Recently in Technological Cross-Fertilization Category

I am currently researching one of The Second Sight's topical foci: the economic, technological, and contentual cross-fertilization between the media, entertainment and the defense sector. 

For a general description of the technological cross-fertilization between entertainment and defense please read the January 2008 post: Military Entertainment Complex - the U.S. Entertainment Superpower or my June 2006 post, Creatonomics.

For a look at the cultural significance and asset of U.S. economic dominance in content production and distribution, see the March 2007 entry  The Arab Media Revolution - War of Ideas.  As I wrote then, "Lest we forget, creative content has a social impact as well as an economic value. I have always argued on this site, that media and entertainment sectors are undervalued assets in the American consciousness (both in terms of the economy and in terms of their social benefit in a global war of ideas)."  In another August 2006 post,  Why the fractured Chinese Market will never Buy your Movie?: The cultural and geo-political benefit of U.S. dominance in content creation and distribution "reminds me of what Simon Cowell remarked to Larry King in March this year [2006] when asked about the prohibition of "American Idol" like shows in China.  Says Cowell:

"Well, because it's a democracy, isn't it? You know, I mean, it's the public voting. So you can understand why they're getting slightly nervous about it. Because it wasn't our show in China, it was the laughing cow, so-and-so, so-and-so competition. And the public got to vote. And suddenly there were demos, and it was democracy. And I think the government went, we don't want this. So then they put out a stupid comment like that. You know? It's that we must control the public. Crazy."

What is the nature of the so called 'military entertainment complex' (also known as 'miltary nintendo complex') and what drives its organization?  The answer to the latter question is found in the maintenance of U.S. global military hegemony.  If the U.S. military is the primary global military power, and this hegemony is based on the ability of the U.S. Navy to dominate the world's oceans, then the condition of hegemony is partially based on the superior numbers and technology of U.S. naval vessels and augmented significantly by U.S. dominance in space-based reconnaissance technology, made possible by entertainment software consumers and movie goers world-wide.  In other words, the mainenance of U.S. global military hegemony, requires the continued militarization of outer and cyberspace; and the pentagon's organizational evolution and strategic positioning against asymmetric threats. 

We are focusing in the next few weeks on cyberwarefare.  Cyberwarefare encompasses a lot of terrain: “from posting misinformation on a blog to crashing a national stock exchange." That means cyberwarefare also encompasses media strategy (the production, distribution, and marketing of cultural content and propoganda) along the organs of communication from traditional media and their hybrids to the internet. 

For example, in a 2006 analysis, Stratfor, a private intelligence service, posted that al Qaeda’s relationship with the media was evolving so that it increasingly relied on the internet to accomplish organizational objectives, including communication and recruitment.  Whereas bin Laden and al-Zawahiri relied on traditional Arabic media outlets to distribute message, al-Zarqawi use of the internet shows the evolving ‘informational wing’ and philosophy of the new generation of al Qaeda:

Within this vein, al Qaeda in Iraq has used the Internet in two very significant ways: to disseminate propaganda in real time, and to shape public perceptions and debate in both the Islamic and Western spheres. In other words, the Web has been a timely, efficient and effective tool for conducting information warfare, which is key for breaking the will of the enemy and in motivating one’s own forces.

Another parallel that Stratfor posits in the same 2006 report is how this newer generation of ‘dot com’ terrorists compares in operational efficiency to their silicone valley counterparts of a decade prior.

It is not yet clear what the future will hold for al-Zarqawi’s organization in, but for the evolving generation of jihadists as a whole, past could be prologue. Ultimately, the dot-com terrorists might learn the same lessons as the dot-com entrepreneurs of the 1990s: There is no “new paradigm” in their industry. The most successful militants have recognized all along that certain basic rules — and operational practices — still apply. And for those who fail to grasp that reality, there will be a painful winnowing.

Cyberwarefare's conspicuity in the minds of Pentagon and intelligence strategists is evident by their acknowledgement of its threat in the 2008 Annual Threat Assessment [Download PDF.]

The US information infrastructure—including telecommunications and computer networks and systems, and the data that reside on them—is critical to virtually every aspect of modern life. Therefore, threats to our IT infrastructure are an important focus of the Intelligence Community. As government, private sector, and personal activities continue to move to networked operations, as our digital systems add ever more capabilities, as wireless systems become even more ubiquitous, and as the design, manufacture, and service of information technology has moved overseas, our vulnerabilities will continue to grow.

