Analysis 2009: Some thoughts for a New Era

By Kurt Cagle
January 6, 2009 | Comments: 8

This particular look forward is definitely longer than what I have written in years past, and for those of you who have managed to wade through the admittedly voluminous text I both admire your fortitude. This has been a hard report to write - both because of the level of detail that I felt needed to be covered, and because there are relatively few bright spots that I see happening within the next twelve months.

It is possible that things may ameliorate quickly - perhaps because we are increasingly aware of what could happen, its possible that we may in fact be able to blunt the edges of a recession that some are predicting may be as bad as anything we've faced since the 1930s. I'd like to believe that, though frankly I'm not optimistic. Programmers have been through recessions before, but a surprisingly large number were not even born the last time the economy got even remotely this bad, in the 1970s, and in many ways the economy is far worse off now than it was even thirty years ago.

Yet for all the obvious similarities to economic crises of times past, there are also some profound differences. One of them, of course, is the existence of the Internet, and of the web of computers and other devices that provide access to the Internet. The Internet has many failings, and many dangers for the unwary, yet at the same time, what the Internet does provide is the ability to communicate, to mobilize, and to debate.
In the 1970s, the dominant communication medium was the television and radio, great for broadcasting if you happened to have the resources to own a television or radio station, lousy if you didn't. Person to person communication took place over phones, and even then only if everyone was at a known place to receive those messages. In the 1930s, even radio was in its formative stages, a letter could take weeks to arrive, and newspapers, then perhaps the dominant communication medium, for the most part reflected very local information about the world.

As long as we can keep these grids going (and we should make it a priority to keep the information grids going especially) what this provides is information about how best to survive, about how to live at a more primitive level if necessary, and about who else is doing these same things in order to emulate them or to improve upon them. The Internet makes it possible to coordinate community action, to express need or available to help with a rapidity that those even forty years ago would have been astonished by.
I watched last September as Hurricane Ike came up the coast, with visual images and communication feeds going on for as long as they could, before the storm brought the grid down, and even then people were communicating on battery power or generators across alternative networks. Within hours after the storm passed, emergency rescue was coordinating their action over ad hoc networks and when they could over satellite uplinks, aid began pouring in from across the country coordinated mostly over the web, and the first thing that people did when power was restored (or they could get access to a coffee-shop or friend's house where power was restored) was to get online and let people know they were safe and what the status was.

Even in the worst of times, this isn't going to go away. This ability to harness collective actions, to inform not only at the coursest levels of granularity but also the finest, will prove crucial in solving the problems we're about to face. The Internet is not a panacea - resources will become harder to come by and much more expensive when they are available, giving the lie to the idea that the economy is moving towards bits not atoms - but what the Internet will do is to open up new and creative solutions to some of the oldest problems of providing enough for everyone.

In addition, to this, however, I think we're also seeing the end of the proprietary value proposition for software. When publishing companies are going out of business in droves, it's difficult pricing a database at $100,000, or a content manager at $20,000. Instead, what will happen is what has been happening for the last two decades - alternatives spring up, open source or mixed license tools that have most of the same functionality as their proprietary equivalents. They'll be crude at first, but the good ones will continue to get better, accrue an ever larger support community of users and extension builders and testers, until they often can compete point for point with the proprietary versions.

Similarly, data services (web services, application services, fill-in-the-blank services) represent a transition away from the proprietary productized world, supplying an abstraction layer that effectively hides the technology on the other side of the cloud with an (increasingly standardized) API. These are complementary to open source technologies, and indeed, because one know longer needs to know that service X runs on Linux or Windows or Solaris it also significantly reduces the reliance on the brand.

Open source is occurring not because there are a bunch of ideologues pushing it - I suspect that there are as many partisans on the other side of the equation that tends to balance things out there. Rather it's occurring because open source and open standards provide real reuse of legacy code and applications and even ideas - open source is proving successful precisely because there is a stronger economic advantage to being able to make use of what's already been developed than in consistently rebuilding the application because third quarter earnings necessitate such a product.

Agile methodologies are also playing a part in the transformation of software design and development, and I see signs that such practices are making their way into the broader world. Agile promotes the notion that software development is always an ongoing process, and rather than creating broad timetables and intricate Gantt charts we should just take it as a given that the software we develop will just continue through successive layers of iterative development.

