From Davos-We Are In The Midst Of A "Transformational Crisis."

Posted by: Bruce Nussbaum on January 28, 2009

A “transformational crisis” is the term used in the opening session of the World Economic Forum by founder Klaus Schwab to describe the state of the global economy today. Institutions are not working, unemployment is soaring and we have to first manage the crisis, then manage a new world post-crisis.

Well, if we are in a transformation crisis then we need to have people who know how to transform in power to do so. Transformers (innovators, designers, design thinkers) are not running big sessions, talking on-stage about major policy changes or debating top politicians about how best to create new institutions to deal with our new economic circumstances. Many transformers are here but they relegated to small, minor sessions or lunches that will have little impact.

Most of this year’s World Economic Forum’s big, public sessions at the Conference Center will have old faces, many belonging to people who got us into this mess in the first place. Do I really want to hear a banker tell me about the financial mess?

Other old faces will be politicians who will be offering up old solutions—more regulation, more government spending, more of the same of prescriptions. Unfortunately, politicians are the ones picking up the mess from the private sector folks who lost it and they are doing it with the tools they know.

Do we have anyone in Washington now trying to use social media networks to deal with the financial crisis? Anyone talking about new business models for Detroit (like ending car dealerships and permitting buyers to design their own cars directly with manufacturers)? Taxpayer money is being spnt to rebuild class-rooms—but how? Edifices are less important than networks and interractions in learning today. A new high school in New York City will soon open that uses gaming culture (video gaming, not gambling) to help kids learn. Who in government in Washington and around the world capitals is thinking like this?

It goes on.

Here are some quotes from the opening session at Davos:

“It is important that leaders who come here go back and work on ways of finding far-reaching policies that will allow us to create sustainable economic growth, create jobs and coordinate macroeconomic policies,” insisted Kofi Annan, Secretary-General, United Nations (1997-2006), Member of the Foundation Board of the World Economic Forum and Co-Chair, Annual Meeting 2009, on the opening day of the five-day Annual Meeting.

“I believe we are also facing a crisis of governance at a national and international level. The current architecture of managing global affairs is broken and needs to be fixed. We have new players that have to be integrated and the poor have to be given a voice,” he said. “The world has changed; are we capable of changing fast enough to save the planet?”

Stephen Green, Group Chairman, HSBC Holdings, United Kingdom, and Co-Chair of the Annual Meeting 2009, agreed that the Annual Meeting gives leaders the space to share ideas needed to address current challenges. “Talking through what we need to do is important and that is why Davos is more than ordinarily important,” he said.

In the wake of the global financial fallout, re-examining values is key to moving forward, argued Maria Ramos, Group Chief Executive, Transnet Limited, South Africa and Co-Chair of the Annual Meeting 2009. “It is fundamentally important that the issue of values is on the agenda…and also the institutions that underpin these values and how the rules of the game are enforced is important here,” she said.

The world is still in crisis, yet we should treat it “as an opportunity to set goals for how we want to come out of it, such as energy sufficiency, world pollution…and shape policies which will help to solve some of those problems,” said Rupert Murdoch, Chairman and Chief Executive Officer, News Corporation, USA, and Co-Chair of the Annual Meeting 2009. “Don’t let’s lose sight of what creates wealth; it’s open markets, capitalism and we’ve proved this again and again in last century,” he cautioned.

“I do not expect we will find from Davos solutions, but expect that we are able to get a joint understanding of the reasons for the crisis, and that we get a good understanding of how we are really able to overcome such a severe crisis in a globalized world,” said Werner Wenning, Chairman of the Board of Management, Bayer, Germany, and Co-Chair of the Annual Meeting 2009. “We’re talking about growing populations; we have to address issues of how to secure energy supply and of climate change; we’re also talking a lot about sustainability and returning to the basics of sustainable behaviour.”

Reader Comments

olubi babalola

January 28, 2009 8:59 PM

i share your view on the importance of innovation and having a design background, also carry a bias in my view of designers as innovators by training and inclination. i do however find myself in the very uncommon position of tempering your criticism of political leadership and their tendency to always operate behind the trailing end of innovation. the reasons are simple. first, and especially in times of crisis like we presently have, the politicians task after choosing one solution from amongst the options presented (sometime all being wrong)must then marshal the energies and resources of society towards the implementation of this. needsless to say, some caution is in order here, as resources are not infinite, and society does not (cannot)change track nimbly. where i think many go wrong is when intellectual laziness and ideological dogma trump any willingness to consider all options, including those prsented by the opposition. of course these ideas should ab-initio be grounded in realities rather fantasies about how one wishes that reality was constructed.

