Archives for posts with tag: recession

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Most companies fail because they treat headaches. Not broken limbs.

I have more than 100 apps on my iPhone. I use 10 of them regularly because they solve an important problem for me. All the other apps are nice to have and relevant but their solution lacks true urgency.

The majority of companies/brands that didn’t make it through the Great Recession or continue to struggle are companies that treat headaches. Nice to have a pill or massage to battle the head pounding. But not life-threatening. You’ll make it through another day with a headache, hard to imagine when it comes to broken limbs.

When the Great Recession started, businesses that treated minor head pressures disappeared overnight: the 100th clothing store, the 51st coffeeshop, the 11th video store. Over the next years, businesses went belly up when they treated minor headaches. In early 2012, businesses are starting to disappear that treated major headaches.

It’s part of the de-leveraging process our society is going through. We cut the fat, only invest in necessities. At this point in time, people don’t buy products or services. They buy solutions.

Be brutally honest

Are you solving a significant problem? Did you identify and quantify a real problem worth solving? If you answered at least one question with a resounding “Yes”, you will succeed.

If your answer was a whimper, a muttered “I don’t know” or a loud “Yes!” – time to start rethinking your business. We don’t know when things get really better and luxuries are affordable again. We know businesses don’t have the luxury to wait until then.

Danger Innovation Zone Sign

strife

  1. vigorous or bitter conflict, discord, or antagonism: to be at strife.

  2. a quarrel, struggle, or clash: armed strife

  3. competition or rivalry: the strife of the marketplace

Definition by Dictionary.com

50 years ago, JFK asked the nation to send a man to the moon.

2 days ago, the last Space Shuttle mission launched.

50 years between both events. 50 years that have transformed the United States for good.

50 years ago, we, the people, had a solid contract with the government and institutions. We believed in serving for the common good, for a better nation and, yes, for a government. We were able to pull off the Apollo 11 miracle. And we felt it was our responsibility to help disadvantaged fellow citizen through laws, government programs and subsidies. That contract was signed by the people, the government and, yes, corporations.

Fast forward 50 years and the US is a different country. The government is about to exit manned space exploration, handing over the rockets to private companies. Distrust in government has never been higher, the comfort level with our overall system never been lower and the pile of problems on our doorstep never been more overwhelming: Unemployment, debt levels, financial crisis, climate change, 3 wars, a rapidly deteriorating infrastructure, unsustainable fiscal realities on all government levels.

Our leadership resembles an anemic ruling class, almost like an in-bred monarchy that never leaves the palace. The dynamic leadership in terms of wealth, power and authority has migrated to large corporations. These enterprises take the most promising talent and ask them to join the elite class to live off society and give nothing back. Even worse: They have the audacity to ask for subsidies from the government, holding states or federal government hostage. The strength of leadership is selfishly invested in these small principalities (Think about Disney: they are a principality like Liechtenstein). The old, compact nation state where you have the government and people in a joint effort has completely fallen apart and is about to disappear.

The age of strife

The United States just entered a period where the nation will be more insular and inward-looking, where crisis is imminent, and crisis has new dimensions that encompasses climate change, energy shocks, financial panic and a tremendous economic reordering. We haven’t even begun to understand the unimagineable transformation our economic system will undergo in the decades to come. We have started to build a society that can produce services and products with much less labor:

  • Any human driving jobs (truck, bus, cab) will be eliminated and replaced by machines.
  • Most manufacturing will be done by machines.
  • Educational institutions (especially colleges) will have to change, eliminate tenure and reform the whole crumbling system. The ubiquity of technology might make physical campuses obsolete.
  • The financial system will be run (It is already, isn’t it?) by computers.

The list could go on and on. What will happen to these millions of people without a job and needed skills?

Even worse, this might put us in a situation where we revert back to being an aristocratic society. The vast majority will be working in the service industry while a tiny aristocracy of money elites are being able to live off the world and the serving class. The narrative of the United States of America was based on egalitarian expectations. These egalitarians expectations are crumbling in front of our eyes.

We’ve entered an intermediate period of civil strife, cultism, ineffective leadership and a bureaucratic apparatus that’s only beholden to itself, funding itself despite the labor of the working. We have a bureaucracy that is removed from the people and ineffective in leading. We also a have a de facto dynasty with all these massive corporations that essentially own the government because they can buy it. That creates the basis for much of the social strife we’re going to see because we’re facing a structural problem, imminent shocks and shifts in the world system, and the nature of the global economy itself. Inherent and self-reinforcing inequalities and concentration of wealth in a society that was based on an egalitarian principle will lead to massive dislocations.

Two options

The glass is either half full or half empty. Depends on your point of view.