Perhaps this is the same methodology that we should be employing to our economy and our lives ... keep the goals in front of you, but make such goals discrete and obtainable, revisiting the reason for those goals in the first place as often as necessary. Make everyone involved in the decision making process collaborators in achieving those solutions, rather than just foisting the problem (and the responsibility) off on someone else by throwing money at it. Plan your activities such that at any given time, within a couple of weeks, you have something that works to a certain degree, rather than trying to find solutions that will work perfectly on or before a given deadline. Keep teams small and focused on specific goals, and make meeting those goals the responsibility of everyone on that team.

When you listen to the litany of economic "mishaps" that have led up to the current crisis, one thing begins to emerge (at least if you listen to the mainstream press)- most of the problems came about because "rogues" engaged in activities that were either illegal, unethical or both, and there was no one who was aware of the activities being done under the table. In practice of course, rogues tend to emerge in cultures that encourage them, because those same practices may make their businesses a great deal of money ... at least in the short term.

My suspicion (indeed, my expectation) is that the next few years will see a growing importance placed upon personal responsibility, on collaboration not only on production but also on oversight, and on increase in personal ethics. Hard times tend to reinforce these traits, but there is also a burgeoning change in how we view the way that we work as technical modes of thinking affect the rest of the world.

Agile methodology, open standards, data services, data abstraction and open source also all fit well into the emerging movement towards sustainability that is being seen in the broader culture. We've had nearly eighty years of growth culture, but growth cannot be sustained indefinitely. Most of the problems we face today ultimately derive from the fact that out culture (especially in the US) has been built on the foundation of consumption, initiated in the last great depression in order to get money moving in the economy again.

At the time, it was a good idea - there was a great deal of pent-up demand, and as the standards of living climbed dramatically, so too did the ability of people to contribute back into the economy. Yet we've been facing diminishing returns on our energy investments even as we've filled our houses with goods we don't use and fill our landfills with the detritus of the planned obsolescence introduced in order to sell more goods.
Economic solutions work until they don't. When they don't there is a tendency to look back to the past to see what worked before and try those solutions again - Friedman monetarism gives way to Keynesian public stimulus (the experiment underway now with the Obama administration). This will work for a little while, but in the end I suspect that even state stimulation of business will ultimately fail because the world approaching 2010 is not the world of the 1930s. New economic theories will emerge that ultimately will do the trick, but these will be based not on orthodox theories but on new ones, ones that are only just now emerging from that area that is perhaps the great testing ground for society at large ... the IT world.

Be at peace, prosper as best you can, and may you have a happy new year.

Kurt Cagle is an editor for O'Reilly media.


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8 Comments

Looking for a new economic theory? I have one for you! Rampant population growth threatens our economy and quality of life. I'm not talking about environmental and resource issues. I'm talking about the effect upon rising unemployment and poverty.

I should introduce myself. I am the author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." To make a long story short, my theory is that, as population density rises beyond some optimum level, per capita consumption of products begins to decline out of the need to conserve space. People who live in crowded conditions simply don’t have enough space to use and store many products. This declining per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

This theory has huge implications for U.S. policy toward population management. Our policies that encourage high rates of population growth are rooted in the belief of economists that population growth is a good thing, fueling economic growth. Through most of human history, the interests of the common good and business (corporations) were both well-served by continuing population growth. For the common good, we needed more workers to man our factories, producing the goods needed for a high standard of living. This population growth translated into sales volume growth for corporations. Both were happy.

But, once an optimum population density is breached, their interests diverge. It is in the best interest of the common good to stabilize the population, avoiding an erosion of our quality of life through high unemployment and poverty. However, it is still in the interest of corporations to fuel population growth because, even though per capita consumption goes into decline, total consumption still increases. We now find ourselves in the position of having corporations and economists influencing public policy in a direction that is not in the best interest of the common good.

If you’re interested in learning more about this important new economic theory, I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in my blog discussion and, of course, purchase the book if you like. (It's also available at Amazon.com.)

Please forgive the somewhat spammish nature of the previous paragraph. I just don't know how else to introduce this new perspective without drawing attention to the book that explains the theory.

Pete Murphy
Author, "Five Short Blasts"

Eh, I think someone beat you to the punch on your "new perspective". His name was Malthus and he was around a few centuries ago.

Pete, Alkyseltzer,

But Malthus is obsolete! We have the Internet and the New Economy now, that makes it possible to have an infinite amount of resources because resources don't matter in an age of bits and bytes!!

(If you happen to be a New Economy economist, the last paragraph is what is called sarcasm.)

Malthus was "wrong" because he didn't anticipate the Industrial Revolution. Paul Ehrlich was "wrong" because he didn't anticipate Chemical Agribusiness. Both are right, however. The only issue is how soon do we reach the edge of the cliff, and do we (as a Planet; nations that conserve will be scuttled by those that don't, China as example) take steps to provide for All Humans, in some measure. Kind of the Scandinavian approach, "there's enough for everybody". That's only true if "enough" is redefined, a tad. The Mellon's and the Madoff's will need to be shackled. Too bad for them.

