The architect Richard Rogers says he has two clients for every job: the person who pays him and the person who walks by and takes a look. As far as I know, the people who paid for his Lloyds HQ in London, the Pompidou Centre in Paris and other buildings are happy. But it’s the public, not them, who decide if a building succeeds. The Irish novelist Margaret Wolfe Hungerford reworded an old Greek saying that ‘beauty is in the eye of the beholder’. In the creative economy, success is in the eye of the beholder.
I believe all creative businesses have this split personality. At least, I’m convinced all good ones do. As well as wanting to be commercially successful, they are ambitious and competitive in ways that go beyond business expectations. Their desire to make money mingles with their personal desire to do good and their desire for peer-group respect.
Richard Rogers is massively successful. He is Lord Rogers, one of only three British architects honoured in this way, and has received many of his profession’s top prizes. And he still worries what an anonymous passerby might think.
This sensitivity, this acceptance of social implications, can irritate others, particularly the people who pay the bill. But it is inevitable in any enterprise that strives to be continually new and better. And sensible clients and investors use it to their advantage.
We cannot understand the creative economy through the lens of conventional finance. To see it clearly, we need to understand its culture and psychology. In the same way that managing the Covid pandemic requires more than epidemiology, so understanding the creative economy requires more than conventional economics.
This humanising of business is long overdue. John Newbigin suggests we replace the term ‘creative economy’ with ‘human economy’. We are seeing a shift in emphasis from economic value to human values.
This is why talent companies can teach investment managers and business executives about environmental, social and corporate governance. They have been doing it for longer.
Of course, they need cash and profit like anyone else. The fact that the creative economy is the fastest-growing sector in many countries is not evidence of financial stupidity. In OECD countries, the creative economy grew two to three times faster than the rest of the economy in 2015-19, although most sectors suffered last year.
But money is not the chief reason why many young people have the itch and urge to strike out and have a serious go at doing something creative. In 2020, ‘creativity’ was the most common term in LinkedIn job searches. It’s evidence of their wish to make the world a better place in other than transactional terms. It’s evident in their instinct to co-create and collaborate more often than in other sectors and to share ideas for free.
I want to suggest two aspects that are relevant for impact investing: additionality and positivism.
Additionality is the constant search for something new, different and better. This can be merely new, or more beautiful, or faster, cheaper or more convenient. The added value can be measured by business indicators such as sales or returns. But this transactional sense is not enough.
This is where positivism kicks in. Creative people’s ambitions go beyond the immediate deal. They have a sense of the wider implications of what they do. They believe the world that contains their idea, their work, will be a better place. I don’t mean better in transactional terms, but in terms of wider cultural and social benefits. This is Rogers’ passerby. The passerby is everyone.
This may seem arrogant, but it is fundamental to the creative mindset. It is the motor of great, memorable impact. It is a useful check on doing harm.
It applies to the software designer who writes an elegant line of code as much as the great architect. It is a personal feeling and may be witnessed only by the creator or a few friends. If asked, many deny it. But it is there, and it is inbuilt in the creative mind. It’s one reason why we admire and respect them.
This is why creative people are ahead in thinking about what economists call ‘externalities’, and ahead in thinking about environmental, social and governance issues.
I’ve met investors who acknowledge these strengths in social and environmental impacts but jib at the claims to good governance. It is true that companies based on talent and creativity tend to be structured and managed differently. But that is not the problem.
The problem is that traditional investors familiar with business models based on repetition and marginal pricing can be misled by businesses based on creativity and innovation. Experts on physical assets can be puzzled by intellectual property. Or they understand brands but don’t know how to value copyright. Or they can’t judge founders’ or executives’ competence. Or they are comfortable with discounted pricing but cannot understand followers who act like fans.
Yet these issues of assessment, inclusiveness and impact lie at the heart of ESG. Far from being left behind by corporate ESG, creative companies have an extraordinary vision of what might be possible.
The creative economy is the first economy to be based on what people want, think and do as individuals within a community of interest. Previous capitalist systems have been based on land, labour and capital. Creative businesses may need these at some stage, but they are seldom sufficient to drive growth. The irrelevance of interest rates is one of my favourite pieces of evidence (as is central banks’ incomprehension that this is so).
The raw material of creativity is our capacity to imagine something and add value. This is the core asset of the creative economy. We should not be surprised if people who work this way are keenly aware of community, social and environmental impacts. It is the human economy in action.