Our information infrastructure—including the internet, telecommunications networks, computer systems, and embedded processors and controllers in critical industries—increasingly is being targeted for exploitation and potentially for disruption or destruction, by a growing array of state and non-state adversaries. Over the past year, cyber exploitation activity has grown more sophisticated, more targeted, and more serious. The Intelligence Community expects these trends to continue in the coming year.

We assess that nations, including Russia and China, have the technical capabilities to target and disrupt elements of the US information infrastructure and for intelligence collection.  Nation states and criminals target our government and private sector information networks to gain competitive advantage in the commercial sector. Terrorist groups—including al-Qa’ida, HAMAS, and Hizballah—have expressed the desire to use cyber means to target the United States. Criminal elements continue to show growing sophistication in technical capability and targeting, and today operate a pervasive, mature on-line service economy in illicit cyber capabilities and services available to anyone willing to pay.

Each of these actors has different levels of skill and different intentions; therefore, we must develop flexible capabilities to counter each. It is no longer sufficient for the US Government to discover cyber intrusions in its networks, clean up the damage, and take legal or political steps to deter further intrusions. We must take proactive measures to detect and prevent intrusions from whatever source, as they happen, and before they can do significant damage. (p. 16)

As did the Pentagon’s 2008 Annual Report to Congress on the Military Power of the People’s Republic of China [Download PDF].

In the past year, numerous computer networks around the world including those owned by the U.S. Government were subject to intrusions that appear to have originated within the PRC. These intrusions require many of the skills and capabilities that would also be required for computer network attack. Although it is unclear if these intrusions were conducted by, or with the endorsement of, the PLA or other elements of the PRC government, developing capabilities for cyberwarfare is consistent with authoritative PLA writings on this subject.

In 2007, the Department of Defense, other U.S. Government agencies and departments, and defense-related think tanks and contractors experienced multiple computer network intrusions, many of which appeared to originate in the PRC (Sec 1:4)

"Non-Contact” Warfare: An example of China’s current thinking on asymmetric warfare is encapsulated by a military theory termed ”non-contact” which seeks to attain a political goal by looking for auxiliary means beyond military boundaries or limits. Examples include: cyberwarfare against civilian and military networks – especially against communications and logistics nodes; fifth column attacks, including sabotage and subversion, attacks on financial infrastructure; and, information operations. (Sec 1:21)

According to Stratfor, “The United States has a very impressive ability to function in and command cyberspace. But by no means does it enjoy the unquestioned military dominance it enjoys in so many other domains." Hence the creation of the Air Force Cyber Command and the organizational shift this asymmetric threat precipitates:

Mastery of cyberspace is essential to America’s national security. Controlling cyberspace is the prerequisite to effective operations across all strategic and operational domains—securing freedom from attack and freedom to attack.  (Air Force Cyber Threat Vision Statement [Download PDF], Sec 2: II)

Though not well known, there exists a dynamic cross-fertilization between media, entertainment and defense technology: i.e., military surveillance, targeting, and weapons systems use technology that was developed primarily for motion pictures and entertainment software. In fact, the U.S. government currently employs Panavision's 300x compound zoom lens for military surveillance; and according to an interview I conducted for The Second Sight (http://www.alexaobrien.com/TheSecondSight) with Bob Harvey, senior vice president of worldwide sales at Panavision, federal contracts with the U.S. State Department are the fastest growing segment of Panavision's business.

More provocative is how 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. Entertainment software has lead to faster introduction and deployment of processors, broadband networks, and high definition disks like HD-DVD and Blu-Ray. But, "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." The Mercury Computer's CELL based blade server, for example, can 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."

If the U.S. military is the primary global military power, and this hegemony is based on the ability of the U.S. Navy to dominate the world's oceans, then the condition of hegemony is partially based on the superior numbers and technology of U.S. naval vessels and augmented significantly by U.S. dominance in space-based reconnaissance technology, made possible by entertainment software consumers and movie goers world-wide.

Most Americans, however, 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 U.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.

  • 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.

  • 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. 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.

This development has hastened the transformation of the U.S. 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.

Who owns the Company Store?

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Viacom Asks YouTube to Remove Clips - New York Times

In a sign of the growing tension between old-line media and the new Internet behemoths, Viacom, the parent company of MTV and Comedy Central, demanded yesterday that YouTube, the video-sharing Web site owned by Google, remove more than 100,000 clips of its programming...

