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A specter is haunting America - a specter of the creative economy.  Its expressions are the lifeblood of our nation's economic muscle, and the metamorphoses of our social and economic organs are symptoms of its manifestation.  Yet, we are largely unaware of its existence, and its ideation remains unarticulated in our public discourse - obscured as it were by the rapping bare knuckles of narrow-minded extremities on the left and right hands of our cultural divide.  The more opposable of left-handed thumbs call the phantom menace capitalism and condemn the corporatization of art and the commodification of culture.  On the right, all fingers - except pinkies - point to the sun setting in the West and call the umbrage Hollywood.  For it is better, that one of your fingers should perish rather than have your whole hand cast into Gehenna. 

I have reduced these analogue dubs into binary code - comprised of the numeral zero and - for the increasing number of this magazine's bilingual readers - the numero uno.  I then filtered out discordant noise using compression algorithms that preserved each sound bite's ideological fidelity, but I scrambled the signals so that left and right channels reversed stereophonic polarity.  Presto change-o!  At zero decibels, the human ear perceives near silence - or the sound of both hands clapping for the "no brow" culture of today's youth.† The canine ear, however, would still detect the looping chant of hippies asking if that is freedom rock they hear, and if so, that the volume be turned up.

Friends, country/city men/women!   Before you hand cyanide to the old man behind the curtain - excuse me, 35mm camera - or have postmodern nightmares of movie executives screaming, “What are our theaters now if not the tombs and monuments to Film?” Before you condemn the blasphemy of Technicolor's "technology agnostic" e-cinema rollout; or become a digital Bolshevik, shooting at the heart and mind of film's aristocracy with your web clips of skateboarding dogs; before you write that long-procrastinated blog manifesto on the weak social capital of myspace friendship; or, better yet, one to educate our Prince de’ Medici; keep in mind: This is no joke.  Call it what you will, but the creative economy is here, and our nation's and your region's wealth depend upon it.

Our means of production is no longer capital, natural resources, or labor, declares economist Peter Drucker. It's information. Yet, one in four IT jobs and ten to twenty percent of financial services jobs in the United States and Europe will be offshored by 2010.  Forrester Research estimates that from 2000 to 2015 some 3.3 million white-collar jobs and $136 billion in wages will shift from the U.S. to lower-cost countries like India, China, and Russia.  Manufacturing bore the brunt of outsourcing in the past.  Today, the service sector, which employs four-fifths of the labor force, is increasingly affected.[1]

“In the old days," says computer scientist Vernor Vinge, “anybody with even routine skills could get a job as a programmer.  That isn’t true anymore.  The routine functions are increasingly being turned over to machines.”[2]  Appligenics, for example, a small British company, has created software that writes software.  The application is "up to 500,000 times faster than human programmers and completely error-free," says Jim Close, the company's business development director: "That means whereas a human would consider four hundred lines of computer code a good day's work, our software writes that in under a quarter of a second."[3]  Even online à la carte legal services have made inroads into the legal industry.  Analysts say, "As online resources grow, the demand for traditional services force lawyers to lower fees."[4]

More provocative than outsourcing, is the magnitude of convergence between telecommunications, digital technology and industry.  This development has hastened the transformation of our economy from one based largely on information and knowledge to one driven principally by creativity.   John Howkins categorizes the creative economy to include fifteen creative sectors - such as research and development, software, design, and content industries like film, music, and video games  - that produce intellectual property in the form of patents, copyrights, trademarks and proprietary designs.  The annual global revenue for Howkin’s fifteen identified sectors was $2.24 trillion in 1999.  The U.S. share represents forty percent of the market with revenue totaling $960 billion.  The U.S. share also accounts for more than forty percent of research and development, forty percent of television and radio, and thirty percent of film.  Howkins calculates that core copyright industries will be worth $6.1 trillion internationally in fifteen years.  U.S. dominance in these segments - more than productivity improvements related to new technology and new manufacturing methods - is responsible for much of the nation’s global economic competitiveness since the nineteen-eighties.[5]

