Defining the new economy

I’m collecting links to thinking that tries to identify the essence of the new economy. In a stream-of-consciousness flow about just this, Brian Frank argues that we’re moving from an industrial to a venture-capital economy where supposed scientific precision gives way to the imperfection that is inherent in innovation:

[Paul] Graham compares this to the Industrial Revolution, which is a fair comparison in terms of scale, but I think we should recognize that these current changes are a kind of reversal, or inversion, or undoing of the Industrial Revolution.

Through the Industrial Revolution the economy itself gradually became like one big machine — or at least that’s how most economists tended to see it. Everything could supposedly be quantified, reduced, and rigorously predicted.

Silicon Valley represents something else entirely. . . .

Rather than expanding control and diminishing variations, the emerging attitude will be about expanding variety and accommodating the unknown. It inverts all of our intuitions and assumptions about doing business and managing the economy… Know your ecology and complexity science.

(My favourite books on this are The New Pioneers by Tom Petzinger, Surfing on the Edge of Chaos by Richard Pascale et al, and Bob Sutton’s Weird Ideas That Work… I haven’t read Jeff Jarvis’s What Would Google Do? yet — I have it on-reserve — but I think it might make my list too. Orbiting the Giant Hairball has been on my reading list for a long time as well.)

So far Silicon Valley is the best model we have for going forward. It addresses the two big defects of industrialism: the one pointed out by Roger Martin, that employees and customers are turned off by rigorous efficiency, and the one pointed out by Nassim Taleb, that the unexpected is inevitable.

  • http://www.hungrygarden.com Hungry Gardener

    Some of the freshest thinking is coming from Umair Haque at Harvard http://discussionleader.hbsp.com/haque/

  • http://www.worldplenty.com John Banfill

    One of the best books I have read about the new economy was written by Kevin Kelley and is called New Rules for the New Economy. The book is available free online (http://www.kk.org/newrules/contents.php) or as a PDF but can be purchased as hardcopy also. The rules are:

    1) Embrace the Swarm. As power flows away from the center, the competitive advantage belongs to those who learn how to embrace decentralized points of control.

    2) Increasing Returns. As the number of connections between people and things add up, the consequences of those connections multiply out even faster, so that initial successes aren’t self-limiting, but self-feeding.

    3) Plentitude, Not Scarcity. As manufacturing techniques perfect the art of making copies plentiful, value is carried by abundance, rather than scarcity, inverting traditional business propositions.

    4) Follow the Free. As resource scarcity gives way to abundance, generosity begets wealth. Following the free rehearses the inevitable fall of prices, and takes advantage of the only true scarcity: human attention.

    5) Feed the Web First. As networks entangle all commerce, a firm’s primary focus shifts from maximizing the firm’s value to maximizing the network’s value. Unless the net survives, the firm perishes.

    6) Let Go at the Top. As innovation accelerates, abandoning the highly successful in order to escape from its eventual obsolescence becomes the most difficult and yet most essential task.

    7) From Places to Spaces. As physical proximity (place) is replaced by multiple interactions with anything, anytime, anywhere (space), the opportunities for intermediaries, middlemen, and mid-size niches expand greatly.

    8) No Harmony, All Flux. As turbulence and instability become the norm in business, the most effective survival stance is a constant but highly selective disruption that we call innovation.

    9) Relationship Tech. As the soft trumps the hard, the most powerful technologies are those that enhance, amplify, extend, augment, distill, recall, expand, and develop soft relationships of all types.

    10) Opportunities Before Efficiencies. As fortunes are made by training machines to be ever more efficient, there is yet far greater wealth to be had by unleashing the inefficient discovery and creation of new opportunities.

