Detroit: Currently rebooting. Picture by PhotoFusion

Detroit, and the rest of the American economy, is in deep trouble. Drastic changes are taking place because of the skyrocketing price of oil, from GM shuttering plants to the nosediving airlines, but to fix the problems of towns like Detroit, it’s going to take more than an unlikely return to cheap gas prices.

I was so happy to see Obama finally clinch it last night, for so many reasons, but it’s going to take more than changes we can believe in. We need changes we can be involved in and instigate. To fix places like Detroit, faced with uncertain global economic conditions that change by the hour, we need systems that allow for change constantly. We need systems and organizations that can organize and reorganize at a moment’s notice. Companies and cities like Detroit need to become hackable. Ryan Holiday just pointed me in the direction of a great article on hacking industrial economies by Umair Haque over on the HBS site. Haque writes:

“Last week, I asked: how would you rethink a rusting, obsolete American auto industry?

“Let me rephrase that question, to illustrate why I asked it. I was really asking: how would you hack Detroit?

“The answers were (seriously) phenomenal: different approaches to hacking Detroit’s resources, capabilities, business model, and DNA.

“Why is that so important?

“Hacking wasn’t just a cultural phenomenon; a bunch of socially awkward dudes with even worse haircuts than investment bankers geeking out in their bedrooms. It was larger: a loose set of anti-management principles that unlocked innovative capacity companies couldn’t – and still can’t – match. Hacking was a radically different - and often hyperefficient - way to find big economic problems, and then solve them.

“And that’s exactly what we’ve been discussing: the malaise gripping the venture industry, because it’s seemingly unable to find and solve big problems. One of the reasons today’s revolutionaries are failing is because they’re losing perhaps the most essential part of their DNA: they’re forgetting what it means to hack stuff.”

It’s a good read. I think there is also another side to the point above about the venture industry. The VC business and the record industry for that matter, and many other industries besides, are not solving the big problems as well because we have other ways to solve them. We don’t necessarily need an encyclopedia company to make an encyclopedia (See Clay Shirky’s excellent book for more on this). You don’t need a $100,000 video and a fleet of trucks loaded with plastic discs in jewel cases, headed to stores you have to pay to display your plastic discs, to get a great song out there. And you don’t always need a VC firm to scale a good idea. You just need the idea.

Meaning and ideas have long been spoken of as currencies, but it seems to me their value is going through the roof while the value of hard currency is falling. Companies create value by privatizing some idea that starts as social capital - like a form of youth culture which is co-opted to sell sneakers. Sometimes this works out, and the company adds value to the culture as well as making money (see: the surf, skate and snowboard industries). Sometimes it doesn’t, and the culture becomes a bloated corporate parody of itself (see: disco). But now we are finding new ways to create value without traditional companies, and some problems that could previously only be solved with private capital can be addressed with social capital.

Take Zipcar founder Robin Chase’s latest venture, GoLoco.org for example - a great combination of carpooling and social networking. Go Loco hacked Detroit by creating a new layer of social capital on top of the value created by cars. I’m sure business is booming for them given the current price of gas. Of course by ‘business’, I mean the amount of social capital they are creating, but that means the private capital saved can be used in other ways. The money saved on gas can be spent somewhere else. Using social capital to unlock new forms of private capital, which in turn needs to be supportive of new layers of social capital, is a great way to build sustainable economies, and create dynamic systems which could regenerate rusting cities. A rising tide may indeed lift all cars.

Update

Apparently Detroit is already being hacked, for all the wrong reasons. Invincible and Finale made this music video/documentary hybrid rhyme about the impacts of gentrification on the Motor City. This piece includes interviews with community activists discussing displacement and predatory planning versus sustainable development in the D. Thanks to Dart for the heads up.

I’ve was in LA last week talking to various people in the entertainment business about various things, and a subject that kept coming up was how the way we create stories is changing. Most forms of big media storytelling are one-to-many, but new forms of malleable media and new opportunities to create many-to-many networks are adding value to broadcast models, and the way they tell stories.

