Though disruptions are not inherently negative – if I disrupt what you’re doing to present you with a check for $1 million, I think you would deem that disruption positive – they typically present challenges before they surface opportunities (remember going from A to chaos to B). The three major disruptions in the news today, I would say, are: global warming, the presidential election in the United States (although this is primarily a domestic event for us in the US of A, indubitably our choice will impact world events), and the financial crisis. Leaving out global warming for now, let’s see whether digital technologies are involved in the other two.

New Media and New Campaigns
Unquestionably, the US presidential candidates had to embrace the digital disruption presented by online New Media (New Media is a disruption in the Digital Disruptions report) or risk falling behind in raising money and getting their messages out, as well as risk being deemed out of touch with their increasingly tech-savvy constituencies.

Obama jumped on the Internet early but McCain has come back strong, according to an article in Online Media Daily:

Barack Obama trounced John McCain in online media and advertising during the first six months of the year, according to a new comScore study. The Web ratings service found Obama’s online display ads drew 92 million views monthly on average from January through June 2008, compared to just 7.3 million for McCain.

The Obama campaign appeared to ramp up online efforts in May and June as ad impressions surged to 150 million and 244 million, respectively, while McCain’s fell to a low of 3.2 million in June.

Obama also outstripped McCain in the average number of monthly visitors to their respective campaign sites (2.2 million to 583,000) and searches of “Obama” versus “McCain” (5.3 million to 1.3 million). . . .

One area where McCain turned the tables was video. His site had more than triple the video views of Obama’s at 2.1 million to 612,000. ComScore attributed the Republican presidential nominee’s online upset to video being featured more prominently on the home page of JohnMcCain.com than on BarackObama.com.

McCain has also been closing the gap more recently in video views on YouTube, where Obama has far more ads and original shorts. In the last month he had 6.5 million views to Obama’s 9.8 million, according to video tracking site TubeMogul.

Though one could argue that this does not represent a shift to a new grassroots political model as was initially thought – after all, we increasingly purchase online, so online donations merely reflect that trend (see article) – no one would dispute that New Media technologies represent one of the fastest, most effective ways to bolster a campaign.

Information Transparency and Financial Transparency
As for the financial crisis, I would argue that it was created in part by digital technologies, and I think it will be resolved by them as well. In the late 80s and early 90s I worked on Wall Street for Bankers Trust – often credited with inventing derivatives: customized, complex securities such as mortgage-backed securities and collateralized debt obligations.  I managed the design and implementation of C-Trac, the first collateral management system for these exotic offerings and learned that without powerful computers it would have been impossible to craft, value, pool, strip into traunches, and mark to market all but the simplest of these, not to mention track the collateral that was being rehypothicated on a daily basis – i.e., passed around institutions to back whichever deals’ change in net present value required additional risk mitigation.

What was lacking then is lacking now: information transparency (another of our digital disruptions).  When Bankers Trust’s clients started to lose money on these initially highly lucrative deals that turned corporate treasury departments into huge profit centers, they claimed they didn’t understand the risks they had been taking. Very few outsiders were aware of the huge risks to which the increasingly unregulated investment banks and hedge funds exposed themselves and their investors, and many of those who were aware were profiting handsomely from the risky transactions and weren’t about to blow the whistle.

This is changing. The New York Times started a blog on Merrill Lynch, Lehman Brothers and the bailout. Web sites like factcheck.org and glassdoor.com, which aggregates insights anonymously provided by employees and is consulted by the press and, it is hoped, the Securities and Exchange Commission, are exposing in real time what CEOs and CFOs may be withholding from their shareholders and the government.

Last week the Federal Reserve Bank of New York met with Eurex, NYSE Euronext, CME Group/Citadel, IntercontinentalExchange/the Clearing Corp., representatives from the major dealers who sell Collateralized Debt Securities contracts, buyers of the contracts, and representatives from the SEC, the Commodity Futures Trading Commission, and the European Central Bank to discuss setting up a clearinghouse for the hitherto unregulated $55 trillion market for credit derivatives.  (See article.)

This is a first step in exposing to players, investors, industry and government the day-to-day market value of these complex assets, and the leverage that players and investors have taken on. I envision something like a software RFID-like tag for securities that allows the world at large to track every detail of what is going on in the financial markets, in the same manner that Wal-Mart tracks products from initial order to production, sale and restock. This follows, too, the much publicised example of information transparency, the Goldcorp turn around.

When in March 2000 the mining company Goldcorp exposed all of its geological data to the world and launched the Goldcorp Challenge, with prize money for those who provided the best methods and estimates for mining Goldcorp’s property, it was a huge success.  More than 1,000 virtual prospectors from 50 countries helped propel the “under-performing $100 million company into a $9 billion juggernaut while transforming a backward mining site in Northern Ontario into one of the most innovative and profitable properties in the industry.”  (See article.) 

Similarly, by leveraging some of the technologies reviewed in our Digital Disruptions report, and others, a new level of information transparency and collective expertise can be brought to bear on the financial markets, making them once again the safe and liquid engines that finance and reward innovation.