A colleague of yore said: "the world is not linear". He was a Ph.D. in math stats, so he knew what he was talking about.

Another great article, Kurt.

Your previous article stated the confusion people face of deciding the value of services during economic downturns, and *instant* communication through the Internet, comprised not only of text but also multimedia (something even the 70's couldn't have predicted) could truly turn depressions into something completely different.

Thanks again.

To Pete: You're correct, overpopulation means fewer large products and a tangible need for smaller; and yet, the more advanced our technology gets, the smaller and smaller they become. TV's are being replaced by desktop computers, phones by cell phones (that can do so much more).

On an exponential scale, which technology seems to fall on, imagine what can be created in just another 5 or 10 years.

I seriously doubt technology will become the bane of humanity; quite the opposite I believe — and I'm a pessimist. Technology will help feed, power, shelter and transport billions of people.

CBellmor,

You bring up a good point on technology, though I tend to be more of a pessimist about the degree to which technological solutions can "save" us from our own follies.

Technology in general makes it easier to exploit a given resource, but this can be both benefit and bane. With a given technology, we can generally extract more value from a given resource, and do so faster.

The value part is important, of course. For instance, technology makes it possible to make use of nearly everything from a cow gone to slaughter. There is comparatively little waste in the process, as everything is utilized, from prime steak to manure.

In as far as it's good to raise cattle for slaughter (and I think there are some strong arguments to be made against that, for all that I occasionally eat meat), the problem is that this same technology also coincidentally speeds up the process, which means that you can render more cows in the same time. This tends to be the negative side of that technology, though it may appear positive from a strictly economic argument.

By increasing the number of renders, you also increase the potential for the number of cattles that the market can sustain, which means you also increase your use of land, food, water, energy and so forth in order to raise those cattle. You increase the temptation to fill those cattle with growth hormones so as to increase the yield weight for those renders, and you increase green-house gas emissions (methane, in this case).

Moreover, in the current market economy, by increasing the capacity for rendering, you also decrease the overall cost of the beef byproducts, which in turn serves to additionally demand.

Eventually what you end up with is this cycle where the technology has in effect degraded the overall environment even though it has beneficial effects at the local level. Since environmental costs have tended to be socialized (think tax-payer funded toxic waste cleanup projects) even while profits from the technology have been privatized, this means that paradoxically the improved technology for rendering cattle, perhaps even touted as a green solution, ends up reducing the overall standard of living of people because they spend more in taxes to compensate.

So long as the costs of technology can effectively be hidden, its easy to point to technology as being a good thing for humanity. However, we're reaching a stage now where its becoming increasingly difficult to ignore those costs, which to me is indicative of being at or near the carrying capacity of the planet.

Some sobering thoughts, admittedly.

If we can't use cost effective technology to fix modern issues, and we've hit our quota, the only apparent solution is to cut demand, correct?

…sobering thoughts indeed.

I don't think reducing demand is the only solution, and certainly technology can help, but only to the extent that the cost of the help isn't worse than the original problem.

Most green technologies are specifically focused on reducing demand by using resources more efficiently. In a few cases, this ultimately comes down to switching a more expensive or critically constrained resource (such as corn, which has a huge presence in our economy) with a less expensive or less constrained resource (sawgrass, which is more or less a weed and as such can grown in places that would not be possible for trying to grow corn).

However, this points out the problem with looking for technological solutions to problems. So long as your economic basis is predicated upon growth, making processes more efficient (which is ultimately what technology is) may actually stimulate demand rather than reduce it, as I pointed out before.

What's effectively happening now is that the global economy is now attempting to find a new metastable phase. An economy doesn't exist at equilibrium, because it ultimately requires that differentials exist in order to facilitate the movement of money.

Rather, an economy typically has an "orbit", albeit along a strange attractor, around which it oscillates. When the stresses become too great on it, the economy will get thrown to a different orbit, one that will likely be less stable initially until it can reach a new point of quasi-stability. That's what is happening now, despite the attempts of every player with a stake in the status quo towards keeping the initial orbit.

That's why talking about technology and demand may be a little misleading. I'm not of the opinion of the doomsayers that see the world reverting to the 1850s (though some of that WILL happen unless we can provide a more encompassing alternative to oil). We're entering into a new phase in the economy, however, and as such it will be difficult to even understand it within the framework of the existing terms and ideas.

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