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MUSIC AS A HOTBED FOR ECONOMIC DEVELOPMENT

A ROLE FOR THE MUSIC INDUSTRY IN DESIGNING DEVELOPMENT POLICY?

Alberto Cottica (alberto@thehubweb.net)

Notes for a WOMEX (www.womex.org) conference session, October 28th 2005, Newcastle (UK).

ABSTRACT

Creativity is cool among the most unlikely people these days: economists, high-ranking civilservants and policy makers in general. Recent economic literature emphasises the role of localculture to foster innovation and development. The general idea is that regions or cities, to besuccessful, need to attract and keep happy the people that come up with new things, and thisentails attaching a positive ethical value to things like individualism, will to take risks, being “fringe”.

Music is an excellent area in which you can promote this creative ethos. It commands enormousmotivation; it requires entrepreneurship; it has almost no capital requirements.

This is an opportunity for the music industry: There are a lot more funds in regional developmentthan in culture, and governments are more willing to listen to showbiz people paying attention todevelopment issues, as shown by some projects going on in Italy.

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1. Theme

In this paper I argue that the music industry has a role to play in the shaping of the economicdevelopment policies Europe needs to meet the competitivity challenge of our times. Thisconclusion stems from the following points.

1. There seems to be a wide consensus that the key driver to economic development isinnovation.

2. The notion of innovation has been broadened well beyond the traditional idea of atechnical invention covered by a patent. The word innovation now extends to creativethinking in almost any field imaginable, from communication to education.

3. It seems increasingly clear that innovative thinking depends very little onmacroeconomic (amount of capital), financial (availability of venture capital funds) orlegal (patent protection legislation) variables in straightforward ways. At the very least,such old-school-economics conditions are necessary, but by no means sufficient.

4. In fact, innovative thinking seems to happen within the context of relationships betweenpeople that are similar enough to be able to communicate and work together, butdifferent enough to give rise to new intuitions. This is fully consistent with the well knownfact that innovation has a regional dimension: it tends to happen more in some placesthan in others. Innovative regions are said to have an “innovation culture”.

5. This raises the issue of what to do in order to stimulate the process. Can a culture bebuilt, or reinforced, by design? Certainly, given the stakes, European policy makers atvarious levels seem to be willing to give it a try.

6. Among the recipes being circulated, two of the most promising seem interaction designand values communication. By interaction design I mean essentially the setting up ofloci of interaction for potentially creative people and the shaping of the appropriateincentives for these people to start using these loci. By values communication I meanactively encouraging attidutes like individualism, will to take risks, even being “fringe”.Both these strands of policy must concern themselves with the young, who are theobvious source of innovative thinking.

7. The music industry seems to be a valuable asset in this process. It thrives on creativity,aesthetical innovation, continuous remixing of styles; it makes ample use of socialmilieux in which creatives can interact; it strongly embraces a “do-your-own-thing”ethics; it has low barriers to entry; finally, it commands remarkable motivation and streetcredibility with respect to the new generations. It can be the training camp of innovators-to-be, and so have have a tremendous impact in promoting the participation of theyoung to the building or reinforcement of an innovation culture.

8. In contributing to this process the music industry has a lot to gain. Playing the big gameof shaping our common future is in itself more rewarding than just minding one’s ownbusiness at the margin of the debate. Also, economic development is a much higherpriority than music, so it naturally enjoys a level of funding which is greater by variousorders of magnitude.

9. However, discussing economic development requires a new set of tools for musicindustry players. This cannot be used as a new source of funding for business as usual.The industry’s core skills must be bent and integrated to design and implementinitiatives that are functional to development policies. For instance, Arts Centres shouldtry to function as business incubators, spinning off new companies in the creative

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industries; festivals should encourage grassroots creativity, both artistic and business,by involving up-and-coming artists and cooperating with young live productioncompanies wherever possible in a systematic way; integration with new media shouldbe pursued, and so on. Also, great attention should be paid to the regional dimension ofprojects: policy makers, with few important exceptions, think in terms of territory.

10. Of course, a lot of these things are already happening. But, with a few exceptions, thereseems to be little awareness of the role that they play in development policy, asopposed to cultural policy. I recommend a Europe-wide effort of the industry to proposeitself as a valuable partner for economics ministries and their counterparts in localadministrations. I also recommend that companies monitor closely the EuropeanCommission’s 7th Framework Programme and make an effort to launch projects outsideCulture 2000 and other programmes for the arts.

Section 2 discusses briefly some recent developments in innovation theory. This should beregarded as a sketchy survey of the conceptual arsenal with which to build policy proposals basedon music and creativity. Section 3 proposes that the music industry bids to take part in thisprocess, taking on the roles of policies test facility and large-scale value communicator.

