The imagination economy
To keep wages rising, American workers need to get creative.
By Geoffrey Colvin, senior editor-at-large

(FORTUNE Magazine) -- The U.S. economy faces a historic problem, and how it is resolved will drive major consequences for managers, investors, politicians, and especially workers.

The problem is that Americans' pay isn't going up. That's remarkable because the economy is booming - growth is strong, unemployment low, productivity rising smartly. Yet the latest figures show that the broadest index of pay (inflation-adjusted wages, salaries, benefits) is no higher than it was at the end of 2003.

This is serious trouble because America's great economic story is that living standards keep rising, especially when times are good. But living standards are not rising right now. That is the kind of deep disruption that over time can lead to economic and political crisis.

The conventional response is to urge greater achievement in science and technology, long our economy's foundation. In his most recent State of the Union address, President Bush announced "an American Competitiveness Initiative, to encourage innovation throughout our economy and to give our nation's children a firm grounding in math and science." There is much argument about how to do that.

But a contrarian school argues that the whole debate is wrong - that focusing on science and technology is fighting the last war. They hold that the very basis of value creation is shifting from the disciplines of logic and linear thinking to the intuitive, nonlinear processes of creativity and imagination. Tech advances will cease to confer much competitive advantage as they circle the world almost instantly.

Authors like Daniel Pink (A Whole New Mind), Richard Florida (The Rise of the Creative Class), and Virginia Postrel (The Substance of Style) see the value shift happening already and say the trend is just getting started.

Exhibit A in this argument is the iPod. Its success was based on imagination as much as technology. MP3 players had been around for years and had never done much commercially. Apple's achievement was creating an appealing design and extraordinary software that yielded a superior, intuitive interface - plus the business innovation of the iTunes online music store. The company then imbued the whole thing with an undeniable coolness.

The result is an overwhelmingly dominant business, with about 75% of the MP3-player market and the online-music market - all based on existing basic technology plus a lot of ingenious creativity.

Could that model - expressed already in hundreds of forms, from the carefully created Starbucks environment to Michael Graves-designed toilet brushes at Target - be the new basis of economic success? It's an extremely audacious claim. Left-brained logical rigor has been the foundation of economic growth for more than 300 years.

Most people instinctively rebel at the notion that touchy-feeliness could power the greatest economy on earth. It's fine for a few, but how can it employ the vast numbers who will no longer be working in America's factories, mills, and back offices?

I put that objection to Daniel Pink. He responds that in massive economic shifts people are terrible at foreseeing what's next. The conventional view 30 years ago was that an economy couldn't be based on services - manufacturing had to be the foundation.

No one "envisioned search-engine optimizers or web designers or executive coaches or nanotechnologists," he says. "When we're cabined in the present, we suffer from a certain poverty of imagination. We massively underestimate human ingenuity and resilience." The future, he says, will bring "industries we can't imagine and jobs which we lack the vocabulary to describe. Yes, it represents a leap of faith of sorts, but that's how it has always worked."

He's right. And the vision of the right-brain future is also appealing because it plays to America's strengths today. We're falling behind in science and math? Hey, we're awesomely good at creating games, humor, design, story, and other elements of the hypothesized future. Of course I could also tell you a dozen reasons that theory might not hold.

The larger point is that American workers need a new formula for raising their living standard. Experience says they'll find one. But they need it soon. Watching out for it, discerning it early, and jumping on it - whatever it may be - has become one of the most important things we must do. Top of page