Creative Class

The book is getting snarky reviews but if it were by an unknown, rather than by the famous Malcolm Gladwell, many people would be saying how interesting it is. The main point, in economic language, is that human talent is heterogeneous and that the talent of a particular person must mesh with the capital structure of his or her time if major success is to result… The main enduring insight… is simply how much we live in a world of complementarity rather than substitutability… In reality the complementarity concept is easier to work with and also more fruitful for thinking about policy implications or for that matter the implications for management or talent training.  Success is fragile but foster competing cultures based on clusters of talent motivated by rivalry and emulation. Don’t filter out the eccentrics or the risk takers. It’s still a good book and a fun book.

The rest is here. I concur. I think it is the best of Gladwell’s books, actually. And he handled himself very well with Matt Lauer this morning.

Google CEO Eric Schmidt counters the notion of the long tail (via Whimsley):

although the tail is very interesting and we enable it, the vast majority of the revenue remains in the head. And this a lesson that businesses have to learn. While you can have a long tail strategy, you better have a head, because that’s where all the revenue is. a very short Head of Long Tail aggregators: Amazon, iTunes, Google and their kin dominate their markets to a blockbuster-like degree.

Chris Anderson, author of The Long Tail, responds noting the “irony” that:

a very short Head of Long Tail aggregators: Amazon, iTunes, Google and their kin dominate their markets to a blockbuster-like degree.  … [N]ew research from McKinsey suggests that this sort of radical inequality is increasingly the norm as markets get more networked. ”Powerlaws do imply wildly unequal distributions of money, power, celebrity and everything else.” So much for “democratization.” And it’s not just companies. The Long Tail – the powerlaw created by network effects – may be creating super-celebrity,

Whimsley concludes: “There’s more, and he holds on to some of his assertions, but basically, it’s all over for the long tail.”

We have been looking closely at the geography of creative industries and occupations. You get exactly this pattern of a big fat huge head (that is extreme geographic concentration in two super-celebrity markets – New York and L.A.), a dramatic fall-off after that, the emergence of one or two specialized nodes (Nashville in music, D.C. in media, Las Vegas in dancers, and so on) and then some gentle dispersion among much smaller centers in the tail. We see this pattern of a biruficated, barbell-like spatial structure popping up in the geography of these and other creative industries and occupations. More to come…

The relationship between our personalities and our choice of locations is one of the hottest topics for understanding cities and urban areas. A new study in Psychological Science shows the connection between psychological “temperament” and migration. Not a psychology expert myself, I consulted with Cambridge University psychologist, Jason Rentfrow co-author of a path-breaking study of personality and place.

As Rentfrow explains, the concept of temperament comes from “developmental psychology and is generally regarded as the inherited.” They appear early in life and serve as the foundation for personality. In other words, they are the aspects of our personalities that are tied most closely to our genetics. There are three kinds of temperament – activity, sociability, and emotionality – and the study looked at the effects of these types on who was likely to migrate and where.

The study shows that temperament or personality influences whether someone moves, how frequently they move, and the kind of place they move to. Highly sociable people are the most likely to move, and they are more likely to move to urban areas than rural areas. The study suggests one explanation may be that urban areas have more people and therefore provide sociable types with more opportunities to meet and mingle with others. People with an active temperament were more likely to move, and to move more often.

I asked Rentfrow for his thoughts on the possible relationship between active temperament and open-to-experience people. My interviews with creative-class types reflected a preference for activity or “energy” often combining an intellectual energy with a need for outdoor activity as well as for street level cultural activity. He responded that “being open and curious involves having an active imagination. And physical activity is sometimes required to satisfy intellectual activity. ”

The study is here.

While of great interest today, the discussion of design in business is hardly a new phenomenon. In a 1965 speech at the Rochester Institute of Technology, Hugh DuPree, one of a troika of DuPrees who presided over the company for half a century, described how his family went about connecting business with design. In the process, they transformed Herman Miller from a tiny failing residential furniture manufacturer to a paragon of American design:

“Design is an integral part of the business. The designer’s decisions are as important as those of the sales or production departments. It is his responsibility to recognize needs and solve them in his own way. There is no pressure on the designer to modify design to meet the market. Sales and Manufacturing have a responsibility to feed back to Design information that helps the designers to define the problem.

