? Perhaps, we’d achieve similar productivity gains in society to those we’ve had in the economy and in technology.
And if a generation or two ago, the big challenges were ones like getting a man on the moon, perhaps the challenges we need to set ourselves now are ones like eliminating child malnutrition, stopping trafficking, or one, I think closer to home for America or Europe, why don’t we set ourselves the goal of achieving a billion extra years of life for today’s citizens. Now those are all goals which could be achieved within a decade, but only with radical and systematic experiment, not just with technologies, but also with lifestyles and culture and policies and institutions too.
Now, I want to end by saying a little bit about what I think this means for capitalism. I think what this is all about, this whole movement which is growing from the margins, remains quite small. Nothing like the resources of a CERN or a DARPA or an IBM or a Dupont. What it’s telling us is that capitalism is going to become more social. It’s already immersed in social networks. It will become become more involved in social investment and social care and in industries where the value comes from what you do with others, not just from what you sell to them, and from relationships, as well as from consumption. But interestingly too, it implies a future where society learns a few tricks from capitalism about how you embed the DNA of restless continual innovation into society, trying things out and then growing and scaling the ones that work.
Now, I think this future will be quite surprising to many people. In recent years, a lot of intelligent people thought that capitalism had basically won. History was over and society would inevitably have to take second place to economy. But I’ve been struck with a parallel in how people often talk about capitalism today and how they talked about the monarchy 200 years ago, just after the French Revolution and the restoration of the monarchy in France.
Then, people said monarchy dominated everywhere because it was rooted in human nature. We were naturally deferential. We needed hierarchy. Just as today, the enthusiasts of unrestrained capitalism say it’s rooted in human nature, only now it’s individualism, inquisitiveness, and so on. Then monarchy had seen off its big challenger, mass democracy, which was seen as well-intentioned, but doomed experiment. Just as capitalism has seen off socialism. Even Fidel Castro now says that the only thing worse than being exploited by multinational capitalism is not being exploited by multinational capitalism. And whereas then monarchies, palaces and forts dominated every city skyline and looked permanent and confident, today it’s the gleaming towers of the banks which dominate every big city.
I’m not suggesting the crowds are about to storm the barracades and string up every investment banker from the nearest lamppost, though that might be quite tempting. But I do think we’re on the verge of a period when, just as happened to the monarchy, and interestingly the military too, the central position of finance capital is going to come to an end, and it’s going to steadily move to the sides, the margins of our society, transformed from being a master into a servant, a servant to the productive economy and of human needs.
And as that happens, we will remember something very simple and obvious about capitalism, which is that, unlike what you read in economics textbooks, it’s not a self-sufficient system. It depends on other systems, on ecology, on family, on community, and if these aren’t replenished, capitalism suffers too. And our human nature isn’t just selfish, it’s also compassionate. It’s not just competitive, it’s also caring. Because of the depth of the crisis, I think we are at a moment of choice.
The crisis is almost certainly deepening around us. It will be worse at the end of this year, quite possibly worse in a year’s time than it is today. But this is one of those very rare moments when we have to choose whether we’re just pedaling furiously to get back to where we were a year or two ago, and a very narrow idea of what the economy is for, or whether this is a moment to jump ahead, to reboot and to do some of the things we probably should have been doing anyway. Thank you.
Posted: 29 Oct 2011 03:30 PM PDT
European Summit: A Plan with No Details
A Definite Plan (Minus Those Sticky Details)
Posted: 29 Oct 2011 10:00 AM PDT
Here’s another look at last week’s graphic:
Hat tip Tech Crunch
Posted: 29 Oct 2011 08:30 AM PDT
James Stack of InvesTech Research looks at past bear markets and recessions going back more than 82 years. The details of his findings?
One thought on this: The fear of another giant bear market — of another 50% loss — is likely due to the recency effect and the aftermath of 2007-09 as much anything else.
Posted: 29 Oct 2011 05:00 AM PDT
In a nova, gas drawn off one star ends up exploding off the surface of its companion.
