A Creative Economy in the Service of What?

''The creative economy'' (The 21st Century Corporation, Aug. 21-28) was insightful and especially timely for my MBA class, stimulating a great deal of discussion. However, regarding the contrasts drawn between the Industrial Economy (physical) and the Creative Economy (ideas and software), if it's true that ''the advanced economies have gotten so efficient at producing food and physical goods that most of the workforce has been freed up to provide services or to produce abstract goods: data, software, news, entertainment, advertising, and the like,'' then the software revolution is over. The only value that ideas encased in software have is to generate better decisions about physical goods.

It is stated that ''software is an idea; hamburger is a cow.'' I cannot eat software. But I may be able to get more and better hamburgers to market using ideas embodied in software. In effect, I am substituting silicon for other resources that might be used to produce hamburgers. The value of the software is created by the redeployment of the physical resources. The software and ideas in isolation are worthless. The ideas embodied in the software must ultimately be driven by our understanding of the physical world.

David E. Pingry
Professor of Economics
University of Arizona
Tucson

I enjoyed reading your vision of business and the workplace in the 21st century. The entire section offered some stimulating and well-articulated ideas and comments, particularly ''The boss in the Web Age.'' While the way it captured a day in the life of a fictitious ''creative economy'' CEO in 2020 made for intriguing reading, living as I still am in 2000, it left me unconvinced.

You assume that corporations will place increasing value on offbeat, creative people with unique backgrounds. This makes sense on paper, as companies and headhunters love to talk about creativity and ''war for talent'' these days. But what is the reality?

Pockets of recruiting enlightenment may perhaps be found in the U.S., but headhunters and human-resource managers in other parts of the world are as conservative as ever. Are you fluent in several languages? One or two sure looks nice on the resume, but more than that will likely be a cause for suspicion. Hold a master's degree in humanities/social sciences? Why would anyone do that? Besides, we have people working for us who have been doing this since they were 22. And why an MA and not an MBA? Born in China/Poland/Brazil? Ouch--that means you're not a native [English] speaker...

When it comes to hiring practices, corporations rushing into the 21st century want nothing quite as much as candidates who are standard, ''focused'' (i.e., have never studied anything outside of their job area) and ''make sense.'' An Anglo-Saxon background, a college degree in marketing, perhaps a semester abroad (but not two) are still the safest way to play it.

Where does this leave your hypothetical next-century CEO, Sylvia Chen? If in 2020 she'll be 45, then at the moment she's 25 and has probably just finished her master's degree in music. I don't know if she has tried explaining to human-resource people how that helps her to see creative solutions, but I have a feeling she has pretty much shot herself in the foot. Unless she wants to languish at the bottom for the next 20 years, she had better get that Ivy League MBA soon.

Martin Kralik
Hong Kong

Thanks for asking John Chambers and Andy Grove whether they think we're going through a second Industrial Revolution (''Visionary vs. visionary''). With a moderate jogging of the memory banks, however, you might have remembered from Western Civilization 101 that we're now approaching (maybe) a third Industrial Revolution. The first was in England in the 18th century and involved the use of machines such as the spinning jenny to make cloth; the second (which you are no doubt thinking of as the first) took off in the 19th century with the steam engine.

David Light
Maynard, Mass.

I have been a subscriber for many years, but it still amazes me how you once in a while get completely out of touch and do things like turning a nonsubject into an 86-page editorial. The use of expressions such as the Creative Economy, virtual integration, and mass customization gives the impression that the world is under a revolution so far understood by few. If you say ''the companies that will thrive... are those that value ideas above all else,'' I ask you: What were Ford Motor, Hewlett-Packard, Sony, Boeing, Honda Motor, and Philips Electronics putting above all else to thrive 50 to 80 years ago?

As a matter of fact, the opposite may be truer today. Mankind is under the risk of becoming less, and not more, creative exactly because of things such as mass customization. You mention that now ''customers can design up to 50,000 cosmetics and perfume formulations at Procter & Gamble spin-off reflect.com.'' At first, this appears great, but who in a normal state of mind would ever need 50,000 different perfume scents to feel better? Or 1 zillion Web sites to get news from? The age of information technology is important but certainly no more so than the age of the steam engine, the automobile, the telephone, electricity, or TV, just to mention a few.

Antonio Camargo
Sao Paulo

''The boss in the Web age'' offers the notion that business leaders will become the primary world leaders in the next 20 years or so. How can a CEO dedicated to the bottom line also take into account social problems and formulate policy? Does the CEO have the facts to set military goals and budgets, raise headstart funding, and deal with the plethora of problems that beset any society? I would venture to guess that the selfishness and egocentricity that characterize a large number of the leaders of our global and domestic businesses will not be transformed into the humanism of this CEO of 20 years hence, concerned with and willing to work on problems that do not affect the bottom line.

