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  • I'm going to talk about a very fundamental change that is going on

  • in the very fabric of the modern economy.

  • And to talk about that, I'm going to go back to the beginning,

  • because in the beginning were commodities.

  • Commodities are things that you grow in the ground, raise on the ground or pull out of the ground:

  • basically, animal, mineral, vegetable.

  • And then you extract them out of the ground,

  • and sell them on the open marketplace.

  • Commodities were the basis of the agrarian economy

  • that lasted for millennia.

  • But then along came the industrial revolution,

  • and then goods became the predominant economic offering,

  • where we used commodities as a raw material

  • to be able to make or manufacture goods.

  • So, we moved from an agrarian economy to an industrial economy.

  • Well, what then happened over the last 50 or 60 years,

  • is that goods have become commoditized.

  • Commoditized: where they're treated like a commodity,

  • where people don't care who makes them.

  • They just care about three things and three things only:

  • price, price and price.

  • Now, there's an antidote to commoditization,

  • and that is customization.

  • My first book was called "Mass Customization" --

  • it came up a couple of times yesterday --

  • and how I discovered this progression of economic value

  • was realizing that customizing a good

  • automatically turned it into a service,

  • because it was done just for a particular person,

  • because it wasn't inventoried,

  • it was delivered on demand to that individual person.

  • So, we moved from an industrial economy to a service-based economy.

  • But over the past 10 or 20 years, what's happened is that

  • services are being commoditized as well.

  • Long-distance telephone service sold on price, price, price;

  • fast-food restaurants with all their value pricing;

  • and even the Internet is commoditizing not just goods,

  • but services as well.

  • What that means is that it's time

  • to move to a new level of economic value.

  • Time to go beyond the goods and the services,

  • and use, in that same heuristic, what happens when you customize a service?

  • What happens when you design a service that is so appropriate for a particular person --

  • that's exactly what they need at this moment in time?

  • Then you can't help but make them go "wow";

  • you can't help but turn it into a memorable event --

  • you can't help but turn it into an experience.

  • So we're shifting to an experience economy,

  • where experiences are becoming the predominant economic offering.

  • Now most places that I talk to,

  • when I talk about experience, I talk about Disney --

  • the world's premier experience-stager.

  • I talk about theme restaurants, and experiential retail,

  • and boutique hotels, and Las Vegas --

  • the experience capital of the world.

  • But here, when you think about experiences,

  • think about Thomas Dolby and his group, playing music.

  • Think about meaningful places.

  • Think about drinking wine,

  • about a journey to the Clock of the Long Now.

  • Those are all experiences. Think about TED itself.

  • The experience capital in the world of conferences.

  • All of these are experiences.

  • Now, over the last several years I spent a lot of time in Europe,

  • and particularly in the Netherlands,

  • and whenever I talk about the experience economy there,

  • I'm always greeted at the end with one particular question,

  • almost invariably.

  • And the question isn't really so much a question

  • as an accusation.

  • And the Dutch, when they usually put it,

  • it always starts with the same two words.

  • You know the words I mean?

  • You Americans.

  • They say, you Americans.

  • You like your fantasy environments,

  • your fake, your Disneyland experiences.

  • They say, we Dutch, we like real,

  • natural, authentic experiences.

  • So much has that happened that I've developed a fairly praticed response,

  • which is: I point out that first of all,

  • you have to understand that there is no such thing

  • as an inauthentic experience.

  • Why? Because the experience happens inside of us.

  • It's our reaction to the events that are staged in front of us.

  • So, as long as we are in any sense authentic human beings,

  • then every experience we have is authentic.

  • Now, there may be more or less natural or artificial

  • stimuli for the experience,

  • but even that is a matter of degree, not kind.

  • And there's no such thing as a 100 percent natural experience.

  • Even if you go for a walk in the proverbial woods,

  • there is a company that manufactured the car

  • that delivered you to the edge of the woods;

  • there's a company that manufactured the shoes that you have

  • to protect yourself from the ground of the woods.

  • There's a company that provides a cell phone service you have

  • in case you get lost in the woods.

  • Right? All of those are man-made,

  • artificiality brought into the woods by you,

  • and by the very nature of being there.

  • And then I always finish off

  • by talking about -- the thing that amazes me the most about this question,

  • particularly coming from the Dutch,

  • is that the Netherlands

  • is every bit as manufactured as Disneyland.

  • (Laughter)

  • And the Dutch, they always go ...

  • and they realize, I'm right!

  • There isn't a square meter of ground in the entire country

  • that hasn't been reclaimed from the sea,

  • or otherwise moved, modified and manicured

  • to look as if it had always been there.

  • It's the only place you ever go for a walk in the woods and all the trees are lined up in rows.

  • (Laughter)

  • But nonetheless, not just the Dutch,

  • but everyone has this desire for the authentic.

  • And authenticity is therefore

  • becoming the new consumer sensibility --

  • the buying criteria by which consumers

  • are choosing who are they going to buy from,

  • and what they're going to buy.

  • Becoming the basis of the economy.

  • In fact, you can look at how each of these economies developed,

  • that each one has their own business imperative,

  • matched with a consumer sensibility.

