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Notes on the financial crisis
Good Experience doesn't often cover the financial markets, but this is an exceptional time. The current US financial crisis will likely affect everyone who reads this column - even outside the US - so it's worth discussing.
I believe this crisis could have been avoided had the people in charge followed a "good experience" approach to their work: committing to simplicity (rather than gratuitously complicated products), a long-term approach (rather than short-term gains at everyone else's expense), and an integrated view of their own role in the world (rather than a narrow view of "just keeping my head down, don't ask me to think about it").
A simple, long-term, integrated approach is the right way to do business. There are many reasons to advocate it, but I'll just list one. Committing to good experience focuses attention on other people in the system, not just oneself - one might even call it "caring" (!) - and for companies that follow the approach, it happens to pay enormous dividends over the long run.
I believe in capitalism and the benefits it can bring society, even a global one. But like any system, the output depends on the input. If enough players try to cheat - say, by swindling their fellow citizens - the system won't perform well in the long run. When the day of reckoning arrives, someone has to pay up. And here we are.
I'm - well, what's the best word - outraged? sickened? - that our system worked in the perverse way it did. Many of those who made out with unfairly large short-term gains are now on their yachts, safely out of the game, while everyone else - teachers, nurses, designers, middle managers, stay-at-home parents, and so on - will have to pay back those indiscretions for a generation or two.
One good way I've heard the problem described is "privatize profits, socialize losses." To the robber barons running the system, here's the deal we-the-people had with them: heads you win, tails we lose (and we'll pay for it all). What's to keep someone from taking huge risks, with that upside-only arrangement?
Of course, it's more complex than simple finger-pointing. The robber barons were playing the game made legal by the legislation passed by the people we elected. And the signs of this corruption have been visible for awhile, so maybe the people didn't do enough to get it fixed. Maybe it's time to "throw the bums out," or maybe it's time just to pay more attention. I don't know. The important question is what we create, starting now.
For my part, I'm still a hedgehog, sticking to the same old message, advocating for good experience: a simple, long-term, integrated approach that focuses on benefits outside a narrow self-centered view. I'll continue, via the Gel conference, to spotlight creative leaders who take this approach.
And via our Councils, the Creative Good team and I will continue to build a community of executives who are helping each other get through these times.
And finally, I'll keep writing Good Experience. For anyone who's ready to build, there are good things afoot. Stay tuned.
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P.S. Below are some of my favorite resources for understanding the credit crisis and the larger financial system. Hope you find them useful:
• Roller coaster of housing prices
• Relating the financial crisis to Moses and the golden calf
• Must-listen Fresh Air interview explaining the crisis
• On a prescient column from a year ago
• A good punk song to accompany the crisis
• Money as Debt, a video on the origins of money
• A summary of the crisis (back in May!) by Douglas Rushkoff, Gel '06 speaker
Update: Just came across this column by Philip Greenspun, who writes:
The people who created the bubble, in many cases engaging in frauds of various kinds, were rewarded handsomely and are now relaxing in their Greenwich, Connecticut mansions deciding whether to take out the yacht or the private jet. Wall Street firms did not retain their exceptional profits during the years of fraud, but rather paid out almost all of it to the executives and rank-and-file employees who engineered the fraud. (Actually if they had retained some of these profits they wouldn't be needing a bailout!)
http://www.youtube.com/watch?v=IU6PamCQ6zw
watch that video...Peter Schiff warns us 2 years ago that this will happen
I believe that the issue was that the people in charge weren't in any way centralized and had a powerful interest in making securities in whatever way would yield them a profit as soon as possible. Moreover, this kind of behavior was encouraged by the government, citizens, shareholders and bankers. To change that system is asking for a revolution of some sort -- and one that won't happen easily in the US.
Thank you!
Yes but ...
in the same way that your implementation of the Good User Experience solution is very much a practioner network and, for lack of a better word, belief based approach, the FC is also based on networks and beliefs. Though there are good guys and bad guys, most of us are neither. I think you might Nassim Taleb's article in Edge an interesting pointer to some of the failures of current beliefs in financial matters.
Regards, Peter
Spot on. I cannot count the number of times initiatives for the improvement of the experience for customers have been squashed in favour of short term gains driven by reporting periods, or " not on my watch" attitudes (fuelled by short term incentives) where executives really do not care about long term profitable growth. In many cases (not all!) it's a combination of corporate and personal greed.
True story about a good experience from my mortgage broker, Ellen Klapper at Wells Fargo.
I had these crazy low interest, interest only mortgages from 2000-2005. I knew it was a bad idea, but I loved the cheap money, and it was a great way to pay down extra.
Anyway, the second the rates started to go up, Ellen from Wells Fargo called and practically forced me into a 30-year fixed at 5.75%. She said rates would never be lower, and they haven't. And those adjustable rates have just kept going up.
For some of us, they signs of an impending "non-good experience" were pretty darned visible in the early part of 2000. The gubernatorial approach certainly was anything but creating a good experience for all. It was about creating an enriching experience for some specific individuals/entities, and the rest of us, well, whatever.
Political opinions notwithstanding, I like the approach of thinking of government as providing a "good experience." It is really interesting how some municipalities get it, and others don't. Here in Culver City, you can go into City Hall and get your building permits, business licenses, and a host of other things in real-time, over the counter, with friendly people behind the counter interested in helping you.