When you think of a nova explosion, you probably associate it with a supernova—a similar, but fundamentally different, stellar explosion. The word nova is Latin for "new," referring to what early astronomers thought was a bright new star in the sky (specifically, Tycho Brahe in 1573 with his book De nova stella). We now know the general mechanism behind a nova—it’s a runaway nuclear reaction—but there is (at least) one mystery that's confounded astronomers for almost 50 years.
The nuclear reactions propelling the nova produce isotopes of carbon, nitrogen, and oxygen (among others), in addition to the primary product of hydrogen fusion, helium. But even though the process should be spatially even, these species don’t end up spatially homogenous. For example, in observations of the nova V1974 Cygni, there's three times as much carbon in one position compared to another in the nova’s shell. Physical modeling hasn’t been able to account for this difference. A team of researchers from Spain, Italy, and the US tackled this problem and found that the source of this difference is actually a common fluid dynamics phenomenon.
There’s often some confusion about the difference between a nova and a supernova. A nova is a runaway nuclear explosion that results from the accretion of hydrogen on the surface of a white dwarf. This star must have a companion (the two form a binary system) from which to draw off the hydrogen. Only a small portion of the star's mass is consumed in a nova, so many (if not all) nova recur, although the period of time can range from decades to millennia.
A supernova, on the other hand, is a destructive, extremely bright explosion caused by the star gravitationally collapsing in on itself (there are a couple different ways this happens). Most of a star's mass is ejected in a supernova, so this can happen only once.
So how does a nova, which should start with relatively well-mixed materials, produce an asymmetric explosion? In order to explain this discrepancy, we need to understand the physical processes that occur during the explosion. It has been suggested that thermonuclear reactions may be producing greater quantities of certain species. But these reactions are well known and the temperatures of novas we’ve observed don't make sense with this theory.
The other main possibility is mixing at the core/shell interface, but one- and two-dimensional computational simulations haven't been able to see this. The team behind the new research performed three-dimensional simulations of a nova explosion and focused on mixing at the core/shell interface. They found that shear flow at the interface triggers Kelvin-Helmholtz (KH) instabilities—which in turn cause the mixing. Previous studies only used one- and two-dimensional simulations, which couldn't capture the three-dimensional nature of the complex vortex structures created.
The KH instability is a well-known fluid dynamics phenomenon (first described by Lord Kelvin in 1871 and Hermann von Helmholtz in 1868) caused by a significant velocity difference between two fluids. Basically, the faster-moving fluid pulls the other into motion, and this interaction develops swirling waves that eventually transition into full-blown turbulent mixing. This occurs frequently in nature, in clouds, the ocean, Saturn's atmosphere—and apparently also in novae.
The three-dimensional nature of turbulence is well-known to the fluid dynamics community, so it's not clear why this appears to be the first simulation of a nova explosion in 3D. However, the team did solve this decades-old mystery, which should help improve our understanding of not only this fascinating stellar phenomenon, but also one of the sources of heavier elements in the universe.
Posted: 29 Oct 2011 04:00 AM PDT
Some reading material to stimulate your brains and start off your weekend:
Posted: 29 Oct 2011 03:30 AM PDT
Dr. Bill Dunkelberg is the Chief Economist for the National Federation of Independent Business.
A recent Bloomberg article entitled "Small-Business Job Engine Myth Hampers Effort to Lift Employment" (September 29) reports "…the notion that small business is the force behind prosperity is not true." The author cites statistics such as "Hourly wages at the largest companies, those with more than 2,500 employees, average around $27, compared with $16 in companies with payrolls of fewer than 100" to prove that small businesses are of little value. Out of 6 million employer firms, only 3,900 are this large. If this is such a good deal, why aren't all firms of that size? Maybe a barber shop with 2,500 chairs is not economical and too large to serve a local market? Maybe wages are better at larger firms because they are specialized (high tech, manufacturing) and require better skilled workers (which not everyone is)? Markets pay for skills. And maybe an economy full of these firms would not be able to provide the kinds of goods and service or convenience we like (no more "7-11"s, we just need a few 2,500 worker grocery stores to drive to?).