Gunther H. Schiff
Beverly Hills, Calif.

You predict astonishing changes for the corporation. But while the editorial addresses more efficient globalization of ideas and products, it does not mention how those global ideas will be shared.

We may expect that the conventional system of language translation will be supplanted, to a large extent, by direct interpersonal, intercultural communication via global dialects, or a global dialect--in effect, a global second language that will exist alongside other national and ethnic languages.

For more than two generations, language researchers around the world have been proposing a revolutionary methodology of simplification of languages. The first such complete, radical simplification of any language has now been made available to anyone desiring to learn English. Known as Transitional English--transition from no knowledge of the language to knowledge of its standard form--this methodology is freely available on the Web for dissemination among speakers of all languages: www.uky.edu/Projects/Gioblec/.

John Lihani
Lexington, Ky.

Where Eco-Cars Take a Wrong Turn

The authors of ''The eco-cars'' (Special Report, Aug. 14) overlooked an eco-car that is common in Europe and has had rising sales in the U.S. during the past few years--the Volkswagon Jetta diesel. My Jetta consistently gets 45 to 48 miles per gallon--even with the air conditioning running. It also has outstanding steering, cornering, and road stability, comfortable riding characteristics, and all of the conveniences (most as standard equipment) of more expensive midsize luxury cars. At about $20,000, it is a relative bargain.

Engine noise in the passenger compartment is low even at high speeds--lower than in many gasoline-engine cars. Unlike aluminum gasoline engines, the diesel can often be rebuilt with new cylinder liners after its expected 300,000- to 400,000-mile lifetime. This makes its total energy efficiency even greater than that of gasoline engines, since it takes a lot of energy to manufacture a new engine. The engine and associated components are fewer in number and less expensive to maintain than those of gasoline engines. Oil changes are required only every 10,000 miles. A battery is required only for cranking the engine. No loss of performance, convenience, or comfort is required to gain the Jetta diesel advantages.

Since diesel fuel is less volatile than gasoline, diesel is much safer than gasoline. Claims that diesel fuel causes cancer are fraudulent when considered in the context of the practical use of diesel fuel. Refined diesel (kerosene) can even be drunk (a ''white lightning chaser'') without causing injury. Gasoline liquid and vapor are toxic, cause cancer and other adverse health effects, and the vapor is extremely explosive even in relatively small concentrations. The risk of fire is much higher in a fuel truck or an auto accident.

William C. Bartusek
Bloomington, Ill.

To Save Power, Give Consumers Smart Technology

Building new power plants and paying customers not to use power during peak periods are not the only solutions to the problems that electric deregulation has caused in California and elsewhere (''Gridlock on the power grid,'' News: Analysis & Commentary, Aug. 21-28). We can also reach the desired outcome with much less public opposition, pollution, and inefficiency by providing customers with the information and technology they need to adjust their power consumption as prices fluctuate hour by hour and day by day.

Existing ''smart-building'' technologies designed for large commercial buildings can respond automatically to real-time price signals sent by utilities, saving the customers inside as much as 15% on their power costs. And because they let users curtail consumption when demand is highest, these technologies can also cut the reliability stress on the grid, reduce air emissions at peak usage times, and defuse much of the political tension surrounding the industry today.

Prototype systems have proven their worth: In 1995, a large Manhattan hotel saved $6,300 in a single day. With little effort, these technologies can be adapted to residential use. The next step is to bring building owners, manufacturers, regulators, and other stakeholders together to map out a plan to commercialize these technologies.

Peter Fox-Penner
Washington

Stanford on a Blacklist? They Don't Buy It

Choosing to work in the Santa Clara/San Francisco/Marin County areas is a no-brainer (''Stanford high-hats its way onto a blacklist,'' Management, Aug. 21-28). Who wouldn't want to be within less than a half-day's drive to Carmel/Big Sur, Lake Tahoe, the wine country, the redwoods, San Francisco, and Yosemite National Park? Who would prefer to work in some humid hellhole along the Gulf of Mexico during the summer, or endure the winters of Chicago, New York, or, heaven forbid, Boston?

Gary Irons
Marriottsville, Md.

Your harsh indictment of Stanford Graduate School of Business reflects your bias that all of the nation's leading business schools should cater to large corporations. Stanford has developed a unique identity within the New Economy--one that its closest competitors are working hard to emulate.

While Stanford MBAs may not be flocking to General Motors Corp. in Detroit, they are having unparalleled impact in creating the Dell Computers and Intels of tomorrow. Although ''the company Andy Grove built'' may be walking away from on-campus visits, Andy Grove (along with many other industry leaders) still finds it worth his time to teach Stanford MBAs how to build great companies.

