Feb 02, 2009
Has the Internet aggravated the slide; will it help dig us out?
One of the most shocking things about the economic bust is the frightening speed at which it has become mission critical. Sure, the subprime cracks started to show in 2007, but the whole thing was barely on the WEF radar last year in Davos. Last May, we raised a red flag about alarming economic problems ahead in our Intelligent Dialogue report “Prime Angst,” and a few short months later things began to flail (and fail) wildly.
Practically overnight banks stopped lending to one another, the financial system froze up, consumers cut spending, retail sales fell off a cliff and companies started layoffs. This decline has truly been faster and steeper than previous ones, and partly for the same reason many other things in life are going at record pace: interactive technology. Global feedback contributes to the amplification of trends and emotions—euphoric on the upside, depressed on the down. Billionaire George Soros insists “reflexivity”—people’s perceptions shaping economic reality—is a key factor.
The Web gives every person a hotline to economic horror stories. Anyone who fears the worst can find it in abundance and confirm his or her gloomiest fears, thereby deepening the mood of despair. As Financial Times columnist Lucy Kellaway put it, “Confidence is the medicine that cures a recession … all this sharing of bad news leaves one with no confidence at all.”
I’m being optimistic for sure, but let’s hope these factors can contribute in some similar way to the upturn, when it comes—that our connectivity may galvanize us to reach record-breaking speed then too.