From Wacky to Wiki
By: Prof. Shlomo Maital

How bad will 2009 be for Israel’s economy? And what can we learn from these hard times?

It is hard to remain optimistic. In Israel’s last downturn, which began in 2000, the rate of unemployment topped 10.5% by 2004. Today, as companies announce layoffs almost daily, the rate of unemployment, now exceeding 6%, seems well on its way to 10% or higher in 2009. Bank of Israel Governor, Stanley Fisher recently told Hebrew University economic students that he is about to sharply revise downward his GDP growth forecast for 2009, from its current 1.5% level. The math here is simple. When Israel’s economic growth dives from 5% during 2004-7 to perhaps zero, unemployment must rise by at least four percentage points.  

Tel Aviv Stock Exchange (TASE) stocks lost over a third of their value during 2000-2002, but quickly gained it all back in 2003. But this time, we investors and savers face a double whammy. Not only have our stocks fallen but also bonds, normally safe, bought by our pension, and provident funds. 

“In previous bear markets, members of pension and provident funds suffered losses resulting primarily from the depreciation of share prices,” TASE officials state, on their website. 

“In 2008, however, the decline in corporate bonds, which constituted a key component of many institutional portfolios, left its mark as well. The unprecedented fall of corporate bond prices... was particularly prominent for bonds issued by internationally active real estate companies.” 

In other words, the billionaire oligarchs – including Lev Leviev and Yitzhak Tshuva -- who control 40% of Israel’s economy borrowed billions by selling bonds in Israel, to invest mainly in real estate abroad. Real estate prices have now collapsed in America and in Europe. As the oligarchs swallow huge losses and struggle to pay off maturing bonds, capital markets have dumped them, driving down bond prices, fearing default. Ordinary people pay for the oligarchs’ risky misadventures.  

I believe there is a powerful lesson to be learned from all this. The insight came to me when I took part in a panel discussion at a recent business conference hosted by Globes, the financial newspaper. Next to me sat Florence Devouard, former chair of the Wikimedia Foundation that funds Wikipedia. 

Wikipedia is an online encyclopedia. The name “wiki” is Hawaiian for "fast." And it is. Some 250 million people visit Wikipedia monthly. Using it you can find out everything about anything, anytime, anywhere, in 250 languages, including Hebrew. The 11.5 million articles are all contributed by volunteers. Devouard noted that the site is funded Obama-style by millions of donors – some 38 million, so far. No advertising is accepted.    

There is no business model and minimal organizational structure. Florence claims there is a business model. But if a business model answers the question, how do we make money out of this? Then there is none. Florence says 95% of the business model is the ‘gift economy’, answering the question, “how to convince others to give us money when they absolutely do not have to?” I am astonished that the world’s 8th most popular website could be made into a business worth many billions (by accepting advertising, for instance), but its founders (Larry Sanger and Jimmy Wales) and leaders steadfastly refuse. It is a true wiki. Florence, an agronomist, served as foundation Chair for four years, a job she describes as unpaid and full-time. It was her responsibility to raise funds that kept Wikipedia’s 300 servers operating.

My fellow panelists discussed the dismal global scene, defining numerous problems but offering few solutions. So I asked Devouard a question.

“Can we build a wiki society?” I asked.

“Yes, of course,” she responded.

The basic idea is simple. The form of “capitalism” embraced by the world in the past two decades spun out of control. One reason is that it was controlled by a tiny handful of greedy individuals who acquired billions in wealth and who invested our money recklessly, without our knowledge.       

That old system has crashed and burned. Good riddance. The system, both in Israel and abroad, was not truly capitalist. Capitalism in its purest form is about creating value for others, not about grasping short-term high-risk profits for ourselves. 

Can we rebuild the system as a wiki? And how?

A wiki society is one based on the following principles. Individuals commit themselves every day to helping friends, neighbors and strangers who have less than them. We accept personal responsibility for each other’s wellbeing and do not expect the government to help much. We do this especially in our neighborhoods, to rebuild our sense of community. We each volunteer daily non-random acts of kindness. We give of our time as well as money. We receive as well as give. We do this with minimal organization and zero bureaucracy, using Internet technology for communication and coordination. Indeed, as NGO’s (non-governmental organizations) blossom, a kind of wiki society is being born as we speak. 

Some say that when stocks are owned by a broad swathe of society, this is in effect a wiki society. But it is not, for two reasons. First, half of all equities are owned by funds, so that ordinary people have little knowledge or say about it. Second, diffuse share ownership means, in effect, that CEO’s (half of whom are also Board Chair) do whatever they please – the opposite of a wiki.

In the panel, Giora Yaron, a brilliant and successful entrepreneur, responded to my wiki society idea by calling me, “my friend from HaShomer HaTzair” (a left-wing youth group). He meant that the wiki society idea was hopelessly idealistic and utterly socialist.

I laughed and recalled that in the American presidential campaign, when candidate Barack Obama suggested slashing taxes on the middle class, Republican John McCain called him a "socialist."  

What a huge misunderstanding! Socialism means relying on the government for everything. In the wiki society, we rely only on each other, and on innate human goodness, energy, generosity and initiative. 

We now understand world markets were wacky. It is time we turned ‘wacky’ into ‘wiki.’