2. Understanding innovation and its drivers

Europe’s social and economic system is widely perceived as needing more innovation, the LisbonStrategy being only the tip of a very large iceberg in this respect. Though well structured andendowed with remarkable strenghts, it seems to be losing momentum and resilience, frozen in aconfiguration that is not necessarily the most desirable one, nor the fittest in times of rapid change:innovation is seen as the force that can regenerate it. This judgment implies a broad definition ofinnovation. The latter is not only – and not even mainly – technical change, but is defined by theability to tackle new problems; to develop new approaches to the old ones; to promote the rise ofnew actors; to allow and encourage the diffusion of new solutions. In this sense a society is“innovative” if it shares in a full-spectrum innovation culture, i.e. if it accepts without reservationsthat looking for new solutions is a desirable activity even though it does not yield immediate results,and that whoever proposes a new idea to the community’s attention deserves respect. The exactopposite of innovator in this sense is conservative. A conservative person values the status quo,perceived as a guarantee of a satisfying equilibrium, whereas an innovator is ready to forego it infavour af any other solution, as long as it is more advantageous.

So what drives innovation in this broad sense? A convincing answer comes from a recent strand ineconomic literature, the theory of strategy in a complex foresight environment. This theory wasproposed at the end of the 90s to explain the behaviour of firms (especially hi-tech ones) thatmove in a strategic environment that changes very fast, with lines of business that open up andclose down again within few years, lightning-fast-rising new players and sudden bankruptcies anddisapperances, mergers and spinoffs. This theory uses a notion of innovation similar to the oneproposed here, and puts it right in the center of its argument. The reason is simple: strategy in acomplex environment is the governance of structural change, and structural change is innovation ina broad sense. The theory of strategy in a complex foresight environment argues what follows.

Innovation is the redefining of the meaning of artìfacts (that can be material, likeproducts, or immaterial, like organizations) and the identities of the agents1. The

1 The original terminology of Lane and Maxfield [1997], used also in subsequent work in this strand ofliterature, does not coincide completely with the one used nere. These authors use word borrowed froncognitive sciences, that may appear obscure and even pretentious to the uninitiated reader. For example,the word agent is not an exact synonimous of the more familiar concept of social actor. To avoid getting lostin definitions, I choose here to illustrate its fundamental intuitions using as few technical terms as possible.

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rationale here is that the world is shaped by the actions of agents, so change occurs whenone or more agents do something new or stop doing something they had previously beendoing. What determines the space of the possible courses af action (and largely the actionsthemselves) for each agent is the meaning that that agent attributes to the artifacts, to otheragents and to himself. So, for him to do something new he needs to have changed some ofhis attributions, and therefore the way he sees the world or parts of it. There are countlessexamples: the personal computer stems from the redefinition of computers from numbercrunching machines to domestic appliances; the desktop interface operating systemoriginates in Steve Jobs’s attribution to the average computer user of little interest inprogramming his machine himself, favouring rather a “plug and play” approach.

The innovative redefinition of meanings happens in the context of relationshipsbetween agents. It is difficult to see the world with new eyes if one does not interact withothers. The innovative intuition is often triggered by the interaction between people that aresimilar enough to communicate well, but different enough to stimulate in each othercognitive perturbations in each other. These relationships are called “generative”. Theconditions for a relationship to be generative are five: aligned directedness, heterogeneity,mutual directedness, permission, action opportunities.

Strategy in a complex foresight environment, so , is essentially an investment inrelationships. It is impossible to foresee, even approximately, the future state of the worldand decide a course of action over such foresight. What is possible is build relationships,and monitor their generative potential. An agent doing this will increase his chances ofadapt to, anticipate, or even trigger future changes that he cannot predict in the present.

Innovation has a local dimension. Some artifacts play a role in enhancing the agents’ability to build generative relationships. They are very diverse, including interaction loci(associations, trade fairs, journals and even customs, like the celebrated Happy Hour at theWagon Wheel in the Silicon Valley2) as well as cognitive artifacts (like emergent rules, thatallow for the diffusion of mutual trust between agents, or role structures, for exampleconventions that allow respected entrepreneurs or CEOs of important companies to speak“in the name of” the whole business). Lane [2002] groups them under the label ofscaffolding structures. Scaffolding structures are the hardware of the system: they arestable in the medium run (it takes time and investments to build them), and they provide theagent with a metastable identity, while at the same time creating the conditions for theconstant renewal of the system. Some scaffolding structures, by their very nature, can onlyexert their positive influence on a certain territory: many interaction loci, for example, arephysical places. While it is perfectly conceivable that the key interaction loci are movedonline, there is no evidence that this has ever happened so far.

