January 28, 2012

The experience economy by B. Joseph Pine II & James H. Gilmore

The experience economy by B. Joseph Pine II & James H. Gilmore
Work is theater and every business a stage.

[Wonderful book that explains correlations between artistic world & transformation business and categorically states the importance of experience in any business, if it wants to succeed]

Economist Tibor Scitovsky notes that ‘man’s main response to increasing affluence seems to be an increase in the frequency of festive meals.; he adds to the number of special occasions and holidays considered worthy of them and ultimately, he makes them routine - in the form, say, of Sunday dinners. The same is true of experience we pay for. We are going out to eat more frequently at increasingly experimental venues.

Companies stage an experience whenever they engage customers, connecting with them in personal, memorable way. Experiences are events that engage individuals in a personal way. Staging experience is not about entertaining customers, it is about engaging them.

Economic Distinctions:

Economic Offerings: Commodities: Goods: Services: Experiences: Transformations

Economy: Agrarian: Industrial: Service: Experience: Transformation
Economic function: Extract: Make: Deliver: Stage: Guide
Nature of Offering: Fungible: Tangible: Intangible: Memorable: Effectual
Key Attribute: Natural: Standardized: Customized: Personal: Individual
Method of Supply: Stored in Bulk: Inventoried after production: Delivered on Demand: Revealed over a duration: Sustained through time
Seller: Trader: Manufacturer: Provider: Stager: Elicitor
Buyer: Market: Customer: Client: Guest: Aspirant
Factors of Demand: Characteristics: Features: Benefits: Sensations: Traits

By definition, commodities are fungible - they are what they are. Because commodities cannot be differentiated. “The best thing in life are not things”, says Rebecca Pine.

Experience Realms:
It is a four quadrant with four axis (Passive Participation, Immersion, Active Participation & Absorption) - horizontal axis (passive to active participation - Guest Participation) & vertical axis(absorption to immersion- experience -kind of connection or environmental relationship)

Between Passive participation Immersion - It is Esthetic
Between Immersion & Active Participation - it is Escapist
Between Active Participation & Absorption - it is Educational
Between Absorption & Passive Participation - it is entertainment.

Entertainment Experience: The kind of experience most people think of as entertainment occur when they passively absorb the experiences through their senses as generally occurs when viewing a performance or reading for pleasure. As the experience economy gears up, people will look in new and different directions for more unusual experiences.

Educational Experience: With education experience a guest absorbs the events unfolding before him while actively participating. Stan Davis & Jim Botkin mentioned in ‘The Monster Under the Bed’: “In the new learning marketplace, customers, employees and students are all active listeners or even accurately, interactively learners”.

Escapist Experience: involve much greater immersion than entertainment or education experience. (e.g. theme parks, casinos, chat rooms). The guest if the escapist experience is completely immersed in it, an actively involved participant.

Esthetic experience: In such experience, individuals immerse themselves in an event or environment but themselves have little or no effect on it, leaving the environment essentially untouched. (E.g. standing on the rim of the Grand Canyon, visiting art gallery, )

The richest experience encompass aspects of all four realms these center around the ‘sweet spot’ in the middle of the framework. Set the stage by exploring the possibilities of each realm.

While designing your experience, you should consider the following questions.
1. What can be done to improve the aesthetic of the experience? You want to create an atmosphere in which your guests feel free ‘to be’.
2. Once there, what should your guests do? Focus on what you should encourage guest ‘to do’, if they are to become active participants in the experience.
3. The educational aspect of an experience, like the escapist, is essentially active. What do you want your guest ‘to learn’ from the experience? What information or activates will help to engage them in the exploration of knowledge and skills?
4. What can you do by way of entertainment to get your guests ‘to stay’? How can you make the experience more fun and more enjoyable? Professional speakers lace their speeches with jokes to hold the attention of their audience to get them to listen to the ideas.

(The idea of Disneyland is simple one. It will be a place for people to find happiness and knowledge). In his insightful book ‘The Themeing of America’ sociology professor Mark Gottdinener identifies ten themes that often materialist in the ‘built environments’ that the calls stages experience and these are:

Status, Tropical Paradise, Wild West, Classical civilization, Nostalgia, Arabian fantasy, Urban motif, fortress architecture and surveillance, modernism and progress, representations of unrepresentable(Vietnam veterans memorial wall)

Marketing professors Bernd Schmitt and Alex Simonson in their instructive book ‘Marketing Aesthetics’ offers nine domains:

History, religion, fashion, politics, psychology, philosophy, the physical world, popular culture and the arts.

Five principles are paramount in developing such a theme.
1. An engaging theme must alter a guest’s sense of reality
2.The richness venues posses themes that fully alter one’s sense of reality by affecting the experience of space, time and matter
3. Engaging themes integrate space, time and matter into a cohesive realistic whole. Dr. Henry M. Morris states, “It is not that the universe is a triad of three distinct entities (time, space & matter) whihc, when added together comprises the whole”
4. Themes are strengthened by creating multiple places within a place.
5. A theme should fit the character of the enterprise staging the experience.

While the theme forms the foundation of an experience, the experience must be rendered with indelible impressions (take always). Professor Schmitt and Simonson again provide a useful list, this one delineating six dimensions of overall impression:
1. Time - traditional, contemporary, or futuristic representation of the theme
2. Space - City/Country, West/East, Indoor/Outdoor, House/Business representations
3. Technology - hand-made/machine -made, natural/artificial representations
4. Authenticity - original or imitative representations
5. Sophistication - Yielding refined/unrefined or luxurious/cheap representations
6. Scale: Representing the theme as grand or small.

