Book extract - Trading on experience.
The corporate giants of the industrial age are giving way to the new
The corporate giants of the industrial age are giving way to the new
The marketplace is a pervasive force in our lives. We all are deeply affected by its moods and swings. Its well being becomes a measure of our own.
If markets are healthy, we feel buoyed. If they weaken, we despair. The marketplace is our guide and counsellor and sometimes the bane of our existence.
But now the foundation of modern life is beginning to disintegrate. The institution which once drove men to ideological battles, revolutions, and wars is slowly dying out in the wake of a new constellation of economic realities that is moving society to rethink the kinds of bonds and boundaries that will define human relations in the coming century.
In the new era, markets are making way for networks, and ownership is steadily being replaced by access. Companies and consumers are beginning to abandon the central reality of modern economic life – the market exchange of property between sellers and buyers.
This doesn’t mean property disappears in the coming age of access. Quite the contrary.
Property continues to exist but is far less likely to be exchanged in markets. Instead, suppliers hold on to property in the new economy and lease, rent or charge admission fee, subscription, or new membership dues for its short-term use.
The exchange of property between sellers and buyers – the most important feature of the modern market system – gives way to short-term access between servers and clients operating in network relationship. Markets remain but play a diminished role.
In the network economy, both physical and intellectual properties are more likely to be accessed by businesses rather than exchanged. Ownership of physical capital, once the heart of the industrial way of life, becomes increasingly marginal to the economic process.
It is more likely to be regarded by companies as a mere expense of operation rather than an asset, and or something to borrow rather than to own.
Intellectual capital, on the other hand, is the driving force of the new era, and much coveted. Concepts, ideas and images – not things – are real items of value in the new economy. Wealth is no longer vested in physical capital but rather in human imagination and creativity. Intellectual capital, it should be pointed out, is rarely exchanged. Instead, it is closely held by the suppliers and leased or licensed to other parties for their limited use.
Businesses already are well along the way toward the transition from ownership to access. They are selling off real estate, shrinking their inventories, leasing equipment, and outsourcing their activities in a life or death race to rid themselves of every conceivable kind of physical property.
Owning things is considered outdated and out of place in the more ephemeral, fast paced economy of the new century. In the contemporary commercial world, almost everything needed to run the physical business is itself borrowed.
Where the market used to boast sellers and buyers, now the talk is more of suppliers and users. In the network economy, market transactions are giving way to strategic alliances, co-sourcing, and gain-sharing agreements.
Many companies no longer sell things to one another but rather pool and share their collective resources, creating vast supplier-user networks that co-manage each other’s businesses.
Not surprisingly, the new means of organising economic life brings with it different ways of concentrating economic power in fewer corporate hands.
In the era of markets, institutions that amassed physical capital exercised increasing control over the exchange of goods between sellers and buyers.
In the era of networks, suppliers who amass valuable intellectual capital are beginning to exercise control over conditions and terms by which users secure access to critical ideas, knowledge, and expertise.
Commercial success in the access economy depends less on individual market exchanges of goods and more on establishing long-term commercial relationships.
Consumers too, are just beginning to make the shift from ownership to access. While cheap durable goods will continue to be brought and sold in the market, more costly items like appliances, automobiles, and homes will increasingly be held by suppliers and accessed by consumers in the form of short-term leases, rentals, memberships, and other service arrangements.
The changes taking place in the structuring of economic relationships are part of an even larger transformation occurring in the nature of the capitalist system. We are making a long-term shift from industrial production to cultural production.
More and more cutting-edge commerce in the future will involve the marketing of a vast array of cultural experiences rather than of just traditional industrial-based goods and services.
Global travel and tourism, theme cities and parks, destination entertainment centres, wellness, fashion and cuisine, professional sports and games, gambling, music, film, television, the virtual worlds of cyberspace, electronically mediated entertainment of every kind are fast becoming the centre of a new hypercapitalism that trades in access to cultural experiences.
The top fifth of the world’s population now spends almost as much of its income accessing cultural experiences as buying manufactured goods and basic services. We are making the transition in to what economists call an ‘experience’ economy world in which each person’s own life becomes, in effect, a commercial market. In business circles, the new operative term is the ‘lifetime value’ (LTV) of the customer, the theoretical measure of how much a human being is worth if every moment of his or life were to be commodified in one form or another in the commercial sphere. In the new era, people purchase their very existence in small commercial segments.
Between two worlds
Cultural production is beginning to eclipse physical production in world commerce and trade. The old giants of the industrial age – Exxon, General Motors, USX, and Sears – are giving way to the new giants of cultural capitalism – Viacom, Time Warner, Disney, Sony, Seagram, Microsoft, News Corporation, General Electric, Bertelsmann and PolyGram.
These transitional media companies are using the digital revolution in communications to connect the world and in the process are pulling the cultural sphere into the commercial sphere, where it is being commodified in the form of customised cultural experience, mass commercial spectacles, and personal entertainment.
Think how much of our daily interactions with fellow human beings already are bound up in strictly commercial relationships. We increasingly buy others’ time, regard and affection, sympathy and attention. We buy enlightenment and play, grooming and grace, and everything in between even the passing of time itself is on the clock.
Even in a fully mature market economy, remember, commerce is periodic.
Sellers and buyers come together for a brief moment to negotiate a transfer of goods and services, and then they go their separate ways.
The rest of their time is free of market considerations and commerce.
Cultural time – time non-commodified – still exists. In a hyper capitalist economy, however, steeped in access relationships, virtually all our time is commodified. For example, when a customer buys a car the real-time relationship with the dealer is short lived. If a client secures access to the same vehicle in the form of a lease, his relationship with the supplier is continuous and uninterrupted for the duration of the agreement.
Suppliers say they prefer commodifying relationships’ with their customers because they provide them with ongoing connections that are renewable and at least in theory, perpetual.
When everyone is embedded in commercial time. Cultural time wanes, leaving humanity with only commercial bonds to hold civilisation together. This is the crisis of postmodernity.
The notion of access and networks, however, is becoming ever more important and is beginning to redefine our social dynamics as powerfully as did the idea of property and markets at the dawn of the era.
Access has become the ticket to advancement and personal fulfilment and as powerful as democratic vision was to earlier generations. It is a highly charged word, full of political significance.
Access is, after all, about distinctions and divisions, about who is included and who is to excluded. Access is becoming a potent conceptual tool for rethinking our worldview as well as our economic view, making it the single most powerful metaphor of the coming age.
– This is an edited extract from The Age of Access, written by Jeremy Rifkin it is published by Penguin books and retails at £20.