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Get ready for a new economic era

By Paul Saffo

26 February 2009

The mortgage-fueled market slide is leading the United States into much more than a recession—it is also ushering in a new economy. The consumer economy that was born in the 1950s is lurching to an end, and a new “creator economy” is emerging. This shift represents the third economic turning in just over a century. A look back at its antecedents reveals much about what to expect.

1900: The rise of the producer economy

The producer economy harnessed manufacturing in the service of satisfying the material desires of a newly prosperous working class and emergent middle class. This was the economy out of which the great brands of the 20th century were born, and which promised the public a dizzying array of conveniences, from dishwashers and phonographs to cameras and cars.

The producer economy promised abundance, but it was haunted by scarcity, so efficiency became a managerial obsession. The specter of scarcity was most visible during World Wars I and II, when patriotic citizens accepted rationing and surrendered everything from metal pots to old tires to be recycled into war materiel. But when the industrial giants returned to making civilian goods after the war, they were in danger of making vastly more goods than the public would ever want to buy. At this moment, the producer economy began to come to a close, doomed by its own success. The consumer economy had arrived.

1950: The consumer economy begins

The consumer economy began when companies realized that they had a demand problem rather than a production problem and shifted their resources to finding new ways to sell their existing products. The consumer replaced the worker as the economy’s central actor, resulting in dramatic power shifts. Within companies, for example, power migrated from manufacturing to sales and marketing, as corporations sought to generate ever-greater demand for what they produced.

Television was crucial in this transition. In 1950, 9 percent of households had a TV; ten years later, it was 90 percent. Marketers created new demand for products such as appliances and automobiles, and TV did its part to inflame consumer desires. The possibilities afforded by TV triggered two profound shifts. First, TV created category-dominating superbrands such as Tide. And second, it helped to create entirely new products that could never have been sold without TV. Swayed by the messages of mass media, consumers discovered that, suddenly, their lives were incomplete without products they had never even known existed—things such as Saran Wrap, tail fins, TV dinners, transistor radios, and, of course, the hula hoop. Mass media turned consumer economy products into totems of aspiration. Consumers no longer waited until an appliance broke to buy a replacement; they upgraded because the color was no longer fashionable.

The consumer economy reversed consumer attitudes towards debt, from a producer-era vice to a consumer-era virtue. US household debt swelled from less than $20 billion in 1950 to $2.8 trillion in 2008. Debt was the key to the consumer economy’s growth in the same way that manufacturing efficiency drove the producer economy.

The more consumers had, the more they desired; the forces that had driven the consumer economy’s success now began to lead to its inevitable end, which came with the financial meltdown of 2008. It was a moment when the collective debt had become so large that even the US consumer was incapable of spending the world out of its financial hole. Just as the producer economy was brought to a close by overproduction, the consumer economy was dragged to its end by overconsumption.

2008: The creator economy beckons

Now we are entering a third age in which the central economic actor is someone who both produces and consumes in the same act. I like the term “creator,” as this new kind of actor is doing something more fundamental than the mere sum of their simultaneous production and consumption. Creators are ordinary people whose everyday actions create value.

Just as the mass media were essential to the rise of the consumer economy, today’s emergent personal media platforms are making the creator society possible. The quintessential example of creation is a Google search. Two decades ago, online search cost money in the form of a monthly subscription, but now, thanks to Google, it is free to the user. Or, rather, it seems free but in fact the searcher is paying with each search—and the payment is the search string they enter. The string of text that goes into the search box seems valueless to the creator, but when aggregated with all the other search strings flowing in, it is valuable enough to make Google worth billions. A simple Google search thus typifies what drives the creator economy—creative value flowing in both directions at the same instant.

Other examples of creator transactions abound—think of YouTube and Wikipedia. Interactivity is the common thread, which makes sense because interactivity is what defines the creator economy. The rise of interactivity is no more exotic than the 1950s notion of ordinary consumers being able to purchase items that had been luxuries just a few decades earlier. Now, everyone will create as they go about their daily lives. These transactions may not be art or deathless prose, but they create value. Thus, just as the time clock symbolized the producer economy and the credit card the consumer economy, the computer mouse is the symbol of the emerging creator economy.

Not everything in the creator economy will require interaction, any more than manufacturing disappeared during the consumer economy. But the most successful companies will be the ones that harness creator instincts, and the biggest winners will be the companies who harness the smallest creative acts. More people watch YouTube than post videos because creating a video is work. More people read blogs than write them because long-form writing is a hassle. Meanwhile, the telegraphic sentences of tweets, texting, and Facebook updates are becoming ubiquitous acts of creator haiku. And everyone can scribble a few words to compose a Google search, which is why Google dwarfs other creator companies.

There will eventually be a company that dwarfs Google. I don’t know its name, but I know how it will grow—click by click.

Comment [22]

Agree? Disagree? Let us know what you think. Please include your full name with your comment. Comments may be edited.

