Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.


 
Wednesday, September 17, 2008

Lessons From the Macropocalypse


I have been wracking my head trying to write a post for my HBS blog about the macropocalypse.

There's so much to say.

For now, I will say this: the Fed bailing out AIG is kind of jaw-dropping as a total evisceration of the bedrock of the financial system - and orthodox finance and economics.

The real point is this. The time is now.

Now is the time for revolutionaries to step up and build something better, something more real, and something greater.

There will probably never - at least in our lifetimes - be an opportunity for total economic reinvention this tremendous.

Or this meaningful. Because that's what it's really about - not shareholder value, money, or "competitive advantage".

But doing something that means something.

-- umair // 1:59 AM // 19 comments


Comments:

Building.

Working on a marketplace for teacherpreneurs and have 1,200 amazing teachers fired up to revolutionize the education system.

Would love what others are doing!
// Blogger Jon // 3:19 AM
 

almost no one has figured out how to get greed out of human dna, let alone organizational dna ...

we need much, much more chaos for things to truly transform ...

smart evolved people are already doing useful things ... business people sneer at them as new-agers or worse, but they don't care, they are already living in the new paradigm ...

the old HAS to die off, it will not change, and we should be celebrating the collapse with big smiles and sighs of "thank god"

this is NOT a bad thing, and NOT a macroclypse .. it is a lovely revaluation of what it means to be a human being and is to be encouraged, not fixed or avoided.

we don't actually have to do anything, failure of the old is guaranteed by its very structure. simply do what you want to do and relax. all is unfolding as it should.

enjoy, gregory lent
// Blogger gregory // 4:36 AM
 

There is clearly a tremendous need for a revolution in finance--a retooling of the system in terms of the regulations, the regulators, and the incentives among the players to restore our faith. As one of the first to observe how truly broken our current system is, any specific guidance you can develop on what should be done would be well received and probably very influential right now.

I'm an entrepreneur. For the last several months I've been mainly focused on researching and reflecting to try to decide where I should direct my energy next and make a difference. I feel I have a decent grasp of things like harnessing the internet, building and leading a team, developing software, and other general aspects of starting and growing a technology company.

What I feel I lack most is domain expertise in the areas that I think are most in need of innovation, and I believe this is a widespread problem: the disconnect between people who have a deep understanding of the problems and needs of certain domains (in this case, finance), and people who are looking to create value directly by trying to solve problems, in my case hopefully by starting an innovative business tackling the biggest problem that I uniquely can contribute to solving. I think there are a lot of talented young people out there who end up creating a modified twitter clone when they could probably be solving a much more valuable problem if they had some idea of where to start looking.

Right now these are just thoughts, but I'm trying to develop them into ideas for how this disconnect could be improved. Especially given the urgency of the need for innovation in finance right now, I'd be up for any sort of brainstorming sessions for starters, either in person or online somewhere. I put up a discussion site at ideaify.com, not because it's a perfect solution, but more to show I'm serious. Open to suggestions...
// Anonymous blake borgeosn // 8:01 AM
 

How about something along the lines that the financial wizardry wall street has been so lauded for was nothing more than a confidence trick. A scam.

Packaging and distributing risk never really happened. Buyers sold risk to seller who in turn sold it back to buyers.

It would be nice for all the people who have been involved have their assets repossessed even if they have left the companies in the last 5 years.
// Blogger Simon Cast // 8:49 AM
 

Unfortunately, I don't see this happening until a truly frightening event occurs: the US cannot make its interest payments and is forced to default on its debt.

What happened at the personal level over the past decade is now happening at the national level. When the US goes BK, something will HAVE to be done. Until that time, people care more about American Idol and the NFL.
// Anonymous Jason Kolb // 11:29 AM
 

reform begins with understanding this is largely a *political* problem, as the US, as well as pretty much every other country in the world, uses a fiat currency that is issued by a central bank. true reform begins with an understanding of monetary policy, and a willingness to reform it.

there is a solution, and as you note umair, the opportunity is f'ing outrageous, once in a lifetime -- no, actually, once in a millennium.

but a willingness to understand real history and attack the root of the problem (central banking + fiat currency) is essential. most people are afraid of talking about real politics, as evidenced by the fear of talking about 9/11 being an inside job. the unfortunate thing is that we all have more to fear by NOT talking about it than we do by talking about it.