I bet it would make for a fascinating Consumer Reports article if all city services of a local area's municipalities were reviewed, especially with an eye towards "Good Experience!"
Hi! Interesting read, and yes, I share your point of view - it is an usability issue. Here, that is German speaking Europe, voices about a 'next big crash' already came up as soon as 2002. One of the most respected is Prof. Dr. F. Malik, his URL is www.malik-mzsg.ch (he is in Switzerland).
The point he made in his book 'management' is that the American economy is focused on creating shareholder value only. He neatly works out why this is wrong, why it will lead to a collapse (again, he predicted real estate as cause in 2002!) - and that the only and correct focus for a company are customers. They pay the bills, they'll stay as long the product is ok - good or bad times. They will even help you inovate, if you listen to them. Just keep pleasing the customer - give a good experience.
Try to get a copy if it's available in English. It's worth it. He is one of the leading management gurus over here.
The sorrow learning for me is that again, "we c/should have known". And that puts me to deep doubt. I hoped the internet would serve us information, help us to better judge and interact (in our "democracies"). So what went wrong? Is it all beauty and no brains? Is the user stupid, lacking maturity? Or did somebody tinker with the content?
AMEN to this!
"A simple, long-term, integrated approach is the right way to do business. There are many reasons to advocate it, but I'll just list one. Committing to good experience focuses attention on other people in the system, not just oneself - one might even call it "caring" (!) - and for companies that follow the approach, it happens to pay enormous dividends over the long run."
"it's more complex than simple finger-pointing. " No, the root causes must be identified before any systematized corrections are possible.
"Maybe it's time to "throw the bums out..." Only if it's clearly understood that THE bums are Barney Frank, Chuck Schumer, Carl Levin, Hillary Clinton, Charles Rangel, ACORN ... [tired of typing]
Your move.
peter
Mark,
"Privatise profits, socialise lossess" is not just restricted to this current financial crisis. It is the nature of capitalism itself. For example, packaging waste, pollution, soil erosion, deforestation,nuclear power stations, etc. all require citizens to pick up the tab for the negative externalities from these types of activities.
Perhaps the greatest example of socialising losses (apart from this latest fiasco on Wall Street) is climate change caused by greenhouse emissions.
You are right to focus on the customer and the good experience but in the end, the people who cause the mess rarely pay for the mess so why do they care?
This is an excellent observation. The question is my mind is why wasn't anything done about it. No corner deli owner would allow his manager to earnh an enormous salary while running the business into the ground yet this is exactly what happened in the large corporations. This could be solved by giving the owners, the stockholders, more control over the business. Corporations are not a free-enterprise concept. They are a creation of the state governments. It seems like the states have created a bunch of Frankenstein monsters--powerful creatures but uncontrollable by their owners.
I am also a big proponent of the free market system, but I believe we need greater accountability from the people whose job is to make sure the system works properly and without abuses. Freedom of enterprise doesn't mean freedom to lie, steal and deceive.
Where were the SEC and Congress when these worthless securities were being sold and people were buying houses with no collateral? Why did the Fed keep the interest rate so low for so long, helping to fuel the bubble?
Unless the people responsible of keeping the checks and balances mechanisms in good working order are held accountable for their "oversights", this will happen again; the next bubble could very well be hatching right now.
Yesterday I wrote on my blog about the bailout failure from a different angle: bad salesmanship by the executive and Congress. Hope you guys can read it and tell me what you think.
Excellent post. Excellent comments too. Who didn't see this train wreck coming? One thing bothers me though, and it is that you are preaching to the choir. The people who should be heeding your message don't actually care about customer experience, never have, never will. The people in positions to fix this system probably aren't aware that they need to care about all the participants USING the system. When will the world begin to appreciate PLANNING? I live near Washington DC and have actually looked at government jobs. The whole concept of "user experience" completely mystifies every single government employee I've met. Why? I think some people want to do good, but they are just ignorant of the whole idea of customer experience. Keep advocating good experience, there is a lot of work to do.
Good article on this.
Europe tried to change this stupid system since years but without success. Outside the US some critical experts talk for a long time about the virtual virtual financial system of the world.
I think that a new president of your country should be brave and change this system in a historical way.
The proof is in the pudding. Many providing a good customer experience are still making money. Yes there are some bad apples but those providing valuable, memorable experiences are generating fans despite the conditions.
Being a student finishing her last year of school the financial crisis has gotten alot of people attention. Attention that should have been happening all along. It seems to take a huge crisis to get the people to finally say something. We get so caught up in our everyday exists that to focus on the bigger picture is too much trouble. Now that we have trouble all of the sudden the big picture is more important since it affects our individual live styles. Personally, I think the persons who create this problem should be the ones selling off their yacht, second homes to pay us back. Of course this is only a dream since it is too much trouble to nail down the people who create this nightmare. Who knows maybe some of them have already died since this has been a issue in America since almost its birth.
I believe there's a global affliction of "not-wanting-to hear-it", but it seems especially prevalent in the US. The knowledge is there, but 1) it's unpleasant and 2) it would involve restraint - limiting oneself in some way (in this case foregoing big short term profit) another thing against which there seems to be a lot of resistance in this culture. Perhaps things will change as the country matures and realizes you can't have it all...