Capitalism needs you


Capitalism needs you. It needs people who have their ear to the ground, who understand what is happening in contemporary culture, who can read and respond to the dynamism of the world around us. Capitalism has created (or at least enabled) a “plenitude” it can’t keep up with. It needs you.

Scott Miller divides the world of business into three categories. At the top of his model, he puts the big corporations like General Electric, General Foods, General Motors. These companies are very large and quite slow. They respond to the shifting “field of battle” with difficulty and often they find themselves caught in a desperate game of catch-up.

At the bottom, he puts the little companies: start-ups and small enterprises like Vans (before they were bought by Nike), Kashi (before they were bought be General Foods) and Snapple (before they were bought by Quaker). These companies are (or were) smart, fast and highly responsive. (In the middle he puts the companies that are too small to have muscle and too big to be nimble. Scott calls this “death valley.”)

Most innovation and responsiveness enter the marketplace at the bottom of the marketplace, through small enterprise. If we wanted to increase the cultural responsiveness of capitalism, this is where we would put our efforts.

Normally, we may and we do leave this to the “invisible hand” of capitalism. Opportunity has the magical effect of summoning enterprise and we can leave this naturally occurring process to its own devices. But culture, often aided and disseminated by capitalism, is moving ever faster. The ability of the marketplace to respond to culture is under challenge.

So I was thinking to myself the other day: “what is the path of least resistance by which someone who “gets” contemporary culture can enter the marketplace?” I am no expert here. A year teaching at the Harvard Business School was illuminating and I got to sit at the feet of the likes of Joe Lassiter and John Deighton, but strictly speaking I should have been studying, not teaching, there. So treat these remarks with caution. They represent an early cartography, filled with error and ‘terra incognita.”

The fastest route is “import.” Ennis (refs. below) very kindly sent me a great clipping recently that described black visors now being worn by female bicyclists in China. In this case, the world supplies the “product development lab” and the manufacturing. It’s up to us to decide whether this innovation could ‘take” in North America.

If, with good research, we decide it can, we play the import game. We do not need a big investment to secure some of these helmets and we can test them in a couple of local markets (Seattle and New York City, say). If these work, we need to find a distribution channel and I am assuming that bike shops are numerous and disaggregated enough that we should be able to get “placement” here without having to worry about getting “muscled out” by larger players. In the import game, we are merely moving fads from one part of the planet to the other. Our advantage, we see them early and we respond much more quickly than a larger company can.

The problem with this option is that we will see our spouses or significant others 5 times a year tops. We spend the rest of our lives on the plane. We will die with many millions of frequent flyer points. The second problem is that this enterprise has almost no momentum. We are only as good and as profitable as our last “find.” We are cats on a hot tin roof.

There is a “scale up” opportunity here. I believe that the guy who founded Restoration hardware started by sourcing things this way, and now of course he has a small empire of stores. But this makes sense only if we wish to invest the time and risk that big enterprise takes. And we’re not. Some people like the leadership, the book keeping, the constant pressure of turning a little enterprise into a large enterprise, but I am pretty sure you are not one of them. I know I’m not.

The next fastest route is the small brand. This is how Snapple got started. Just a couple of brothers in Brooklyn, the original little engine that could. Snapple had the advantage of attaching itself to the moment in a way that the big companies like Coke and Pepsi could not. It “got” the 1990s and it spoke to them with advertising that used a receptionist as its spokesperson, and delighted in the fact that Ivan Lendl mispronounced the company name. They also made a virtue of necessity. Their only hope of distribution was the “mom and pop” store. (Coke and Pepsi controlled the supermarket and the 7-11.) But this turned out to be the very place that a generation preferred to shop.

Then it was a matter of scaling up and selling out. Many big companies are too big to anticipate the trend and they make up for this by buying out those who can. This makes for a big “pay day.”. Now we have the problem of too much money, instead of too little (see post for July 11, 2004: “Connecticut Problems and other business opportunities”), but this is the problem of plenty. We can start a foundation to support third world education, fund start ups in the alternative energy field, or just lie on the beach and turn ourselves into one of the great living authorities on the street life of Elizabethan England. Poor us.