Julie Young

January 28, 2009 9:08 PM

Julie,
Take a look about paragraph 5. Could be interesting quote for spring LHRIC conference.

Daniel Steele

January 29, 2009 3:00 AM

One way of infusing the wisdom of democracy into political & managerial processes is to, on important issues (especially), limit the role of leaders/"deciders" to that of formulating approaches, legislation and options, inclusive of propositions from those affected. Constituents would then vote to ultimately "decide" what will be adopted.

A successful leadership process would then ideally be one that best explores the issues at hand and correspondingly focuses itself upon selling what it thinks are the best solutions, to their voting constituents in order to win respective votes for approval.

It seems that power is now too concentrated in the hands of too few individuals where voting is almost too important a tool to be left solely in the hands of individual leaders, often compromised by self interest.

Properly encrypted internet communications and voting can make such a voting rich process as this accurate, efficient and auditable.

sam

January 29, 2009 3:58 PM

The US needs to give up the delusion that it can specialize in consumption. China needs to give up the delusion that it can specialize in production. That party is over and there is no way to restart it.

Catherine

January 31, 2009 5:00 PM

Från Anders

Rex Solomon

February 1, 2009 4:49 AM

To survive in these times, master the oriental 'arms-length' rule of combat, but keep your eyes fixed on a definite way out.

munidas pereira M.B.A (McGill)

February 2, 2009 11:40 AM

Agreed , $18 billion in Wall St. Bonus payments and only $3.6 billion for cancer research? Something is wrong !
munidaspereira@yahoo.ca

Eduardo M. Nogoy

February 2, 2009 5:52 PM

Break down the large institutions (banks, insurance, conglomerates, etc) to encourage competition. They're all too big to fail that they need government bailout. Going to bankruptcy would've been the solution for making those bad decisions.

Stop business lobbying in Washington and Brussels. All Political Action Committee (PAC) money from businesses to incumbents should be illegal.

The media should focus more energy and resources to investigative reporting. They could have prevented all this mess we're in if they pursued all those leads before the global economic crisis went to a critical mass. Everyone knew that the subprime mortgage will have a bad effect on the economy in genral but it did not get the proper air time and the front page headlines until it was too late. Someone knew about the ponzi scheme of Bernie Madoff but did not get enough media coverage before the stock market began a stiff downturn for the worse and investors have to deleverage.

Perhaps capitalism without moral values and transparency will always be doom to failure and the cycle of boom and bust.

John Bailo

February 2, 2009 8:36 PM

Wealth is being dispersed from the large buckets.

We need people who can build small buckets.

Christopher Holland

February 3, 2009 5:15 AM

None of the statements made at Davos means anything - anybody could have said those things anywhere, anytime. During a recession the first thing to do is reorder your priorities and cut wasteful,unnecessary expenditures. Gab fests like Davos should be high on the list of extravagences that are neither useful or affordable.

Amoroso Gombe

February 6, 2009 1:48 PM

The real issue, dummies, is trade. This crunch is as a result of market saturation. The credit crisis is a red herring. The world needs freer and more open trade to get the global economic juices flowing again. Unfortunately with the protectionist sentiment around the world and the stubborness of the EU and US over removing barriers to agricultural trade, it is going to take a lot more pain to force the people of the developed world to accept the validity and the pain of true global free trade for a functional global economy.

Amoroso Gombe

February 6, 2009 1:50 PM

The real issue, the elephant in the room that no one seems to be able to see, is trade. This crunch is as a result of market saturation. The credit crisis is a red herring. The world needs freer and more open trade to get the global economic juices flowing again. Unfortunately with the protectionist sentiment around the world and the stubborness of the EU and US over removing barriers to agricultural trade, it is going to take a lot more pain to force the people of the developed world to accept the validity and the pain of true global free trade for a functional global economy.

arty kraft

February 17, 2009 8:36 PM

Where to begin? Greed's a good start. The term, The Almighty Dollar, was coined in 1831; in retrospect it's been a remarkably prescient concept. The banks in "The Grapes of Wrath" and the commoners in James Cain's novels, especially "The Postman Alawys Rings Twice" and "Mildred Pierce," illustrate the phenomenon quite clearly. But be careful if you go on for more than a paragraph about greed; you may sound bitter, or even worse, you'll quickly be judged a dreaded socialist. Dismissive logic is rampant in the "open" society of America.

