This Market Needs an Intervention - and a 12 Step Plan

  by Richard Muirhead | 29 Jan 2009 | Permalink | Everything Else, Featured, Go Green, Home Page, IT Management, Software, Virtualization

This morning, the message at Davos was a sobering one right out of the gate: Get on with it; let the TARP be the TARP, etc. Yes, we need to come up with a way to value toxic assets. If recapitalization or foreclosure mitigation is necessary, then design a mechanism to deal with it and pass it into law. We were told we are headed for 2.5% growth average over the next three years thanks to a global recession this year and anemic growth next. Other more dire predictions from Davos? We may be in “Proto-Depression” and/or could “drift along like this for 10 years.”

How on earth did the all powerful, self-healing free market get us into this fix? Well let’s attempt to go to the heart, or perhaps the mind of the matter. In The Third Chimp, Jared Diamond theorized that man evolved his capacity for drug abuse and addiction as an exaggerated form of social posturing, among other things: “Let me show you I can still be the best even with my hand tied behind my back.” He likens it to the attractiveness of the Marlboro Man: rugged provider who can achieve all this in spite of his smoking habit. However it came about, we developed a thrill from pursuits that are essentially bad for us. They range from eating crazily hot chillies to even more irresponsible adventures. Now, according to the economist Andy Lowe, they might include the rush derived from developing highly complex financial instruments that you may or may not fully understand – and that may or may not come a cropper. Over time we naturally become desensitized to those risks. Perhaps the extreme financial incentives to gamble like this could explain the psychology that underlies the lack of “self interest” upon which Alan Greenspan was so fatefully relying!

The theme of the afternoon at Davos seemed to be summed up as this: “Crisis is a productive state once you have overcome the aftertaste of disaster.” The day’s ray of optimism came from China’s Premier, Wen Jiabao. While Chine attained only 6.8% annualized growth in Q4, the target set for 2009 is 8%, something “necessary and attainable through hard work” according to the premier. Wen Jiabo may not have a 12 step plan to ween us from our addiction to debt and excessive risk – but he does have a 10 step one. Some may disagree with him and feel that government directed funds can only ever capture economic low-hanging fruit, but it sounded pretty comprehensive and convincing to me, and was noticeably interlaced with elements of environmental sustainability.

Information Technology also took the spotlight today as a great force for good and for growth through automation, for the global empowerment of social computing and through innovations yet to come. However, it was evident that it is also time for responsible, proactive IT management. It’s no longer enough to allow skilled IT artisans to engage in a game of complex system brinkmanship, where only they fully understand the systems and risks (if anyone really does). Attendees seemed to realize we must break that pattern, that addiction. Indeed, the answer is no longer to throw servers, power, people, data centers and all manner of technology at the problem. The industry needs solutions that take a fresh approach and allow us all to get a grip on our IT systems. Like the markets, IT needs transparency, collaboration and trust. And as we heard today, IT will once again be positioned to power the next wave of economic growth and rising living standards.