  • We're the agrarian economy, and we're supplying commodities.

  • It's about supply and availability.

  • Getting the commodities to market.

  • With the industrial economy, it is about controlling costs --

  • getting the costs down as low as possible

  • so we can offer them to the masses.

  • With the service economy, it is about

  • improving quality.

  • That has -- the whole quality movement has risen

  • with the service economy over the past 20 or 30 years.

  • And now, with the experience economy,

  • it's about rendering authenticity.

  • Rendering authenticity -- and the keyword is "rendering."

  • Right? Rendering, because you have to get your consumers --

  • as business people --

  • to percieve your offerings as authentic.

  • Because there is a basic paradox:

  • no one can have an inauthentic experience,

  • but no business can supply one.

  • Because all businesses are man-made objects; all business is involved with money;

  • all business is a matter of using machinery,

  • and all those things make something inauthentic.

  • So, how do you render authenticity,

  • is the question.

  • Are you rendering authenticity?

  • When you think about that, let me go back to

  • what Lionel Trilling, in his seminal book on authenticity,

  • "Sincerity and Authenticity" -- came out in 1960 --

  • points to as the seminal point

  • at which authenticity entered the lexicon,

  • if you will.

  • And that is, to no surprise, in Shakespeare,

  • and in his play, Hamlet.

  • And there is one part in this play, Hamlet,

  • where the most fake of all the characters in Hamlet, Polonius,

  • says something profoundly real.

  • At the end of a laundry list of advice

  • he's giving to his son, Laertes,

  • he says this:

  • And this above all: to thine own self be true.

  • And it doth follow, as night the day,

  • that thou canst not then be false to any man.

  • And those three verses are the core of authenticity.

  • There are two dimensions to authenticity:

  • one, being true to yourself, which is very self-directed.

  • Two, is other-directed:

  • being what you say you are to others.

  • And I don't know about you, but whenever I encounter two dimensions,

  • I immediately go, ahh, two-by-two!

  • All right? Anybody else like that, no?

  • Well, if you think about that, you do, in fact, get

  • a two-by-two.

  • Where, on one dimension it's a matter of being true to yourself.

  • As businesses, are the economic offerings you are providing --

  • are they true to themselves?

  • And the other dimension is:

  • are they what they say they are to others?

  • If not, you have,

  • "is not true to itself," and "is not what it says it is,"

  • yielding a two-by-two matrix.

  • And of course, if you are both true to yourself,

  • and are what you say you are, then you're real real!

  • (Laughter)

  • The opposite, of course, is -- fake fake.

  • All right, now, there is value for fake.

  • There will always be companies around to supply the fake,

  • because there will always be desire for the fake.

  • Fact is, there's a general rule: if you don't like it, it's fake;

  • if you do like it, it's faux.

  • (Laughter)

  • Now, the other two sides of the coin are:

  • being a real fake --

  • is what it says it is,

  • but is not true to itself,

  • or being a fake real:

  • is true to itself, but not what it says it is.

  • You can think about those two -- you know, both of these

  • better than being fake fake -- not quite as good as being real real.

  • You can contrast them by thinking about

  • Universal City Walk versus

  • Disney World, or Disneyland.

  • Universal City Walk is a real fake --

  • in fact, we got this very term

  • from Ada Louise Huxtable's book, "The Unreal America."

  • A wonderful book, where she talks about Universal City Walk as --

  • you know, she decries the fake, but she says, at least that's a real fake,

  • right, because you can see behind the facade, right?

  • It is what it says it is: It's Universal Studio;

  • it's in the city of Los Angeles; you're going to walk a lot.

  • Right? You don't tend to walk a lot in Los Angeles,

  • well, here's a place where you are going to walk a lot,

  • outside in this city.

  • But is it really true to itself?

  • Right? Is it really in the city?

  • Is it --

  • you can see behind all of it,

  • and see what is going on in the facades of it.

  • So she calls it a real fake.

  • Disney World, on the other hand, is a fake real,

  • or a fake reality.

  • Right? It's not what it says it is. It's not really the magic kingdom.

  • (Laughter)

  • But it is -- oh, I'm sorry, I didn't mean to --

  • (Laughter)

  • -- sorry.

  • We won't talk about Santa Claus then.

  • (Laughter)

  • But Disney World is wonderfully true to itself.

  • Right? Just wonderfully true to itself.

  • When you are there you are just immersed

  • in this wonderful environment.

  • So, it's a fake real.

  • Now the easiest way

  • to fall down in this,

  • and not be real real,

  • right, the easiest way not to be true to yourself

  • is not to understand your heritage,

  • and thereby repudiate that heritage.

  • Right, the key of being true to yourself is knowing who you are as a business.

  • Knowing where your heritage is: what you have done in the past.

  • And what you have done in the past limits what you can do,

  • what you can get away with, essentially, in the future.

  • So, you have to understand that past.

  • Think about Disney again.

  • Disney,

  • 10 or 15 years ago, right,

  • the Disney -- the company that is probably

  • best-known for family values out there,

  • Disney bought the ABC network.