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Recession and Innovation
Julia Levitt, 22 Dec 08

NickDewar.jpg

At the close of a year that's been a tough one, I've been inspired by people around me to remember that it's often times like these – when things are at their worst – that potential for real and positive change is arguably at its very highest.

There is no question that the final months of 2008 have been bleak. Residents of countries around the world face the stress and insecurity of unemployment, and governments – especially the United States -- are turning to last-resort stimulus packages and policies to aid both corporate and private citizens. Economists predict that the recession will continue through at least July 2009 (with recovery effects lasting the rest of the year or longer), making it the longest period of economic downturn since the Great Depression. During the next year, people around the world will continue to suffer the recession's devastating impacts, and as is often the case, the ones who will suffer most are the ones who can least afford it.

A few months ago, I spoke with an acquaintance days after she was laid off from her job at a high profile firm. I found the news devastating – after all, if people as qualified and hardworking as she is could lose their jobs, then the trouble is truly serious. But she was actually in relatively high spirits, doing her best to see the positive angle. When things are going well, she pointed out, it's hard for most people to stir things up, to change their own lives, their jobs, their communities. When times are hard, she suggested, we might just be more likely to, for example, run with that startup idea we've always dreamed about … if for no other reason than the simple fact that there isn't much to lose.

It made me think about how, for better or for worse, collective action for change often requires a period of collective discomfort, or collective anger. Lean times can arguably beget innovation that is smarter than the innovation that springs from fatter times; innovations that are more practical and effectively more sustainable from both a social and financial standpoint.

Worldchanging contributor Rob Katz (who covers global enterprise and development on his blog, NextBillion.net) and I were recently talking about this on the phone.

"There are two main differences in social innovation during difficult financial times," Katz said. "First, the need for true social innovation is never more acute than when things are not humming along in the global economy. Second, there is increased oversight on social innovators to be ruthlessly efficient and profit-driven."

Instead of investing in superficial solutions that make people feel like there is progress being made, now is the time to move forward selectively, favoring the ideas that will pay for themselves in the long run. As one example directed at institutions, Katz says, "you should sink money into weatherproofing your entire [college] campus by improving heating and cooling, installing motion-sensor lighting, demand/response thermostats, better carpet; making your buildings more energy-efficient post-construction. We should be thinking about how we could be saving money from an environmental standpoint. If we were to upgrade all the existing buildings in America, it would save on the order of 25 percent of our energy consumption. In difficult financial times, social innovation has to be ruthlessly cost efficient and in pursuit of those innovations that don’t come out negative on the balance sheet."

The recession also showcases the resilience of – and levels the playing field for -- community and socially responsible investments. For example, Katz says, "investing in a portfolio of microfinance institutions, which offer a four to five percent rate of return, would have been below market rate. Now, four to five percent looks very competitive. Where once investors had to conjure up their inner do-gooder to give to socially responsible initiatives, now the rates of return on social investment are converging with market rates of return on any investment decision you could make." People who have been investing in microfinance institutions haven't been losing money in the last six months, he says, while other investors across the board have been watching their holdings drop. Microfinance offers an option for low-risk, medium-return investment that isn't directly correlated with the financial world, and that kind of investment looks much smarter to prudent investors right now. And community-oriented lending is not just for the developing world, as proven by new banking institutions like San Francisco's New Resource Bank.

Frugal practicality also shines a spotlight on community and cooperative solutions, illuminating ways we can support one other and pool resources for mutual benefit. At teach-in about the food crisis earlier this month in Seattle, Webster Walker, trustee of Central Co-op's Madison Market (a local, member-owned, natural foods cooperative) surprised me by saying that when the economy is down, the popularity of co-ops increases. Patricia Cumbie concurs in this article from the Cooperative Development Services: "It’s also notable that, historically, food co-ops are resilient, surviving challenging economic times just fine."

This could be a good time to look into community solutions. As a jumping off point, food offers endless opportunities for meaningful connections. I recently posted about many of these solutions, from starting a food buying club to volunteering to serve meals to those who need them, on our Seattle blog. But there are many other options for turning shared needs into shared resources: cohousing, community currency, and turning waste into treasure are just a few of these.

