City-states, capitalism, creatives + customers

My brain is exploding.

This will be a short post that foreshadows an (as yet unwritten) longer one but I wanted to point out some great thinking + writing by others, and also offer up the beginnings of a framework that extends / integrates these ideas to (hopefully) make them more actionable.

First, the links:

  • Steve Denning’s excellent article on the failure of “shareholder value maximization” as the animating principle for organizations, pointing to “customer capitalism” as the way forward.
  • Venkat Rao’s equally thought-provoking three-part Forbes series, “Entrepreneurs are the New Labor” (Part I, Part II, Part III), which among many other ideas predicts the rise of a “Global City-State Economy”

And finally, the intellectual antecedent (by 20 years!) of both of these:

  • Robert Reich’s The Work of Nations, which I have heard about for years but finally sat down to read this weekend, and which anticipated the effective secession of the global “symbolic analyst” class (i.e., the one that you belong to if you’re reading this) from the rest of society.
These are by no means the only thinkers / ideas that are at work here — Brad Feld’s “Startup Communities” is a very practical riff on many of the same themes — but they help stake out the boundaries of the idea-space I’m trying to get my head around.
The themes / assertions in these (and other writings that I’m now trying to integrate) include the following:
  1. The “disruption” promised in the first Internet boom — and then dismissed as so much hype by non-tech market players — is finally here and gathering steam.
  2. Many complementary innovations (e.g., open source / cloud / mobile / big data / global IP networks / etc.) are acting in combination to create a Sandy-sized hurricane of threat (to incumbents) and opportunity (to innovators) across nearly every sector of the global economy.
  3. The “limiting reagent” in this transformation — the scarce resource that controls the rate at which this chemical reaction can proceed — is talent: those with access to “digital creatives” skilled enough to compete in the global innovation market are able to advance their agendas; those that cannot attract / retain digital creative talent fall further and further behind.
  4. Unlike previous waves of capitalist innovation and progress, the unit of organization for this pool of digital creatives is not the firm but the individual (in the first degree) and the city (in the second): the elite pools of digital creative talent that currently control the rate of global innovation are dynamic, self-organizing and location-based.
  5. Silicon Valley is (and will remain) a global leader in digital innovation, but its dominance will diminish somewhat as elite pools of talent agglomerate in cities around the world: there will be many global innovation hubs that compete along increasingly specialized vectors of innovation that leverage local strengths (e.g., New York in Finance, Media + AdTech; LA in Entertainment; etc.)
  6. As software “eats the world” (to use Marc Andreesen’s pointed phrasing), demand for digital creative skills across the global economy will expand much faster than the available pool of talent can grow to address it. This will be somewhat mitigated by new productivity tools and labor market innovations, but acute scarcity will prevail for the foreseeable future.
  7. In these conditions of acute / persistent scarcity, the global competition for digital creative talent will intensify. Traditional labor market actors like corporations and universities will continue to be players, but new actors — particularly location-based innovation communities like the kind described in Brad Feld’s book (see above) — will take a leading role in promoting their markets as destinations for the world’s most capable digital creators (i.e, independent of any specific company or economic interest in that community).
  8. The city-states with the best odds of competing successfully in this new reality will be those that can attract and retain elite talent without regard to specific companies or industries: the cities or regions that optimally serve the full range of human needs of the maker class (and not just their professional  / economic aspirations) will be the ones that win the long-term battle for talent.
  9. Because the most powerful economic actors in the global economy will be members of the digital creative class, the firms that stand the greatest odds of success in this new, talent-centered economy will be those that best address the human needs of their customers (in many cases blurring the distinction between customers and employees in terms of who has a voice in the direction of the company and the development of its products); the commercial battle will increasingly be for customers’ hearts as well as their wallets.
  10. All of the above trends will quickly and dangerously exacerbate the separation of elite players in the global economy from those who lack the skills to participate in digital creative work. The most pressing economic and policy question of the next 20 years will be how to bring the greatest possible share of the global population along with these changes, and what to do on behalf of those unable or unwilling to participate.
Lots to chew on here — and lots of better brains and pens than mine have been pushing these ideas along for many years — but it feels like another big inflection point in the modern narrative is unfolding right now and I’m eager to engage folks in my own little innovation community about how we can work together to play a bigger role.