Posts Tagged ‘economic recovery’

Silicon Valley, not President Obama, has the Power to Save the World from Depression

March 21, 2009

 

Everybody agrees that the economic meltdown was caused by a crisis of trust.  Once disbelief entered the system, tight knit economic networks swiftly frayed into “every man for himself” loose threads.  The Emperor Economy has no clothes. 

So who can weave together a new economic fabric?  No, not Washinton D.C.  Silicon Valley.  And you.

During the United States Presidential Election, the Obama team successfully used the slogan “Change We Can Believe In.”  The media lasered in on the word “change” because that meant “not Republicans” but it’s my belief that average public hearts were most responding to the “believe in” aspect.  Human beings are intrinsically wired not to like change, but it’s an inherent need to believe in the people, ideas and institutions that surround us.

A growing number of American citizens are already becoming leery or downright fearful of President Obama’s sweeping list of changes.  While talking “bottom up solutions” during the campaign, he’s working to impose more and more top-down mandates.  That’s no surprise.  The Federal Government was designed to be the top of a power hierarchy.  Obama must work within that top-down system.

The problem is that no matter what the Obama administration desires, no matter what actions they take, trust — that one essential element that can turn around the economy – will not be injected back into the economy by government.  They simply don’t have the power or means to do it.  The bailouts and stimulus bill haven’t helped because they haven’t restored trust.  Many argue they’ve done just the opposite by highlighting abuse and excess and have made matters worse.

Recession lingers and depression threatens because of deep mistrust that is turning into despair.   Now that it’s lost, how can the public be expected to rebuild faith in people we don’t know, institutions we can’t reach, and extraordinarily complex systems we don’t fathom?  There is only one way.  Trust must come, as Obama rightfully stated in the campaign, from the bottom up.  It must start by believing in the people and the commerce around you.

My regular readers will be tired of hearing this from me again, but understanding this is so vital to economic recovery (and the avoidance of grave world conflict sparked by global depression) that I can’t say it enough.  For the two hundred thousand years that modern humans have lived on this Earth, social networks were economic networks.  Everybody depended on family, friends and trading partners for their livelihoods.  It was people they knew, they spoke with, they trusted, who kept them alive.

Today, especially online, social networking is mostly about conversation, education and entertainment, not about making a living.  For most of us, our ability to earn or lose money is dependent on things so far removed from us that we have very little control over it.  Mysterious things that happen in far-off places affect us more than the people and things we can touch.

This needs to change.  Luckily, everything is already in place to make that change.   We just need to tweak and build on what already exists.  We just need to turn online social networks into simultaneous economic networks, as they are naturally meant to become.  Social networking grows up, if you will.

I’ve written here and here about what Silicon Valley can do and how.  Basically, we need to create a true digitized economy based on heart to heart connection.  This means taking responsibility for letting friends, family and followers know which products and services are worth supporting and being compensated for that endorsement. 

This, in turn, means taking power away from corporations so that successful advertising distribution is dependent more on having goodwill than having deep pockets.  By holding companies accountable, having the power to affect their ability to find customers, gross atrocities will at least diminish if not end.

It also means creating a market for ALL digital goods.   Every creative person no matter what their skills and passions needs to have a seat at the table, not just musicians and application developers.

Journalism must also have a seat at the table.  Professional journalists who work for publications as well as compensated independent bloggers must be included.

The final thing that’s required is to allow people who produce non-digital goods and services to have access to the market.  If I have one pizza shop in Petaluma, I should have as much opportunity to reach potential customers in my area as Pizza Hut does.

By creating one-on-one bonds between buyers and sellers, we can rebuild trust, get buying and selling going strong again, and rebuild the economy.  Moreover, we can strengthen the social/economic fabric so that devastating economic unraveling never happens again.

But Silicon Valley must step up.  The tech world needs to stop wasting its time on having no business models, no outward look, and no clear and focused ambition.  It’s time for the Valley to cross over into the mainsteam instead of waiting for the mainstream to come to them.  It’s time to show some leadership.

The world needs Silicon Valley to create some change we can believe in.

Advertisements

The Square Triangle’s History

February 2, 2009

 

I believe if we look to our past and remember how our modern economy was created in the first place, we can find our way out of the economic disaster.

Most people will point to the industrial revolution as the catalyst that propelled us into our modern economy, and certainly that’s the primary impetus.  But the industrial revolution had been churning away across Europe and the U.S. since the mid-1700s.  After 150 years of slow progression, it was something else that lit the fire that would thrust us forward dramatically.

4-together1That “something” is what I call the Square Triangle.  It was created by the serendipitous combination of four things:  technology, advertising, media and entertainment.

