Down the slippery slope

I'm expecting the next economy to fill in the gaps as the current economy fails to rebound from the recession. The next economy will be much more sustainable and resilient than it's predecessor. So much of the current economy is centralized and efficient, it's very prone to sliding down the slippery slope. The next economy is distributed, loosely coupled, and paced for humans with fascinating lives to keep in balance.

In A Demon of Our Own Design, Richard Bookstaber gives a superb analysis of the difficulties in regulating hedge funds or investment banks. He explores the comparison to the meltdown of a nuclear power plant or the explosion of oxygen cylinders on an aircraft in flight. The rapid failure occurs because there are no timeouts, buffers, delays, circuit breakers or due process protocols. Crash-prone systems are tightly coupled. One thing leads to the next in rapid sequence. The attempt to dampen the effect or slow the flameout only adds to the spiraling problem.

A similar pattern of collapse is described by Fred Pearce in With Speed and Violence: Why Scientists Fear Tipping Points in Climate Change. Our planet regulates the climate to maintain temperate regions for long periods of time. Yet throughout the archaeological record, there is evidence of numerous ice ages. The self-regulating dynamics take out each other like a row of dominoes or a house of cards. Changes in atmospheric temperature melts glaciers which alters the salt/fresh water balance, which ultimately reverses the flow of the Atlantic ocean current. Instead of bringing warm currents up from the Caribbean, the ocean brings cold down from the Arctic. The atmosphere and oceans are tightly coupled.

Enterprises are much more prone to collapse when they drop one or more of the balls I described yesterday. Their devotion to short term gains, quarterly earnings and stockholder intentions sacrifices more than quality, customer satisfaction and employee initiatives - it kills the goose that lays the golden eggs.

The next economy will not have the incentives or financial pressures to scale beyond local enterprises. Our new ability to link up, keep up date and coordinate events online suggests we will experience the best of both: distributed nodes and connectivity. It will be well understood that enterprises contribute to their locations and face consequences when they neglect their neighbors. It will also make economic sense to focus on local markets as the cost of transporting and importing soar once oil prices reflect the irreversible decline in reserves.