The creative economy suggests more than technological progress or the growth of media and entertainment.  However, the latter development is important to emphasize.  Most of us are oblivious to the considerable role that content industries play in job and wealth creation - not only in terms of regional economic development and growing high-tech industry, but also in terms of our nation's global economic competitiveness.  In fact, the media, entertainment, and cultural copyright sectors create new jobs at a rate three times faster than the remaining economy.  In 2002, these sectors employed 5.48 million workers and accounted for six percent of U.S. gross domestic product.  These sectors also generated $89.26 billion in export revenue - surpassing every other category including automotive, aviation, agricultural, as well as chemical and allied products.[6]  Foreign sales of motion pictures alone totaled $17 billion in 2002.  The motion picture industry is the only U.S. sector that boasts a surplus balance of trade with every other country in the world; and the international sale of filmed entertainment plays a significant role in our nation's overall trade surplus in services.[7]  U.S. sales of entertainment software also totaled $8.2 billion in 2004, and U.S. game designers exported an additional $2.1 billion the same year. [8]    Deutsche Bank forecasts that global revenue for game software will grow at thirteen percent annually over the next four years, while PricewaterhouseCooper projects that the U.S. media and entertainment industries will be worth $690 billion by 2009.[9] 

U.S. regions are increasingly unable to compete against places like Bangalore, India or other lower cost localities for the routine information and knowledge jobs considered to be the holy grail of economic development.  Emphasis is frequently placed on attracting and growing high-tech to the exclusion of all else.  In reality, the high-tech sector does not grow in a vacuum.  It certainly will not grow without the creative forms of the content industries that drive technological advance for fields as diverse as real estate and medicine, and that also add high-value to technology products and consumer goods in today's glutted marketplace.  “You can’t have high-tech innovation without art and music," writes urban planner Richard Florida: "All forms of creativity feed off each other."[10]  Ultimately, high-tech requires a creative social milieu - what Florida has termed "the creative ethos".  This chief ingredient underpins the entire creative economy and those fertile regions that establish tangible high-tech hubs.

Even firms cannot compete exclusively with technology in today's global market.  Technology is cheap and ubiquitous until it acquires the high-value-added context of creative forms like branding, content, and design.  “At Sony, we assume that all the products of our competitors have basically the same technology, price, performance, and features," says Norio Ohga, former chairman at Sony. “Design is the only thing that differentiates one product from another in the marketplace.”[11]  Global competition has pushed quality so high and prices so low that the pressure to add value is intense.  “We can’t compete with the pricing structure and labor costs of the Far East," remarks Paul Thomson, director of the Cooper-Hewitt Museum in New York City. “So how can we compete?  It has to be with design.”[12] 

Stock from companies that place a heavy emphasis on design outperform their counterparts by a wide margin.[13]  For every percentage of sales invested in product design, a company’s profits increase by an average of three to four percent.[14]  In 2001, Whirlpool introduced its Duet line of washers and dryers.  By 2003, the company had nineteen percent of the front-loading washer market, up from zero, two years before.  "If you looked four or five years ago, the average life of a washing machine was something like thirteen years," says CEO, Jeff Fettig: "We're surveying owners and finding out a lot of people are replacing their washing machine with the Duet after five, six, or seven years because they want it, not because their old machine broke or wore out."[15]  Coleman Coolers was long considered the industry standard until competition began to erode the company's market share.  In 1999, Coleman redesigned its coolers.  Two years later, the company's cooler sales increased by forty percent and Coleman led its product market for the first time in years.[16]

“Jeff Grady, CEO of Charleston based DLO,” remarks Director of the Charleston Digital Corridor, Ernest Andrade, “was smart enough to figure out that you've the iPod, but you don't have the little accessories to go along with it.”  Design also has the powerful capacity to create new markets - whether for ring tones, medical devices, or cutensils.  “Abundance, Asia, and Automation turn goods and services into commodities so quickly,” explains business writer Daniel Pink, “that the only way to survive is by constantly developing new innovations, inventing new categories.”[17]  “Every product from sneakers to software is constantly being upgraded," writes Florida, “and everything from mutual funds to potato chips now comes in an ever-proliferating variety of types - because the Creative Economy is largely based on selling novelty, variety, and customization.”[18]  "Design has expanded its definition to include creating, recognizing, and developing opportunities to build business," says Tim Brown, president and CEO of IDEO, a design firm based in Palo Alto.[19]

While the creative economy does not represent the first time application of the high-value-added context of creative forms to technology products or consumer goods, it does embody the large scale and pervasive use of this methodology - what Virginia Postrel has termed the "aesthetic imperative" - and the considerable bearing that this approach has on the profit margins of every major industry sector.  “Manufacturing and technology generate wealth only when they make matter and information serve human desire," writes Postrel: “Desire is the true source of economic value.”[20]  When The New York Times asked GM Vice Chairman, Bob Lutz how his approach differed from his predecessors, Lutz responded, “I see us being in the art business.  Art, entertainment and mobile sculpture, which, coincidentally, also happens to provide transportation.”[21]