“But the designer decides how to use this information…. We decide what we will make. If the designer and management like a solution to a particular problem, it is put into production. There is no attempt to conform to the so-called norms of public taste, nor is there any special faith in the methods used to evaluate the buying public. Our designers must not be hamstrung by management’s fear of getting out of step. All that is asked of the designer is a valid solution.”

“ABSOLUTE CONTROL.” Hugh and his father, DJ, and brother, Max, believed the role of designers was to create “valid solutions,” while the role of sales and manufacturing was to provide feedback that would help designers define problems, and the role of top management was to protect the designers from the rest of the company: “In our company, the designers receive and depend upon feedback from Sales and Manufacturing, but they report only to top management.”

This philosophy follows from the initial edict of the first designer Herman Miller hired in 1931, Gilbert Rohde: “The designer was to retain absolute control over the production of his creations. The manufacturer would not be allowed to change the mechanics or appearance of a design to the slightest degree.”

The DuPree approach could be seen as the second broad model of modern management. The first can be credited to Frederick Taylor and Alfred Sloan. Taylor was instrumental in bringing science to the field of management with his time and motion studies in the early 20th century. Sloan was the legendary CEO of General Motors who helped establish the notion of modern professional management in the U.S. consciousness.

PRECIOUS RESOURCE. Thanks to Taylor and Sloan the business world saw that the role of senior management was to manage with dispassion and analytical rigor. The second model can be credited to early proponents such as Herman Miller all the way through to players such as Apple Computer.

This model brought the understanding that the modern analytical management of Taylor and Sloan should be supplemented with the artistic and creative sensibilities of designers such as George Nelson, Charles Eames, and David Kelley. In this second model, the role of senior management was to protect these precious designers and incorporate their thinking into the corporation’s decisions.

To DuPree, what exactly was this magical thing called design that required protection and that only designers could do?

“Designing then is a basic activity. It comes to grips with the very essence of a problem and proceeds to develop a solution organically, from the inside out, as opposed to ’styling’ which concerns itself largely with the distinctive mode of presentation or with the externals of a given solution. The design activity is based upon an understanding of the intrinsic principle of a given problem and its solution.”

CREATIVE TEMPERAMENT. To DuPree, designing clearly is a fundamental way of thinking; a different way of thinking-what we might call “Design Thinking”-than either that of stylists or salespeople or manufacturers. Stylists think about making things pretty, while salespeople and manufacturers think about making things profitable.

While defining his top management role centrally as protecting and exalting the designers, Hugh DuPree was not completely unconflicted about his life with designers: “Like it or not, designers are important; indeed, vitally essential for the success of a business enterprise.” “Like it or not” – an interesting turn of phrase that was perhaps a product of one too many conflicts with his indispensable but dictatorial designers!

But did his model, which had great designers protected by inspired senior executives from philistine line managers, take hold across the U.S. economy and have the effect he sought? By his own assessment: Definitively not. “American industrial programs of planned obsolescence have set up an industrial complex geared to producing waste, and a society trained to accept it.” Already by 1965, DuPree witnessed the scourge of drab, uninspiring products dominating the industrial landscape that was a mere minor foreshadowing of the world to come.

TIME TO INTEGRATE. The DuPree design model worked for Herman Miller, thanks to the commitment of the DuPree family. However, to the extent that DuPree’s assessment is correct, the model didn’t take hold and produce the desired outcome across the economy. So we must consider the possibility that if Design Thinking is critical, maybe restricting it to designers and protecting them from business people is not actually the most productive avenue to pursue. Perhaps eliminating the need for protection by turning business people into Design Thinkers would be more effective.

While for its time, the DuPree family design model was highly advanced and visionary, it is time for a third-generation management model. Rather than supplementing modern analytical management with design sensibilities, it is time to integrate design into management practice. The job of executives isn’t to protect designers from line management, but to help line management become Design Thinkers. It is time for the management discipline of Design Thinking.