Stories that include their audiences in the creation process become more complex, go off on tangents and create new relationships between the broadcaster and the audience. Some even extend markets and product life spans. Giving the audience space to create their own stories within the broadcast story is a great way to create mass media. Instead of creating one story with broad enough appeal for a mass audience to find it palatable, it’s now possible to create a piece of mass media without much of a storyline at all, but instead, the tools the audience needs to create millions of their own, that they in turn can change and narrowcast to their peers. The audience knows what they need from narrowcast entertainment better than the broadcaster does, and they know the target audience for that entertainment (their friends and families) better than the broadcaster ever will.

Video games, currently biggest selling form of entertainment, have realized the potential of this idea more than any other type of storytelling. The battle between Master Chief and the Covenant isn’t the whole story of the Halo franchise. Your YouTube video of yourself regulating ten noobs with nothing but the butt of your gun and a hand grenade, set to a techno music bed that sounds offensively bad to everyone other than you and your friends, is also a major part of the story. That’s the reason why Halo set the record for the most single day sales of any form of media. The game about to knock Halo off the top spot is GTA IV. It will do so for the same reason – GTA story lines are paper thin, the real value has always been the rich and detailed sandbox worlds of GTA and how they let you create your own stories within them.

Networks drive stories in physical spaces too, they drive our life stories. David Leonhardt recently made the point that ideas and the value of networks keep us living close together in cities when we don’t necessarily have to. You might visit a major city like LA or Tokyo or London as a tourist for the linear story, to see the sights and so on, but people move to cities for the opportunities and stories they themselves can create with the networks that exist there. The quality of the relationship you are able to have with the network in a physical place makes the difference between that place feeling like a nice place to visit, and that place feeling like it could be home. New York City and Liberty City are great places to be for the same reason.

Great networks perpetually add value to all kinds of stories. From fan-fiction to remixes to making home videos at theme parks, people have been creating their own niche stories within mass entertainment properties for a long time. When mass entertainment properties encourage and add value to the networks that grow around them, they make it easier for the network to reciprocate.

Current TV just put up an interview I did a few months back with Brooklyn producers John Carluccio and Mark Kotlinkski - They dug up some cool slides I haven’t seen before. Mark also has a production outfit called 88 Hip Hop which does some great stuff - look for his film The Mural Kings about legendary graffiti artists TATS CRU - which is well worth checking out.

I did an interview for Booz Allen Hamilton’s strategy + business magazine with Edward Baker - you can read it here.

Here’s the full speech from my keynote last week at The Medici Summit on when and how it’s best to compete with pirates. There were some amazing speakers at this conference, check the Summit website for more videos over the coming months.

I wrote and op-ed on the future of mobile marketing for this week’s edition of ADWEEK, making the case that treating customers like criminals for illegally remixing your brands and messages isn’t a good idea:

“Effective strategies will mean more connections with consumers and increased opportunities to communicate with them. But they may also mean more crossed wires and mixed messages. The question is, are we in the business of spreading messages or controlling them? In the future it’s going to be harder to do both.”

You can read the piece in its entirety here.

Update: The New York Times picked up on the op-ed too.

Apologies for the lack of activity these last few days, was taking a break in Costa Rica, but normal activities have now resumed. While I was away a lot has been going on…

Lawrence Lessig might be running for congress.

Ji Lee developed the ultimate t-shirt for Red Sox fans.

Some great books came out, like Clay Shirky’s Here Comes Everybody and Gerd Leonhard’s Music 2.0

The BBC thinks the Chinese model of music-as-advertising could be the answer, I think that loss of independence will damage music and all we’ll be left with is muzak. As a revenue stream sponsorship makes sense, but as the revenue stream, it will damage music. There needs to be royalties and licenses and other ways for people to earn money from their work. I think as prices of these things fall (which they will) the value artists can create will go up, because more people will be consuming their material.

Oh, and I did an interview with Creative Generalist.

Giving away something for free is a great way to compete with pirates, but it’s also a great way to compete with obscurity. Around 200,000 books come out every year in North America, and the average book sells 500 copies or less. A free e-version might cost you some sales, but all the evidence suggests it’s more likely to gain you an audience.