Another informed but optimistic prediction comes from design critic Alice Rawsthorn, who wrote last month in the International Herald-Tribune that recession creates "a boom time for creative energy." Though it's true that economic difficulty will hobble some corners of the design world – namely, as she states, the exclusively aesthetic "design-art," she makes the uplifting point that, "if you rewind through design history, many of the most exhilarating periods have been during economic downturns."

The entire article was well worth reading, but here are some choice bits:

2. Responding to Change

But the main reason why design could benefit from this recession is because it always thrives on change, and every area of our lives is currently in flux. The economic crisis will not only transform finance and business, but the way we think and behave. Then there's the environmental crisis, and the realization that most of the institutions and systems that regulated our lives in the 20th century need to be reconfigured for the 21st century.
At the World Economic Forum summit meeting last weekend in Dubai on the global agenda the dominant words were "change," "reboot" and "transformative." There was clear consensus on the need for fundamental change and for experimenting with new approaches to achieving it. I attended the summit meeting as a member of the forum's Global Agenda Council on Design, and we all agreed that design had an important role to play. Designers are adept at analyzing problems from fresh perspectives, and applying lateral thinking to develop ingenious solutions. They also excel at simplifying complex issues (and there are lots of those around right now), and collaborating with other disciplines.
The recent changes within design itself make those skills even more useful. The 20th-century model of design was devoted to the creation of things - both objects and images - but designers are now also applying their expertise to systems.
3. Redesigning businesses.
This means that designers will be called upon to advise recession-struck companies on how to cut costs without impeding efficiency. They will also be asked to exploit the entrepreneurial opportunities offered by the recession by developing austerity-friendly products and services.
An example is the Virtual Wallet online banking service developed for the young, tech-savvy customers of the American bank PNC, by the IDEO design group. It enables account holders to manage their finances online more efficiently, even on tiny cellphone screens. IDEO's design also helps them to manage their cashflow by anticipating when money will be paid in and out of their accounts. Rather than showing rows of numbers, as conventional bank statements do, IDEO has deployed visualization techniques to illustrate them graphically on screen. PNC's research showed that, as the credit crunch deepened, people felt confused and even frightened at being bombarded by complex financial information from their banks.
Designers will also help to develop recession-friendly business models, including rental systems, such as the bicycle services in Paris, Montreal and other cities. These projects not only involve old-fashioned product design, but a systemic approach to planning how they'll work. As the environmental crisis deepens, sophisticated new forms of renting - or "rentalism" as it's called - may emerge as popular alternatives to owning things that we'll only use for short periods of time.

Finally, difficult times seem to also be boom times for social values. The latest issue of ReadyMade magazine featured a fantastic collection of re-imagined posters based on the iconic designs of the Works Progress Administration (one of the posters appears above). From ReadyMade:

American art has never been so liberally supported by government as it was during the critical years between 1933 and 1943. The FAP served a dual purpose: It gave unemployed artists work while demonstratively branding the virtues of the nation through rousing mass communication. The WPA Poster Division was mandated to promote the cultural and social programs that FDR’s administration took great pains to foster. The posters supported hygiene, education, sports, vacations, conservation, community, theater, dance, and music; they cautioned about workplace safety and venereal disease.

ChristopherSilasNeal.jpg
Poster by Christopher Silas Neal
Image source: ReadyMade magazine, Issue 38, "Poster Children"

The Great Depression, and the recovery period that followed, irreversibly realigned the values of those who struggled through it, leaving its mark on the way they raised their families, spent their money, and did their jobs. Though ReadyMade hardly asserts that its readership represents the general American public, the values portrayed in the collection are noteworthy for the relevant messages the artists chose as much as for their bold and creative composition. These are the buzzwords of 2009: Simplicity. Creativity. Local. Global. DIY.

What legacy will this convergence of crises, both financial and environmental, leave on the psyches of today's young workers, students, artists and innovators? And what other solutions will emerge as intelligent messages of hope?

For my part, I hope that Rawsthorn is right about business, and that we'll see more sharing and a less wasteful approach to ownership. And I hope that Katz is right about efficiency, and that we'll see policy makers and entrepreneurs alike embrace smart solutions that conserve the planet's resources. I'd like to add the hope that we'll see the continued growth of open-source working and sharing when it comes to education, design, technology and more. And also the hope that as we learn, collaborative design and leapfrog development will continue, so that the social and environmental destruction generated by the consumptive habits of the Global North need not be repeated in spreading real prosperity in the Global South (and so that we here in the North can learn too from the innovations unfolding in the South).

