Recession and Innovation
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.
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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