Pulin Sanghvi
Redwood City, Calif.

Brand-Building: Customers Will Always Come First

Regarding ''Brands in a bind'' (Marketing, Aug. 21-28): First, ''innovation'' is not necessarily the ticket. For years--before giving up in the late 1970s--I tried to introduce the concept of ''constituency'' management, as opposed to ''brand' management, as a means of maintaining brand equity. Simply, this is a focus on customers in an effort to track the benefits the constituency of a brand would be willing to pay for and to track the ways these benefits could be communicated to them.

Interests, meaningful language, media methods, and even retail channels change over time, and I believe that the malaise in brand profitability results directly from an old-fashioned lack of attention to these elements--all constituency-focused. If this type of focus on benefit delivery leads to innovation, so be it, but as a marketer, I would be less interested in innovating than in delivering benefits to those who would be willing to pay prices that lead to profitable businesses.

David Selib
Greenwich, Conn.

Another Point of View on AT&T

''AT&T can't buy its way out of this mess,'' (News: Analysis & Commentary, Sept. 4) fell short on the facts. First, its basic premise was flawed. Your commentator chides us because none of the rumors swirling around the company have bumped up the stock. Come again?

Share prices across the whole telecommunications sector are down at the moment. But we're primarily focused on satisfying our customers and on running the business. We simply believe that building the market strength of our businesses will create long-term shareowner value.

True, we've made some big investments, including cable. The Tele-Communications Inc. and MediaOne cable systems cost us less than half as much per household passed as other cable deals. And we didn't make these investments just to have something to sell along with long distance, as some seem to think. It was to transform AT&T into a new broadband services company that will link consumers and businesses to the important people in their lives and to the critical information they need.

In three short years, the people of AT&T have created three new growth businesses that are among the leaders in their industries. Our broadband cable business is not only the country's largest provider of video programming, it is growing revenue from advanced new services faster than any other major cable company, thanks in part to an aggressive program to cluster and upgrade its facilities. We have clustered our cable systems so that more than 90% of our customers will be in our top 25 markets.

By the end of the year, 75% to 80% of our cable systems will be two-way and digital. On schedule and on budget. As of June 30, we had substantially more digital video customers--2.2 million--than any other cable company. We also had more high-speed data customers--689,000. And no one is adding cable telephony customers at a faster clip--we now have more than 300,000. Our cable business is on track for revenue growth of 12% to 14% this year.

Our wireless business is also outpacing the industry with revenue growth over 30%. It has nearly 14 million subscribers, including 2 million through partnerships. Its average revenue per subscriber is among the highest in the industry at $71.50 a month. And 85% of its customers subscribe to digital service, vs. 55% for the rest of the wireless industry. When we offered 360 million shares that track our wireless business last quarter, demand doubly outstripped supply. We have already used part of the $10.6 billion raised to expand our wholly owned footprint into five new major markets and to enhance our network's quality.

Much has been written about AT&T's declining voice long-distance revenue, but it's not a phenomenon exclusive to our company. The entire industry is experiencing pricing pressure and lots of traffic is moving onto wireless networks. As a consequence, many long-distance companies have had to adjust expectations this year.

But at the same time, AT&T is showing strong growth in data, Internet communications, and complex networking. High-speed data and Internet protocol services now account for about a third of our revenue from businesses. Last quarter, that revenue grew more than 20%, with IP revenue alone growing more than 50%. And at the end of June, AT&T was hosting Web sites for more than 10,000 businesses. Our outsourcing business grew 23%, and we have signed more than $12 billion in contracts with some of the most sophisticated data networking users in the world.

In fact, taken together, our growth businesses--wireless, cable, and business services--produced more than $23 billion in revenue and grew more than 11% in just the first six months of 2000.

Maybe that's why most of the leading analysts who cover AT&T expect our stock price to reach $45 to $65 a share. It's certainly why I wanted to provide the facts that BUSINESS WEEK didn't.

Dick Martin
Executive Vice-President
AT&T
Basking Ridge, N.J.

''AT&T can't buy its way out of this mess'' (News: Analysis & Commentary, Sept. 4, 2000)

''AT&T can't buy its way out of this mess'' (News: Analysis & Commentary, Sept. 4) should not have drawn a connection between the price the company paid for its cable properties and subsequent cost cuts imposed on other operating units. The commentary also should not have said ''almost none'' of AT&T's units are measuring up to expectations, since the wireless and cable businesses are performing well. The estimate of $1.8 billion that AT&T must invest in its cable properties dates back to 1999, and most of that investment has already been made. The article should have said that CEO C. Michael Armstrong arrived at the company in 1997, not 1996.