What innovations do you hope to see spread and take hold as we recover from this recession?

Top and front page image credit: "Simplicity is the Key to Successful Living" poster by Nick Dewar. Image source: ReadyMade magazine, Issue 38, "Poster Children"

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Comments

Despite the economy, there are still high paying jobs on job sites, here's 3 from about.com's top ten job sites-

www.linkedin.com (professional networking)
www.indeed.com (aggregated listings)
www.realmatch.com (matches jobs based on your skills)

good luck to those looking.


Posted by: Peter on 22 Dec 08

Yep, simplicity is the keyword. See also this very simple solution to use your bike to charge your mobile phone or i-pod:

http://www.stichtingmilieunet.nl/andersbekekenblog/?p=6055


Posted by: Erik van Erne, Milieunet Foundation on 23 Dec 08

In these depressed, world changing times spending on green makes sense!

Lots of green energy and infrastructure development also means huge sums being spent on the products and services of green companies. Stocks of these companies could benefit significantly!

For anyone interested in green and socially responsible investing, I have one of the most popular sites on the web on the subject. It also covers the latest related global news and research too. It's at http://investingforthesoul.com/

Best wishes, Ron Robins


Posted by: Ron Robins on 23 Dec 08

Great article. I notice there is a focus in my community to try to survive this time, to muddle through instead of using it to create change. It is an interesting time for a graduating college student like me, who is entering into the work-world as it is and never truly experiencing how things "were."
The Great Depression did change the way we operated here and steered us off the dangerous industrialism-rush path we were on, but the time after the depression and WWII also created the systems that are failing us now--an advanced highway system (making cars our only choice), the ridiculous food process (emphasis on process), and urban sprawl. History repeats itself--as Recession hits us once more it's time for some new ideas!


Posted by: Kimberly on 23 Dec 08

I have been watching the impact of the global financial (and now economic) crisis on microfinance. While the microentrepreneurs have been resilient, owing in part to their operating within local economies, the lenders have not. As a result, the loan capital for microfinance is drying up, in spite of its continued strength. The opposite should be the case, as Katz points out. Investors should be looking to microfinance as a safe harbor for their investments rather than the riskier standard financial markets.


Posted by: Ryan Calkins on 23 Dec 08

"[F]or better or for worse, collective action for change often requires a period of collective discomfort."

This has really been true for me and my husband. We started a business (Crestview Doors) about two years ago, just as the housing crisis was gaining momentum. Even though our focus is on renovating existing homes rather than building new ones and our business took off and grew quickly, our basic business model has always proven a challenge. How do we build and ship big, heavy items across the US efficiently and cost-effectively? How environmentally-friendly is it for someone to throw out a viable door for a new one?

The recession really only hit us a few weeks ago, but it spurred us to finally discuss and resolve issues that we knew were inevitable: how can our little business be a part of the global solution? We see many other businesses around us waiting it out, assuming that things will go back to "normal" in 6-18 months. I am not sure that is the case.

I honestly believe that the current economic and environmental crises are rooted in our culture's misguided notion that it is okay to consume disposable goods. This isn't a sustainable way of life. Sustainability isn't just about building wind farms or driving electric cars. It is about a mindset, a willingness to reuse and repair instead of throw away or even recycle. It is a point of view that values what we have not just what we desire. Sustainability requires patience and creativity.

We're still trying to figure out how our mission (to bring back cool mid-century doors) fits in with the needs of the future (sustainable, eco-friendly and budget-conscious manufacturing). Currently, we're looking to our DIY Doorlite Kits to be a part of the solution, and we're focusing our efforts on them instead of on building whole doors. Yes, this kind of breaks my heart, but I know we're headed in the right direction.

All we can hope for is that other businesses are taking a similar look at their business practices and realigning them with their values and the greater good.

Thanks again for your website. It is very inspiring!


Posted by: Christiane on 23 Dec 08

This 'downturn' feels different. It has "transformation" embedded in it, a sense that we're not going back to the toxic economy as usual this time. That this down turn is part of the "great turning."