So, what's left? Plenty. Deregulation. Adios Glass-Steagall, hello Invisible Hand. Yeah, thanks Phil Gramm who still has the nerve to defend his idiotic philosophy in public! Let the market take care of itself and everything will reach equilibrium, if and only if housing prices rise faster than the GDP, and no one cheats. To be fair to Gramm, the Enlightenment philosophers are the main culprits here, especially Hutcheson, Smith and Hume. Eager to do away with the repressive sort of religiosity that ruled the Middle Ages, they, and others, accentuated the natural goodness of humans. And for a while, they're right. Eventually, however, the bundle of foibles and inadeqaucies that plague the entire species, regardless of ethnicity, creed, gender, or religion, affect markets.

At some point in the state of Capitalism or Communism or Socialism or whatever ism you've got, the Invisible Hand or the ruling comrades fall prey to temptations. Unfortunately, Hobbes was more accurate than his Enlightenment successors, at least about the war of all against all.

Psychology impacts economies. Secular freedoms shape psychology. Sad but true: Democracy affords freedom to some who have no business being free, such as Mr. Madoff, and a host of others - particularly those who peddled ARMS, CDOs, SIVs, and Credit Default Swaps like blackjack dealers high on coke. Where was the growth going to come from to sustain all that profitability? One place, and only one place: the Isle of Grand Delusions.

OK, the theme of creativity. That's perhaps the most relevant because despite all the other problems, this society is going to require innovation. But look around carefully. What's playing at the movies every week? Cinematic comic books, for adults. What happened to the searing kinds of drama like "Meet John Doe," "On the Waterfront," and "Citizen Kane"? Now it's fluff. Now it's fogitaboutit, let's have a jolly good time, and postpone examining our real lives.

What's on Broadway? Mostly reruns, fluff or one-man, one-woman shows. Where's content that's truly meaningful? It's in very short supply. Philosophy, for instance, is largely consigned to the few at universities who keep it alive. Hey, the rest of us could use it right about now.

Or take jazz. If it isn't smooth, it's not very successful. Creative? Hardly. Or how about the novel? Those deemed to be the best are mostly clever, at times whimsical, tales of dysfunction, as if we need to be hit over the head with dysfunction.

Yo, how about some creative scenarious that don't have Aunt Mary drowning in Prozac or Father Joe molesting a teen, or an enraged husband who routinely beating his wife. By now, we get it. It's out there. It's bad. And now we need a solution, not more accounting of it. OK?

Lack of innovation is hardly an economic circumstance; it's a societal curse. When most Americans turned their attention to the baubles, bangles, and beads, creativity became too costly; cheack out Veblen's "Theory of the Leisure Class" if you're unfamiliar. Call it Pecuniary Emulation for short, or PE on your PDAs.

Why take a risk when you can hedge? Why walk the tightrope when you can diversify? Why sell blue widgets when red ones are moving more quickly? Why create and risk abject failure when you can glide and slide with derivatives?

The fix is in. Vico's theory of cyclical decline and fall may well be the most accurate model now. But, I too am an American, and thus inflicted with a grain of foolish optimism. All is not lost.

Science is on the verge of bringing quatum computing to the unwashed masses, which will radically transform, well, a lot of stuff. Fusion reactors running on water (hydrogen) will one day power the world, perhaps in less than 50 years. Particle colliders are yielding secrets to bosons, antigravity and the universe. Brain science is unlocking the secrets of consciousness, behavior and healing. And genetic research may in the near future figure out how to halt the tail of telomeres from disappearing and thus bringing us all one link closer to the kind of immortality that now comes in the form of antioxidants and botox injections.

Sooner or later, whether we're all in line for cheese or have already bitten the dust, science will, as advertised, deliver us to the Promised Land, albeit with a plethora of sticky ethical challenges. At that point, when the heavens seem swollen with hope, an individual with a trumpet -- someone like Satchmo -- will arrive and accentuate the new age of enlightenment. Until then, don't get your hopes up.

Zsolt

February 25, 2009 10:52 AM

A transformational crisis. But what is to be transformed into what? Some say that this initially credit crisis turned into a deep and world wide economic crisis will change the very fundamentals of our economies.

Here is an idea to think about. If someone had deposited one dollar into a bank account 2000 years ago for a 2 per cent interest rate only, that deposit would be worth 1,5 raised to the 17th power (an incomprehensibly high amount of money). All this means that the idea of interest, the price or cost of money, is in itself nonsensical.

If you want to follow how Obama is trying to pull the US out of the crisis here is a good one: http://allobamablog.blogspot.com/

Big Mommas Like Father Like Son

February 9, 2011 10:51 AM

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About

Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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