The dispute underscored the tense dance that major media companies are doing with Google, which bought YouTube for $1.65 billion last October. Google hopes to strike deals that will give it the rights to mainstream programming and also wipe away its potential liability for any violations of copyright law by YouTube so far...

YouTube is supported by advertising, but in most cases it does not share that revenue with copyright holders.

These developments are important to note, but the following comment jumped out at me and formed a synergy of thought about intellectual property and property rights in an age where the frontier no longer exists and natural resources of the world have become scarce.

"They choose not to filter out copyrighted content, " said the spokesman, Carl D. Folta. He added that the company apparently had the technology to filter out pornography and hateful material, which is rarely seen on YouTube.

It is no secret that totalitarian governments like the one in China use filtering software designed and sold by western companies, headquartered in liberal democracies. 

I am not suggesting that Google’s use of filtering software in the context of this New York Time’s article is totalitarian.  It’s not.  The thoughts that flowed within me after reading the article and which will follow do not directly relate to the content of the article itself.

NB I do know Google's relationship with the Chinese Communist Party is complicit when Google agreed to filter the Internet in order to secure their place in the oxymoronic "opening" of the Chinese market(s).  Who knows? I suspect they rationalize that their decision to do so is part of China's long term transition to liberal democracy brought about by the eventual increase in the economic and consequent political power or the Chinese middle class: in other words, a slow revolution or political evolution.  That model is certainly documented in human history.  I hope they are right.

In terms of any technology, for example, it is not the knowledge of how to split the atom that creates ill, it is the contextual use of technology that creates both good and evil. 

More to my ultimate point, I was more struck by the description of the filtering technology's application and the way in which its reference in the article further illuminated to me my own age and its philosophical dilemmas. 

Perhaps, the mention of filtering technology describe within reminded me of how its benign application for Google could be used in other contexts.  Certainly, Viacom has the right to protect its intellectual property however it wishes.  But what about this notion of intellectual property and ideas itself, the life blood our political and economic discourse?

The rise of fundamentalism and the changing post "Cold War" world order has been studied and described by others more accomplished than me, including Samuel P. Huntington in his "Foreign Affairs" essay and then book, The Clash of Civilizations. 

News, media and politics are interdependent organisms...and certainly many political scientists focus on their relationship to one another both in terms of the political cycle of nation states (elections), but also their political economy, in other worlds the market place.  The West increasingly depends on sectors like entertainment, research and development, and defense for its continued economic growth, and its overall political economy is direct responsibility for much of the West’s political stability and power.

We live in an age where entertainment and defense are curious bedfellows.  For example, entertainment software, as I have said elsewhere on this site, drives the technological development of the processors used by the defense sector. 

I have never heard anyone, however, flesh out the dilemma of Locke's notion of property rights in his "Second Treatise on Nature" (the philosophical underpinning of our own democratic republic is this notion of property rights) vis a vis intellectual or abstract property rights, central themselves to our creative economy, the underpinning of the West's continued economic growth. 

When intellectual property becomes the central driver of our economy, as it has, and the organs of information that distribute that property are consolidated (as they naturally are.  See Creatonomics), what does this mean for the average citizen?  For those who poo poo these ideas as too high brow for the mass, or somehow separate mass culture from the philosophical debates of our time, I say, “Forget the forest or the trees, you, my friend, are missing ecosystem of the forest.”  

Will our citizen own his plot of land in the media and entertainment landscape, or will he be forced to rent space from the company owned tenement, distribute his goods by the company owned railroad, and buy his supplies from the company owned store?  What does self-protection, natural to Locke’s notion of natural rights mean for the individual and social group within society? 

More importantly, the growing factionalism of our political discourse and the ceaseless polemics of extremist ideas are not simply a rehashing of polemics from times before.  These extreme polemics are manifest because of the underlying conflict and philosophical dilemmas of our time, the repercussions of which are experienced through every organ of society, including its central organs of information and ideas, mass media, entertainment, and art.

There is no save haven or neutral space for the tolerant in a world with less resources and no frontier to escape to.  This is the philosophical dilemma of our age and we must understand the dilemma as such.  Our liberal democracy depends upon it.  Our economic innovation, which drives our nation’s wealth, also depends upon that neutral and open space.   

The role of art, information, propaganda, and communication are the new frontier and the battleground in our ‘New World of Information’.  Is there an alternative to the increasing space that extremist polemics take up in our nation’s intellectual life? Any alternative must ultimately float the complex tensions of political correctness and fundamental secularism that is equally damaging, in my opinion, to the fabric of our society.  

