This is what the Greek default looks like

Europe will have to make its choice this year. Either a much tighter, more constrictive fiscal union with a central bank that can aggressively print euros in this crisis, or a break-up, either controlled or not. I don’t think they can kick the can until 2013, as the market will not allow it. Either the ECB takes off its gloves and gets down to real monetization when Italy and Spain need it, or the wheels come off.

If you want to understand what’s going on in global financial markets, go to John Mauldin’s site and subscribe to his free weekly newsletter Thoughts from the Frontline. Every week he pores over analyst reports, travels, talks to a lot of people who know what’s going on behind the scenes, and sits down to package thoughts, numbers and charts to be conveniently delivered to your inbox to provide you with food for thought.  Also from this week’s newsletter: this is what the Greek default looks like.

Greece has two choices. They can choose Disaster A, which is to stay in the euro, cutting spending and raising taxes so they can qualify for yet another bailout; negotiating more defaults; getting further behind on their balance of payments; and suffering along with a lack of medicine, energy, and other goods they need. They will be mired in a depression for a generation. Demonstrations will get ever larger and uglier, as the government has to make even more cuts to deal with decreasing revenues, as 2.5% of their GDP in euros leaves the country each month. There is a run on their banks. Any Greek who can is getting his money out.

Greek voters will then blame whichever political group was responsible for choosing Disaster A and vote them out, as the opposition calls for Greece to exit the euro. Which is of course Disaster B.

Leaving the euro is a nightmare of biblical proportions, equivalent to about 7 of the 10 plagues that visited Egypt. First there is a banking holiday, then all accounts are converted to drachmas and all pensions and government pay is now in drachmas. What about private contracts made in euros with non-Greek businesses? And it is one thing to convert all the electronic money and cash in the banks; but how do you get Greeks to turn in their euros for drachmas, when they can cross the border and buy goods at lower prices, as inflation and/or outright devaluation will follow any change of currency. It has to. That is the whole point.

So how do you get Zorba and Deimos to willingly turn in their remaining cash euros? You can close the borders, but that creates a black market for euros – and the Greeks have been smuggling through their hills for centuries. And how do you close the fishing villages, where their cousin from Italy meets them in the Mediterranean for a little currency exchange? What about non-Greek businesses that built apartments or condos and sold them? They now get paid in depreciating drachmas, while having to cover their euro costs back home? Not to mention, how do you get “hard” currency to buy medicine, energy, food, military supplies, etc.? The list goes on and on. It is a lawyer’s dream.

There is a third choice, Disaster C, which is worse than both of the above. Greece can stay in the euro and default on all debt, which cuts them off completely from the bond market for some time to come. This forces them to make drastic cuts in all government services and payments (salaries, pensions etc.), and suffer a capital D Depression, as they must balance their trade payments overnight, or do without. Then they choose Disaster B anyway.

The Teacher as Hero

In Austin Wright’s Susan & Tony, Susan is a part-time English teacher who finds herself at a crossroads while reading a novel that tells the story of Tony, a university maths professor whom terrible things befall.

In Murakami’s 1Q84, Tengo is a part-time maths teacher at a cram school and Aomame is a fitness instructor: both, in typical Murakami fashion, have plenty of free time to get swept up in their respective surreal adventures.

In Stephen King’s 11/22/1963, Jake is a high-school English teacher with a chance to go back in time and change history.

In fiction, it appears, teaching has more than its usual rewards.

The future of work and what we’ll have to learn

The structural changes awaiting us GenXers in work environments, careers, and employment relationships have been debated at least since Jeremy Rifkin’s The End of Work (1995). More recently, the macroscopic uncertainties facing GenY have taken center stage. For both generations, especially in Europe, there is a stark awareness that the concept of retirement our parents relied upon no longer applies to us: I have friends who retired at 58, yet my own expectation (currently being enshrined into law by the Italian austerity package) is that I’ll be well over 70 before I can draw a pension from the coffers into which I’ve been contributing since my first paycheck, 20 years ago this year.

Yet it is not just employees who will have to adjust to staying in paid employment much longer: it is also employers.