The experience must leave indelible impressions. A theme should fit the character of the enterprise staging the experience. Companies must introduce cues affirming the nature of the experience. Different kinds of experience rely on different kinds of impressions. Experience stagers eliminate anything that distracts from the theme. Too many haphazard cues can ruin an experience. People purchase memorabilia as tangible artifacts or experience. The price point is a function of the value of remembering the experience. The more sensory an experience, the more memorable it will be.

Among the numerous categories of activities in which guests delight and that could apply to any experience are the following.

· Period demonstrations (glass making, book binding etc)
· Crafts that guests perform themselves (candle-making, brass rubbing)
· Games, contests and other challenges for which prizes are awarded
· Human and animal powered rides
· Food
· Drinks
· Shows, ceremonies and parades.

Companies should use it to create customer-unique value, the portal through which expedience reach individual customers. An economic offering confers customers-unique value at its ideal, when it is:

  • Specific to individual customers- brought into being at a particular moment for this precise customer
  • Particular in its characteristics - designed to meet this customer’s individual needs
  • Singular in its purpose to benefit this customer - not trying to be any more or less than, but rather only and exactly what customer desires.
Customers don’t want choice; they just want exactly what they want. All customers deserve to have exactly what they want at a price they are willing to pay.

Mass customization and one-to-one marketing enable learning relationships and the advantage of this approach are:
Premium price, reduced discounts, greater revenue per customer, higher number of customers, increased customer retention.

Four types of customer sacrifice leading to your approaches to customization.
  • Adaptive customization offer one product designed to let users alter it themselves
  • cosmetic customization, present a standard good or service differently to different customers
  • transparent customization provide a tailored offering without customers knowing that it is customized for them
  • collaborative customization, work with their customers to determine what they need and then produce it for them.
Employee in an enterprise is a performer and his/her work is theater and hence, acts accordingly. Acting is taking deliberate steps to connect with an audience.

Four forms of theater:
1. Platform theater allows for little variations and use Platform Theater when workers do not directly interact with customers.

2. Matching theater, integrated portions of work into a unified whole and scripts in matching theater are always dynamic. Use matching theater when the same customers and the same performers interact over and over.

3. Street theater performers draw people in amaze them and then ask for money (sales people)

4. Improve theatre involves new-to the world performance. If you are winging it, you are doing improv. Improvisation involves imagination, creativity. (New offer intro to the market)
You must determine what forms of theater to perform.

Staging business performances: the act of acting differentiates memorable experience from ordinary activity.

Drama = Strategy; Script=process; theater=work; performance=offering
cast=people; role=responsibilities; characterization =representations; ensemble=organization to engage guests in memorable ways.

When you customize an experience, you change the individual. Transformation offerings will emerge across almost every part of the service sector. Transformations are as distinct from experiences as experiences are from services. The individual buyer of the transformation essentially says ’change me’.

For example, see the insurance industry successive economic offerings.
  • Service - Insure - secure payment in the event of loss
  • Experience - assure - secure confidence, encouragement, trust or feeling of satisfaction
  • Transformation - Ensure - Secure event, situation or outcome.
Transformations cannot be extracted, made, delivered, or even staged: they can only be guided. As the old saying goes, “You can lead a horse to water, but you can’t make it drink” No one can force someone to change. Employees themselves who make sure they have the resources for a competence boost as soon as they feel it is needed. Transformation elicitors can, at best, bring about the right situation under which the proper change can occur, meaning staging the right experiences that involve the right services.

Three phases of guiding transformations.

1. Diagnosing aspirations. Without proper diagnosis, customers cannot achieve their aspirations. Essential to every transformation, is the understanding what the customer truly needs to become and how far way he is from fulfilling those needs within himself., even if the customer does not realize it or deludes himself about the direction or magnitude of the change required.

2. Staging transforming experiences. Elicitors may use any one of the four realms of experience for a transformation. Entertainment experience can alter our view of the world, while educational experiences can make us rethink how we fit into that world. Escapist experiences can boost our personal capabilitie4s and characteristics to new levels, while esthetic experiences can imbue a sense of wonder, beauty and appreciation.

3. Following through. It is not truly transformation unless it is sustained.

The ServiceMaster Company reminds us, ‘The spirit and souls of people can be enriched by what they do as they server and work. And they can grow in the process of who they are becoming”. The very idea of transforming people(companies) demands that we think about and apply a world little used in business today: Wisdom (the quality of being wise, esp. in relation to conduct and the choice of means and ends; the combination of experience and knowledge with the ability to apply them judiciously; sound judgment, prudence, practical sense”.

When the offering becomes more intangible the value becomes more tangible. Nothing is more important than the wisdom required to transform customers. Being in the transformation business means charging for the demonstrated outcome.

Consider the business of consulting and if consulting truly viewed themselves as being in the business of transformation, they would, spend much more time in the up-front diagnose phase, identifying clients, strategic needs as well as their capacity for change. They would stop writing analytical docs and start staging memorable events that would enable the client first to experience what it would be like to live and work in a world where the strategy has been achieved and then to actually create that future world.

If you charge for the demonstrated outcome the customer achieves, then and only then are you in the transformation business. In this transformation phase, following are happening,

· Organization: new aims are determined - Work that generates value from something new

· Execution: Guiding is the core activity of the elicitor - work that generates value from something done.