It’s also a great strategy for books that aren’t obscure. Bestselling author Paul Coelho had a lot of success with this approach, which I wrote about a few weeks ago. But it seems the idea of free books itself is now starting to go viral. This morning I got this email from Frans Johansson, bestselling author of innovation bible The Medici Effect:

“My publisher Harvard Business School Press has just done a first. They sent me the pdf for The Medici Effect for me to post on my site. Anyone can download it, post it, and share it with anyone for free. They have never done anything like this in the past and we are all very curious about what could happen … The inspiration for this came effectively from The Pirate’s Dilemma blog where my friend Matt Mason describes how best-selling author Paolo Coelho boosted sales in Russia by uploading a pirate copy of his book The Alchemist. Very good example of competing with pirates. I sent the post to HBS Press – and they said let’s do it with the English version.”

You can download the full version of The Medici Effect here (pdf), which is one of the best innovation books I’ve ever read, and a bargain at twice the price.

I realize there is one book mentioned in this post that doesn’t yet have a free e-version available. I’m working on it…

Steve D of TechVat has done a very cool appraisal of Digg using the ‘four pillars of community’ idea from the book, a device I use to think about building open source systems, social networks and other types of communities that will attract participants.

It’s cool that people are starting to pick up on some of the other ideas in the book. The pirate’s dilemma model is actually one of many (well, eight…), but it seemed to be the best title that tied them all together. The main points are quoted below, but check out the full post here. Steve uses the four pillars as I outlined them to examine where he thinks Digg is faltering, and where it’s doing well. He writes:

“Pillar 1: Altruism – Inspire your Audience to Help You Start Something.

When Digg began it was all about getting great content on the site. Back then it was strictly a tech site and the user base consisted of a large following that came from Kevin Rose’s days on TechTV.

Kevin had a vision. He wanted to harness the Wisdom of Crowds for the purpose of spreading great content to a multitude of users all over the web. If there was a money making system at work no one saw it back then. Many members wanted to see Digg succeed because they felt it was the wave of the future, putting the power of the media back into the hands of the common man.

Pillar 2: Reputation – Let Your Audience Create New Identities and Distinguish Themselves.

MegaDeth had a song in the 80’s, “Peace Sells, But Who’s Buying?” Even the most altruistic of people like to have a modicum of recognition for their deeds. Many Internet forums are run by volunteer administrators. They do not do it for pay they do it as they see personal value in it. Having the title of admin on some forums gives you a title equivalent to King or Queen. It is something you have earned and others respect.

Between the top digs users list and the DiggNation podcast Rose and company offered a valid reward system to get members involved; fame.

Many of the top Diggers on the site grew to have followings. They became social news celebrities in their own right. Becoming a top Digger was not something that was handed to you. Oh no, it is something that you had to work your ass off to achieve.

Pillar 3: Experience – Give Your Audience a New Experience and the Chance to Improve Their Skills.

Not all users of Digg are in it for the fame. Some of them just want to learn a thing or two about how social media works.

I know, from my own personal experience, that my involvement in Digg has been rewarding because I have met many new friends. People I would have never met outside of Digg are now people that I can call friends.

Not only have I met new people but I have also been able to debate my ideals and sway others (or been swayed myself) all because of Digg. Outside of home, work and my small circle of local friends I do not encounter many people who do not share my ideals and way of looking at things. Thanks to Digg (at least in the early days) I was able to learn things that have changed my point of view on various subjects.

I have found myself to be a better writer and debater because of the time I have spent on Digg.

Pillar 4: Pay Them!

I am not talking about cash money here (wouldn’t that be nice!) but about paying back the Digg user base for, without them, Digg is nothing.

Digg does still give back in the form of the DiggNation podcast but, they dropped the top Digger list. Not only have they dropped the list but they have turned the site upside down by making harder for the top Diggers to stay in the game. They have created an un-level playing field by forcing the more popular members to acquire more Diggs on a story before it gets promoted to the front page.

I understand that Digg wants to attract new members but what about all those people who made Digg big in the first place? If I, as a new user, am told that I am only welcome to submit content to the site until I hit a certain popularity threshold than why should I invest any time at all into the site? Digg is effectively telling me that they are scared of influential members using the site.

It has long been said that good managers hire good workers while bad managers hire bad workers so that they will not be shown up. Is that where Digg is headed?”

Get Steve’s answer here…