As employers, I am afraid we have no idea how to deal with this. Companies have, if at all, offered “early retirement” (say, a 3-year parachute to 55-year-olds) in order to downsize, restructure and make space for a few more young people at the bottom. Once “early retirement” means 68 or so, they’ll have to find work that vast masses of employees in their 60s can be productive at; perhaps part-time, with a different cognitive load (and physical effort), in different shifts or what have you. Have you ever been served by a call center representative in their 60s? I don’t think you have – but you will.

As employees, we will have to accept that not everybody can reinvent themselves as a “consultant”: people will just have to remain employed. We will also see, if organizations are at all meritocratic, the complete decoupling of the corporate pyramid from the age structure of the corporate population. It used to be that, as employees aged, a few managers floated to the top and the rest in their age group magically disappeared along the way (women, unfortunately, much earlier than men). No longer. Not only will we see people from our own generation at every possibile level in the organization (we’re just too many), but late in life those same people will have to deal – realistically – with having a boss much younger than they are. I am talking about employees in their 60s reporting to bosses in their 40s or even 30s. We haven’t seen this type of employment relationship, I believe, in the past half century or so. And yet this is the future of work, and this is what we’ll have to learn to deal with.

The end of an era, and what it means

All political lives end in failure, Enoch Powell said: but some failures drag on for much, much longer than others. Yesterday, 75-year old Silvio Berlusconi released his stubborn grip on power by handing in his resignation to our President Giorgio Napolitano.

Bill Clinton left office at 55; Tony Blair at 54; José Luis Zapatero is standing down at 52. The era-defining Margaret Thatcher ceased being Prime Minister at 65, ten years younger than Berlusconi is today. Among leaders who beat Berlusconi’s retirement age from high office, Ronald Reagan stood down at 78, and Fidel Castro at 82; Juan Domingo Perón died at 79 while still in power.

Berlusconi first won elections in 1994, and dominated the political scene so thoroughly that even his intervals in opposition will be remembered as part of an uninterrupted, 17-year spell of Berlusconismo. Millions of young voters have come of age with no memory of Italy before Berlusconi’s discesa in campo. They remember nothing but his political pragmatism, cloaked under an anti-Communist ideology that wore thinner and thinner by the day; his jests, excesses and jokes that slowly turned from charming to pathetic; his extreme personalization of politics as an exchange of favors; and his blind refusal to modernize Italy.

Most of all, he bears responsibility for changing the nature of social mobility in Italy. In the post-war years, Italy’s miracolo economico meant that millions of Italians quit toiling in the fields and migrated to work in the factories of our very late Industrial Revolution. The diseases of the dirt poor, pellagra and malaria, were beaten in the 1950s. In the ’60s and ’70s, many people found their way to middle-class comfort through newly created jobs in banks, commerce, and the public sector. Those who had worked in factories were often able to set up shop on their own, and created a generation of family companies with their own fabbrichetta (small factory). In the ’80s, we even built an elite of Italians who were at home in the upper echelons of worldwide finance, academia and corporations; many young and brilliant students joined international business schools, consulting firms and investment banks. All through this extraordinary growth story, we never ceased believing that doing well in school and working hard were the two keys to our success: even during the darkest days of terrorism and kidnappings in the ’70s, when wealthy entrepreneurial families feared for their children, they sent them out of Italy, to study and earn university degrees abroad.

But something broke in the ’90s. Our ascensore sociale, the elevator that people could catch from humble origins to become respectable and rich, no longer worked very smoothly. Tangentopoli disrupted the old order. It gradually emerged that for ambitious young people it was a smart career move to get a job somewhere in Berlusconi’s economic empire. In 1993-1994, young managers, entertainers, and salespeople went through central casting for Berlusconi’s new political party. “Casting” is not a metaphor: there are many witnesses to what happened in those TV studios. If you were telegenic and could seduce an audience, you were a candidate. If you were a nerd or an intellectual, you were out.

We did not know it, but Italy’s economy had already started growing at less than half the pace of the rest of Europe – which it has done for the past two decades by now. Without reliable growth, young people resorted to patronage and crapshoots: the rise of soccer players’ and TV entertainers’ salaries dramatically shrunk the range of success models and career aspirations for young Italians. Aided by a criminally undemocratic electoral system on one side, and criminally conservative labor unions on the other, our politicians froze the system for nearly two decades. Standards of hard work and diligence went out of the window: when kids got bad grades in my generation, they were locked up to study; when kids get bad grades today, parents complain to the teacher. Politics, with few exceptions, became the refuge of the mediocre. Integrity and intellectual rigor became old-fashioned, unnecessary virtues. Many of the brightest minds of our generation stood by as this happened; many sought their fortunes outside Italy. The privileges of the political class were the target of much discontent, but little action. Stunning arrogance and vulgarity were displayed by politicians even last night, as they left the palaces of power worrying about their own future after Berlusconi.