· Correction: A relapse triggers stronger resolve - work that generates value from something improved

· Application: Preserving connects with aspirants - work that generates value from something used.

Business needs a strategy for managing these four dimensions of value creation: Determine new aims, guiding the individual, strengthening resolve, preserving with the aspirant.

January 22, 2012

Steve Jobs by Walter Isaacson

[STEPHEN WOZNIAK – one of the three founders of Apple. He is a gem of a person. However, such good hearted people cannot grow up much. Steve is a tough person (control freak & perfectionist) and the book showed no mercy in revealing all aspect of his personality that includes ‘the other side’.

This is a great book on an amazing genius of our time.

Following some of my picks!]

[His Childhood & college life] Seventeen years earlier, Jobs’s parents had made a pledge when they adopted him: He would go to college. So they had worked hard and saved dutifully for his college fund, which was modest but adequate by the time he graduated.

But Jobs, becoming ever more willful, did not make it easy. Instead he insisted on applying only to Reed College, a private liberal arts school in Portland, Oregon, that was one of the most expensive in the nation. He was visiting Woz at Berkeley when his father called to say an acceptance letter had arrived from Reed, and he tried to talk Steve out of going there. So did his mother. It was far more than they could afford, they said. But their son responded with an ultimatum: If he couldn’t go to Reed, he wouldn’t go anywhere. They relented, as usual.

[When he decided to drop from the expensive college, Reed]Jobs also began to feel guilty, he later said, about spending so much of his parents’ money on an education that did not seem worthwhile. “I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out okay.”

[India Trip] At one point Jobs was told of a young Hindu holy man who was holding a gathering of his followers at the Himalayan estate of a wealthy businessman. “It was a chance to meet a spiritual being and hang out with his followers, but it was also a chance to have a good meal. I could smell the food as we got near, and I was very hungry.” As Jobs was eating, the holy man—who was not much older than Jobs—picked him out of the crowd, pointed at him, and began laughing maniacally. “He came running over and grabbed me and made a tooting sound and said, ‘You are just like a baby,’” recalled Jobs. “I was not relishing this attention.” Taking Jobs by the hand, he led him out of the worshipful crowd and walked him up to a hill, where there was a well and a small pond. “We sit down and he pulls out this straight razor. I’m thinking he’s a nutcase and begin to worry. Then he pulls out a bar of soap—I had long hair at the time—and he lathered up my hair and shaved my head. He told me that he was saving my health.

Daniel Kottke arrived in India at the beginning of the summer, and Jobs went back to New Delhi to meet him. They wandered, mainly by bus, rather aimlessly. By this point Jobs was no longer trying to find a guru who could impart wisdom, but instead was seeking enlightenment through ascetic experience, deprivation, and simplicity. He was not able to achieve inner calm. Kottke remembers him getting into a furious shouting match

with a Hindu woman in a village marketplace who, Jobs alleged, had been watering down the milk she was selling them.

After coming back to US after seven months in India: “My head had been shaved, I was wearing Indian cotton robes, and my skin had turned a deep, chocolate brown-red from the sun,” he recalled. “So I’m sitting there and my parents walked past me about five times and finally my mother came up and said ‘Steve?’ and I said ‘Hi!’”

Coming back to America was, for me, much more of a cultural shock than going to India. The people in the Indian countryside don’t use their intellect like we do, they use their intuition instead, and their intuition is far more developed than in the rest of the world. Intuition is a very powerful thing, more powerful than intellect, in my opinion. That’s had a big impact on my work. Western rational thought is not an innate human characteristic; it is learned and is the great achievement of Western civilization. In the villages of India, they never learned it. They learned something else, which is in some ways just as valuable but in other ways is not. That’s the power of intuition and experiential wisdom. Zen Buddhism has been a deep influence in my life ever since.

Vegetarianism and Zen Buddhism, meditation and spirituality, acid and rock—Jobs rolled together, in an amped-up way, the multiple impulses that were hallmarks of the enlightenment-seeking campus subculture of the era. The Autobiography of a Yogi, the guide to meditation and spirituality that he had first read as a teenager, then reread in India, and had read once a year ever since

Taking LSD was one of the two or three most important things he’d done in his life, Jobs told Markoff. People who had never taken acid would never fully understand him.

His mischievous interview questions were “How many of you are virgins? How many of you have taken LSD?”

Asked if he wanted to do market research, he said, “No, because customers don’t know what they want until we’ve shown them.”

[Perfection to the details] Rand came up with a colorful type treatment, which Jobs liked, but they ended up having a lengthy and heated disagreement about the placement of the period after the “P” in Steven P. Jobs. Rand had placed the period to the right of the “P.”, as it would appear if set in lead type. Steve preferred the period to be nudged to the left, under the curve of the “P.”, as is possible with digital typography. “It was a fairly large argument about something relatively small,” Susan Kare recalled. On this one Jobs prevailed.

[Another mischievous] At one point Jobs and Ellison (Founder/CEO Oracle) pulled a prank on a clueless computer consultant who was campaigning for the job(as CEO of Apple); they sent him an email saying that he had been selected, which caused both amusement and embarrassment when stories appeared in the papers that they were just toying with him.

[Ellison's plan to buy out Apple for his best buddy, Jobs [when Jobs were ousted from Apple] Once again Ellison publicly floated the idea of doing a hostile takeover and installing his “best friend” Jobs as CEO. “Steve’s the only one who can save Apple,” he told reporters. “I’m ready to help him the minute he says the word.”

