Posts Tagged ‘recession’

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.

How Silicon Valley can Re-grow the Economy from the Bottom Up

February 28, 2009

Details:

1)     Create an Open Ad Network, similar to Adsense but for any multimedia, for use on social networking sites like Twitter, Facebook and FriendFeed, as well as blog sites like WordPress.

2)     While anybody can upload an ad and say how much they are willing to pay for its run, only users will have the power to distribute the ads.  IOW, users get to pick and choose the products and services they wish to endorse for their own social graph and casual readers.

3)     Ads are very dynamic, mostly limited-time offers and invitations by companies previously approved (Users will input their “150” – the number of brands we are each loyal to on average, which serve 80% of our everyday needs) .  Once the goal of the advertiser is met (such as 10,000 coupons saved or printed), the ad is automatically replaced by another in the queue.

4)     Of course, there will be room to introduce new products and services, too, for those companies seeking brand awareness.  This will spawn limited offers to targeted influencers such as “Can we send you our new coffee maker to try at home?”

5)     As users’ friends, family and followers engage with the ads, the user makes money.

6)     Smaller businesses that can’t afford to pay cash can offer users discounts.  For example, $.25 per engagement towards meals at my local restaurant (so if 20 of your local friends check out the ad of the new restaurant you recommend, you get $5 off your next meal there).  Also, if a startup cannot afford to pay, the user can override the “place best paying ads first” function and distribute the ads for little to nothing, to give deserving companies a boost and help make sure they stick around.

7)     Earned money can be spent at participating LOCAL businesses via cell phone exchange, so that users are encouraged to spend the money locally, to shore up their own communities.  If spent this way, the money is not taxable for the user (but would be subject to tax for the businesses) and the business picks up the bank transaction fees.  So even if you earned $1,000 a month or more via this system, you wouldn’t get taxed on it and you wouldn’t increase the tax rate of your primary income. (Of course, the government will have to sign off on this, but given the state of our economy, if there were a groundswell of support for this, it shouldn’t be a problem.)

8 )     The alternative is to withdraw cash once a month, which will be reported to the IRS and bank transaction fees will be charged.

Advantages:

1)     Individuals will earn and spend extra money, stimulating the economy, especially their local communities.

2)     Since people will be recommending products and services they know and enjoy, then trust, confidence and demand will all increase.

3)     Advertisers will finally benefit from an online advertising method that actually works for demand creation (as opposed to Search’s demand fulfillment).

4)     Because companies themselves cannot distribute the ads, goodwill and not just money is required for any and all ad runs.  This will make businesses more accountable to customers and society at large.

5)     Crappy ads will not be distributed.  Demand for higher quality ads will increase and professional copywriters, photographers, videographers, and so on will be put back to work.

6)     Everybody has the same, level playing field so that small companies without huge advertising budgets can still access the marketplace and compete effectively with big companies.

7)     Being able to access the market will make entrepreneurism skyrocket, creating income, tax revenue and jobs.

As I’ve written before, we should create a for-profit consortium to make this a reality.  The sooner the better.