Emergence of New Systems

Last week the National Intelligence Council released its 2025 Global Trends report and naturally our Georgetown MSFS program was pretty interested in looking at it.  The report considers what the major themes and trends will be of the next couple decades and assesses how they will affect different countries, power structures, and ideologies.

It must have sucked for the NIC because at first the report was issued at 33MB and didn’t seem to be uploaded correctly.  It wasn’t until this weekend that the report was fixed and was only 8MB to download.  Lost a lot of readership that way.

Some of the report’s assessments I didn’t exactly agree with.  I felt that it sold international institutions short, saying countries and regions would seek pragmatic concerns — a return to a “mercantilist” and realist perspective — over recommitting to international institutions.  At the very least I think it’s up in the air on that count; Obama’s presence alone (see his calm, thoughtful interview on 60 Minutes) might bring people back to the table, especially with Europe seeking to reassert itself in the midst of its own internal problems with population and economic stagnation and with filling a power vacuum from America’s absence the last 8 years.

A daytrading channel I frequent has become enamored with this one guru who is predicting even worse things for the financial markets:

“But here is the key point to ingrain in your minds as wave {B} up takes over: Raise cash. This phase is a gift. The eye of the hurricane storm, which is a category 5 financial storm. A second chance to raise cash at higher prices. Because, once it completes, a world rattling catastrophic plunge is coming, one that will take prices far lower than anyone – even Bears – imagine, wave {C} down.

“Wave {C} down could be so bad as to usher in mergers of nations, where nations become states within new larger nations. This coming political solution to wave {C}’s calamity is good reason to accumulate Gold.”

In my opinion, I think that is an over-stretch.  In contrast, the financial crisis serves as good a catalyst for recommitment as Bretton Woods was in a previous age.  Sensitivity to international development is also greater than it was before, and this will require coordination from many countries.  I think there’s a huge opportunity to embrace Iran and Russia soon.  A reinvigorated US under Obama has serious potential to put the hurt on Al-Qaeda’s top leadership for once.

These I’m not sure were properly expressed in the Global Trends report — opportunities and not just vulnerabilities.

Anyway.  The more and more I look at the policy issues and problems facing the US and other nations, the more I see the complete failure of business models and ways of doing things from the past era.  The internet, certainly coming into its own, is destroying outdated models at an astonishing pace; it started with music, and then movies, and then copyright, and then the channels through which individuals could communicate (HTML, blogs), and then to distributed computing, journalism, mass media, and more.  Now the internet is banging on the doors of civic action through the Obama election.  Ideas gaining momentum online are exerting pressure on nations, the automotive and bandwidth and pharmaceutical and electricity and energy industries.  Advertising and marketing are moving into the hands of the many.  The many now have a way to voice themselves, but it’s not fully formed yet.

It’s the death of old models and the companies that cling to them, exacerbated by a financial crisis that’s shutting down business worldwide.

Sounds pretty bad, right?

But it’s really not.  Yes, lots of people are losing their jobs.  Yes, a lot of wealth has been destroyed in retirement and investments and savings.  But there are ways out.  And those ways out, which were previously unprofitable, will gradually become more profitable as a new model emerges.

I was blown away by Dave McClure’s update to a post he wrote back in 2001 about securitizing happiness.

In it, he first writes that

“[i]n capitalist systems, it is difficult to avoid any business activity that is positively motivated by the flow and optimization of capital.  However, some of these business activities may have a negative effect on natural resources and other public infrastructure, and such infrastructure may be traditionally maintained only by government and/or non-profit organizations.”

It’s true; the commons have not been securitized or valued at the same level as equity capital.  This leads to a great discrepancy in business interest given to sustainability and community and individual assets, and the “tragedy of the commons”.