“It’s better to be a pirate than to join the navy. He wanted to instill a rebel spirit in his team division. One of Jobs’s business rules was to never be afraid of cannibalizing yourself. “If you don’t cannibalize yourself, someone else will,” he said.

“In his presence, reality is malleable. He can convince anyone of practically anything. “It was dangerous to get caught in Steve’s distortion field, but it was what led him to actually be able to change reality.”

Recounting the scene (Think Different Advertisement) years later, Jobs started to cry. This chokes me up, this really chokes me up. It was so clear that Lee loved Apple so much. Here was the best guy in advertising. And he hadn’t pitched in ten years. Yet here he was, and he was pitching his heart out, because he loved Apple as much as we did. He and his team had come up with this brilliant idea, “Think Different.” And it was ten times better than anything the other agencies showed. It choked me up, and it still makes me cry to think about it, both the fact that Lee cared so much and also how brilliant his “Think Different” idea was. Every once
in a while, I find myself in the presence of purity—purity of spirit and love—and I always cry. It always just reaches in and grabs me. That was one of those moments. There was a purity about that I will never forget. I cried in my office as he was showing me the idea, and I still cry when I think about it.

[Steve’s return to Apple where he cut most of existing products and retained only four]
After a few weeks Jobs finally had enough. “Stop!” he shouted at one big product strategy session. “This is crazy.” He grabbed a magic marker, padded to a whiteboard, and drew a horizontal and vertical line to make a four-squared chart. “Here’s what we need,” he continued. Atop the two

columns he wrote “Consumer” and “Pro”; he labeled the two rows “Desktop” and “Portable.” Their job, he said, was to make four great products, one for each quadrant. “The room was in dumb silence,” Schiller recalled.

In return for speaking at the retreat, Jobs got Murdoch to hear him out on Fox News, which he believed was destructive, harmful to the nation, and a blot on Murdoch’s reputation. “You’re blowing it with Fox News,” Jobs told him over dinner. “The axis today is not liberal and conservative, the axis is constructive-destructive, and you’ve cast your lot with the destructive people. Fox has become an incredibly destructive force in our society. You can be better, and this is going to be your legacy if you’re not careful.” Jobs said he thought Murdoch did not really like how far Fox had gone.“Rupert’s a builder, not a tearer-downer,” he said. “I’ve had some meetings with James, and I think he agrees with me. I can just tell.”

[Comparing Microsoft] The older I get, the more I see how much motivations matter. The Zune was crappy because the people at Microsoft don’t really love music or art the way we do. We won because we personally love music. We made the iPod for ourselves, and when you’re doing something for yourself, or your best friend or family, you’re not going to cheese out. If you don’t love something, you’re not going to go the extra mile, work the extra weekend, challenge the status quo as much.

[On Android] Our lawsuit is saying, “Google, you fucking ripped off the iPhone, wholesale ripped us off.” Grand theft. I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong. I’m going to destroy Android, because it’s a stolen product. I’m willing to go to thermonuclear war on this. They are scared to death, because they know they are guilty. Outside of Search, Google’s products—Android, Google Docs—are shit.

[Taking his high-school son, Reed during iPhone 4 Antenna crisis] “I’m going to be in meetings 24/7 for probably two days and I want you to be in every single one because you’ll learn more in those two days than you would in two years at business school,” he told him. “You’re going to be in the room with the best people in the world making really tough decisions and get to see how the sausage is made.”

It’s in Apple’s DNA that technology alone is not enough. We believe that it’s technology married with the humanities that yields us the result that makes our heart sing. Nowhere is that more true than in these post-PC devices. Folks are rushing into this tablet market, and they’re looking at it as the next PC, in which the hardware and the software are done by different companies. Our experience, and every bone in our body, says that is not the right approach. These are post-PC devices that need to be even more intuitive and easier to use than a PC, and where the software and the hardware and the applications need to be intertwined in an even more seamless way than they are on a PC. We think we have the right architecture not just in silicon, but in our organization, to build these kinds of products. It was an architecture that was bred not just into the organization he had built, but into his own soul.

The announcement of Jobs’s 2011 medical leave prompted others to make a pilgrimage to the house in Palo Alto. Bill Clinton, for example, came by and talked about everything from the Middle East to American politics. But the most poignant visit was from the other tech prodigy born in 1955, the guy who, for more than three decades, had been Jobs’s rival and partner in defining the age of personal computers. Bill Gates had never lost his fascination with Jobs. Through their mutual friend Mike Slade, Gates made arrangements to visit Jobs in May. The day before it was supposed to happen, Jobs’s assistant called to say he wasn’t feeling well enough. But it was rescheduled, and early one afternoon Gates drove to Jobs’s house, walked through the back gate to the open kitchen door, and saw Eve studying at the table. “Is Steve around?” he asked. Eve pointed him to the living room. Their discussion lasted three hours.

When our discussion turned to the sorry state of the economy and politics, he offered a few sharp opinions about the lack of strong leadership around the world. “I’m disappointed in Obama,” he said. “He’s having trouble leading because he’s reluctant to offend people or piss them off.” He caught what I was thinking and assented with a little smile: “Yes, that’s not a problem I ever had.”