Applied research seems to be consistent with this analisys. Scott [1999] gives a convincinginterpretation of the extreme geographic concentration of the recorded music industry in the U.S.:the dense networks of professionals in these cities function simultaneously as creativity reservoirsand communities of evolving competences and talents. In an industry that feeds on aestheticalinnovation, since innovation seems to happen most in the interaction between agents, theagglomeration of workers and companies that sustain a strong interaction enjoy a competitiveadvantage. Florida [2002] goes as far as to state that the characteristics of cities and regions (interms of lifestyle, supply of cultural and recreational activities, amenities) are the main determinant

The word agent has been deemed intuitive enough for the sake of the argument. The reader is referred tothe original articles for a more rigorous explanation.

2 The Wagon Wheel is a restaurant in Mountain View, CA, a favourite hangout place for people in thesemiconductor industry already in the early 70s. The custom in the late 90s was for hi-tech entrepreneurslooking for investors and venture capitalists to meet there for the Happy Hour. Tom Wolfe [1983] draws acolourful portrait of the place in an article about Robert Noyce, one of Intel’s cofounders.

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of regional development patterns. His research on the mobility of the key productive hi-tech growthfactors, venture capital and science and engineering graduates in top universities, conclude thatthe former follow the latter, and that these choose to live in cities that offer a welcoming habitat forthem: creative, tolerant vis-a-vis the bohemian lifestyle that they prefer, endowed with a thrivingnightlife and so on. Saxenian [1994] compares two regions specializing in hi-tech, Boston’s Route128 and California’s Silicon Valley: she concludes that the determinant of their differentperformance is the difference in local productive culture, which gives companies located in theValley a killer competitive advantage.

3. The music industry as a resource for development policy design

The new wave in innovation and economic development economics has gotten the attention ofEuropean policy makers. An important role in popularizing the theme was played by Americaneconomist Richard Florida, whose book The rise of the creative class seems to have been read, orat least to be quoted, by most politicians and high ranking civil servants in the continent. Floridalikes anecdotes from the rock (or, yes, even world -) music industry, and this is consistent with thevery broad definition of innovation he adopts: he prefers to speak of creativity. The idea is that, inan innovative society, people will be encouraged to use their creativity to do what they like andwhat they do best, and so regional economies will end up not only with more hi-tech entrepreneurs,but also with more fashion designers and rock musicians. You cannot buy the ones without theothers: if you do not create a climate conducive to self expression, pretty much all creative peoplewill simply move out3 to some more hospitable place.

Florida does not suggest that creating a vibrant music scene per se will create hi-tech or biotechcompanies, but he does insist that different forms of creativity reinforce each other andperformance in one is highly correlated with performance in the others. This opens up the way for astrategy aimed at establishing the music industry function as a test facility for policies on creativity,innovation and development; and as a communicator of the values of innovation.

The music industry can and should be a test facility for policies on innovation because of (1)its low or non-existent barriers to entry; (2) its low or non-existent capital requirements; (3) theexistence of an audience for its product that tends to be young, and to understand and make useof new media more than the average mass consumer. So, for example, suppose that the mayor ofa city wants to try to build a creative business incubator, that gives services and facilities tonewborn companies whose business plans satisfy certain requirements. Music industry companiestypically require only a very limited capital investment, which means that the social cost of anyoneof them going out of business is also very limited. Also, given the profile of the typical consumer,music business plans are likely to entail a fair dose of ICTs. This low-cost, low-risk experience,then, could suggest ways to incubate successfully other, more capital intensive forms of creativebusiness.

This example carries us into the theme of interaction design, which seems to be a very intriguingstrand of policy: how can a policy maker induce generative relationships? Even before that, howcan he make people get together? In Italy the obvious answer, widely employed in developmentpolicies of the Mezzogiorno, our poor South, has been to use economic incentives: funds wereallocated that were only accessible to coalitions of agents with a common project for a certainregion or territory. This, however, turned out to be the wrong answer: too much funding made itdifficult for new agents to sit at the table where a lot of money was allocated, since all of theavailable space was taken by incumbents with political clout competing for public resources. Thisresulted in a lot of coalitions, but no generative relationships: there was just too little heterogeneity,as the existing elìtes adapted to the new funding system. Again, I believe there are lessons to be

3 Of course, Florida has in mind the great mobility of labour that characterizes the U.S. The extent to whichhis results can be applied to Europein this respect remains to be seen.