Understanding these questions is the work of my generation and those living whose experience and wisdom can guide our society’s safe passage.  There are always consequences, even to inaction, so the focus of those who are interested need not be filled with petitions for the lazy. 

When the pilgrims came to North America, they were escaping religious persecution in the Old World.  A war of ideas is not new to human history, the epoch that we are in, however, is critical to the very existence of those organisms that we take for granted in the West. 

I continue to look to the former dissidents of eastern bloc countries, like the former Czechoslovakian, Vaclav Havel, 'playwright and antipolitican' later president of the democratic Czech Republic, for insight into the post-modern world order. 

For example, Havel wrote in the 1981 in his famous essay the "Power of the Powerless” about the post totalitarian state: where ideology is the tyrant (not the Politburo) and how the line of complicity runs through each citizen, including the grocer who puts up his seemingly benign poster which states, "Workers of the World Unite".   

All of us live in interesting times, but those of us involved in media have a tremendous responsibility for those who come after us.  I look forward to investigating and understanding these questions myself and in the timely work of my generation and others more capable and experienced than me.    More on these ideas later.

Dolby pushes 3D cinema scheme, News at CNET.co.uk

    Excerpts and Highlights:

    Dolby Laboratories, best known for its cinema surround-sound systems, on Monday said it has teamed up with German virtual-reality company Infitec to develop a three-dimensional projection system for cinemas.

      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]

       

      core_industries.jpg

      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.”[48] 

       

      Meanwhile, firms in the gaming industry, the fastest growing entertainment sector, search for gifted grads with degrees like Carnegie Mellon’s new Masters of Entertainment Technology or MET.  “The larger FX houses are constantly asking us about our students," says Professor John Kundert-Gibbs, Director of Clemson’s Digital Production Arts Program - whose alumnae work for the likes of ILM, Pixar, EA, and Nintendo.  As one game developer put it to columnist Tom Loftus, “Changes in the way games are built indicate less of a future demand for coders, but more of a demand for artists, producers, story tellers, and designers.” [49]    

       

      Film and video games are to this generation what journalism was to Bob Woodward’s.  Media and art programs are busting at the seams.  Enrollment at the Savannah College of Art and Design has increased fifty-two percent in the last five years.  “When I arrived at USC in 2000,” says Susan Hogue, Media Arts Instructor at the University of South Carolina and documentarian,  “there might have been two-hundred and twenty majors in Media Arts, and now it’s over four hundred.”

       

      In his prescient and aptly titled book, The Rise of the Creative Class, urban planner Richard Florida identified the emergence of the new economic and social class of “thirty-eight million Americans roughly thirty percent of the entire U.S. workforce,” whose creativity is the driving force of our nation’s economic growth. [50]   The key difference between the Creative Class and other classes lie in what they are primarily paid to do.  Those in the Working and Service Classes are primarily paid to execute according to plan.  The core of the Creative Class includes people in science and engineering, architecture and design, education, arts, entertainment, and the media whose economic function is to create new ideas, new technology, or new creative content and intellectual property.[51]  Around this core, exists a broader group of creative professionals in business, finance, law, health care and other related fields, who engage in complex problem solving that involves a lot of independent judgment and requires high levels of education or human capital.[52]   Today in the United States, the Creative Class is larger than the traditional Working Class.  The Service Class, totaling fifty-five million workers or forty-three percent of the U.S. workforce, is the largest of all.  The growth of the Service Class, according to Florida, is also largely a response to the demands of the creative economy.  “Members of the Creative Class, because they are well compensated and work long and unpredictable hours," writes Florida, “require a growing pool of low-end service workers to take care of them and do their chores.”[53]

       

      Our collective blackout about the central driver in our economy flows partly from the intoxicating polemics of the previous generations’ culture war that eclipse most public discourse about the shifting boundaries of our social geography and economic life.  On the left, critics bemoan the commodification of art and corporate America’s cooption of the symbols from the former bohemian and newer alternative counterculture.  “Hip is how business understands itself," writes Tom Frank, suggesting that the emerging culture is just another aspect of capitalism.[54]  On the right, detractors echo related themes about the devolution of society.  David Brooks describes the members of today’s generation as “The Organization Kid," part of the “Future Workaholics of America, obsessively career conscious and deferent to any authority that will get them ahead."  Brooks argues that the game generation lacks defining concepts of “character and virtue," because they have "been reared in a country that has lost, in its frenetic seeking after happiness and success, the language of sin and character-building."  "When I asked about moral questions they often flee such talk and start discussing legislative questions," writes Brooks: "These young people are not part of an insurrection against inherited order. They are not even part of the conservative reaction against the insurrection.  It's not that they reject one side of that culture war, or embrace the other. They've just moved on.” [55]    