There is an intermediate game that seems to be to maximize the fun and diminish the risk. This is to start a brand nursery. In this case, the trick is to listen to contemporary culture and rough out a brand that speaks to it. We are doing the conceptual work, and leaving everything else to someone else. In this mode, we might have created the idea and the branding for the cereal Kashi (before there was a Kashi). Along comes General Foods, and snaps it up. We don’t get a vast pay day, but we do get a pay day.

The advantage is this third option is that it leave us free to devote ourselves to the extensive process of staying in touch with contemporary culture, without having to invest our time and life savings in the much more intensive game of starting a company and babying it into existence.

In the first two options, we need capital, that great “barrier to entry.” In the first case, we don’t need a lot, but we will probably need more than can be extracted from parents, friends, and credit cards (the traditional indie method of financing). In the second case, we are going to need lots of capital and that means venture capital. (And venture capitalists are described by some of the people who turn to them as a little like the Mafia. They make you take most of the risk and they take most of the profit.) In this third case, we need just enough financial capital to create intellectual capital and that means a small office somewhere filled with lots of very smart people. Actually, we don’t even need to hire lots of people. In a “free agent” nation, it is possible to create a virtual corporation that “velcros” teams together on an “as needed” basis.

That’s the rough outline. To truly map the opportunities for the plenitude specialist, we would have to talk to someone who knows what they are talking about: venture capitalists, brand specialists, distribution specialists, and so on. And to do this right, hiring or getting an MBA would be a good idea.

But then we are a gull on the winds of contemporary culture, surrounded by 767s with imperfect navigational devices. There is a place for those who really understand contemporary culture in the marketplace. And without them capitalism will continue to be run by the generals.


Ennis here and here

6 thoughts on “Capitalism needs you

  1. steve

    I’m not sure I understand the intellectual property aspects of this business model. It seems like it would suffer from the Arrow Paradox–to get anyone to pay for your idea, you have to reveal it, but once you reveal it, no one will pay you. The only ways around this I can see are 1) if some sort of non-compete/non-disclosure form could be implemented or 2) if some key “ingredient” of the idea necessary for executing it could be withheld until payment was received. Otherwise, this sounds like a tough way to pay the bills.

  2. Grant

    Steve, thanks, happily, contemporary culture moves quickly (like an arrow, in fact) so the deliverable can be delivered and renew itself at the same time. Grant

  3. LK

    …but isn’t there a built-in problem here…that most people think their ideas are in fact *way* better and potentially more lucrative than they actually are? and these people would therefore would be extremely reluctant to “give” their winning ideas away for a flat fee. i think of a recent episode of ali G in tha US ( in which he tried to sell his brilliant idea for an ice cream glove that catches the drips to donald trump and other wall street VCs. i think this is far closer to how most people view their ingenuity. i understand the virtue and idea of working in an economy of ideas but my concern is that most people don’t/won’t.

  4. Grant

    Leora, thanks! But isn’t this what the market place is for, to tell us what our ideas (or products or services) are worth. It doesn’t matter what we think something is worth, the world will decide that for us. (And thus does capitalism do the miraculous work of apportioning value, when we cannot.) And if people withhold their ideas from the marketplace, well, as the French say, tant mieux. Their valuative schemes remove them from the market (and a good thing to). This brings us back to the issue of solipsism, one we talked about before, and the inclination of a contemporary culture to prompt people to hold inflated ideas of their value. As long as they stay out of the marketplace, they will never know the “wisdom” it can confer on them. The cultural issue is clear: there are people who preserve their ideas of themselves by staying well clear of the world. But the economics one is clear as well: even in a world as various and multiple as our own, there is a way of finding out. Thanks.

  5. Liz

    I left here to visit boing boing which had:

    Hong Kong-based AI development company Artificial Life is launching a sort of persistent, quasi-reality game in which a virtual girlfriend appears as an animated figure on your phone display. There is a direct relationship between her level of romantic activity output and the amount of money you spend on her. Actually, my people have a word for this sort of creature: ho.

    this seems to me some iconic form of marketing, an imaginary girlfriend. But the Japanese also have companies, I’m told, that provide rentafriends.

  6. Grant

    Liz, well said, and very funny. I guess the market can respond to our identity deficits and as AI gets better it will. This will provoke the solpsism problem (as above) and we will find ourselves surrounded by people with artificially inflated stocks of self esteem, people so divorced from the real exchange and determiner of value that they are effectively unplugged and more and more self fashioning. Beauty. Thank you. Grant

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