Over the last quarter, I’ve talked about several economic issues. I discussed the financial crisis in I Got Mugged OnWall Street, how Oligopolies Can Be As Bad As Monopolies, why measuring presidential performance shouldn’t be measured by the unemployment rate, looked corporate lobbying in The EconomicAquarium, and work life balance in I’m Too Busy To Be Happy.
Embedded in all these posts are my opinions on various issues. Looking back, I see a major theme: how the powerful are able to retain power and maintain the status quo. The powerful entities around us have several tools at their disposal, and they’ve designed the system to be very hard to change. But, change is in the air, and not admitting it will be detrimental to these entities.
There are several examples to illustrate this. Toyota is a market leader in hybrid cars. They didn’t get there out of luck; they had the foresight to develop this technology before it was popular. In contrast, GM put no effort or value into hybrid technology, even as it was emerging from Japan. This lack of foresight cost them and they’re just now getting competitive in this space. Instead of fighting fuel economy standards and ignoring the inevitable rising trend in fuel prices, they stuck their collective fingers in their ears and lobbied against more aggressive fuel economy standards.
We’re seeing history repeat itself today with solar technology. Germany and China are becoming world leaders in solar panel production. Solar technology just at the beginning of becoming a huge industry, and these countries are positioning themselves to be leaders. It appears that China is even undercutting themselves now to gain market share- a move that shows they see the long term gain to be had. The US is probably going to regret passing on this opportunity.
A potential game changer in the financial industry is the Rolling Jubilee. This has the potential to break the financial system. Today, debt is bought and sold with no thought to the terms of the underlying mortgage contract that provides the income stream. There’s no reason you can’t buy some debt (in many cases for far less than its original cost). The Rolling Jubilee buys some of the worst debt, for the cheapest cost, and simply relieves the debt.
Now imagine that this takes off in a big way. This could fundamentally break the mortgage market. This is because the incentive to pay a mortgage goes away if not paying is rewarded with the debt being erased. It may seem far-fetched today, but if this movement gains traction, the banking industry would be wise to take notice.
The modern sustainability moment is a game changer in a big way and anyone or thing that doesn’t recognize it is going to regret it. Those that deny this change will be left behind like GM was to Toyota and Honda.
Great points Zach. I'm glad they're on notice. I had forgotten about the Rolling Jubilee that was mentioned at the last intensive. What an amazing concept.
ReplyDeleteThe subject of the unfortunate lack of foresight that the U.S. has shown both with the hybrid and electric cars and with solar is seriously maddening. We were poised to be the leaders of the electric car and then the big oil lobbyists got involved and said hold it right there! I'm sure you've seen the documentary "Who Killed the Electric Car?", one guess: GM.
I look forward to reading more of your posts over the winter break.
Zach,
ReplyDeleteThis post is very appropriate for the end of the quarter! I write often about how powerful those who benefit from the status quo are and how they acted as architects of this system, not just luck benefactors as most seem to want to believe. That analysis does not lead me to utter despair however, it instead leads me to thinking similar to yours in this post. I truly believe that our best hope in changing the current system into one that is equitable for people and planet, lies with innovative work at the local levels, in coalition with similar movements nationally. If we all build local living economies and are connected in our efforts through the BGI's, BALLE's, and NEI's of the world, then we will change the system in a way which peacefully destroys the current status quo.
Thank you for your thoughts!
Joel
The Status Quo is, indeed, powerful. I'm glad to hear that you and others are putting it On Notice.
ReplyDeleteOne thing we probably haven't emphasized enough this quarter is the way in which the Status Quo got to be there. We know that once it's in place, it's very difficult to unseat (although there is whole study of disruptive innovation that looks at just that). But what we haven't talked about much is how the Status Quo came to be in the first place.
In some cases, it was a simple exercise of power or force. In other cases, though, it had a certain compelling logic. In many cases, that logic ignored unintended consequences that subsequently became huge disadvantages, but in a lot of cases the original motivation for a system to come into existence was to solve a problem. And if we act too quickly to dismantle the system, the unintended consequences of the current system may be addressed -- but the underlying problem may not be solved.
Pick a system of your choosing and conduct a thought experiment along these lines to determine whether this gives you any new insight.