To create a Design Thinking organization, a company must create a corporate environment in which it is the job of all managers to understand customer needs at a deep and sophisticated level and to understand what the firm’s product means to the customer at not only a functional level, but also an emotional and psychological level. It must also create a culture in which line managers are not satisfied with merely serving customers, but insist on delighting them and making them feel the company is their partner, friend, and confidante.

FOLLOW THE TRAIL. It must create an operating environment by which line managers experiment with new ways of delighting the customer, realizing fully that some new ideas will fail, but that in failing these efforts have valuable benefits. Even failed experiments help convince customers that the company is aiming high, and the feedback will help them come up with newer, better approaches. In this operating environment, line managers will view customers as people with whom to prototype and test new ideas, as colleagues in innovation, sitting on the same side of the table.

The great firms of the 21st century will be those that recognize the goal isn’t to supplement analytics with design; it is all about integrating design and management. Everybody with an ounce of sense and a checkbook can supplement. Only those with passion and courage can and will integrate. And those who integrate should whisper a “thank you” to the DuPrees who blazed a path that made the notion of integration a true possibility.

Originally published in BusinessWeek.

As U.S. cities compete for the title of “Greenest” and vie to attract green industry, Portland State University is launching an initiative to use the city as a laboratory for sustainability studies. Portland was recently named America’s most sustainable city for the second year by SustainLane. PSU hired noted Dutch urbanist Wim Wiewel as its president this year, and the city as laboratory may be the first fruit of his administration.

While I was looking this up online, I came across a link to Paul Hawkin’s great piece on cities as environmental assets. Here’s a key line:

Urban migration represents a kind of collective wisdom, and how we configure our cities will be critical to our survival. Regardless of the myths about living close to the land, cities are where human beings have the lowest ecological footprint. It takes less energy, wood, material, and food to provide a good life for a person in a city than in the country.

The lost decade is often talked about in Japan. From 1990 to 2000, the Japanese economy was stuck in the aftermath of a burst housing bubble and the inability to channel investment into the “next big thing.” Of course that was the Internet. Today the U.S. is in a similar situation. We are in a post-housing bubble, a credit and banking crisis. We also face the difficult choice of figuring out the next big thing to invest in. If we miss it or do not get it right we will be Japan in the 1990s and Germany, Singapore, China, and Denmark will lead the next economic expansion. Where to put the money? The answer is simple – it’s The New New Deal. The Obama administration has a chance to set America on the right course. The question is… will it?  Will they cave in the old New Deal (bail out the auto industry) or can they embrace the New New Deal? What is the New New Deal? According to Jefferey Sachs:

• The development of mass-market, battery-powered autos that achieve at least 100 mpg of gasoline on fleets by the year 2015.
• An efficient power grid that can carry renewable energy – solar from the Mojave Desert and wind from the Great Plains – to the population centers of the U.S.
• A utility industry that can reduce 80 percent of emissions per kilowatt on newly built power plants by 2016. For the U.S. to achieve this it will have to decrease consumption and increase investment. One policy to help would be for a gasoline tax to keep gas prices high to reduce consumption and create tax revenues to fund R&D. I would suggest a tax that would keep gasoline prices at $4.00 a gallon rising by 50 cents a gallon over the next four years. This would create the incentives to invest in our energy efficient and sustainable future.

The latest issue of Dwell Magazine looks at one of America’s first (and often considered the most successful) urban renewal projects. Detroit’s Lafayette Park, now undergoing a subtle transformation as a new wave of residents including Keira Alexandra and Toby Barlow settle in, remix the past, and make the place their own.

Given the uncertainty looming with the likely restructuring of the automotive and manufacturing base in this area, it’s encouraging to see a vibrant and stable cooperative community within the city that has endured the region’s many changes over the last 50 years. And, who knows, what comes next may in fact be orchestrated from this place.