  

print2You can think of the triangle as a technology, in this case, the printing press, connecting 3 points: publishers, readers, and advertisers.  Newspapers existed like this for centuries, each focusing on its own small community. 

 

The change came in the United States when the first national brand, laundry soup, was created in 1906.  Suddenly, brand advertisers across the country wanted to reach ALL potential buyers, including the so-called “illiterate masses.”  So comic strips were born.  This created two more points that squared off the triangle, adding cartoonists (artistic types) and newspaper syndicates (business people).

bloggerComic strips drove eyeballs in mass to newspapers, which drove eyeballs to pictures of national brands, which created demand and the one mass market.  A fury of innovation,  production and consumption followed; the economy exploded in growth and our modern middle class was formed.

Cartoonists were considered heroes.  They became the rock stars of the day and were treated as such.  Newspapers were eager to pay for comics because it meant they could secure more and better ads.  More ads, more products, more jobs, more money to invest, more tax revenue.  Living standards increased substantially for over two decades, until the Great Depression, which I could argue was an inevitable reckoning.  Nobody knew how to handle the increasing complexity of such a huge market.  Sound familiar?  History has repeated itself all these decades later as the one global market has grown beyond the establishment’s capacity to handle it and we’re now having to regroup.

But getting back to the history…

So then it’s the 1940s and WWII is finally over.  People have money and want to celebrate.  At the same time, a new technology has emerged, the television.  From the late 40s on, more entertainment is matched to more advertising and when household television ownership reaches a tipping point, another explosion of growth occurs.

 

tvAgain, the Square Triangle is the model.  Various creatives like actors, writers and directors pool together to collaborate, and business people like lawyers and producers manage it all.  Networks eagerly pay for programming because it, in turn, generates more money from advertisers.  Quality and quantity of shows grow rapidly and great cultural progress is achieved as we learn more about strange places and diverse lifestyles.  The giant leaps in understanding and tolerance from the 1950s to today are happy consequences of the Square Triangle.

Which brings us to the Internet.  Internet connections started hitting the mainstream in 1995, almost 14 full years ago!  So why hasn’t the success of the Square Triangle been repeated?  Because it has never been adopted.  The “Dot com” bubble and crash were mainly about selling retail products online.  Originally, the only online advertising was by electronic versions of newspapers.  So that was the best approximation of the Square Triangle.  Trouble was, they didn’t have an effective entertainment component.  Newspapers relied on the same print comic strips that editors have kept trapped in 1950s sensibilities to this day — most of which didn’t appeal to young Internet audiences.  Plus, the syndicates put the same comics online for free on their own websites, so why go to a newspaper to read them?  Since there wasn’t compelling entertainment to match to the ads and make them effective, advertisers soon lost interest and fled the Internet.  Massive retail sales never materialized.  Dotcom crashed.

internet2From the ashes came blogs and that recreated the triangle.  But the squaring has still never happened.  Why?  Because of Free. 

 

To make the Square Triangle work, publishers need to have confidence that if they purchase entertainment, they can get bigger, more loyal audiences and more and better advertising, and thereby make a lot more money than they’re spending on content.  As the Internet exists today, there is no way to do that.  The vast majority of consumer-generated entertainment isn’t consistent enough in quality to ensure audience loyalty.  And when something worthy does appear, it’s passed around for free. 

It’s not that talent doesn’t exist to make high quality Internet entertainment.  Far from it.  The problem is that the countless talented people out there who could be producing and collaborating don’t have the time and focus to do so on the consistent, ongoing basis that is demanded for the Square Triangle to work.  They must attend to paying jobs in order to make a living.  And because all media are on a downhill slide, it’s increasing likely that those jobs are not “creative” at all, and that their talents – which could be used to make Internet advertising effective and catapult our economy forward just as cartoonists did a century ago – are going to waste.

There’s no Square Triangle to generate high quality, innovative entertainment made specifically for the Internet, except in relatively small pockets like the gaming sector. 

There are movie actors and TV actors, after 14 years, why are there no Internet actors?  There are screen writers and television writers, why are there no cell phone writers?  Why aren’t photographers and cartoonists and illustrators making a living by directly selling their products online – instead of having to give them away for free in the hopes of generating paid work that has all but disappeared offline, too?

If the past 100 years has taught us anything about wealth creation, it’s that audience-building entertainment and demand-building advertising must go hand in hand. 

4-apart2But here we are, with poor melding of sectors and stagnation.  No demand creation, no job creation, no economic and cultural boom.

 

I strongly believe that if we take the Square Triangle – a model that has proven itself for one hundred years to be extremely effective at creating economic and cultural growth –and apply it to the World Wide Web, then global peace and prosperity will make giant strides.