Branding, like design, can distinguish a product from the glut of global competition, but firms today cannot succeed with a brand strategy based on awareness and identity alone. “Mastery of design, empathy, play, and other seemingly, 'soft' aptitudes," explains business writer Daniel Pink, is “the main way for individuals and firms to stand out in a crowded marketplace.”[22]  "It may seem odd to hear a designer discuss brand positioning," writes John Tanz in Fortune: "Get over it.  No longer the wacky freethinkers whose work may never exist anywhere beyond their sketchpads and computer screens, designers are developing serious business chops, becoming better versed in the concerns of the manufacturing, finance, and marketing departments."[23] 

When I asked media-christened branding expert, Rob Frankel, how companies protect brand in the digital age with its lower barriers to market entry, he responded: "Most of these guys confuse 'brand' with identity or product. Identity is one small fraction of brand and products are merely 'proof' of your brand's promise."  Frankel distinguishes himself from "old school" marketing consultants like Jack Trout and Al Ries "by redefining brand in a way that impacts the bottom line."  "Branding," Frankel continues, "is not about getting your prospects to choose you over the competition.  It's about getting your prospects to see you as the only solution to their problem. Everyone makes a PC, but why do some people insist on a Mac, when it costs more and ostensibly has less software?"

When you look at the size and scope of the global advertising industry, you can appreciate how creativity factors into our economy.  Zenith Media estimates that global expenditure on advertising totaled $403 billion in 2005.[24]  According to economists Deidre McClosky and Arjo Klamer, persuasion, advertising, counseling, and consulting account for twenty-five percent of U.S. gross domestic product.[25] Economist Gillian Doyle also notes that when “expenditure on advertising is calculated as a percentage of GDP, the pattern that emerges indicates that as the national economy has grown over time in real terms, advertising has not just grown in parallel, but has grown even faster.  So the amount of advertising activity in an economy is related to the size and growth rates of the economy itself, and advertising has tended to account for a progressively more significant portion of GDP as time goes on.”[26] 

The convergence of digital technology, telecommunications, and industry has also eroded product market boundaries.  Sectors that were once distinct and unrelated now overlap through their shared use of media and information technology.  "What we do in medicine now relies on digital imaging.  It also relies on high-resolution, high-speed data processing," says Dr. John Raymond, Vice President for Academic Affairs and Provost at the Medical University of South Carolina.  So do digital cinema and entertainment software.  "MUSC was one of the first institutions in the U.S. to have a sixty-four slice CT scan that gives amazingly high-resolution pictures of the heart," continues Dr. Raymond, "Some people believe that this technology may even supplant doing cardiac catherizations for diagnosing cardiac disease.  But trying to enhance the images, learn how to use computer algorithms to read them correctly, or transfer the data rich files to a distant site to be read by an expert; those are issues we have to deal with, that we haven't dealt with adequately."  

The CELL based Mercury Computer blade server is a perfect example of a direct technology transfer from entertainment software to medicine.  Video games rely on powerful CPUs for the high-speed data processing required to render 3D images in real time.  As gamers demand a more heightened experience and greater realism, the data rich digital graphics and audio require more processor speed. Advanced scanning techniques - like the one described by Dr. Raymond - lead to huge amounts of data.  Using a traditional computer processor, reconstructing an image takes two seconds per slice, or over five minutes for a full image, but using the CELL processor, a central processing unit developed and optimized for gaming and broadband by Sony, IBM, and Toshiba, an image is processed in seconds. 

Digital cinema technology has repercussions for any application where the display and transmission of high-speed high-resolution data rich images are required: for example, high-resolution satellite imagery or telemedicine.  Consequently, the National Institute of Standards and Technology developed scientific measures and test materials to assess image quality and the effects of compression for the display and transmission of digital content in collaboration with the Digital Cinema Initiatives LLC - a consortium formed by seven major movie studios to create a digital equivalent to 35mm film.  Before a cinema can screen digital movie content, the presentation is compressed using high-speed high-resolution algorithms, encrypted, and transported to theaters via satellite, broadband, or hard drive.  In the end, "networks don't care what kind of data you are sending over them," says Bob Gibbons, Director of Marketing and Communications at Kodak Digital Cinema.