       

      Yes, they have, and the notion illustrates a fundamental difference between today’s generation and the boomers.  The latter are wired to view creativity as a choice between “selling out" or “sticking it to the man”, and the quest for the great society as a battle between the mediocrity of relativism and the virtue of absolutes.  To use former bohemian terminology, today’s generation do not have those hang-ups.  Perhaps like earlier dissident antipoliticians from the former communist Czechoslovakia, who used satire and absurdity to highlight the fact that in a post-modern consumer society the “line of complicity runs through each of us," this new American generation distrusts political grandstanding and even traditional forms of organized politics.  “Ideology is a specious way of relating to the world,” writes Vaclav Havel former antipolitician later turned President of the democratic Czech Republic - especially when it fails to find solutions that arise organically outside the limits of its proverbial box.  “All of us,” writes Virgina Postrel, “must give up the cultural baggage we've inherited from the romantics, who set art against tech, and feeling against reason; from the modernists, who treated ornament as crime and commerce as corruption; and from the efficiency experts, who valued function while disdaining form.  We must abandon our prejudices regarding the sources of economic value. The production of wealth comes not simply from labor or raw materials or even intellectual brilliance. It comes from new ways to give people what they want. By matching creativity and desire, the economy will renew itself.”[56]

       

      The discussion continues online.  For an in-depth look at this and other related topics, visit http://www.alexaobrien.com/TheSecondSight.  If you would like to share your thoughts with me, or if you are a Nigerian official seeking to bequest the estate of a distant O'Brien relation who died unexpectedly without an heir, my email address is email@alexaobrien.com.



      The term "no brow" is attributed to writer John Seabrook, Nobrow: The Culture of Marketing, the Marketing of Culture (New York: Alfred Knopf, 2000).

       



      [1] Paul Taylor, “Outsourcing of IT Jobs Predicted to Continue," Financial Times 17 March 2004; John C. McCarthy. 3.3 Million U.S. Service Jobs to Go Offshore. Forrester Research, 11 November 2002.  Online.  Available: http://www.forrester.com/ER/Research/Brief/Excerpt/0,1317,15900,FF.html

      [2] Daniel Pink, “Revenge of the Right Brain,” Wired February 2005.  Online.  Available: http://www.wired.com/wired/archive/13.02/brain.html

      [3] Software That Writes Software. Futurist Update, March 2003. Online.  Avaliable: http://www.wfs.org/futuristupdate.htm

      [4] Jennifer 8. Lee, “Dot-Com, Esquire: Legal Guidance, Lawyer Optional,” The New York Times, 22 February 2001.  Online.  Available: http://www.nytimes.com/2001/02/22/technology/22LEGA.html?ex=1150084800&en=35db8cfb8e6f2494&ei=5070

      [5] John Howkins, The Creative Economy: How People Make Money from Ideas (New York: Allen Lane, Penguin Press, 2001) 116.

      [6] Copyright Industries in the U.S. Economy: The 2004 Report. International Intellectual Property Alliance, 2004: 7-8.  Online.  Available: http://www.iipa.com/pdf/2004_SIWEK_FULL.pdf

      [7] Jack Valenti, president and CEO, MPAA, Too Much, Too Little, or Just Right? Intellectual Property Protections and Technological Innovation in the Broadband Economy.  Forum On Technology and Innovation, June Lunchtime Policy Briefing, Washington D.C., 27 June 2002.  Online.  Available: http://www.tech-forum.org/upcoming/transcripts/062702COC.pdf; Bureau of Economic Affairs, U.S. Department of Commerce. The Migration of U.S. Film and Television Production Impact of "Runaways" on Workers and Small Business in the U.S. Film Industry.  Export.gov, Office of Public Affairs, 2001: 10. Online.  Available: http://www.ita.doc.gov/media/filmreport.htm

      [8] PriceWaterhouseCooper, Global Entertainment and Media Outlook: 2005-2009 (June 2005).

      [9]Charles Van Horn, president of the International Recording Media Association. State of the Industry Address: All the world's a game: but are you a player? IRMA's 35thAnnual Recording Media Forum in Indian Wells, California, 15 March 2005.  Online.  Available: http://www.recordingmedia.org/news/speechforum2005.html; PriceWaterhouseCoopers, Global entertainment Outlook: 2005-2009, (June 2005).