Aspects of our lives are not captured at all by economic indicators:  those related to happiness (eudaimonia), productivity through hobbies, innovation, housekeeping, family and community time, and all those other things we do every day that don’t earn us a paycheck.  Likewise, our natural resources in parks and commodities and air quality and whatnot are given little importance in just about any forum.  Those who try to protect them are told to “go get a job”; being at work and being too busy for anything else is rewarded as proper capitalist behavior.

McClure writes,

“[A] future vision might be to capitalize humanity itself, and provide  derivative valuation models for the health, education and overall well-being of society.  Such securitized assets would direct business behavior towards generating infrastructure to support and optimize long-term sustainable health and education benefits for all individuals (including those in developing countries).  This is again not that far-fetched, but simply a side-effect of accurately capturing the values of our society as they exist in a functional capital system, which subsequently would allow capital to optimize itself for overall human benefit.”

This gets me excited because that is what I foresee for my web start-up, Galapag.us.  There is value that can be unlocked within individuals, objects, communities, and all these other non-monetized things in our daily lives.  These are all already considered within a greater realm of reputation, determining how much each identity values the other.  But they need to be mapped into the internet’s platform in the next stage of our economic development.

This will unlock all sorts of ways for individuals to make money, to express themselves, to organize, to collaborate and communicate.  This will allow for proper valuation to be done for the commons, that “free” world out there that we all appreciate but have no responsibility to maintain upkeep for.  And not only that, we will be held accountable for our decisions in a measurable way because we will have to actively maintain good reputations.

This is wildly idealistic and is looking pretty far forward, but I think it has some legitimacy — I guess it will just depend on how many people will be willing to go and make it all happen sooner rather than later.

And, finally, before you go, flip through McClure’s excellent slide deck.  For more good reading on the subject, read Clive Hamilton’s “Growth Fetish”.  I think that book, along with Naomi Klein’s “Shock Doctrine”, will change the way you look at the world.  And I think Fareed Zakaria’s “The Post-American World” will help to put everything recently into perspective.  As skeptical as I am of Jeffrey Sachs, I do think that his most recent book, “Common Wealth”, serves as a better risk/threat assessment than the Global Trends 2025 does; but that said, it’s important to realize that that report is coming from the context of the intelligence and security community.  Another good report to read (which I discovered after one of its contributors spoke at Georgetown MSFS) is the World Economic Forum’s Global Risk 2008 report.

Keep cash on hand, and stay nimble…  Things are changing fast and I think great opportunities are coming sooner than people think.  It’s just that things will likely end up looking far different than what you’d gotten comfortable with.


Filed under Economics, Foreign, Globalization, Government, International Affairs, Internet, Policy

3 responses to “Emergence of New Systems

  1. 1. Awesome theme. Really like it.
    2. Can you make it so people don’t have to login to comment?
    3. On the question of securitizing happiness, etc. check out Lewis Hyde’s “The Gift.” It’s a great book about why the gift economy works so well in many contexts. He was recently profiled in the NYT (http://www.nytimes.com/2008/11/16/magazine/16hyde-t.html) but the book is definitely worth a read.

    Also, I think it is worth noting the “tragedy of the anticommons” which is the subject of “Gridlock Economy” – too much property can be bad: packaged mortgages, patents stopping innovation, etc. A recent talk of his is summarized here (http://www.ethanzuckerman.com/blog/2008/11/18/michael-heller-and-the-gridlock-economy/) and I’m about to read his “Gridlock Economy” so I’ll let you know how it is.

  2. thanks for the hat tip ben. good luck with your project :)

  3. Ben

    Dave: thanks for the cool post!

    Kevin: 1) It’s Derek Powazek’s. The triple columns are tough since the links you have to scroll down for. But it looks clean! 2) Fixed. Sorry about that. Not sure why it went back to that setting. 3) Those were excellent links. I read the NYTimes article and added the book to my Amazon list. I’m starting Lessig’s “The Future of Ideas” and it has already alluded to the solution for the commons not being more ownership. You’re pretty well-read on that subject and I need to learn more about it…definitely appreciate you sending along the info.

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