Mario Monti has a few months, perhaps a year, to pull us back from the brink and to do many important things very quickly, against the opposition of many stakeholders who only wish to stay entrenched in the old order: I wish him all the best. But rebuilding an Italy we are proud of, and shaking out the heavy burden of Berlusconi’s legacy, will take years, maybe decades, if it is at all possible. And we can no longer watch from the sidelines: it starts with each of us.

The Internet of the Future: Nouveau Monde 2.0, Paris, October 21, 2011

I had the pleasure to represent Italian Angels for Growth yesterday at a seminar held at the French Ministry for the Economy, Finance and Industry in order to advance the G8 Deauville agenda for the digital economy. It is a bit unusual for me to participate in a governmental event, but since the invitees were “Ministers for the digital economy, leading firms, start-ups, venture capitalists, bloggers and think tanks”, I thought at least it would be a place where interesting people gathered.

“New World 2.0: Concretizing the Internet of the Future”, or “Nouveau Monde 2.0″, was indeed packed with content and not too long on rhetorics. I had to miss the opening session on Thursday night, which dealt with Democracy 2.0 and saw Minister Eric Besson, the event host, engaged – quite empathically, I am told – with a number of Tunisian bloggers. (Here is a short interview he gave about Nouveau Monde 2.0).

Friday started with a discussion on network infrastructure that is by now familiar to me from working in a telco (I almost felt like crying out: “Those numbers on video traffic on cellular networks? They’re not tomorrow! They are practically today!”) and was framed by Cisco’s Robert Pepper, who showed projections from the Visual Networking Index leading us into the “Zettabyte Era” by 2015. Two key facts here: the volume of data transmitted around the world is increasingly driven by consumers, not businesses; and the biggest consumer demand is for video, in its many incarnations (short- and long-form, recorded and real-time, and so on). It is, also, a remarkably global demand: according to Google’s David Drummond, half of the views for videos uploaded from France this year were due to users ouside France. The question is, obviously, who’s going to pay for the networks we need to put in place. There was a full range of policy options represented on stage: the most laissez-faire was probably the U.S., whose Department of Commerce representative, Lawrence Strickland, maintained that regulators’ job is to “get out of the way”, but nevertheless admitted that there is at least one case, rural broadband, where the government should step in. The most interventionist? Not Sweden, not Finland, but Australia, where fruitless haggling with the incumbent, Minister Stephen Conroy told the audience, led the government to give up in frustration and launch a Newco tasked with building the National Broadband Network out of taxpayers’ money; one guesses that having Singapore, Taiwan and South Korea as “neighbors” and competitors tends to sharpen resolve. The proceedings were lent gravitas by European Commissioner Neelie Kroes, who reminded us that not only do we have a financial crisis to solve, but we must also find the resources to invest in our digital future. She deplored the lack of a single digital market across the Union (think of the mess that national copyright systems have gotten us into), and shone the spotlight on the recent Commission recommendation to establish a €9.2bn “Connecting Europe Facility” (here’s how it should work). Kroes was the star of the session: in a way, at at time when almost all politicians seem to think desperately short-term, she seemed to show how politics should care for the long run. (I am, needless to say, a fan of her commitment to put more “girl power” into technology).

The second session was moderated by entrepreneur, angel investor and independent board member Sherry Coutu, and focused on privacy on the Internet: “as a mother, I worry about these things”, she said in introducing the panel. Barbs were exchanged, as expected, between Simon Davies of Transparency International and Elliot Schrage from Facebook. Schrage was also challenged by the audience, notably when Tunisian journalist Emna Ben Jemaa took Schrage to task about a number of decisions on Tunisian pages made, or rather not made, by Facebook administrators during the Arab spring: if you followed the hashtag #NMwww, you could almost hear the Twittershphere cheering her on.