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learned from the music industries: artists, firms and fans themselves all share in a galaxy ofcreative communities, each with their own scaffolding structures (clubs, newsletters, onlineforums…). Building on the existing structures and developing them is sure to yield insights on thesubject of managing creative communities, and therefore designing interaction loci and patternswith a surer hand when it comes to do it on hi-tech or biotech industries. At the time of writing, I amengaged in the fascinating task of seducing independent agents as diverse as music promoters,local banks, a trade fair, trade unions and local authorities to cooperate with each other in twodifferent projects.

The music industry can and should communicate the values of creativity and innovation toa large audience. It should be stressed that what Florida calls “creative ethos” is notenthusiastically endorsed throughout Europe. There are important differences between differentmember states, and perhaps even more important ones within members states. The limitedmobility of European workers may signal some sort of conservativism. My personal experience ofgrowing up in an Italian smalltowns in the 80s conveyed to me the opposite message: find a safejob, do not risk, do as others do. The punk rock ethics of “do your own thing” is a powerfulmessage to convey to the young: it just happens to be fully consistent with the aim of building aninnovative society, and musicians, record labels managers and concert promoters just happen tobe very credible in delivering it. This is an opportunity that should not be wasted: in fact, The Huband the most important Italian independent label, Mescal, have a project to use an importantfestival organized by the latter, Tora Tora, in this sense. This is an itinerant festival: the idea is toorganize workshops in which festival performers teach tricks to local musicians; to organize guidedtours to the production; to integrate the festival with vocational training in the field of eventproduction and marketing, and so on. Reconfigured in this way, the festival provides a service tothe community geared towards economic development (besides its usual cultural andentertainment value), and therefore it can credibly team up in partnerships with regionalgovernments or the Ministry of the Economy.

I believe we are looking at an opportunity for the music business. It is the opportunity to be amongthose designing our common future, rather than sit sadly at the site of the debate minding our ownbusiness; it is also the opportunity to cast the industry’s vision into big-time policy operations,which draw from funds that are several orders of magnitude larger than those allocated to cultureper se. And so it should be: from the Lisbon Strategy it is obvious that innovation and thecompetitivity it entails are Europe’s number one priority. However, it would be a huge mistake to tryto use this opportunity window as an additional source of funding for business-as-usual projects.People in charge of development programmes tend to be very skilled technicians, who want valuefor their money: window dressing operations would only result in undermining of the credibility ofthe whole business. The industry’s core competences – producing and selling music – must beintegrated with other, more policy-related competences, and our projects reconfigured to yieldeconomic development value added.

This inevitably leads to thinking in terms of “hybrid” tools: Art Centres reconfigured as businessincubators; microloans to creativity; festivals and concerts combined with workshops andvocational training; “music service counters” to help microbusinesses in the field of music and othercreative industries. And hybrid tools typically involve agents from different backgrounds workingtogether: This is a promising situation, because it makes it more likely that policy innovation arisesfrom generative relationships between these agents, but it also poses a number of coordinationissues. For example, my experience is that language interfaces are very important: when themayor of an Italian city says he’ll do something “in a short time” he typically means “in six to eightmonths”, whereas the concert promoter he is talking to typically understands “the week after next”.After a months has gone by without a word from the mayor, the promoter will conclude he hasbeen lied to and withdraw the enthusiasm he would otherwise have applied to the project. Tomaintain a good climate, it is very important to manage very closely his kind of communication andnuances.

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On the other hand, an encouraging note is that music retains a lot of its magic and glamour, andpeople in (non-artistic) policy making bodies tend to find it rewarding to work with people like us.The Hub was able to organize some very successful networking events involving high-rankinggovernment officials, and it turns out that one important element in boosting attendance is that themeetings were held in a conference room within the Milan offices of Sony Music Italy. Thisapparently added some stardust to the experience, though, of course, allure alone is not enough.

I’ll conclude by encouraging everybody to take part in the process of designing our common future,a much worthier stand than sitting aside while others do it for us. It is for our own good, too: themusic industry will certainly thrive in a society that prizes innovation and creativity. This requiresthat we develop better interfaces with each other and with European economic institutions, as wellas with their national and local counterparts. It also requires a good deal of “thinking big”, incomparative terms: when we, for example, bid on European programmes on innovation ourprojects are compared with those of Nokia, Airbus, Vodafone and so on. We’ll need a lot ofnetworking to reach a critical mass on some tables, and we will probably have to stay out of somediscussions altogether because we are just not big enough. But on the whole I and my colleaguesbelieve that we do have a role to play, and that the prize is well worth the effort.

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