I had great fun writing my last article “What Kind of Software Would People Actually Pay For?” because it helped me flesh out a lot of the ideas that had been swimming around in my head recently (actually for the last few years). And it actually made my Masters Degree in Urban Planning useful!
[Hold on kids, Uncle Pete is reminiscing]
Urban history is just economic history viewed from a different angle. Farming and agriculture was the dominant form of life for thousands of years because it was the best economic option – access to soil and water was more important than access to other people. Even if you couldn’t sell the food you grew, at least you could eat it and not starve.
With the economies of scale gained during the Industrial Revolution, congregating in cities became a better economic option for many (and eventually most) people. [Warning: US-centric view of history ahead] Despite the horror stories of Victorian London of the Chicago stockyards, life in cities was a better choice, especially for people who didn’t own their own land. The technological developments of the era (steel mills, railroads, electricity, heavy manufacturing, etc) made those who developed and invested in them rich, and the cities that accommodated them prospered. Cleveland in 1900 had all the optimism and glitter that cities like Seattle do now. Starting around the 1970s, the US economy shifted from primarily manufacturing to services like finance, insurance, accounting, advertising, marketing, law, high tech, research, software, etc. This if referred to the “white collar” or “service economy” and is what we have now.
Some people claim there is another economic shift underway, from providing services to providing experiences. This idea was first developed in the book “The Experience Economy” by B. Joseph Pine and James Gilmore. Examples of this are how a regular amusement park may offer fun rides, but Disney provides a complete immersion in their (surreal, creepily clean) world. Dunkin Donuts sells you coffee, but Starbucks provides a cozy place with hip music. Nike doesn’t sell shoes, it sells athleticism. You get the point.
Reader: Peter, why are you giving me a history lesson? That’s not why I read your stuff!
[Peter shakes the glimmer out of his eyes and gets back on track]
I don’t buy the argument that there’s a fundamental shift in the economy towards experiences, but rather, like functional or OO programming, it’s a tool that you can use in situations where it’s appropriate. For instance, I’d much rather my lawyer be a service provider than an experience provider. I’d hate to have his office be mocked up as a courtroom with actors pretending to litigate me while he protects my assets. But for those occasions where you can turn your product or service into an experience, you have a chance to
differentiate yourself from your competitors and create a lot of value for your customers.
This was the biggest insight I got from writing about what kinds of software people would buy – that there are a shortage of great experiences available through software, and that people will pay for outstanding experiences. The best experiences I can think of that you can get through a computer are games, music/movies, and social networks. Heavy social network users engage as much and as passionately as people get about games and movies. Plus, creating (not populating) social networks is a fairly straightforward technological problem when compared to all the negotiation and cost and (ick) people skills required to make a major media property like a game or movie. No wonder everyone wants to start a social network right now!
So if social networks are such a great experience, why aren’t people paying for them? Well, the networks let people sign up for free, because they want to have everyone on their network. But then they’ve immediately set the market value of the network at $0! Also, social networks are only a good experience because interacting with people is a good experience! If social networks vanished, people would still have friends, but if your friends vanished, you’d have no use for the social network. Whereas if computers and TV went away, people would still play games (board games? sports?), act, sing and dance.
That leads me to the big current idea in urban planning that I do buy into – The Rise of the Creative Class. This idea, based on research by Richard Florida, is that creativity is the new constrained resource that’s fueling economic growth. Throughout history, the constrained resources have been, depending on time and place, natural resources, arable land, labor, labor, capital, manufacturing capacity, distribution, etc. Now we have all of those things in abundance (sorry for the continued US-centricity) but creativity in all forms is the new economic engine.
From an economic perspective, there are two kinds of creativity: creativity that’s economically productive like software development, marketing, developing new business models, etc, and indirectly valuable forms of creativity like music, visual and performing arts, writing, etc. The second kind create value by increasing the creative capacity of those who experience it. For instance, I’ve never paid anyone for anything I’ve read on the internet, but what I have read has changed my entire perspective on computers, programming, entrepreneurship, economics, and business – basically every aspect of my professional life. The delta of my economic production as a perspective software entrepreneur vs as a company man is directly attributable to the effect that internet authors have had on me.
So if people will pay for great experiences, and creativity is economically valuable, what does that mean for software entrepreneurs looking for opportunities? Find some way people express their creativity (expensive hobbies are a great place to start but definitely not the only source) and help them do it! Just like companies seek financial profits, then creative people seek fulfillment profits, and they’ll happily buy something that helps them achieve a higher level of creative fulfillment. If you want to do this through software, you’re limited by the computer’s interface (you’d have a hard time replicating the thrill of hang gliding or the satisfaction of scaling a mountain). But every one of your competitors is bound by the same limitations, so anything unique, difficult, or expensive you can do to differentiate yourself puts distance between you and them and makes you that hard to follow. To continue the example I gave in my last article, 3D rendering might be a common non-differentiating technology now, but accurate underwater 3D topographic data or accurate AI fish behavior would turn your scuba simulator into a remarkable experience. Lots of hackers have the technical chops to code something like that but who would go to the trouble of researching marine biology, interviewing ichthyologists and divers, and charting tide and temperature conditions?
Reader: “What?!?! You just gave me more work to do! Now it’s not enough to be an outstanding hacker? Now I have to go become an expert in a whole new field too? Peter, if you keep piling on me like this, I’m never going to read your writing again!”
[Peter, arms folded, nodding]
My work here is done for the day.