The third session, introduced by Alcatel-Lucent CEO (and former BT CEO) Ben Verwaayen, took on the issue of the digital divide. In opening the panel discussion, Mr. Verwaayen admitted that even in the West we are absolutely nowhere with “Internet for all”, and asked whether spectrum is treated as a strategic scarce resource or a milk cow for finance ministers. Again, representatives from places such as Japan and Sweden shared the stage with politicians from Kenya and Morocco. Digital inclusion is a tough challenge, both in terms of infrastructure and in terms of awareness and culture: there are lots of inspiring experiments going on, from tools to get cashew nuts to market at the right time in Ghana to telecommuting after the quake in Japan, but no one has any easy answers.

After the “official” conference was over, there followed a start-up evening (“Innovation Night 2.0″) put together by the outstanding team from Le Camping: three nascent start-ups and three slightly more mature ones got to present one-minute pitches and be grilled by senior executives from Microsoft, Google, Facebook… Here, the star performer was Criteo, a business that barely existed three years ago and plans to book $200m in revenues in 2011. When research reports talk about the jobs and the share of GDP growth created by the digital economy, folks like those at Criteo are the reality behing the numbers. Well done, guys!

Overall, the day felt like one of those rare occasions where my generation (the 40-year-olds), the previous generation (Ms. Kroes’s), and the younger generation (the university students presenting their start-ups in the evening) almost spoke the same language. The Ministry (where Mr. Besson holds, in addition to Industry and Energy, a specific mandate for the Digital Economy) deserves credit for creating a common space where this could happen. It was a showcase for a very dynamic France, and perhaps an example to the many other countries where participants came from.

ILLUMInazioni: 2011 Venice Biennale lives up to expectations

After the confused jumble of the 2009 edition, I wasn’t much looking forward to seeing what was on at the Biennale in Venice. Yet, after the past two days, I’m pleased to report that I found this year’s event much better.

The Director, Bice Curiger, has been Curator at the Kunsthaus Zurich since 1993, and has brought to Venice a much-needed measure of clarity and cleanness. The largest pavillion at the Giardini hosts a truly cosmopolitan Biennial show, built around an unofficial lifetime achievement award to Tintoretto, the most modern of the Old Masters.

The national pavillions are mostly solid submissions, with the German homage to Christoph Schlingensief (presenting the installation Eine Kirche der Angst vor dem Fremden in mir, pictured above) deservedly winning the Golden Lion. Another unmissable work is Thomas Hirschhorn’s installation in the Swiss pavillion, Crystal of Resistance (for which I refer you to the designboom post). Among individual artists’ awards, Christian Marclay’s Golden Lion to for The Clock – read more about it here – is also well deserved.

I keep wondering how much art will be hurt by the global crisis: art keeps bouncing back.

The Biennale is on until November 27, 2011.

My Facebook profile: Now open to subscribers

Has Facebook jumped the shark? It’s churning out platform changes faster than you can say “f8″. Yet, we don’t know today whether the changes will weave Facebook into the fabric of our lives even more tightly than today, or whether they will, on the contrary, turn out to be undigestible.

The most significant change in years, I believe, is the Subscribe feature: a full and irreversible move to the asymmetrical model (see my 2010 post about platform choices and personal policy), as if to say that the folks at Twitter (and Quora, and Google+) have been right all along. I think that recognizing this – better late than never – will be a big win for Facebook. Starting from today, my Facebook profile is open to subscribers; at least at the beginning, the majority of the content will still be shared with friends only.

Of course, it’s not enough to make a winning choice of relationship model (asymmetrical vs. symmetrical) for a social utility to win: you have to get a million other little things right. Google Buzz floundered on the wrong defaults. The TimesPeople feature on nytimes.com, one that I liked and used, appears to have been quietly rolled back last summer. Friendfeed, one of my personal favorite sites ever, was terminally mothballed after its 2009 acquisition by Facebook. (This will sound sentimental, but I haven’t loved a social networking site the way I loved Friendfeed since the pre-bubble days of SixDegrees.com). Yet, I maintain that, as I wrote last year, “asymmetry is the right choice for this type of application: it allows you to follow whoever you want, key opinion leaders to behave normally, and the community to grow more fluidly.”