I keep on thinking about Wendell Berry's model of authentic, transformational change, "solving for pattern." "Solving for pattern" requires identifying the catalyst at the core of a system that drives all the parts of the system. Change the catalyst, and you really change the system.

The candidates for catalyst of our economic system that I see changing are:

1) endless material growth of stuff, being replaced by endless growth of non-material qualities of well-being, happiness and flourishing of all;

2) "for profit" being replaced by "for benefit;"

3) toxic assets being replaced by "salutary gains;" ("salutary" means sane, sound, of benefit to the common good.

4) consumer society being replaced by "community" society.

I'm sure that other readers can think of more catalysts, but the point is that this downturn is the collapse of the toxic economy and the birth of a new salutary economy.

Worldchanging is really here. As Bette Davis said in All About Eve, "Fasten your seatbelts. It's going to be a bumpy ride."


Posted by: MimiK on 27 Dec 08

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Posted by: Zersewmence on 27 Dec 08

Hello Julia,

Thanks for an inspiring and intelligent article. I have included it in a roundup of blog posts that give us reasons to stay hopeful in a down economy:

http://www.upmo.com/blog/seven-reasons-to-stay-up-in-a-down-economy

Happy New Year,

Jessica Howard


Posted by: Jessica Howard on 29 Dec 08

Thankyou for the post. The themes of access and community bring challenges to new socially innovative ways of doing. The greater access of transformative ways of thinking to large tracts of the population, and how to localise new initiatives in a changed economy. Plastic bag free towns and community coops to energy saving street lamps activated by text message. Could both these issues be addressed by agents of change becoming more vocal? the answer lies in groundswells of support, which will be a future topic of discussion on my blog. Happy new year!


Posted by: michael roach on 31 Dec 08

Thankyou for the post. The themes of access and community bring challenges to new socially innovative ways of doing. The greater access to transformative ways of thinking to large tracts of the population, and how to localise new initiatives in a changed economy. Plastic bag free towns and community coops to energy saving street lamps activated by text message. Could both these issues be addressed by agents of change becoming more vocal? the answer lies in groundswells of support, which will be a future topic of discussion on my blog. Happy new year!


Posted by: michael roach on 31 Dec 08


Why not lay blame for the current economic catastrophe and the looming environmental calamity where it belongs: at the feet of the economic powerbrokers who organize and manage a colossal pyramid scheme, a modern representation of the ancient Tower of Babel? Is the pernicious denial of anthropogenic global warming and the human-driven destabilization of Earth's climate not primarily for the purpose of preserving the selfish material interests of a few wealthy and powerful people, and their minions?

Let's look a bit more closely at the scandulous 'business' of Bernie Madoff, confidence games, Ponzi schemes and other financial vehicles for funneling, accumulating and concentrating billions of dollars in unearned wealth into the hands of a tiny minority of people who comprise the top of the global economy.

There are many minions of the wealthy and their bought-and-paid-for politicians who "spread the word" of these schemes. Con men operate pyramid schemes. They assure "plausible deniability" and "legal cover" for all that is said and done.

Only a telling of the truth about what they are doing is forbidden. That is the one and only thing that is verboten. Do not break their vow of silence by telling what is true about the perpetration of the schemes {ie, the only games in town, so they say}, because the "houses of cards" out of which a modern Tower of Babel is constructed immediately is exposed as fraudulent and patently unsustainable. These pyramidal constructions can withstand any force except that which is presented by speaking out loudly and clearly about what is happening in these enterprises. As soon as light of what is true was shed on Bernie's scheme, the house of cards he had constructed fell.

Bernard Madoff may be the first of my "Not So GREAT GREED GRAB Generation's" kingpins to find that his "house of cards" has collapsed; but I dare say, Bernie will not be the last. There are other kingpins and many too many minions ready, willing and able to play along in what looks like the greatest self-enrichment scam in human history.

Why not say that greed is not good and mean it? Why not assign value to personal honesty, accountability and transparency?

Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001
http://sustainabilityscience.org/content.html?contentid=1176


Posted by: Steven Earl Salmony on 31 Dec 08

Innovation can thrive even in a recession. There's a great book I'd really recommend for anyone interested in the topic. It's called 'EXPLOITING CHAOS' by Jeremy Gutsche.


Posted by: Rachel on 3 Sep 09

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