      [10]Richard Florida, The Rise of the Creative Class (New York: Basic Books, 2002) 191.

      [11] Cited in Re-imagine! Business Excellence in a Disruptive Age, Dorling Kindersley Limited (2003) 134.

      [12] Jason Tanz, “From Drab to Fab” Fortune, 24 November 2003.  Online.  Available: http://www.mutualofamerica.com/articles/Fortune/Decemb03/fortune2.asp.

      [13] Design in Britain 2003-2004.  Design Council UK, December 2003: 9. Online.  Available: http://www.design-council.org.uk/webdav/harmonise?Page/@id=6016&Session/@id=D_tgDE0UW30LeuDcycKyvJ&Document/@id=6485

      [14] Howkins, 95.

      [15] "Whirlpool's Future Won't Fade," Business Week, 8 May 2006.  Online.  Available: http://www.businessweek.com/magazine/content/06_19/b3983067.htm

      [16] Jason Tanz, Online.  Available: http://www.mutualofamerica.com/articles/Fortune/Decemb03/fortune2.asp

      [17] Daniel Pink, A Whole New Mind (New York: Riverhead Books, 2005): 81.

      [18] Florida, 148.

      [19] Jason Tanz, Online.  Available: http://www.mutualofamerica.com/articles/Fortune/Decemb03/fortune2.asp

      [20] Virginia Postrel, "The Aesthetic Imperative: Why the creative shall inherit the economy,"Wired, July 2003.  Online.  Available: http://www.wired.com/wired/archive/11.07/view.html

      [21] Danny Hakim, “An Artist Invades Stodgy G.M," The New York Times, 19 October 2001.  Online.  Available: http://select.nytimes.com/gst/abstract.html?res=F40F14F8395A0C7A8DDDA90994D9404482&n=Top%2fReference%2fTimes%20Topics%2fPeople%2fH%2fHakim%2c%20Danny

      [22] Pink, A Whole New Mind, 34.

      [23] Jason Tanz, Online.  Available: http://www.mutualofamerica.com/articles/Fortune/Decemb03/fortune2.asp

      [24] Ad growth stable with healthy hotspots. Zenith Media,  December 2005.  Online.  Available: http://www.zenithoptimedia.com

      [25] Deidre McCloskey and Arjo Klamer, “One quarter of GDP is persuasion,” American Economic Review 85 (1995) 191-195.

      [26] Gillian Doyle, Understanding Media Economics, (London: Sage Publications, 2002) 47.

      [27] Robert W. Crandall and J. Gregory Sidak.  Cost of making games set to soar. BBC News, 17 November 2005.  Online.  Available: http://news.bbc.co.uk/1/hi/technology/4442346.stm; Robert W. Crandall and J. Gregory Sidak. Video

       Games: Serious Business for American Economy.  May 2006: 5.  Online.  Available: http://www.theesa.com/archives/2006/05/video_games_ser.php

      [28] John C. Beck and Mitchell Wade, Got Game: How the Gamer Generation is Reshaping Business Forever (Boston: Harvard Business School Press, 2004) 33.

      [29] PriceWaterhouseCooper, Global Entertainment and Media Outlook: 2004–2008 (April 2004).

      [30] Paul Romer, “Ideas and things,” The Economist (11 September 1993).

      [31] Florida, 151.

      [32] Paul Romer, “Ideas and things,” The Economist (11 September 1993).

      [33] Paul Romer, “Economic Growth,” The Fortune Encyclopedia of Economics, David R. Henderson (ed.) (New York: Time Warner Books, 1993) 33.

      [34] Doyle, 80.

      [35] Colin Hoskins, Stuart McFadyen, Adam Finn, Global Television and Film: An Introduction to the Economics of the Business (Oxford: Claredon Press, 1997): 31-2.

      [36] Backgrounder: How New Drugs Move through the Development and Approval Process, Tufts Center for the Study of Drug Development, 1 November 2001.  Online. Available: http://csdd.tufts.edu/NewsEvents/RecentNews.asp?newsid=4

      [37] Meg James, "Warner Bros. Launching TV Unit to Produce Lower-Cost Programs," LA Times, 27 April 2006.  Online.  Available: http://www.latimes.com/business/la-fi-warner27apr27,1,6808834.story?coll=la-headlines-business