A major economic problem in America is the growing disparity in wealth. Trends like Wal-Mart, Google and Amazon are concentrating more resources into fewer hands. The recent near collapse of our consumer-led economy was caused by globalism and the Internet. (Workers wages have been decreasing for some time in real terms.) In addition, regular Americans were forced to resort to credit to maintain the same standard of living. Your idea that Youtube,Wikipedia and Twitter will be the engines of a new economy is quite laughable. The actual content being created by these entities has no value – except for the provider. If there is any basis to your theory, please explain how your trend will lead to a healthier middle class – or to a better (not slave/master) utilization of resources. Oh, by the way, one area of economic development that is very healthy is the growth of drug-related gangs. Here’s a real product you can sell without any competition from the Internet or Wal-Mart. Study the statistics on gang growth and you will conclude that joining a gang or a new-age-tribe will be the growth engine of the Otts. In fact, I am starting my own tribe at my Montana Sanctuary website. For only 5000 dollars you can have a ranch, sanctuary retreat when your electronic ivory tower begins collapsing. Another cheaper option is committing suicide and reincarnating Chinese or to someone important on Wall Street; oh, the Bush family dynasty also works. By the way, you should make a decision sooner rather than later; chaos analysis of the collapse of the Soviet Union indicates that geopolitical collapses can be quite abrupt – and just last year we were mere inches from such a collapse. Try creating your way out of an economic black hole.

Posted 29 January 2010, 16:44 by Blight
Great post indeed.
It will probably be a long time before Google is dwarfed by another company, but that time is coming. No doubts about it, nothing and no one is absolute on the web.

Posted 18 December 2009, 09:13 by Rav
Thanks, for a great, inspiring article.

During the whole history of humankind, we have needed production, consumption and creation. They have been and need to be integrated in many ways.

I agree that there is nowadays bigger chances than ever for creation, but the end result is often superficial, when laymen do it.

Still, the best and greatest things are created by professionals, experts of different fields, whose work can be integrated easier than ever, thanks to digital tools.

I take an example: NatureGate Online Service for species identification: http://www.naturegate.net

IUCN CEC recommends it: http://www.iucn.org/about/union/commissions/cec/?2614/

It is the fastest and easiest identification tool for wild flowers, bushes and trees, I have seen. The system and method is patented by Eija and Jouko Lehmuskallio. This again shows that there are and will be Intellectual Property Rights for those who are inventive and entreprising enough. This kind of highly individualistic creativity is probably the main force also in the Age of Creativity. Together, we can nowadays transform civilized World, but only because the underpinnings are and will be created by entreprising innovators. I am for involving everybody for collaborative knowledge building and other activities. But, there has to be a balance of interests. It is one indicator of wisdom according to great psychologist Robert J. Sternberg.

Posted 14 October 2009, 15:45 by Mauri Ahlberg
I think it would be interesting if you could extrapolate the conclusions of this essay to a non-digital economy… unless you mean to imply that the value of digital creation will eclipse traditional valuations of analogue production and consumption. And finally you will have a satisfactory retort to the commentators who write “Creator society, yes. Creator economy? Not so much.”

I think the most serious problem to the emergence of an analogue corollary to the digital creator economy you rightly suggest, is simply a matter of technology. Molecular nanotechnology and foglets (I think they are called) could ultimately provide a tangible medium for an analogue economy that could follow the rules of the digital creator economy that you proffer… but it seems we are, at the very least, several decades away from that.

After all, we still cant eat 1’s and 0’s.

I think Jeff Jarvis’s new book “What Would Google Do” might be a good start to fleshing out the near term solution to this problem. Transhumanism and ‘accelerating-technologists’ (a term which its ambiguous syntax yields a funny image) probably provide more complete and radical long term solutions.

Posted 30 June 2009, 03:31 by Daniel B Stern
Mr. Saffo, I love that interaction will be the mainstay as we move forward, as technology also breeds a strong desire for increased personability. Technology, production, creation never win alone. We always need the personal touch and interaction. This two way street allows us to connect more deeply with one another. I am glad to see this a positive trend. The two way street also creates greater understanding, as the creator understands both sides as producer and creator.

Secondly, I also believe that quality will be at the helm. We have so much, too much information. Our producer, consumer and creator economies — will be drastically different than our past economies, because the noise is so fierce.

Those creators offering quality, and with the communications skills to communicate this quality effectively via the Internet and technology, will be the winners.

So I am looking forward to being and meeting a new world of quality-focused, personable Creators.

Thank you for an insightful article.

