Our simulation implies that the impact of a disorderly euro break-up on the UK will be roughly half as bad again as the collapse of Lehman Brothers.The UK economy contracts by over 7% between now and 2013, assuming a euro default in early 2012.
Moreover in the absence of massive monetary easing to prevent sterling from rising by upwards of 35%, we see the UK slipping into deflation, which would make servicing its debt even harder. And you can forget those fiscal targets, In our simulation, the austerity measures are simply overwhelmed by the impact such a huge sovereign default event has on global bond yields. Even with austerity, we see UK bond yields rising above 10% by 2013.” —Buttonwood quotes Danny Gabay about the impact of a disorderly Eurozone breakup in The Economist
A great example of why thinking innovatively about products is really more like ethnographic research than engineering or marketing.
Sara L. Beckman and Michael Barry, Innovation as a Learning Process: Embedding Design Thinking, California Management Review, Fall 2007
At the core of doing good observational research, and unearthing important information from potential customers or users, is asking why. While basic use and usability needs are important to observe, more radical innovation comes from understanding meaning-based needs. “The main task of ethnography is not only to watch, but also to decode human experience—to move from unstructured observations to discover the underlying meanings behind behavior; to understand feelings and intentions in order to deduce logical implications for strategic decisions.” [Hy Mariampolski, “The Power of Ethnography,” Journal of the Market Research Society, 41/1 (January 1999)] Those meaning-based needs are only uncovered as the researcher continues to probe, deepening his or her understanding of the user’s thinking about the innovation and its use context.
A short example highlights the importance of understanding needs at
all three levels of use, usability, and meaning. A number of Native American tribes—and, in particular, the Mono Indian tribes in Fresno and Madera Counties in California—subsisted on acorn flour prepared by grinding the acorns. The grinding was done by the women in the tribe who all sat around a large, flat granite boulder with holes in it that served as mortars to do their work. In the early 1900s, the U.S. Government attempted to improve the efficiency and pro- ductivity of the acorn grinding process by providing iron grinders. The attempt failed. Why? The grinding activity served a variety of purposes beyond simply preparing flour for food. It was the place where women gathered to tell stories and pass along the traditions of their people. The grinding activity provided the backdrop or rhythm for the telling of the stories; the women viewed it as accom- paniment to the sharing of their heritage. The U.S. Government approached the problem to be solved as one of food processing, completely missing the much deeper meaning of the activity, and thus failed with its solution. Understanding the broader context might have enabled the development of something much more powerful, and something that would actually be adopted.
Understanding meaning is grounded in observing and understanding culture. Culture represents the agreed upon meanings and behaviors that groups of people develop and share over time. “Culture is shared as the conscious and subconscious blueprint for a group’s way of life. It defines the bound- aries of groups and articulates the distinctiveness they feel compared with others. Culture is the source of any group’s collective sense of self and their aspirations are rooted in cultural learning.”[Hy Mariampolski] It is the “constituting role of culture” that ultimately determines who we are as people and what we think. An understanding of why people do things must be “immersed in culture, it must be organized around those meaning-making and meaning-using processes that connect man to culture.”32 The material components of culture—the tools and trappings of everyday life, and the things we talk about innovating—have deep roots in culture. Culture, thus, has an important role in product choice, usage, and resistance.
Culture is communicated through stories, such as those told by the Native American women while grinding acorns. People take the events that they expe- rience and organize them together into stories. Every culture has some basic set of shared stories or frameworks that explain how the world works, and there- fore explains why people do what they do. It is those shared stories that observation seeks to elicit. Deciding, for example, what type of product one will purchase to clean one’s face depends upon culturally based norms and values about cleanliness and how and where cleaning oneself should take place.
Stories about the use of designed objects are the best way to get at innovative ideas, but the stories have to be based in the cultural context, nor just narrowed down to how it fits in the hand. All human tools are social, and the social stories — how people use the objects, share them, and the contexts where they are used — are the core of all great innovation.
- Amanda Rucker
At root, the E.C.B.’s opposition to helping out Italy and Spain reflects a deep sense that it’s morally offensive to let countries off the hook by inflating one’s way out of trouble. The head of the Bundesbank calls inflation “sweet poison,” making it sound like heroin, while the E.C.B. is praised for its toughness and rectitude. The attitude recalls Herbert Hoover’s account of Andrew Mellon’s advice on how to deal with the Depression: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” For Mellon, liquidation wasn’t just economically sensible. It was a necessary process of purification. Austerity would “purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life.”
Plenty of people in Italy and Spain and Greece were irresponsible, and reform is necessary. But destroying the euro in order to teach a lesson is too blunt an instrument: when economies fall apart, it isn’t just the guilty and the feckless who get punished. The E.C.B. is concerned that becoming a lender of last resort could threaten its much prized price stability, but there’s no point in price stability if the euro vanishes as a result. If the E.C.B. isn’t careful, someday we’ll talk about how great a job it did of protecting the euro right out of existence.” —
- James Surowiecki, Italy, Spain, and the European Central Bank
Surowiecki talks like the fall of the Euro is some distant hazard, the way that people who aren’t paying attention to climate data talk about climate change. Like we have a decade to argue.
The Euro is likely to collapse soon, like in the next few weeks — a month or two at most. There is no political will in Germany to save it. And the moral issues are irrelevant: the countries with the greatest problems have to most to gain from leaving the Euro. It is the banks and powerful investors who do not want to take huge write downs that are forestalling the inevitable, so they can dumb the most exposed bonds and bank stocks, and move their funds into cash, safer stock, or US Treasuries.