Creating the Generative Economy: Transforming Our Economy from the Inside Out Copyright by Brendan Miller, April

2011. Contact: brendan@brendanmiller.com Website: www.generativeeconomy.com

Generative - Having the ability to originate; e.g. "generative power" While the strength of Americas economy is renowned, our economic recovery has been weak, particularly in the area of domestic job creation. And even in good times our economy comes under criticism for producing inequality and for not being environmentally progressive. Advancement towards a green or sustainable model of economic development is certainly essential, but we may be missing opportunities to improve other economic outcomes by focusing too narrowly. The triple bottom line provides a framework for evaluating environmental, social and economic outcomes, but does not tell us how to reliably achieve gains on these three dimensions. Generative Economic Transformation provides a framework and a process to understand how to preserve what is working and simultaneously reverse what is not by addressing their root causes. It is generative in the sense that it transforms our economy from the inside out by changing the code at its core. Specifically, Generative Economic Transformation will: Create a more sustainable economy, with decreasing amounts of waste and pollution and increasing ecosystem health and carrying capacity. Reduce inequalities between the have and have-nots. Encourage individualized, local, unique options rather than continuing to mass produce one size fits all homogeneity. Enrich and elevate our culture by appealing to our higher ideals rather than debase it by exploiting our insecurities and weaknesses. Increase investment in new innovations and infrastructure that create longterm, durable productivity gains rather than extracting short-term value on the backs of our workers or environment. A populace that sees the world exclusively through the practical lens of get used to it: it is and always will be this way, or through the idealistic lens of dream with me: it should be better results in a divide of skeptics and dreamers. The alternative is a unified team that knows what it wants looks for and can work with unfolding systems and processes and nudges them in the preferred direction. How can we move to a model where the visionary inspires rather than frustrates the practical, and the practical helps the visionary to bring their dreams into reality? The two core practices of Generative Economic Transformation form a balanced approach to create this shift:

1. Cultivation of a vision of the possible and the preferred. A true vision provides the direction we seek and the inspiration we need to get to work on whats important. The most compelling vision emerges at the intersection of mental imagination and physical/emotional longing. Such a vision becomes the seed of transformation. 2. Unlocking change from the center of the system. This involves pragmatically charting negative trends, mapping their underlying systems, and identifying and refashioning the seeds of those trends to effect the transformation. Through these practices, drastic improvement becomes not just possible but inevitable. We can transform our economy from the inside out. It is possible to generate our desired economic future. As an exploration of the nature of this transformation, we can first envision an economy that retains the efficiencies and productivity of our current economy, but in which the infinite differences between customers are appreciated and solutions are individually and lovingly crafted for them, at the level of products, experiences, lifestyles and communities; workers are treated as irreplaceable artisans and compensated accordingly: we have learned how to tap into and match their unique passions and creativity with the equally unique desires in the marketplace, creating value for everyone; Amazing new creations enthrall vast numbers of customers in surprising market segments when our workers are encouraged to follow their hearts and imaginations; the outcomes of our economy are increasing equitable and just as compensation patterns shift gradually but dramatically as we reevaluate the tremendous and unique value that has previously remained locked within both workers and customers. businesses, workers and customers have all awakened to the fact that any form of waste, especially of talent and passion, represents immense lost value. In addition to the recapture of physical waste streams and harnessing renewable resources, new ways to harness the renewable resources laying buried within our human nature are discovered once we look for them; we find the cumulative economic value reclaimed through these transformations exceeds the sum of all previously existing economic value by 100 times. This value washes across the world, raising standards of living globally. A portion of this new value is reinvested in accelerated innovation and essential infrastructure, both physical and human, generating tremendous productivity gains that ensures future value growth. A tentative analysis of the systems that must be affected to realize this vision leads us to the following core biases, the seeds, which must be refashioned. In many cases, new technology, especially electronic communication, makes these particular shifts possible for the first time in history. 1. Abandoning top-down control in favor of bottom-up self-organization.

2. Encouraging reflection to identify new preferences, capabilities and choices where before we blindly repeated patterns. 3. Shifting from an emphasis on consumption (outside in) to creation (inside out).

Generative Economic Transformation can be also translated into the language and theory of economics. From utility functions and indifference curves through supply and demand curves via externalities, producer power and price elasticity to deadweight loss, we can identify how the current system is suboptimal, and how new economic value can be created through this strategy.

A case study of Generative Economic Transformation Village 2.0: A technology-driven renaissance of rural prosperity, community and quality of life Why is it that a handful of zip codes account for the lion's share of venture capitalists and successful entrepreneurial ventures in the United States?1 This situation is all the more alarming because research has demonstrated that ALL net new jobs come from new ventures like these.2 It appears that that the growing personal inequality in our country will be reinforced by increasing inequality in economic opportunity based on geography. We may be aware that America's rural areas are losing population because of a lack of good jobs, although many of these communities are beautiful and great places to live. Must rural communities accept this permanent, reinforcing inequity of opportunity? And what about the beleaguered urban workers commuting long hours as well as other drawbacks of urban living? You don't need to be an economist to know there has traditionally been much more opportunity in cities. But technology can create disruptions to established economic patterns. Technology has fed globalization and outsourcing that has moved much manufacturing and many services overseas, and shifted areas of economic opportunity for these types of jobs. Technology can provide access to global knowledge and best practices in areas that were previously isolated. A farmer's daughter in the corn belt can now access advanced engineering courses from MIT online and for free. Village 2.0 suggests that another technology-driven shift in economic opportunity is possible. Businesses will be able to relocate their entire operations to the rural communities of their choice with little or no disruption to their supply chain, access to customers or workforce. Interested entrepreneurs and specialists will be able to start their new companies almost wherever they want. Opportunities for rural economic development will expand greatly.