Warm Regards,

Pamela Hawley
Founder and CEO
UniversalGiving
(http://www.universalgiving.org)

Posted 12 June 2009, 22:39 by Pamela Hawley
I think that due to the explosive use of internet, what we are missing out is its capacity for education. Technology had its various phases of development. When Caxton invented the printing press, it was as much a technological revolution as the internet is today. Surely he was the inventor and precursor of the blog! Today the wheel is reinvented- from the book to the blog, from the page to the space. Blogging is essentially writing, and quintessentially a means to an end. Once we understand the potency of the internet as a creative tool, for research, arts, and education we understand how it serves the means to a greater end. But once we look at it as an end in itself then we are limiting its scope, and assigning to it temporal values, in contrast to eternal ones.
There is where the crux is. Especially in the developing counties the internet, why even the blog can be used for literacy and education. It can tranform the social face of the world, as Free Open Source Software is attempting to do. Children must be edified through blogs, distance education pedagogy can materialise through them, and the internet can be both explosion and implosion. Today we are talking only of networking and go to the Facebook with rapacity. Yes, it has its charm, but the charm can have more permanence if we convert it into a site for research and stimulating discussions. Every school can have its facebook page where counselling and interacation both between teacher and taught, as well as peer group interaction can take place.
I have read many Indian CEOs saying that blogging for them is therapeutic after the tensions of work. This same tension can generate creativity, ideas and brimming of minds.
We have missed the wood for the trees. We have forgotten in a facile manner that blogging is essentially writing, reading. It is as D.H. Lawrence said, though in a different context:’‘the book of life’‘. It is edification. Such edification must start with the child…

Posted 12 June 2009, 08:42 by Ananya S Guha
the highlighted analogies are interesting. i’d make the following remarks: – neither the producer nor the consumer “economy” is dead: manufacturing has NOT disappeared! Nor will the consumer economy!

- geographies should also be considered: in some geographies the even producer economy has not started yet, let alone the consumer economy; in other regions (like India, China) the consumer economy is only now emerging, while in yet others what was referred to as “creator economy” has already been in full swing for a while (see Japan’s teenage demography).

- the word “creator” is used for something that is not creation; entering search terms, jotting down what’s happening (twitter or facebook) is not creation but perhaps conscious (twitter) and unconscious (google) sharing.

- the notion that the consumer economy did not linearly originate from the production economy and the “creator” (sharing?) economy
did not linearly originate from the consumer economy should be considered.

- if there is continuity between these phenomena, it is a pattern of disintegration, which is reflected in increasing amount of data and information. this has given birth to desperate and ineffective attempts of integration.

The next crisis may be exactly this: the crisis of disintegration.
From this point of view, the next “winner”, who dwarfs google, will be the one, who manages to ride the tendencies of disintegration even more, creating conditions for the crisis to become apparent to everybody.

Posted 11 June 2009, 04:59 by laszlo kovari
Very interesting article.

Producing, Consuming, Creating.

But I agree with Mr. Kahn. As everybody is starting to create (the content) and demanding attention (the clicks), it will be more and more difficult for the attentioner to find the interesting creations that are worth his attention. To separate the gems from the soil.

Proof of this evolution can already be found when one follows up on his ‘social networks’. People start sending out the most irrelevant creations … ‘overcreation’ as Mr. Kahn puts it.

The resulting information overload might either bring that new economy to an early halt, or either create opportunities for new mechanics to come in to place.

Only the future will tell …

Posted 10 June 2009, 09:13 by Wim Van Leuven
Mr. Saffo;

Great stuff.

I’m thinking back to your article on “Disinteremediation” and longer value chains (1998) – that seems to me to be lens that created the opportunity for the birth of a Creator Economy.

All the extraordinary global adjustments to over-sized corporations and governments that survived on commoditizing, budgeting, estimating and projecting literally anything that could be hedged are just a reaction to the inability of these organizations to deliver much of anything that is meaningful on a planet where the simple truth seems to be ever-increasingly; Everything that really matters is either completely global, or extremely personal.

…and, what really matters in the end; what really has economic value in the process of acquiring what is valuable, is that which is intensely personal.

In the meantime the fundamental, essential and intimate needs of a planet full of creators – having once been shortchanged by a lack of truly personalized goods and services – have been awakened, to what end, who knows fully. But the new, dramatic consumer behavioral science – the click – has extraordinary value as a yardstick for intuition, interest, and intent.

That’s seems valuable, almost beyond belief.

Thanks for the article.

Posted 2 June 2009, 17:24 by Robert Bausch
Producer, consumer, creator. Seems we are trying to articulate development, evolution. Is this an evolution of the economy separate from consciousness or more likely, biology? Economics is so little understood, kind of like mental health. Seems psychiatrists and economists have a lot in common. Neither really has a strong grip on their subject because their subjects are equally little understood. (unknowable?) I hope we will have a little more consciousness around what we choose to become. Instead of sheep blindly moving with the rushing current, perhaps, if with the creator/attention economy we are participating with greater levels of consciousness, we can choose outcomes through a greater exercise of will. Maybe we won’t be victims of the great singularity, but creators by choice.

Posted 5 May 2009, 09:55 by Mary Anne Davis