I take no pleasure in seeing anyone lose a job, but I can’t say that the recent headlines showing that America’s biggest banks have been losing money on their trading operations, and are having to radically shrink as a result, are entirely bad news for the country. Over the last decade, America’s banking sector got pumped up by steroids—in the form of cheap credit and leverage—every bit as much as Major League Baseball’s home run hitters. And if one result of the downsizing of Wall Street is that more of America’s best and brightest math and physics students decide to go into science and real engineering rather than financial engineering, the country will be a whole lot better off.
Why? Because, to paraphrase the Columbia University economist Jagdish Bhagwati, Wall Street, which was originally designed to finance “creative destruction” (the creation of new industries and products to replace old ones), fell into the habit in the last decade of financing too much “destructive creation” (inventing leveraged financial products with no more societal value than betting on whether Lindy’s sold more cheesecake than strudel). When those products blew up, they almost took the whole economy with them.
Occupy Wall Street protest. Photo by AFP
I was on Wall Street two weeks ago, and I’ve been in Silicon Valley this past week. What a contrast! While Wall Street is being rattled by a social revolution, Silicon Valley is being by transformed by another technology revolution—one that is taking the world from connected to hyperconnected and individuals from empowered to superempowered. It is the biggest leap forward in the IT revolution since the mainframe computer was replaced by desktops and the Web. It is going to change everything about how companies and societies operate.
The latest phase in the IT revolution is being driven by the convergence of social media—Facebook, Twitter, LinkedIn, Groupon, Zynga—with the proliferation of cheap wireless connectivity and Web-enabled smartphones and “the cloud”— those enormous server farms that hold and constantly update thousands of software applications, which are then downloaded (as if from a cloud) by users on their smartphones, making them into incredibly powerful devices that can perform myriad tasks.
The emergence of the cloud, explained Alan Cohen, a vice-president of Nicira, a new networking company, “means than anyone can have the computing resources of Google and rent it by the hour”. This is speeding up everything—innovation, product cycles and competition.
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The October issue of Fast Company has an article about the designer Scott Wilson, who thought of grafting the body of an iPod Nano onto colourful wristbands, turning them into watch-like devices that could wake you up and play your music. He had no money, though, to bring his concept to market, so he turned to Kickstarter, the Web-based funding platform for independent creative projects. He posted his idea on 16 November 2010, reported Fast Company, and “within a month, 13,500 people from 50 countries had ponied up nearly $1 million”. Apple soon picked up the product for its stores. Said Alexis Ringwald, 28, who recently founded an education start-up, her second Silicon Valley venture: “I have many friends— they introduce themselves as ‘reformed’ Wall St bankers and lawyers—who have abandoned conventional careers and are now launching start-ups.”
Marc Benioff, the founder of Salesforce.com, a cloud-based software provider, describes this phase of the IT revolution with the acronym SOCIAL. S, he says, is for speed—everything is now happening faster. O, he says, stands for open. If you don’t have an open environment inside your company or country, these new tools will blow you wide open. C is for collaboration because this revolution enables people to organize themselves within companies and societies into loosely coupled teams to take on any kind of challenges—from designing a new product to taking down a government. I is for individuals, who are able to reach around the globe to start something or collaborate on something farther, faster, deeper, cheaper than ever before—as individuals.
A is for alignment. “There has never been a more important time to have all your ships sailing in the same direction,” said Benioff. “The power of social media is that it is easier than ever to both articulate, and, reinforce, the vision and values that create and inspire alignment.” And L is for the leadership that does that. Leadership in a SOCIAL world has to be a mix of bottom-up and top-down. Leaders need to inspire, enable and empower everything coming up from below in a company or a social movement and then edit and sculpt it with a vision from above into a final product.
The great thing about the new IT revolution, says Jeff Weiner, the chief executive of LinkedIn, is that “it makes it easier and cheaper than ever for anyone anywhere to be an entrepreneur” and to have access to all the best infrastructure of innovation. “And despite all of our challenges,” he adds, “it is happening here in America.”
Like I said, the news isn’t all bad.
©2011/The New York Times
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