Military surveillance, targeting, and weapons testing also use technology that was developed for motion pictures and entertainment software.  The U.S. government currently employs Panavision's 300x compound zoom lens for military surveillance.  The lens made its television debut during ESPN's coverage of the Mercedes Championship in Maui this year.  Applying Panavision's lens technology with a high-speed high-resolution digital camera like the Panavision HDMAX - that incorporates the QuadHD CMOS sensor - detailed images of test missiles or objects of interest can be captured for analysis or target verification.  The Mercury Computer’s CELL based blade server can also handle the requirements of sonar and radar computation for military or scientific applications, because of its ability to process real time data streams.  “The Cell BE processor was originally designed for the volume home entertainment market," says Craig Lund, chief technology officer of Mercury Computer Systems, "but its architecture of nine heterogeneous on-chip cores is well-suited to the type of distributed, real-time processing that will power tomorrow's digital battlefield.”[27] 

Hollywood and video games drive the development of high-speed high-resolution digital image capture, management, transmission, and display that have implications for fields where these advanced technological applications would be economically unviable to develop on their own.  Digital Light Processing technology (DLP) from Texas Instruments uses Digital Micromirror Device light modulators (DMD).  DMD technology has made significant inroads into both the home and theatrical digital projection display markets, but the technology also has applications ranging from volumetric display, holographic data storage, lithography, scientific instrumentation, and medical imaging.  Entertainment software has lead to faster introduction and deployment of processors, broadband networks, and high definition disks like HD-DVD and Blu-Ray. The “media richness demanded by gamers and game developers drives progress in graphics and audio for the entire PC industry,” notes John C. Beck and Mitchell Wade in their study of the game generation's influence on organizational values in business.[28]  “IBM places value on chips made for entertainment software that goes beyond revenue and profits," says Dr. John Kelly, senior vice president and group executive for IBM Technology Group: "These chips help drive technology in other areas."  Online gaming and game downloads are one of the fastest growing uses for bandwidth connections, and entertainment software stimulates the demand for third and fourth generation cellular telephony with broadband speed capability.  PricewaterhouseCooper projects that wireless games in the U.S. will grow from $142 million in 2003 to $2.8 billion by 2008.[29]  

Despite a prima facie assumption regarding technology's cardinal role and inherent value in our local and national economies - technology, while an important catalyst, is not the central driver of long-term economic growth.  Although, we are not used to "thinking of ideas as economic goods," writes economist Paul Romer, "they are surely the most significant ones that we produce." Unlike traditional goods such as raw materials or machines that diminish or deteriorate with repeated use, ideas offer us increasing returns and actually grow in value the more they are used.[30]  The increased competition and shorter product cycles of the global market, however, have made time a scarce commodity.  As Florida writes, "Time is literally worth more than it use to be."[31]  Therefore, sustained and consistent creativity is the keys to deriving durable economic growth in today's economy.  The "only way for us to produce more economic value-and thereby generate economic growth," continues Romer, "is to find ever more valuable ways to make use of the objects available to us.”[32]  

The changes in our economic, social, and cultural organizations that have been developing for decades and define the landscape of the creative economy are not the result of new forms of technology.  Technology, innovation, and creativity are the products of these broader and deeper shifts; because, it is these structures, and not technology, that consistently support and elicit the very conception, production, and transmission of ideas that generate economic wealth.  The “most important ideas of all are meta-ideas," writes Romer, “ideas about how to support the production and transmission of other ideas.”[33]

Creativity is expensive and time consuming.  The production of commodities in the creative industries, which include film and television, is said to suffer from "Baumol's disease":  Costs in these sectors tend to climb faster than the rate of inflation, chiefly because creativity is dependent on highly specialized human capital and inherently labor intensive. Labor costs in the creative sectors also tend to rise more rapidly than others do. [34]

