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How to bootstrap out of this mess!

Understanding a system.

Before it is possible to work on a resolution you must understand the system and particularly when a system consists of a number of feedback loops, loops that can reduce or amplify a change to the input of the system. In my technical years the first test for a  junior in the field of electronics was to repair a “simple” power-supply, the approach he or she took was a clear sign of the understanding, as measuring in a feedback system is very difficult unless you understand the effects of the feedback loops very well. In general it is difficult to distinct between cause and effect. The technical approach was simple cut the feedback loops open and measure the system from begin to end. 

Let’s do that with our market driven system.

  • We absolutely know for sure that the early inhabitants made things for comforting their daily living, by eating what nature offered and making housing and tools from materials nature provided.
  • After that we started to manage food production and created buffers for when there was less food. We created more efficient tools, better housing, energy products and created ways of transportation.
  • The surplus in food, tools, energy products and housing was our buffer that we could use to manage our  energy, temperature, transport and innovation.
  • A day we invented that it was possible to convert that surplus into money and use that to overcome periods where the effort had not resulted yet into new productivity of food and things.
  • Then we industrialised our tools and transportation by building machines fed with cheap energy
  • In a next step computer automated our manual transaction system and allows us to do them fast for limited cost
  • We connected the world allowing information and money transactions to go very fast across the world
  • Unfortunately the managers of our surplus, financial community,  thought that their service was the productivity of the system itself and started to think along those lines, making enormous big swings in change possible, as it is very simple to transfer billions of dollars or euros from one activity to another overnight. Having this mechanism is great for starting things but as we have all seen disastrous when it grows beyond a certain size.
  • I can remember myself saying “it is time my money starts to work for me” (something every pensioner expects), this however can only be true if the majority of people stay in the production cycle as without them money isn’t worth a dime.

So what are the misconceptions?

  1. Money is the driver of productivity.
    Wrong, money bridges the periods of non productivity, it represents previous productivity (when saved) and future productivity (when borowed).
  2. The market mechanism is the efficient system.
    Wrong, the market mechanism allows fast execution but the preference of the money lenders determines for what purpose the money will be used. So if there is no long term money, there will be no long term targets addressed. 
  3. The governments can replace the market. 
    Wrong, they can create long term goals and as such create long term market stability which will allow entrepreneurs to get their ideas financed, a perfect example is the German Feed in Tariff law for sustainable energy. 
  4. Big or more is better.
    Wrong, if you don’t have e.g. enough food, then more is better, however if you already have sufficient food to cover calorie usage and maintain your body, more food is disastrous for the individual. So most natural processes have an optimum size and this also goes for company size and transactions. If however a process is sustainable one can have more of them without problem
  5. The financial world knows best how to repair the system.
    Wrong, they know best how to keep the system working for them. The outsiders have to reset the rules and determine what their added value should be, within that definition the financial world knows best how to implement such a newly defined role efficiently. 

What can we do to bootstrap out of misery?  

We need to start at the beginning of the cycle and focus on making the basic requirement sustainable in a Cradle to Cradle principle. This means that we accept that we do not get more water, air, minerals and get more or less a fixed daily amount of energy, so that when we convert them, we can feed them back and use them the next time. Edward the Bono once handed a very simple solution by stating that when you would be required by law to use  your dumped water, you would really be interested not to dump toxins in it.  This thinking could accelerate progress very fast.

  1. Every business can focus on that principle and accept that we have to do that anyway and the faster we do it the faster we are more competitive and use as much capacity as available , that isn’t needed for production, assuming that the products/services that particular business produces are needed when the economy recovers.  So start with converting the energy consumption into sustainable energy.
  2. Create new transparent banks that focus on providing money for let’s say 
    sustainable transportation
    sustainable energy production
    sustainable food production
  3. Create a value system for innovation, as good ideas are not lost.
  4. Governments must create stability for sustainable targets.
  5. Re size the business to its right size and location, as a result you don’t need the big banks and it becomes easier to attract local money.
  6. Make sure no money is being spent on doing nothing.
  7. Just think about what a freeze of interest (extend the total period to compensate) could do, if we all have to live with less income for one or two years to allow de-leveraging of the financial system. 

3 Comments on “How to bootstrap out of this mess!”

  1. #1 Poul Bakker
    on Feb 20th, 2009 at 10:55 am

    Quite impressive viewpoint on current affairs. Provides remarkable directions for way forward. Is in many respects parallel with Rhineland thinking as opposed to Anglo-American values in shaping organisations and society.
    best regards

  2. #2 Anton van Kimmenade
    on Feb 21st, 2009 at 12:14 pm

    When I look at a system I want to see ways that allow fast growth while at the same time I need to see purpose and a goal to grow towards. As such maybe the Anglo-American values represent more how to start and grow fast, and the Rhineland thinking fills in more points of purpose and goal. One way or another I feel we need all the smarts from opposing thinkers.
    Best Regards

  3. #3 Carlos Bezos
    on Feb 22nd, 2009 at 11:12 am

    very lucid analysis and a good starting point to get out