Now What?

It may be speaking way too soon, but I’m betting that the panic phase of this financial crisis is over. It will get worse before it gets better, but at least most of the experts and analysts I’ve called are starting to agree upon how long it might be (a year-ish downward, then a slow recovery into 2011 is the prediction I’m hearing). So imperfect as it was, the enormous infusion of cash into the banks across the world has addressed the immediate doom.

Now the real challenge. With Alan Greenspan of all people saying uber-deregulation might have had “a flaw” (or two or three hundred?), it’s time to rethink the long-term system. I’ve suggested before some reflections on how to fix the public sector regulators and recruit smarter people to those roles. But what about a financial industry that equates “innovation” with unsustainable assets (those mortgage bundles) and irresponsible risks?

Interestingly, the best reflections on that problem aren’t coming from financial experts (who remain stunned by it all) but from design blogger Bruce Nussbaum (full disclosure: He’s a former boss of mine). Nussbaum says the future of capitalism will be a lot like the ZipCar–based on bottom-up, collaborative growth instead of top-down, proprietary models. His BusinessWeek colleagues make the point that even Web 2.0 (collaborative and bottom-up by default) will have to change in the ZipCar world–the techies too have been hooked on “irrational exuberance” before.

I’ve got my usual bones to pick with the collaboration theory–how is it capitalism if you aren’t motivated by ownership; how do you incentivize sharing–but overall, I think Bruce is right. So, as a Halloween gift, no long diatribes. Just an encouragement to read Bruce’s blog.