Some leaders push innovations by being good at the big picture. Others do so by mastering details. Jobs did both, relentlessly. As a result he launched a series of products over three decades that transformed whole industries:

• The Apple II, which took Wozniak’s circuit board and turned it into the first personal computer that was not just for hobbyists.
• The Macintosh, which begat the home computer revolution and popularized graphical user interfaces.
Toy Story and other Pixar blockbusters, which opened up the miracle of digital imagination.
• Apple stores, which reinvented the role of a store in defining a brand.
• The iPod, which changed the way we consume music.
• The iTunes Store, which saved the music industry.
• The iPhone, which turned mobile phones into music, photography, video, email, and web devices.
• The App Store, which spawned a new content-creation industry.
• The iPad, which launched tablet computing and offered a platform for digital newspapers, magazines, books, and videos.
• iCloud, which demoted the computer from its central role in managing our content and let all of our devices sync seamlessly.
• And Apple itself, which Jobs considered his greatest creation, a place where imagination was nurtured, applied, and executed in ways so creative that it became the most valuable company on earth.

Was he smart? No, not exceptionally. Instead, he was a genius. His imaginative leaps were instinctive, unexpected, and at times magical. He was, indeed, an example of what the mathematician Mark Kac called a magician genius, someone whose insights come out of the blue and require intuition more than mere mental processing power. Like a pathfinder, he could absorb information, sniff the winds, and sense what lay ahead.

I have my own theory about why decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. You’ve got to be able to be super honest. Maybe there’s a better way, a gentlemen’s club where we all wear ties and speak in this Brahmin language and velvet code- words, but I don’t know that way, because I am middle class from California.

Then he looked at her (Ann Bowers, the widow of Intel’s cofounder Bob Noyce) and asked, intently, a question that almost floored her: “Tell me, what was I like when I was young?” Bowers tried to give him an honest answer. “You were very impetuous and very difficult,” she replied. “But your vision was compelling. You told us, ‘The journey is the reward.’ That turned out to be true.”

What drove me? I think most creative people want to express appreciation for being able to take advantage of the work that’s been done by others before us. I didn’t invent the language or mathematics I use. I make little of my own food, none of my own clothes. Everything I do depends on other members of our species and the shoulders that we stand on. And a lot of us want to contribute something back to our species and to add something to the flow. It’s about trying to express something in the only way that most of us know how—because we can’t write Bob Dylan songs or Tom Stoppard plays. We try to use the talents we do have to express our deep feelings, to show our appreciation of all the contributions that came before us, and to add something to that flow. That’s what has driven me.

“I’m about fifty-fifty on believing in God,” he said. “For most of my life, I’ve felt that there must be more to our existence than meets the eye.” He admitted that, as he faced death, he might be overestimating the odds out of a desire to believe in an afterlife. “I like to think that something survives after you die,” he said. “It’s strange to think that you accumulate all this experience, and maybe a little wisdom, and it just goes away. So I really want to believe that something survives, that maybe your consciousness endures.”

January 16, 2012

Supercapitalism by Robert B. Reich

Supercapitalism by Robert B. Reich
The transformation of business, democracy and everyday life
[Scholarly book that tries to answer few tough questions]

Milton Friedman reiterated his long-held belief that free markets were a necessary precondition to political freedom and sustainable democracy. Yet as we have seen over the past several decades, particularly in Southeast Asia, democracy may not be essential to democracy. Democracy means more than a process of free and fair elections. Democracy is a system for accomplishing what can only be achieved by citizens together with other citizens - to determine the rules of the game whose outcomes express the common good. Capitalism has become more responsive to what we want as individual purchasers of goods, but democracy has grown less responsive to what we want together as citizens.

Since the 1970s this all has changed radically. Large firms became far more competitive, global and innovative. Something I call Supercapitalism was born. In this transformation we in our capacities as consumers and investors have done significantly better. Consumer power became aggregated and enlarged by mass retailers like Wal-Mart that used the collective bargaining clout of millions of consumers to get great deals from suppliers. Investor power became aggregated and enlarged by large pension funds and mutual funds which pushed companies to generate higher returns. But the institutions that had negotiated to spread the wealth and protect what citizens valued in common began to disappear.

Why CEO pay has soared into the stratosphere and what prevented it from souring before. Why inflation less of a threat than it was three or four decades ago? Why antitrust laws are less important today as a means of restraining economic power than they were previously. Why there are many lobbyists in DC than three decades ago?

Companies of all sizes are competing more vigorously than before. The world economy contains far fewer oligopolies than it did decades ago. The power and the impetus that once came from the giant corporations’ are gone. Deregulation for example, unleashed many of America’s industries. Variously dubbed ‘neoliberalism, neoclassical economics, neo-conservatism or the Washington consensus, these precepts included free trade, deregulation, privatization and in general more reliance on markets than on gov. and more concern for efficiency than equity.

Large firms (e.g. Wal-Mart) are not brutally insensitive or ruthlessly greedy. They are doing what they are supposed to do, according to the current rules of the game - giving their customers good deals and thereby maximizing the returns to their investors. Just like players in any game, they are doing whatever is necessary to win. Personally I’d be willing to sacrifice some of the benefits I get as a consumer and investor in order to achieve these social ends - as long as I knew everyone else was, too.