As we sit and watch the crisis in global capitalism, it’s obvious that governments are sticking their hands deep into the global economy and various national economies. The U.S. government is taking stakes in major financial and insurance firms, becoming partners (in all likelihood) with Detroit, planning major stimulus packages, bailing out over-leveraged homeowners, and planning increased/new regulations on everything from CAFE standards to 401K management.

For entrepreneurs, the landscape has shifted dramatically. Entrepreneurs and venture investors and lenders are unlikely to get much support from policy makers and elected representatives as those political types look to support/consolidate their power through their new corporate partners and other bailout recipients. In fact, policy actions, from bailouts to government/corporate ties, will likely hurt entrepreneurs going forward. The irony, of course, is that growth and innovation will come from new and growing firms, not badly damaged and slimmed down corporations, unions, and low-income homeowners.

Unfortunately, a new report on entrepreneurship in the U.S. from the Global Entrepreneurship Monitor was released this week and it is not very sunny. The report is full of interesting information information (yes, the U.S. still exhibits high rates of entrepreneurship, albeit slowing) and for the first time GEM has looked into minority entrepreneurship in the U.S. The report is worth checking out.

One way of ensuring that the entrepreneur is kept at the center of our economy is by supporting entrepreneurship education. Yesterday, I was fortunate enough to attend a positive, future-oriented event on Capitol Hill presented by the Youth Entrepreneurship Strategy Group. (A negative, old economy event was also occurring as the Big 3 and their cronies were on the Hill asking for $$$.)

The YES Group, led by the Aspen Institute and the National Foundation for Teaching Entrepreneurship, presented a new policy paper/action guide on entrepreneurship education for policy makers. They also convened a great panel discussion with education committee staff from the Senate and House and  introduced some great young entrepreneurs from low-income areas in the U.S. who highlighted what a difference entrepreneurship education can make in the lives of at-risk youths.

The YES Group sees entrepreneurship education as a key to solving the costly high school drop-out crisis in the U.S. and also creating a generation of entrepreneurs to spur the U.S. economy and lower poverty rates. The most interesting thing I heard was that out of the millions of students in HS and junior high in the U.S., only a small percentage have access to any entrepreneurship/financial education. Only nine states have formal legislation that promotes entrepreneurship education.

So while we have this rising tide of government intervention in the economy, let’s ensure that we support entrepreneurs and entrepreneurship education. Only entrepreneurs can ensure the long-term growth of our economy.

BTW, for a little Canadian flavor, check out the VeloCity Residence at the University of Waterloo. The residence hall is a web/mobile media incubator for entrepreneurially minded students. I recently exchanged emails with one of their first residents and they have some great things going on. It is a great model for entrepreneurship education at the post-secondary level.

In a little more than a few months the world has changed more than one can remember: A financial collapse with a slice of Wall Street gone. Impossible. A governmetn bailout of – would you believe- Wall Street. Paulson arguing that regulation is needed to stabilize the financial system. The global economy in recession, and it seems like it’s not the garden variety. It could be a depression. The election of the first African-American as President of the United States and an eoch changing shift in the electorate. The auto industry on the brink of bankrupcy. Birmingham, Alabama bankrupt. One does not know if we should buy on a rumor, sell on a hunch, or hunker down and hold. The markets are always looking forward and what they seem to be indicating is that we are now in for and have been in a bear market for most of the past decade. On average, these last 15 years or so we have a new administration that is likely to reside over a depression, bear market, major industrial bankrupcies. Welcome to the Global Economy.

I am sick and tired of people using ”Detroit” as a euphemism for the Big Three. Listen to GM chief Rick Wagoner:

“This is about much more than just Detroit… It’s about saving the U.S. economy from a catastrophic collapse.”

Detroit didn’t cause the auto crisis. Out of touch Big Three management did. For all its problems, Detroit – the city and the region that is - has assets and capabilities that go far beyond the Big Three. It has cutting-edge automotive design and technology, a broad-based supply infrastructure, great universities, a top-notch design community, a terrific airport, and perhaps the most incredible musical energy on the planet. The city and region can reinvent and rebuild but only by shucking off the dead-weight of the Big Three. And it is a shame for people to keep denigrating the city by invoking its name as a substitute for the Big Three.