"Most small firms are restaurants, skilled professionals or craftsmen (doctors, plumbers), professional and general service providers (clergy, travel agents, beauticians), and independent retailers……most of these companies are going to remain small." I guess the author thinks this is bad. Notice that if all those big firms hired 500 new workers in a month, a very unlikely outcome even in good times, that would add about 2 million new jobs, just a few more than filed initial claims for unemployment last month (1.6 million, it was 1.2 million per month in 2000, a year of record HIGH employment)!
He quotes the view a professor at Case Western Reserve: "Because the average existing firm is more productive than the average new firm, we would be better off economically if we got rid of policies that encouraged a lot of people to start businesses instead of taking jobs working for others." Now, statistically, new firms are less productive than existing firms since it takes time to build the business to capacity, maturity. So I guess any new firm that starts must start at "maturity" or we should reject it. Bill Gates should have worked for someone else since Microsoft couldn't be started at the mature level it has today.
Nonsense, but this is the kind of misdirected thinking that is shaping policy. This assumes that Microsoft was not the result of many firms trying to compete to make the best operating system, but that somehow someone would identify Gates as the "right one" and every other entrepreneur should go to work for someone else. I guess government is supposed to do this (like with solar panels), making sure that once Gates is picked, he gets enough taxpayer money to open at "maturity" size.
More fundamentally, the author does not understand the main driver of job growth, and confuses our current problem of weak demand (not all the barber chairs are filled) with the factors that cause job growth (population growth), the need for more barber shops and the jobs this creates.
An economy with no population growth has no job growth in the long run (business cycles like our current situation can create lower employment temporarily). More people need more barber shops, clinics and all those small firms the author berates. Yes, those firms don't grow big very often, but it is the proliferation of these firms that accounts for the fact that over the past 20 years, 2/3ds of the net new jobs are created by small firms. Sure, more manufactured goods are needed too, but those are produced with fewer and fewer workers over time (productivity) and are not big job generators.
So here are the facts about small businesses:
The author snipes "So much for being seedbeds of innovation." Yet small business is the R&D for the economy, where new ideas, products, processes are tested in the market. Good ideas are rewarded with profits, the others "re-price" their assets and try again. So what if "many go bust"? These are trials, looking for the best managers and ideas, letting markets (consumers) pick the winners, not the government.
In a growing U.S. economy 500,000 businesses terminate each year, but 600,000 new ones are started, and lots of people are employed and gain experience and training in the process. That's where the greatness of our economy comes from.
And a P.S., small firms don't need tax incentives to hire, they need customers. So get it together in Washington and restore consumer confidence, 131 million workers spending more is a great stimulus and reason to hire which will solve the unemployment problem.
Posted: 29 Oct 2011 03:00 AM PDT
Tablet users are educated, employed, and earning money but are not necessarily young, according to new data.
At this point, 11 percent of Americans have a tablet device and 77 percent of them use it daily. Approximately 46 percent are in the 30 to 49 age bracket, however, and they are serious about their news, according to an infographic produced by the Pew Research Center’s Project for Excellence in Journalism and The Economist Group.
Of the 1,200 tablet owners polled by Pew, 53 percent use their device to access news every day. Getting news is actually almost as popular as email, at 54 percent compared to 53 percent, and the average user spends about 90 minutes catching up on the day’s events.
It’s not just quick bursts of breaking news users are reading, however. About 42 percent read in-depth articles on their tablets, but despite social-networking linkups at every turn, just 16 percent share what they’re reading on those services. Most stick to a small number of recognized sources, though 33 percent said they have branched out to new publications on their tablets.
Surprisingly, apps have not taken over. About 21 percent of people mainly access news via apps, but 40 percent primarily use the browser. About 31 percent use both equally.
Who are these people? About 51 percent are college grads, 53 percent earn more than $75,000 per year, and 62 percent have full-time jobs. While most are between 30 and 50, 22 percent are between 18 and 29 and 32 percent are over 50.
Pew found that 81 percent are using the iPad, bolstering recent reports that suggest the iPad will dominate the market for many years to come. But Amazon’s $199 Kindle Fire hits the market next month, which could take a bite out of the market for cheaper tablets.
For more, see the infographic below.
|You are subscribed to email updates from The Big Picture |
To stop receiving these emails, you may unsubscribe now.
|Email delivery powered by Google|
|Google Inc., 20 West Kinzie, Chicago IL USA 60610|