Roughly between 1945 & 1975, America struck a remarkable accommodation between capitalism and democracy. The economy was based on mass production/ Mass production was profitable because a large middle class had enough money to purchase what could be mass-produced. Before that period too productivity surged. An economic resolution on this scale inevitably had large social consequence. Supply outran demand, leading to sever depression that jolted much of Euro & US in 1873. With silver far more abundant than gold, this would inflate currency values and thereby shrink the debts. Manufactures on both side of the Atlantic wanted higher tariffs to protect from foreign imports (Only Britain whose advanced manufactures were the primary beneficiaries of free trade, decline to raise its tariffs, resulting in what were seen there as German and American ‘economic invasions’)

As America and every other manufacturing nation began scouring more backward regions of the globe for potential markets, the term ‘imperialism’ entered common speech. Britain and Germany equated their economic prowess with their nation’s global spheres of influence. J.A.Hobson - a British Economist - predicted the logical endpoint of such competition: Businessmen opt for war when they have exhausted their home markets.

The size of massive enterprise and their market became almost impregnable for smaller firms that might wish to enter the market. Of the Fortune 500 largest corp. in 1994, more than half founded between 1880 & 1930.These giant corp. of mid-century America necessarily possessed vast discretion and economic power.

Starting in the mid 1970s, the large oligopolies that anchored the American system began to teeter. Technologies have empowered consumers and investors to get better and better deals. Entry barriers collapsed at an accelerating pace. Today low costs can be matched by many potential rivals who don’t produce in large scale. They use software to do their billing, procurement and inventory controls, rely internet for customer service and depend on internet auctions to subcontract production to the lowest-cost and most reliable bidders.

By the late 1970s, the defense dept was underwriting 70% of the R&D fund’s of the nation’s aircraft industry. Look back on many other high technologies that took flight in the last decades of the 20th century, you will see similar patterns. US Gov provided half the R&D funding of the nation’s telecom industry - fiber optics, satellites, etc. University research extended discoveries and entrepreneurs developed it further. Small businesses were founded. Niche market discovered. Within a few years, the entire economy began to shift. Within two or three decades, a new economy was replacing the old.

Three developments bear particular mention.
1. Globalization
2. New production process
3. Deregulation
All these hastened the demise of economies of scale and the mid-century of democratic capitalism.

When Wall-Street analyst’s recommendation changed from buy to sell, the odds increased by nearly 50% that CEO would be fired within the following six months. The impact of such downgrades on CEO tenure was even greater than the impact of declining profits or even falling share prices. CEOs are turning over a faster clip and a record number of are being forced out.

The road to Supercapitalism began with technologies that emerged from the Cold War - containers, cargo ships and planes, fiber-optic cables, Satellite communications... They allowed the creation of global supply chain. they also spurred the commercial development of computers and software that could produce items at low cost without large scale and eventfully distribute services over the Internet. All this shattered the old system of large scale production and dramatically increased competition. Together emerging technologies and financial deregulations opened the way for investors to put their savings into giant mutual funds and pension funds that pressures companies for higher returns. CEOs who delivered were generously rewarded.
Finally intensifying completion for consumers and investors put pressure on companies to cut payrolls, hitting unionized workers especially hard. Power shifted to consumers and investors. Supercapitalism replaced democratic capitalism.

Intensifying competition for us as consumers and investors has made the entire economy more productive. In order to be successful, CEOs and financiers have had to move money, machinery, factories and other assess to where they can be most valuable. And of course, they have moved, demoted or promoted or laid off million people.

[The rest of the book goes over these topics in very detail and followed by author’s recommendation as a citizen to reduce the impact of Supercapitalism for goodness to the citizens. Currently American companies are benefited, not the American people]

January 15, 2012

The rise of the creative class by Richard Florida

The rise of the creative class by Richard Florida
and how it is transforming wok, leisure, community and everyday life.

[We are transforming from knowledge based economy to creative class based economy; talk about who are the creative class and their impact to our society and how can we create environment for alluring them for economic prosperity – another scholarly book]

Take a typical man on the street from the year 1900 and drop him into 1950s. The take someone from 1950s and drop him to present day. Who would experience the greater change?

There are two ways to see this puzzle. A person from the turn of the 20th century would be awestruck by a world filled with baffling technological wonders. He will see biggest wonder not only on the streets, but also at home too. The second person will not see that many wonders as the first one in the space of technology advancement. But when we try to see it from social and cultural world, we shall find that the first person would not find big difference and the second person will see biggest surprise (dress code, women in the working class, reality shows, social networking where people share private memories to unknown friends, trust unknown person compared to his/her neighbor.

What caused this transformation? The logic behind the transformation has been unclear to this point because the transformation is still in progress. But lately a number of diverse and seemingly unconnected threads are starting to come together. That driving force is the rise of human creativity as they key factor in our economy and society. Both at work and in other sphere of our lives, we value creativity more highly than ever and cultivate it more intensely.

Creativity is multinational and comes in many mutually reinforcing forms. Max Webber said long ago that the Protestant ethic provided the underlying spirit of thrift, hard work and efficiency that motivated the rise of early capitalism. In similar fashion, the shared commitments to the creative spirit in its many, a varied manifestation underpins the new creative ethos that powers our age.

In the new world, it is no longer the organizations we work for, churches, neighborhoods or even families that define us. Instead, we do these ourselves, defining our identities along the varied dimensions of our creativity. We often tend to classify people on the basis of their consumption habits or lifestyle choices or more crudely by their income level. A class is a cluster of people who have common interests are fundamentally determined by economic function by the kind of work they do for a living.

George Gilder describes the internet will make customer as the product and product is the customer and both server one another, in a rhythm of creativity between producers and users, a resonance of buyers and sellers in which the buyers also sell and sellers also buy in widening web of commerce. The resonance is wealth and the light and there is no impedance in the middle.