Half empty

In the period of strife that we just entered  and the way we come out, we may find ourselves in a much more elitist society, with a highly impoverished majority and a very different kind of social order and system. That is the fear we should feel while we enter the age of strife. We will continue to prop up failing institutions, finance a legacy model of economic production that drove us to this point but lost its tires in 2008, and is now hubbling along on the rims. Political institutions will remain calcified and unable to deal with the demise of industrial revolution institutions. The gap between institutions and people will continue to grow, leading to civil unrest and political extremism. The Internet will speed up this process by eliminating millions of well-paying jobs and diminish the middle class to a minute minority. Ultimately, we will become a two-class society, closing the loop the US started in 1776.

Since I live in Los Angeles, here’s the Hollywood version: “Escape to New York” meets “Gladiator” meets “Terminator”.

This is the linear future. Meaning, if we continue on the current path, we will end up in a scary world. It’s a world where stability has been replaced by constant shocks and uproars to the system.

But, there’s an alternative.

Half full

We might experience a wonderful flowering.

Think 18th Dynasty in Egypt: After decades of wars and uproars, Amenbotep III, the ninth king of the 18th dynasty, had a long peaceful reign of 40 years. It was marked by unprecedented wealth, cultural creativity, internal strength, and prominence in the ancient world. Magnificent temples were constructed and decorated throughout the land.

Think Europe in the 20’s and early 30’s: After a devastating World War, normalcy returned to politics, jazz music blossomed, the flapper redefined modern womanhood, Art Deco peaked. The era was further distinguished by several inventions and discoveries of far-reaching importance, unprecedented industrialgrowth, accelerated consumer demand and aspirations, and significant changes in lifestyle and culture.

We have been here before.

We’ve entered ages of strife before. And we succeeded.

What to do.

One thing is sure: It will never be 2008 again. Stop hoping this is just a recession, something temporary. This is a revolution, this is fundamental dislocation. Stop kidding yourself.

Don’t expect any solutions from current institutions or political parties: No tax cut, no subsidy, no government program will change the path. Only you can. With innovative ideas and a transformative mindset.

Most importantly, don’t ask what this society can do for you. Ask what you can do for this society. We’re in a perilous situation. We need your passion, your enthusiasm and your openness to see the world with different eyes and change it through your ideas.

I’ll leave you with the (almost) closing words of Umair Haque of his book “The New Capitalist Manifesto – Building a disruptively better business.

“By hardwiring an interdependent world’s often invisible, but very real, human, social, public, and environmental costs and benefits into the heart of management; by giving back the benefits that are borrowed from, and taking back the costs that are shifted to people, communities, society, future generations, and the natural world: their new institutions are beginning to destroy less, to create more. Constructive capitalists are stepping toward a worthier capitalism: one that yields more authentic, sustainable, meaningful value for every dollar, rupee or renminbi spent.”


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In case you haven’t heard yet: We’re in a deep recession. We’re in the middle of a structural transformation of our economic system. Ok, I won’t bore you: We have major problems. Bailouts, global debt crisis, nature pillaged – our future is at stake.

Many influential people have told us technology will be the savior: It will pull the economy out of its misery, improve our lives, the way we connect with each other – you heard all this before.

Which brings me to TechCrunch Disrupt.

I watched the majority of Battlefield presentations where startups pitched their products/applications. And I was utterly disappointed.

A lot of clones, bandwagon riders and way too many companies relying on advertising revenue. (99.9% of companies basing their business model on advertising revenue shouldn’t be funded and close the doors now. The last thing we need is more advertising impressions. We have plenty of those. We need innovation in advertising, not new platforms using the current digital advertising model.)

And, I’m not alone. Even Scobleizer, the biggest fanboy of digital innovation, communicated his disappointment with the chosen companies:

“Silicon Valley needs to be sent a message that we need real innovation and interesting new ideas.”

Mahatma Ghandi said famously: “Be the change you want to see in the world.” Looking at the innovators at TechCrunch Disrupt, our future will be filled with badges, more advertising, more clutter and more applications we need to download. I didn’t see anything revolutionary that questions the Status Quo. Nothing that improves our broken educational system. Nothing that improves our broken political system. Nothing that helps improve communities or our daily lives.

At one point, Silicon Valley used to have a feel for developing stuff that helps change the world. Nowadays, Silicon Valley is more concerned with flipping.

Instead, we need to question our priorities. Questioning the current society constructs and finding new ways to evolve our world into a livable, sustainable and fair community. How can we care more about others and less about material products? How can we develop communities that are less centered around “me” and more centered around a common purpose? How can we make this beautiful world a better place?

We need visionary ideas. Revolutionary products. Companies with missions focused on changing the world, not valuations. I saw a lot of small steps at TechCrunch Disrupt. The big dreams didn’t show up.