The other major change in the Facebook platform, and the one that got the most hype this week, is the much deeper integration of media services such as Spotify, Hulu and Netflix. I’m starting to see in my Ticker what some of my friends are listening to. There’s probably a rather robust algorithmic tweak in progress to prevent our feeds from being overrun with meaningless chatter about songs, TV shows, products and God knows what else: I joked a few days ago that “if [Facebook] turns into MySpace, I’m gone.” Your genuine friends risk being squeezed out by a minority of oversharers drip-feeding you every song that they sample, every video they watch, every product they put into a basket. Of course, you can unfriend the oversharers (… and they can follow you without you following them back): however, as has already been noticed, it is entirely possible that some of your nearest and dearest friends may have poor musical taste.

To Facebook users outside the U.S., these changes won’t make a major difference. Since the media rights landscape is hopelessly fragmented on a national basis, most services such as Spotify, Hulu and Netflix are either available in a very restricted set of countries, or only available in the United States. If you are, say, Italian, you will hardly notice such updates, unless you have a lot of friends in the U.S.  and they use these services a lot.

What will Facebook do to vertical sites built around media and entertainment consumption? Will it swallow them slowly, keep them alive on life support, or just make them irrelevant? I don’t have the answers for you. I’ll keep my eyes open; in the meantime, do enjoy the new Facebook.

Junot Diaz on writing, on luck and on women

I tore off a page from the South China Morning Post’s Post Magazine when I was in transit in Hong Kong, because it carried an interview with Junot Diaz, the author of one of the best novels ever written about the long shadows of dictatorship, The Brief Wondrous Life of Oscar Wao.

On writing:

When I was 26, I published one story in one magazine which was seen by one agent, and I hit the literary jackpot. [...] When I sold my first book [the short story collection Drown], in 1995, I was working at a job making photocopies and living in an unheated apartment in Brooklyn. I quit my job right there. I just walked out. [...] My novel took 11 years to write and it was hell. There are people who come under hardship and do everything possible to make their lives easier. I came under hardship and decided to make my life, and those of the people around me, harder. [...] Basically, I bit off a story that required me to become a different person to finish it. The guy who conceived of Oscar Wao is not the guy who would have been capable of finishing it.

On luck:

I look at my childhood and nothing proves to me more the utter randomness and arbitrariness of what we call success. I hear that word and in my mind I flash to every single person who was better than me and who, through a complete accident, wasn’t served what I was served. I’m here because of an incredible amount of luck. You’ve got to work hard and you have to turn everything you’ve experienced into some kind of vision, but none of that is enough. 

On women:

I would never have been a writer if I hadn’t gone to college and met feminists. The feminist project is absolutely essential to writing good literature. A large part of the planet is encouraged to view women as partial human beings. You can always tell a good writer because, whether they’re male or female, they effortfully resist that idea. 

Sometimes it all became too much. Fiction from Pakistan

And yet, though she insisted that she loved Pakistan, sometimes it all became too much. “I hate it, everyone’s a crook, nothing works here!” she would sob, fighting with her husband.

This is Sonya, an American woman who married a Pakistani man, and a minor character in Daniyal Mueenuddin‘s In Other Rooms, Other Wonders – one of the best works of fiction I’ve read in quite some time.

There is quite a lot of quality stuff being written in English by Pakistanis who’ve lived in America, gone to school and perhaps studied creative writing there. Another one coming to mind is Mohsin Hamid, author of Moth Smoke and The Reluctant Fundamentalist.

I sometimes wonder whether this will be the path forward for Italian fiction, as well: to be led by writers who belong both here and somewhere else, or neither here not there.

The secret sauce in the Google+ design: AngelList

In the couple of weeks since Google+ was unveiled, oceans of digital ink have been poured in reviewing the service, sharing tips and tricks, loving/hating Google for it, as well as in the ultimately futile exercise of predicting whether it will succeed.

I have abstained from such predictions. I have not yet, however, come across any commenters remarking on the Google+ look and feel: it seems to me very much that it took its inspiration from AngelList, the business angels hangout started by Naval Ravikant and Babak Nivi. That is, perhaps, because it is (rightly) difficult to get invited to join AngelList, and therefore a lot fewer people have access to it than to Google+.

But if you look at two screenshots, the resemblance is evident. I sometimes have trouble telling which page I’m on. (Then, of course, I read the content). Do you share this feeling?