With the virtualization of business, physical geography becomes less important. While the value of periodic face-to-face meetings will never be replaced, a great deal of business can be handled through the internet, email, phone, videoconferencing, etc. This trend will only continue as technology and bandwidth improve across the country. Even those who believe in and support "geographically neutral" jobs probably assume that these opportunities are limited to software jobs, and perhaps some other services like customer support centers. But the value chains of even "hard" technologies like automobile manufacturing and development of new consumer electronic products can now go virtual.3 Local Motors is developing the first open source cars with a staff of 10 nowhere near the existing centers of the automobile industry using computer controlled "CNC" machines and off-the-shelf components. TechShop is opening centers with this equipment available for public use on an hourly basis, much like people commonly use computers at the local Kinkos right now. A toy developer lives where he wants, developing prototypes at home using a low cost 3D printer, then has any number from 1 to thousands - produced through a Chinese custom manufacturer he found through Alibaba.com and shipped directly to customers who made internet orders. While of course it would be better to have a US manufacturer to work with, the reality is that until he can find the right partner, his business can still continue to grow. From consumption to creation: Building the community you want Village 2.0 envisions a future in which business owners, workers and communities reconsider their assumptions about what is possible and reach out to co-create new opportunities together. Rather than having to choose from the limited menu of "what is," we can come together to dream and then bring to life "what could be." Making the leap: Solving collective action problems How can an entrepreneur find and assemble the right highly-skilled team who are also willing to live in Cloudcroft, NM? Or how can a group of 200 dispersed software developers who previously didn't know each other coordinate a simultaneous move to a new town where they would prefer to live and work? Tools like Facebook and Kickstarter have already made this possible, they just haven't been applied to this purpose yet. Community customization: The opportunities of uniqueness When geography is no longer the primary determining factor for where business clusters are located, communities and businesses are free to work together to choose a unique identity. They can develop over time both an economy and a culture that suits their residents best. In the world of products, mass customization refers to the new potential enabled by technology to combine the efficiencies of mass production with the flexibility to customize a different product for each individual customer. We will start to see the mass customization of communities, allowing our economy to operate at current levels of efficiency while simultaneously allowing communities to

specialize in certain work and ways of life that best suit those who choose to live there. One community might be a center of computer game development where most people are by choice church-going. Another community might choose to focus on custom clothing design and production where the residents' lives revolve around outdoor activities and wild nightlife or vice versa. We can now create our work and social lives by design. Envisioning the Village 2.0 future The results of these changes over time will be the greater dispersion of opportunity across the country, increased quality of life, and an increased sense of community. There will be positive ripple effects in rural communities as the direct job creation is followed by new indirect jobs and new induced jobs as well. After an engineering services company moves to a new town, a new copy business may start to serve their needs. And those involved in the local real estate market and downtown retail businesses will also benefit from new customers with more money to spend. Village 2.0 may have a number of beneficial side effects. The homogenization of place and the disadvantages small businesses currently face can be reversed. Local, unique businesses will have more ability to compete against national chains because the communities in which they are located will love and support them. Localization will be supported by the customization and differentiation of communities. Food security and health may improve as people move closer to the source of their food and increase their access to open space and natural areas. Some workers will choose to work part-time and homestead part-time, allow them to achieve new balance in their lives. Others will find the reduced cost of living allows them more time to spend with their family or become more involved in the community, strengthening civic life. This vision is not constrained solely to the United States. In time, the Village 2.0 vision will begin to reach the rest of the world, in both developed and developing countries. The most pioneering adherents might move abroad, lured by lower costs of living and quality of life, bringing their work with them. This will accelerate international development and could help reduce global inequality. All that is needed to get the ball rolling is the broadband that makes remote business relationships possible. There are certainly some limitations for many workers and businesses that will be difficult to overcome initially, but over time these barriers will be reduced. Even high tech businesses that depend on advanced research can be relocated. There are college towns all across the country and the same customization that will happen at the business and community level could also happen with university research centers. Professors could be lured by the same quality of life advantages into differentiated research groups in these towns, making possible the relocation of the businesses that

depend on their scientific knowledge. There is no reason a rural college town could not become a center of biomedical device development, for example.

Conclusion This vision, systems analysis and case study are preliminary, to illustrate their practice, as well as outline what we might find. Additional development of these ideas will be pursued. Contributions and feedback from readers are welcomed. brendan@brendanmiller.com

1 2

Josh Lerner, 2010 Kaufmann Foundation research, 2010 3 Atoms are the New Bits, WIRED, 2010