americans, ron paul was the solution. vote third party, mcbama does nothing to help the economy, in fact their policies will only ruin it more. ending the fraudulent wars, abolishing the federal reserve system, and reducing the size of government are essential to creating real solutions. either that, or its secession time, and the internet enables secession through the creation of virtual currencies, which can enable monetary policy reform. my money is actually on that route, as the political system is beyond hope in my opinion, as the american people are still too willing to play along with the two party system, which will never bring about true reform.
// Anonymous kid mercury // 12:58 PM
 

We are witnessing the greatest redistribution of wealth ever seen in the developed world. When the smoke clears, what I hope to see is a greater sense of responsibility, not just fiscally, but socially, from those that survive. I hope it illustrates that the way things have been run in the past is unsustainable.

You are right, it is time for a lasting revolution, and a new future.
// Anonymous Brett // 2:54 PM
 

There's a tremendous amount of chest-thumping rhetoric and wild ideological speculation here - almost as outrageous as the speculation that lead to the financial crisis to begin with.

The market system works to manage risk when there is transparency. Without proper transparency the market becomes speculative. The federal government has been forced to take a reactionary role because, even now, the remaining financial players are unwilling to disclose just how bad things really are in their private books. The policy of gradual multi-billion dollar write offs per quarter seems to be status quo. They must come forth in order to form a true picture of how outrageously leveraged the credit default swaps had gotten. Until that information is known the market will continue to wildly teeter upon hints, rumors, and allegations.

As for a way forward Blake Borgeosn's comment is right. I find myself in the same situation. There is a disconnect between the skillset that I know I have and the areas where I see the greatest need for value creation (food, energy, water, and a value transport mechanism that works more efficiently that what we already have).

It seems as though we've got a lot of really bright people sitting around hoping to be shown the way to get things done. Unfortunately, I don't think that manual is going to be written for awhile. It's going to take a lot of failed steps and frustrating setbacks before we hit upon the way forward. There won't be the eureka-toilet-seat-inspiration for problems as complex as these.
// Anonymous Matthew Reinbold // 2:33 AM
 

Seems like whatever you write it will have to be related to this post http://discussionleader.hbsp.com/haque/2008/04/beyond_the_banking_crisis_a_st.html which was more correct than I believed at the time.

The schadenfreude of the comments here is disconcerting, however. Debt, and liquidity are important and democratizing events, key to investment and entrepreneurism. The joy in watching the corrupt model fail will be replaced by the pain of seeing opportunities vanish for lack of funding, risk taking vanish from debt-overhang, and a flee from equity, and therefore value, as we de-lever the nightmare we have made.

More constructively.

What we need is better ways to share the information necessary about holdings between investing partners so that differences in price negotiation center on strategic vision, rather than short term lack of trust, yet still allow investors to hold proprietary view points. Inverting the relationship between investment positions and investment strategy, if you will.

There are other, less, likely, reform: fixing compensation to limit agency issues, etc, but until every partner in a negotiation can feel confidant they aren't being lied to, we can't begin to deal with the others.
// Blogger Jesper // 10:04 PM
 

There are two reactions that I have to what is taking place.
1. Most experts live in the world of the abstract, and fail to see this sort of thing coming because by default their perspective is narrow. There are no answers to what has happened,and what must happen in the next days and months. It is a step by step process that requires a kind of leadership that has been absent from Wall St. and Washington for a long time.
2. At the core of this problem is the moral vacuity of our leaders. They are in great denial of their responsibility for establishing the conditions for this financial crisis. I am a very optimistic person, but I am not hopeful that either of the presidential candidates or any other politician in Washington will rise up to lead the nation through this crisis.
// Blogger Ed Brenegar // 3:49 AM
 

ETA on the HBS post?
// Blogger Riff // 11:12 PM
 

Brett,

Why would the bankers change? From where I sit, this looks like a massive redistribution of wealth from the middle class to a bunch of bankers. They gambled for 6 years, blew up majorly, and then passed the bill on to you and me. It's certainly the biggest redistro of wealth in human history, but the people don't seem to realize they're getting raped.
// Blogger j allen // 9:15 PM
 

what would the perspective of a future "digital marxism" look like? "marxism" not in the sense of leninism, but as cold analytical theory interested in hidden system-inherent contradictions and extrapolating future developments?
// Blogger jurij m. lotman // 9:00 AM
 