Creativity is not just intelligence - the ability to deal with or process large amounts of data - favors creative potential, it is not synonymous with creativity. Paul Romer has argued that the most important ideas of all are meta-ideas which are ideas about how to support the production and transmission of other ideas. Taken together, following three things will bring social structure of creativity,.
1. New systems for technological creativity and entrepreneurship
2. New and more effective models for producing goods and service
3. A broad social cultural and geographic milieu conductive to creativity of all sorts.

The creative class has three values in common
1. Individuality - The members of the creative class exhibit a strong preference for individuality and self-statement. They don’t want to conform to organizational directives and resist traditional group oriented norms
2. Meritocracy - Merit is strongly valued by creative class; they favor hard work, challenge stimulation. Its members have a propensity for goal-setting and achievement.
3. Diversity and Openness - The favor organization and environment in which they feel that anyone can fit in and can get ahead.

The Nobel prize-winning economist Robert Fogel says “Today’s people are increasingly concerned with what life is all about. That was not true for the ordinary individual in 1800s when nearly the whole day was devoted to earning the food, clothing and shelter needed to sustain life”. We live differently and pursue new lifestyles because we see ourselves as a new kind of person. We are more tolerant and liberal both because our material conditions allow it and because the new creative age tells us to be so.

Money is the only thing the creative class wants and following are observed.
1. Yes, people want enough money to live in the manner they prefer
2. Even if earning enough to pay the bills, they will be unhappy if they feel they are being paid what they are worth as gauged
3. But while the absence of enough money is sufficient, to make them happy with their work, money alone will not make most workers happy or committed or motivated.

Following are top ten highly valued job factors from information week’s survey.
1. Challenge and responsibility
2. Flexibility
3. A stable work environment and a relatively secure job
4. Compensation
5. Professional development
6.Peer recognition
7. Stimulating colleagues and managers
8. Exciting job content
9. Org culture
10. Location and community

The new labor market shaped by these trends has three chief characteristics.
1. People today tend to pursue their careers horizontally rather than vertically. Climbing the corporate ladder is no longer so popular. Perhaps because there is not as much of a ladder in many of today’s leaner, flatter firms - and it is liable to shift or vanish before you are halfway up. Instead more of us swing from tree to tree in search of various fruit.

2. People have come to identify more with their occupation or profession than with a company. This is partly the product of the move to domain-specific knowledge. In search of greater challenge, autonomy or satisfaction, people once again tend to move horizontally rather than vertically.
3. People bear more responsibility for every aspect of their careers. We not only assume the risks of our jobs move, we assume the task of taking care of our creativity - investing in it, supporting it and nurturing it. They go through basic port-of-entry education, education for a career-track change and ongoing learning and upgrading of skills. Skill acquisition has become an individual responsibility., both because the interactive nature of computer tools allows new media workers to learn new skills as their own pace and within their own learning styles and because formal learning programs have not kept pace with skills needs in this fast changing industry.

Peter Drucker writes,” What motivates knowledge workers is what motivates volunteers. Volunteers have to get more satisfaction from their work than paid employees precisely because they do not get a paycheck”. The commitment of creative people is highly contingent and their motivation comes largely from within.

In the creative economy, time is the only nonrenewable resources. The three big factors driving this economy, along with the need for creativity, are the prevalence of change, the need for flexibility and the importance of speed. Paul Romer writes, “Our children will have more of almost everything, with one glaring exception: They won’t have more time in the day. As income and wages increase, the cost of time will continue to grow and so will the sense that time is scarce and that life proceeds at a faster pace than in the past.”

(Considering the value of time, if Bill Gates drops $10,000 bill , it is small bill for Bill to bother with The time that he needs to spend (4 sec) to pick it up from the floor, is more than $10,000 considering his wealth.)

Steve Tomlinson captured the whole dynamic perfectly in a satiric monologue titled Perfect Pitch.

Following is from the ‘Perfect Pitch”.
We can divide the market into three segments
1. People with passion who believe that they on mission from God believe in what they are doing because they love it
2. People with drive - Greedy people - chasing the herd from one gold rush to another, trampling each other on the way.
3. Reasonable people - people with passion and drive. Here is a guy who starts with passion (idea) and he believes it is cool and hoping that other people will like it - so he starts a little business and sure enough some people want it. So the business grows and that means more people and investors and the market. And when the herd gets involved - cool is not enough,. It is got to be hot. It’s got to be the next big thing. And so our guy with a cool idea is suddenly riding the buzz of the next big, hot, scalable thing and people he has seen in magazine are talking to him - promising fame and more money than he and his family could ever spend. So he is ready to sacrifice and we offer him stock in deferred-life and make a rational calculation and as long as his upside fantasy covers the costs, he buys in - he outsources his fulfillment and he shifts form cool to hot. his vital signs follow the NASDAQ, his vision clouds and before long he is making bets with his life that even the craziest VCs would not touch. So we focus our efforts right here. On this calculation, ignore the bears. We simply put the costs and benefits in perspective and the customer sees that he needs us now more than ever. ..

Deepening the moment: If one cannot elongate time, perhaps one can deepen or intensify it, getting more from each bit. To me this is the key difference in our use of time and it can be more insidious than long hours. In ‘Time for Life’ Robinson and Godbey suggests that there are four basic strategies for time deepening.

