The false promise of the passion economy
If you’re like me two weeks ago, you probably don’t really know what the passion economy is all about. You’ve seen the odd article or video but you still can’t quite understand why it’s different to anything we’ve had over the last few decades. Lucky for you, I did some of the hard work and tried to find out. I read what I believed to be the most definitive book on this topic — The Passion Economy by Adam Davidson. I went in expecting my questions to be answered but I, unfortunately, came out scratching my head.
I still don’t know what the fuss is about and here is why.
What is it?
Adam Davidson (author): An economy in which you can create special things that some people want a lot in a way that they didn’t in the past. (Taken from an interview, couldn’t find anything concrete in the book).
Me: An economy in which people can follow their passions and run successful businesses on a small scale while providing goods and services that incumbents can’t or won’t offer.
Explain like I’m 5: Start the next Microsoft but don’t be sad if you only end up with 100 customers.
1. Industrial paintbrushes for big companies that rely on specialised brushes
2. Ice cream, but real ice cream
3. Wine made somewhere really far away in Napa valley
4. Accounting advisory
5. Marketing advisory
Is this something new?
I don’t think so. People have been following their passions and building companies for many years. The real difference seems to be that the risks and the rewards are more conducive to entrepreneurship. In the past, for example, I would have had to work harder to publish this article. I needed to get a domain, create a website, design the website, write the article, etc., And even once published, it would be close to impossible to get more than 5 people to read this. But platforms like this one have changed that. All I now need is the internet and some time to put my thoughts together. Similarly, if I created a physical product, I can easily advertise it on a platform like Etsy or Shopify and get some company to store and deliver my products. I don’t have to be a big corporation that owns everything.
Is this the fix for the economy?
Nope. Unfortunately not. It’s really just people starting small businesses and using technology to make them more sustainable. The author keeps speaking about how “passion” businesses are small or should be small. That is apparently one of the great things about a passion-business. And the reason they can be small and successful is that people are charging high prices in niche areas. And niche, of course, is mainly just code for rich. The passion economy works best when you’re able to offer rich people random things. Or when you find a way to add to their already endless array of options. Rather than being an act of defiance against big corporations that supposedly oppress creativity, many of them have become dependent on corporations to fund their projects and have in effect become de facto contractors with a little more freedom than before. The big corporations are still in control.
This is, of course, before saying anything about the many jobs that are difficult to get passionate about. Contributors in the passion economy still need accountants and lawyers and doctors. For every smart person that is out there making real ice cream, there are dozens of people who don’t get legal representation or don’t get ailments treated before it is too late. Even though the market self-corrects somewhat to attract the right people, there are very few traditional careers that can compete with being a millionaire YouTuber, for example.
The way we view the success of the passion economy, then, boils down to how much we decide to value the individual over the collective. Whereas just about anybody can become successful with limited skills in the passion economy, the traditional economy is supposed to be geared towards productive vocations. If we manage to get every single person on earth through college, then we end up with better infrastructure, healthcare, legal systems, and law enforcement. If we get everyone a laptop and an internet connection, I’m not sure what we end up with. So as we try to get 3.7 billion online, I’d rather we focus on educating them so they are literate enough to read articles like the ones we have on this platform. And then we can make sure they have reliable and inexpensive internet so they can start learning the skills that will help them thrive in a world that encourages life-changing innovation.
Some of the good ideas…
Even though the main premise seems off, I wanted to believe that there are some good ideas. And to be honest, I think they are. But they don’t fall under the ‘passion economy’ gospel that the author is preaching. Anyone who has taken half a business course will see that the author has basically doubled down on some ideas from the business model canvas and Michael Porter.
Here’s an example. In earlier chapters, the author speaks about how the paintbrush business was disrupted by cheap alternatives from China that put a strain on a particular company in the U.S. China decimated the American manufacturing industry. We all know this. So when this happened, successful businesses found a way to differentiate themselves. Since they were unlikely to offer a lower price, they did two other things common in business. They became creative about what they were actually selling and found a way to market it as such. Not a trivial exercise in itself. But companies didn’t survive because the owners decided to follow their passion in response to China as the author suggests. They simply applied business sense, differentiated their product and changed their target market.
Some of the weird ideas…
Here’s a piece from early on in the book:
In the Passion Economy, you can capture value — sell and distribute things — on an unimaginable and unprecedented scale.
So far, so good. We should use the web to scale our small businesses. But then a few lines later:
But you should be careful not to produce value — create a thing that people want — at scale.
So instead of producing value, we should focus on simply capturing it. But then, of course, a few pages later, we’re back to creating value.
While your prices should adapt to the value you create,…
And then somewhere between the backflipping, he takes a dig at his whole big idea about building a solo empire.
Creating value at a large volume is something only huge companies can do profitably. They have have factories that manufacture countless sneakers or candy bars, studios that produce music or movies, giant firms that consult all over the world.
He was just speaking about selling and distributing things at unprecedented scales but now we should actually just keep it small.
Only focusing your attention on those things that reach a relatively small and strongly opinionated customer base,…, will be worth your while.
Like I said, I’m still confused. Maybe I chose the wrong book and that’s obviously my fault. I’ll be going back to the drawing board to find something better.
To be clear, I love small businesses and innovation. I think the web has the power to change people’s lives and that’s a great thing. I know it’s changed my life tremendously. But I’m not going around giving you my life story and punting it as the new way of life. There are some good ideas, but they fit in a series of blog posts that explain how parts of the traditional economy are changing. Let’s just say that if I have kids then I’m definitely teaching them math before I teach them how to use a camera.