    Mr. Kelly is in the process of revising this book and welcomes comments for the revision at http://www.kk.org/newrules/blog/

  • http://www.mcnultymedia.co.uk Ian McNulty

    In reply to one of your earlier article on The Great Restructuring II I postulated a possible analogy between the current revolution in media for the transport of information and the revolution in media for the transport of materials which began around 100 years ago with the invention of the automobile. http://buzzmachine.com/2009/03/19/the-great-restructuring-ii-the-next-ism/#comment-392013

    Revolutions revolve as points on the circumference of a wheel, moving from ground-level to zenith (the diameter of the wheel) then back to ground level again. The height of any point on the circumference plotted against time is a classic (sinusoidal) wave of ebb and flow – or of things returning to where they first started but in a different place one whole wavelength down the road.

    Thus, the cycle from the variety and lack of control of the pre-industrial “cottage” industries through the zenith of centralised control with the global corporate industries back to the cottage style industry of the Silicon Valley Model could be seen as the next wave in the cycle of the Industrial Revolution rather than a reversal, inversion or undoing of it.

    In the beginning, steam engines, and the gun barrels on which they were based, were manufactured on a cottage industry basis where variety and lack of control meant that no two machines could ever be the same.

    The zenith of the physical manifestations of that revolution 100 years later at the beginning of the 20th century coincided with the ground-zero for Ford’s Model-T, Taylor’s Principles of Scientific Management and the Harvard Business school, showing that different aspects of the cycle of industrialisation were running at different phases in the cycle, as do different points on the circumference of a wheel.

    The test of any model is it’s ability to predict the future. If this Second Industrial Revolution model is correct then we would expect to see a return to small, regional, “cottage industry” based newspapers as they were in the beginning but in a different form; analogous to the way in which Ford’s Model-T returned the profession of driving from a few people driving almost identical trains along highly controlled tracks to many people driving a wide variety of different kinds of carriages along relatively loosely controlled roads but using mechanical horse-power rather than organic horses.

    If that proves to be correct, then we might expect to see organisational theory finally catch up practice at roughly the same point that Silicon Valley/Cottage Industry practice reaches its next zenith and begins its return towards conglomeration, standardisation and centralisation.

    • http://wyman.us/ Bob Wyman

      “”a return to small, regional, “cottage industry” based newspapers as they were in the beginning but in a different form;”…

      Thus: A large number of hyper-focused news bureaus whose work is generally aggregated into a smaller number of perspective-based news portals…

      Areas of focus will be defined either by geography or by area of interest. Perspectives will be defined by geography, language or by philosophy.

      bob wyman

      • http://www.mcnultymedia.co.uk Ian McNulty

        “Thus: A large number of hyper-focused news bureaus whose work is generally aggregated into a smaller number of perspective-based news portals… “

        Yes, that would certainly be a predicted outcome of the 2nd Wave in the Mechanisation of Transportation of Information Model. With – as Jeff has said on earlier occasions – journalists returning to their role of curators and aggregators of the conversation which begins at the bottom and works up, rather than pushers of the conversation of government, corporations and PR companies which starts at the top and works down

        Areas of focus will be defined either by geography or by area of interest. Perspectives will be defined by geography, language or by philosophy.

        That too. Which might explain why BuzzMachine is now considered more influential than the Guardian or the BBC for the (currently) very small number of journalists in the UK (i.e. me) who are more interested in exploring what the future of the media might be, rather than going through the cycle of grief, anger and denial for what it once was.

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  • Walter

    Jeff,

    I’d highly recommend The Wealth of Networks by Harvard’s Yochai Benkler. It does the best job I know of in describing the move from an industrial information economy to a networked information economy.

  • http://www.goddessbizblog.net Jan H. Stringer

    The New Economy, for me, looks like ‘installing’ more creativity and intelligence in products and services. I believe that business is very personal.

    It’s about seeing the world in a different way. What is needed is a fresh new angle for doing business expressed in a soon to be published book: BEE-ing Attraction: What Love Has To Do With Business and Marketing. This book introduces a fresh new angle that is based on a different reality. http;//www.perfectcustomers.com/book

    Jan

  • Rosa

    Great post… as usual
    what is more, right now technology is disproportionately benefitting small business which is perfect given our economic downturn. Low cost, high potential and interconnectivity are working in favor of emerging entrepreneurs
    this story has more: http://www.newsy.com/videos/new_economy_better_faster_smaller