People want action, but they have no idea what. That's because we've lost all connection to our history. During the 1930s, government figured most of this stuff out. You don't recall huge stock market crashes or bank runs since then, do you? Not till the 1980s and onward, much accelerated by the bipartisan forces of deregulation. The big danger now is that people will be fooled by the current rush to legislate when the Ds get a little bit of window-dressing (i.e. caps on executive compensation, mortgage assistance for some people, warrants to buy equity in the distressed Wall St firms) in exchange for a huge irreversible payout of $700b for god-knows-what. What we need now is a full-scale international bank holiday to send independent accountants in to figure out who is genuinely solvent, who is insolvent, close down the bad firms, and start over. Read this piece: http://www.thenation.com/doc/20081006/ferguson_johnson for more.
// Anonymous Micah Sifry // 6:35 PM
 

convergence of web2/opensource/social innovation is where we are seeing some hope - where they are based on a common DNA, pick goals meaningful to society, and are organized in ways that is increasingly permeable, iterative, and emergent.

building a new ecosystem to support these types of ventures requires a new kind of 'investment firm' and supercharged social and human capital. the pieces are coming together. lots to do. fun to be had. let's get on with it!
// OpenID Igniter // 4:37 AM
 

Umair - as you know, I couldn't agree more.

Blake - having a few years ago identified exactly the problem you articulated: putting talented entrepreneurs and engineers together with capital and domain experience in financial services and markets, my partner and I are in the early stages of setting up an investment company that will focus on catalyzing innovation in financial services and markets. The opportunities are indeed boundless.
// Anonymous Sean // 2:12 PM
 

I would agree that the grounds are ripe for drastic change, but what change and at what price i wonder. Should be an interesting next 4 years.
// Anonymous houston // 12:20 AM
 

Umair and friends -

Just been viewing your constructive capitalism talk at Daytona. really enjoyed it.

i couldnt agree more that values-based business is the new business of 21st century.

The idea that we are transitioning to ‘meaning economy’ makes lot of sense to me. I recently read survey that 11% of us find meaning at work, and so 89% of population do not find meaning at work!! Imagine what could happen if we are all more inspired through the work we do.

In your Daytona talk you mention Apple and Nike but I see the social enterprise movement - although nascent - as the embodiment of values based business.

I would suggest that social entrepreneurs are the change makers and revolutionaries - those working disruptively at the intersection where the traditional private sector and civil society meet to create new solutions to old problems – to use business approaches to tackle social problems.

You might be interested in our firm - Eastside – that is made up of former bankers & business folk - who are all trying to help mainstream social enterprise movement...

By the way I presented recently to Havas boss, Fernando Rojas, and suggested that social enterprise if fed through the culture of a large advertising firm would create a disruptive position for success in 21st century...

You might be interested at some more thoughts on this from the social enterprise angle: http://www.socialenterpriseconsulting.co.uk/2009/02/voice-mainstreaming-social-enterprise.html

Richard Litchfield, MD, Eastside, www.eastsideconsulting.co.uk
// Blogger Richard Litchfield // 9:15 PM
 

Umair and friends -

Just been viewing your constructive capitalism talk at Daytona. really enjoyed it.

i couldnt agree more that values-based business is the new business of 21st century.

The idea that we are transitioning to ‘meaning economy’ makes lot of sense to me. I recently read survey that 11% of us find meaning at work, and so 89% of population do not find meaning at work!! Imagine what could happen if we are all more inspired through the work we do.

In your Daytona talk you mention Apple and Nike but I see the social enterprise movement - although nascent - as the embodiment of values based business.

I would suggest that social entrepreneurs are the change makers and revolutionaries - those working disruptively at the intersection where the traditional private sector and civil society meet to create new solutions to old problems – to use business approaches to tackle social problems.

You might be interested in our firm - Eastside – that is made up of former bankers & business folk - who are all trying to help mainstream social enterprise movement...

By the way I presented recently to Havas boss, Fernando Rojas, and suggested that social enterprise if fed through the culture of a large advertising firm would create a disruptive position for success in 21st century...

You might be interested at some more thoughts on this from the social enterprise angle: http://www.socialenterpriseconsulting.co.uk/2009/02/voice-mainstreaming-social-enterprise.html

Richard Litchfield, MD, Eastside, www.eastsideconsulting.co.uk
// Blogger Richard Litchfield // 9:16 PM
 
 

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