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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.

I take the abstract quality of the ‘creator economy’ as strong proof – whatever new paradigm is creeping up to us shouldn’t fit neatly into our understanding of how things work now.

The Attention economy as it has been called is deeply intertwined with the Consumer economy – massive debt driven consumption fuels advertising budgets that fuels Google. Huge portions of that debt are now collapsing – and they won’t be replaced. When consumption levels deflate over the next ten years, how do we even begin to imagine what that will be like?

Posted 27 April 2009, 19:32 by Daniel Jetton
There is one point not fully addressed within this topic and dialogue—the idea of creating sustainable systems for commoditized information (particularly in electronic formats).

The loss of information is very real as technologies continually evolve—many times artificially based on consumer economy ideology. Software and hardware evolution continually places burdens on the organization to migrate and many times convert the information. These migrations and conversions are not perfect and many times information loss occurs. Of course, this creates income loss and inefficiencies.

We need to move away from traditional market forces regarding systems for information access, retrieval, and storage. If we do not, we face the loss of income and knowledge.

Posted 20 April 2009, 15:30 by Bryan Loar
If you refer to Alvin Toffler’s book “Powershift” (1990, he coined the word “Prosumer” which combines producer with consumer.

Posted 15 April 2009, 14:11 by Vince Gammino
“Creator society, yes. Creator economy? Not so much”

I agree with Mary above.

The shift to stimulating creative impulses rather than just consumerist will clearly have a huge impact on the current beneficiaries of the consumer economy however the economic implications of this shift are still broadly unknown.

Consumption won’t go away however, but as has been mentioned above – attention will become a key metric of value in the attention economy (I think Kevin Kelly highlights this best – http://www.kk.org/thetechnium/archives/2008/09/where_attention.php)

Will all acts of creation have economic value? Certainly not.

Does both the production and consumption of ‘uneconomic’ material have economic consquences? Almost certainly.

Posted 12 April 2009, 17:31 by the_infonaut
I think this idea of a “creator economy” is a thought in the right direction, however, their is no end to people creating information, what seems more challenging is the monetizing of its so-called value… which is always in the eye of the beholder.

The way of things in the world we are living in right now is unsustainable. Indeed, we may have reached the inflection point this past year…There are simply too many people who are living longer and consuming more of the planet’s dwindling resources each and every day. Nobody really thinks about how nature always finds its balance. The turmoil around the globe to our conventional social, political and economic systems is really the result of nature’s creative destruction… from this dismantled frame of reference, humans will soon see that a space is being cleared for the “new order” as yet unformed and undefined.

The party is over and we are left with the bill that no one wants to pay…like it or not, the unseen forces of nature are at play and that is the good news…

Posted 22 March 2009, 14:56 by Thomson Dawson
The big question is will anyone make any money from a bunch of clicks? Yes google does, but what about everyone else? What could happen: the creators will soon learn that their information is worth something, and they will ask for money everytime the leeches try to take their info and make money from it without financial compensation. Want to put a cookie on my computer? Pay me. Want to track my energy usage and see if I have an inefficent refrigerator? Pay me. Want to know where I am? Pay me. Want to know what I’m doing? Pay me.

Paris Hilton will be the twitter haiku queen.
Of course, if you are Paris Hilton you will be paid extremely well just for uttering, “oh my god! those Jimmy Choo shoes are it”.

How’s that for haiku.

Paris Hilton will be the Twitter haiku queen

Posted 19 March 2009, 15:15 by ajolie
The categorisation of the last century into the producer and consumer economy is an interesting perspective and makes sense.

The “creator” economy is also a fitting way to describe what we are experiencing right now. I believe its clear that information is the main currency of the 21st century (as opposed to goods in the 20th century).

Information is only a means to an end – I wonder where all the over-abundance of information will lead to. Perhaps the current economy is not so much a “new” kind of economy but more an intermediate state where goods are produced and consumed at an accelerated state?

Posted 17 March 2009, 20:23 by Leonard Chan
paul,

from clicks to touches to looks to thoughts…

good stuff.

sd

Posted 11 March 2009, 12:08 by scott doniger
Is it a new economy, or simply a new dimension to the economy? And I wonder whether this dual-state creator-beneficiary concept is really any different than saying it’s about the 1:1 relationships we’re able to build now.

Print, radio, and television each added a new layer to what we knew and experienced of the world. Now technology is adding a new layer to how we experience and connect.

Now, I know people from all over the world, and they know me. We collaborate and learn from each other in our areas of interest: science, music, work, whatever. I grow my professional knowledge in leaps and bounds any time I choose to dip into this resource, through the generosity of other professionals who share their insights with me through blogs, comments, articles and tweets — and whose value as contributors grows with my consumption of what they’ve shared.

And I wonder whether now, with so many people building ever more relationships with others literally all over the world— without regard to geography, ethnicity or religion— if we are turning human nature on its head. Might we evolve into a world where the net of relationships is so strong that it is nearly impossible to gain the necessary emotional and economic traction for war? That would truly be a new era.

Posted 5 March 2009, 16:14 by Lorre Zuppan
Thank you for putting this idea of a creator economy out there…it made me think. And reminded me that I once heard that the next economy would be the “attention” economy. It would be all about what we each give our attention to.

So in the consumer economy we were all about tangible items we could consume. In the attention economy, it about what we chose to pay attention to. This seems logical and a broader idea. I think the idea of a creator economy fits with an attention economy. Not everybody can be a creator, but everybody has attention. Both are important.

I think I first heard the concept of an attention economy from Seth Godin but it was about 8 years ago so I could be wrong. This reminds me —- I think the shift didn’t necessarily occur in 2008. It started sooner…and probably can’t be pinned to a specific year. I would say that 2008 was a watershed year for the consumer economy becoming less important. I think that the intangible is becoming more important and the tangible is less important. So rather than pick up a phone book to find a restaurant, I ask my followers on twitter.

Posted 4 March 2009, 14:15 by Karyn