Conventional creative sectors - like high tech and entertainment - have always fallen under the traditional research and development model with its characteristic high production and low replication costs; intrinsic risk; and dependencies on intellectual property and human capital.[35]  Once the first generation of a pharmaceutical like Lipitor or a movie like Episode III: Revenge of the Sith is produced in its expensive and lengthy R&D phase, it costs comparatively little to reproduce and supply it to extra customers.  In the United States, the period from development, to FDA approval, to market for a new prescription medicine is ten to fifteen years, and typically costs $802 million.[36]  While corresponding data for the time it takes an average feature to make it to market varies, the industry slang "development hell" is frequently used to emphasize the notoriously long periods projects can remain in development before they are finally scrapped or "green lit."  Spiderman, for example, was announced as a film in 1986 but not released until 2002.  In 2005, the cost of an average feature released by MPAA members was $96.2 million. About thirty-seven percent of, that was spent on marketing.  The norm for expenditure on an hour-long television episode is $2 million, not counting development costs.[37]  Console game development costs between $3 million to $10 million per title,[38] with time from inception to market ranging from one to four years.[39]  Meanwhile, costs are projected to rise as demand for third party intellectual property becomes more desirable to game companies looking to mitigate escalating risks from fewer profitable titles.  Along with the increase in licensing fees from proven sports and movie franchises, development costs for three dimensional graphics, artificial intelligence, and enhanced voice and sound effects for the next generation game consoles are also projected to rise.

Creativity carries tremendous risk.  Only five of every five thousand medicines tested, according to the Pharmaceutical Research and Manufacturers of America, make it to clinical trials.  Based on research by the Tufts Center for the Study of Drug Development, only one of these five is eventually approved for patient use. Of the roughly forty thousand feature scripts that are written on spec in any given year, three thousand are optioned and a mere fifty actually made.[40]  In 2005, new releases totaled five hundred and forty-nine.  One hundred and ninety-four or roughly thirty-five percent were released by the majors and the other three hundred and fifty-five or sixty-five percent by independent distributors.  According to media analyst Christopher Gasson, only two out of every ten films made by even the most successful Hollywood studios, make a profit. [41]   Most films lose money.  "It’s a very frustrating process," remarks Megan Wolpert, Executive Vice President of Spyglass Television, "In terms of television very little work is done on spec.  Development has a seventy-five percent failure rate every year and that’s part of the game.  You buy eighty projects knowing that fourteen will be good enough to shoot.  Then of that fourteen, six will be on the air, and the rest just go away."  In 2004, three percent of PlayStation 2, Xbox, and GameCube titles accounted for 30 percent of the firms' combined 2004 revenues.  The total market for games included 1,751 separate titles, of which 91.3 percent sold fewer than 500,000 copies.[42]

Writers like Thomas Friedman and others have referred to the flattening or horizontal effect of globalization on business.  The trend is fundamentally a direct result of the emergence of the creative economy.  Urban planner Richard Florida notes how the formal venture capital system, high-tech startup phenomenon, and rise in research spending have now combined with the creative factory and subcontract-manufacture systems - translate outsourcing - and a new creative social milieu to form an “age of pervasive creativity that permeates all sectors of the economy and society.” [43]   Focus on creativity, while outsourcing or automating production, provides firms with the most efficient division of labor.  According to Timothy Sturgeon of MIT’s Industrial Performance Center, this model has another benefit; subcontracted manufacture can also capitalize on risk spreading and economies of scale.   “I think that quality wins in the long run.  Now, quality can also mean that it is downsized that means that you may be the best but you’re not the biggest," says Bob Harvey, Vice President of Worldwide Sales at Panavision: "I believe that Panavision is the best but we are not the biggest.  We manufacture everything here in this country for the most part.  That isn't fair with digital obviously, but we design everything here.  That is fair with digital.”

Despite our old-fashioned notions about creativity as something relegated to the fringe, or worse, the elite, creativity is mainstream.  More Americans work in art, entertainment, and design, than as lawyers, accountants, and auditors.[44]  In the United States, professional artists, writers, and performers have increased three hundred and twenty-five percent from 525,000 in 1950 to 2.5 million in 1999.[45]  Graphic designers outnumber chemical engineers by four to one, and more Americans are directly employed in film production than in the steel industry.[46] 

Corporate recruiters visit graduate art schools looking for talent, and design schools emphasize corporate skills along with draftsmanship.  Northwestern's Master's program in product development at the McCormick School of Engineering and Applied Science includes courses in basic accounting, marketing, conflict resolution, statistics, and ethics. Design programs at Stanford and the Illinois Institute of Technology are also adding business courses to their curriculums.[47]  The “MFA is the new MBA,” writes Daniel Pink, because, in today’s Creative Economy, “the high-concept abilities of an artist are often more valuable than the easily replicated [left brain] directed skills of an entry-level business graduate.”