Fast Company

Creating a Post-Crisis Economy: Moving Beyond Consumption

For the next few days I plan to explore what I am calling the Age of Involvement: the role of participation in an information society and how it leads to an expanded view of our economy. I am not an economist and have never studied economics. I am approaching this as someone who believes that innovation is redefining everything around us, including the ways that we measure human achievement. For those who do understand economics I apologize for the inevitable naiveties represented here but I hope there is enough of interest to stimulate a conversation.

coins I have been thinking quite a bit recently about the failure of the economy and whether we want it to recover to its pre-bust state. As I listened to the arguments for various stimulus packages, the main justification for distributing hundreds of billions of dollars seemed mostly to involve getting us to spend more by consuming more. As a short term fix this may be okay, but wasn't it just such an unsustainable approach to growth and consumption that got us into trouble in the first place? Can we really expect to spend our way out of this downturn and somehow magically create a post-crisis economy that is sustainable?

If the financial crisis was caused by the over-consumption of things we couldn't afford (cheap mortgages, for instance), and the environmental crisis is being caused by the over-consumption of things we can't afford (the earth's resources, for one), and the health crisis is being caused by the over-consumption of things we can't afford (calories, for example), then all signs point toward our having a bit of a problem with endless consumption.

So what's the alternative?

I think one problem is that our economy is too simple in what it measures. Industrialization created an economy that converts raw materials into goods that are sold for cash. Our GDP measures the worth of the goods and services we produce each year, and growth is dependent on both creating more, and doing it more efficiently. This may be appropriate when manufacturing physical products was the majority of humanity's value-adding activity, which was the case for the first 150 years of the industrial revolution. But it is not the case anymore. Whether it is reputations created through brands, relationships created through services, ideas created through knowledge, or access created through networks, many more forms of value are now created in our modern information society. And yet, our economy does not measure those in any meaningful way. If it did might we find that growth through consumption of resources was, in fact, being replaced by growth through participation in networks, relationships and experiences?

Take the music industry as an example. Measured the conventional way, the music economy has seen a massive destruction of value in the last ten years through the emergence of digital downloads and the Internet. Put simply, the record companies are selling far fewer CDs. If, however, we were to look at the industry differently, might we find a different answer? If we could value the increase in the amount of music being listened to, or the social connections that sharing music creates, or the increase in the number of music creators, or the meaning that an individual gets from creating his own music, would we find that instead of the destruction of value we had instead experienced a significant creation of value?

We tend to get more of what we measure. If we measure consumption, we will get more of it. If we measure participation, we will get more of that--and we might just find we are already far wealthier than we realize. Or, perhaps, learn that we’re far poorer. More importantly, if our economy measured different types of value, we could focus on designing things that created growth without automatically requiring that we consume more stuff.

(This post is adapted from one first published on my blog design thinking.)

Editor's note: Tim Brown is the CEO and president of IDEO, and a thought leader on the subject of design thinking. He's also an industrial designer himself, and has exhibited at the Museum of Modern Art in New York, and the Design Museum in London. He's particularly interested in the convergence of technology and the arts, and how design can have a social impact, particularly in emerging economies.

His talk on "Serious Play" can be seen on TED.com and his article on design thinking for The Harvard Business Review is available here. Brown's new book, Change By Design, on how design thinking transforms organizations, will be released by HarperBusiness in September 2009.

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8 Comments

  • real-exams.net real-exams.net

    You tried well to inform the people about the economy system.If we adopt a responsible consumption,we will consume less. Thanks for the valid information.

  • John Mawhood

    Since the "Wealth of Nations", economic theory has assumed the exploitation of a resource is a basic model for producing "good". Today we have to re-define "good" as only applicable if the resource is renewable, not destructive. Alternatively we must insist a change of language - "Does your company produce..." "renewable good(s)?" or "destructive good(s)?". Only then can culture take over and influence consumers and producers to consume as if we all live on one planet.

  • Matthew Shears

    It is not about consuming less but about consuming smarter and consuming responsibly. If we adopt smart and responsible consumption we will consume less - and smart consumption is all about the environment, health, community and economy. After 10 years of transition to renewables, the islanders of Samso in Denmark did not consume any less energy (in fact consumption increased slightly) - BUT they consumed smarter because the energy came from non-fossil fuel sources.

    Smart consumption is also about thinking about the implications of what you consume before you consume - not after. And this allows you to redefine value - if you eat smarter you contribute to mitigating environmental change, to lowering health bills, etc. There are financial consequences that can be measured.

    All our metrics now are based on scarcity, real or perceived: filling the car at the pump, buying fruit, borrowing a book from the library, etc. We need to change consumption patterns, value creation (green our technologies, etc.) and value extraction (shift our fuel sources, etc.) so that scarcity becomes less of a determinant in our lives, whether at the level of the individual's pocket book or the global economic system.

  • Grant Czerepak

    I don't think open systems (free participation) or closed systems (priced participation) are the answers. It's like saying that zero and infinity are numbers. They aren't.

    What we have to see is an intermediate solution which rewards us for collaboration in a way that puts food on all of our tables. In otherwords, not just intellectual property, but property in general has to be revisted, redefined and reregulated.

    R. Buckminster Fuller said that the existing power structure is telling 6 billion billionaires that everything is scarce. The scarcity we experience is manufactured. And the manufacturers of that scarcity have to be stripped of their illusionary authority. It is time for us all to expose the men behind the curtain, uncerimoniously strip them and redistribute the world's wealth equitably.

    I believe this generation is capable of doing it.

  • Michael Mullins

    I see where you're going with this, but it sounds like you're proposing in part a change to the definition of value. This is dangerous territory - the whole purpose of mark to market accounting was to have an objective and transparent system of measurement. Sure enough, as soon as companies ran into financial trouble they wanted to go back to a more subjective measurement standard that would give them the desired outcome. We have to be careful about changing rules to create desired outcomes.

    Things like participation can be measured effectively when analysts can convert them to statistics, like (shudder!) eyeballs. However, valuation can only come from trying those measures to market based real-dollar values, such as the accounting concept of goodwill.

    In any case, you're correct about the production/consumption ratio problem that we have. Independent non-economic measurements of quality of life are helpful for setting policy objectives, but the prevailing wisdom is that bottom-line growth figures are most important to watch. The best way to alter the picture then is to use technology to monetize networks in a way that they are counted in the total. The best example of this may be google adwords, which monetize blogs covering everything from politics to beanie babies. Or in the case of music, find ways to inarguably link music sharing to the sale of mp3's and ringtones, giving music companies economic justification to support sharing.

  • Ricardo Sosa

    Gilbert K. Chesterton (1874-1936) defined it as "the fatal metaphor of progress: leaving things behind us... has utterly obscured the real idea of growth, which means leaving things inside us". I just came from a trip to Ecuador, and their new Constitution is exemplary. It's based on "Sumak Kawsai", an ancient Inca (kwicha actually) idea of well-being in balance with Nature. I'd rethink the phrase "innovation is redefining everything around us". As I see it, 'innovation' as most people think of it, has actually taken us exactly where we are...

  • Guest

    Despite nomenclature and economists' claims to the contrary, our economic system is not designed to improve (or measure) Quality of Life. It is a system designed to increase "Quantity in Life", under the specious assumption that more stuff makes life better.