1. The speeding up of activities
2. Substituting a leisure activity that can be done more quickly for one that takes longer, such as getting take-out or home delivery rather than cooking, playing racquetball rather than a slower game like tennis - or in my case, an hour of spinning in the gym as opposed to two or three hour bike ride with friends
3. Multitasking or doing more than one thing at once. Watching TV while reading news paper, using cell phone while driving etc
4. Detailed time planning and budgeting - esp. for leisure or recreational activiti4s,: compartmentalizing time so as to get a handle on it. What astounds me more than anything is that my students now carry personal organizers with their days parceled into half-hour chunks.

In general, write Robinson and Godbey, we are shifting from the consumption of good to the consumption of experience. In their insightful book ‘The experience economy, Joseph Pine and James Gilmore observe that consumers are coming to favor the consumption of experience over traditional goods and service.

“Experience is a fourth economic offering, as distinct from service as services are from goods. While commodities are fungible, goods tangible and services intangible, experience are memorable. The Nobel Prize-winning economic historian Robert Fogel sums up the situation this way: “Today ordinary people wish to use their liberated time to buy those amenities of life that only the rich could afford in abundance a century ago... The principle cost off these activities is not measured by cash outlays, but outlays of time”. And with the life having become the scarce and precious commodity, many increasingly define the quality of their lives by the quality of experience they consume.

A new resolution of the centuries old tension between two value systems: protestant work ethics and the bohemian ethic. Protestant ethic says meaning is to be found in hard work and the bohemian ethic is more hedonistic. It says value is to be found in pleasure and happiness - not necessarily in gross indulgence or gluttonous excess, but in experiencing and appreciating what life has to offer.

Bohemian ethic came to signify everything the protestant work ethic was not.

Creative community: How do we decide where to live and work? What really matters to us in making this kind of decision? How ahs this changed? And why? A number of consistent themes emerges from my research:

1. The creative class is moving away from traditional corporate communities to a set of place I call creative centers
2. The creative centers tend to be the economic winners of our age. They also show strong signs of overall regional vitality such as increases in regional employment and population
3. The creative centers are not thriving for such traditional economic reasons as access to natural resources or transportation routes. Creative centers provide the integrated eco-system or habitat where all forms of creativity - artistic, and cultural, technological and economic - can take root and flourish
4. Creative people are not moving to these places for traditional reasons. What they look for in communities are abundant high-quality amenities and experiences, an openness to diversity of all kinds and above all else the opportunity to validate their identities as creative people.

Creative capital theory says that regional economic growth is driven by the location choice of creative people who prefers places that are diverse, tolerant and open to new ideas. It thus differs from the human capital theory into two respects.

1. It identifies a type of human capital, creative people as being key to economic growth
2. It identifies the underlying factors that shape the location decisions of these people, instead of merely saying that regions are blessed with certain endowments of them.

Great city has two hallmarks: tolerance for strangers and intolerance for mediocrity - These are precisely the qualities that appeal to members of creative class. Places are also valued for authenticity and uniqueness. Authenticity comes from several aspects of a community - historic building, established neighborhoods, a unique music scene or special cultural attributes. Music is a key part of what makes a place authentic. Music in facts plays a central role in the creation of identity and the formation of real communities. Sounds, songs and musical memories are some of the strongest and most easily evoked.

Cities are now favorite for the people for the following reasons

1. Crime is down and cities are safer

2. Cities have become the prime location for the creative lifestyle and the new amenities that go with it.

3. Cities are benefiting from powerful demographic shifts (more people staying singles than married)and urban centers server lifestyle centers and as mating markets for single people

4. Cities have reemerged as centers of creativity and incubators of innovation

5. The current round of urban revitalization is giving rise to serious tensions between established neighborhood residents and newer more affluent people moving in

6. Both sprawling cities and traditional suburbs are seeking to emulate elements of urban life.

Place provides an increasingly important dimension of our identity. The combination of where we live and what we do has come to replace who we work for as a main element of identity. Qualities of the place are defined by these three KPIs.

1. What is there
2. Who is there
3. What is going on

One of the great remaining puzzle of urban economic and regional analysis resolved around Zipf’s law and that says that the distribution of virtually all cities within a nation follows a simple ‘power law’: the basic idea being that the second largest city is roughly half the size of the largest; the third roughly one-third of the size and so on. This law accurately describes all the other advanced industrial nations.

While the university is a key institution of the creative economy, to be effective contributor to regional growth, the university must play three interrelated roles that reflect the 3Ts of creative places - technology, talent and tolerance.

The challenge before the creative class is a toll order. Mancur Olson noted in his classic book ‘The logic of collective action’, those who organize around discrete goals with sustained effort have a great advantage over those who have strong interests but are diffuse and disorganized. The creative class in my view has three fundamental issues to address
1. Investing in creativity to ensure long-run economic growth
2. Overcoming the class divides that weaken our social fabric and threaten economic well-being
3. Building new forms of social cohesion in a world defined by increasing diversity and beset by growing fragmentation.

Book referred in this book
Organization man - William Whyte & Jabe Jacobs
Capitalism, Socialism and Democracy - Joseph Schumpeter.
The social life of information by John Seely Brown and Paul Duguid
The Death and life of Great American Cities - Jane Jacob
Guns, Germs and Steel by Jared Diamond
the wealth of Nations by Adam Smith
The experience economy by Jospeh Pine and James Gilmore
Bohemian versus Bourgeois by Cesar Grana.
One market under God by Frank Bemoans
The logic of collective action by Mancur Olson