Joseph Pine (Ep. 43)
BY Future of StoryTelling — August 4, 2021

Bestselling author and business consultant Joseph Pine discusses the roots of today's experience economy and what it means for entrepreneurs and storytellers.



Available wherever you listen to your podcasts:


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Additional Links:

• Watch Joseph's TED Talk

Purchase the updated edition of The Experience Economy


See the experience economy at work in these other great episodes of the FoST Podcast:

Scott Trowbridge, Disney Imagineering

• Vince Kadlubek, Meow Wolf

• Angela Ahrendts, Apple & Burberry



Episode Transcript


Charlie Melcher:

Hi, I'm Charlie Melcher founder and director of the Future of StoryTelling. Welcome back to the FoST podcast. My guest today is writer and business consultant, Joseph Pine. In 1999, the book The Experience Economy, which he co-wrote with James Gilmore, articulated an economic transformation that has given rise to so much of the work that we champion at FoST. From experiential retail, to immersive theater, to interactive art exhibits and beyond. The fact that an economic treatise written over 20 years ago could still be so essential to business people and creatives alike today speaks to the power and clarity of its insights.


The Experience Economy was updated and re-released in hardcover in 2019, and it's been published in 15 languages. Joe has brought his ideas to Fortune 500 companies, university and conferences around the globe, and countless newspapers, and business journals. Joe's work has had a major influence in my life. And so I'm thrilled to welcome him to the FoST podcast. Joe, it is such a pleasure and a true honor to have you on the Future of StoryTelling podcast. Welcome.

 

Joe Pine:

Thank you, Charlie. It's an honor for me to be here, since you do such a great job in leading explorers and others around the world in storytelling, which, of course, is a key experience.

 

Charlie Melcher:

Well, thank you. So for those who might been living under a rock for the last 22 years, and somehow missed your seminal book, your and James Gilmore's seminal book, The Experience Economy, which you published back in 1999, originally, I wonder if you could give us a brief introduction to the key principles in that book.

 

Joe Pine:

The core framework in the book we call the progression of economic value that talks about how economic value that companies create for customers has changed over millennia, where in the beginning there was an agrarian economy based off commodities. And then we shifted to an industrial economy based off goods. And then the latter half of the 20th century, we shifted into a service economy. And today, we shifted into an experience economy, which means that experiences are a distinct economic offering, as distinct from services as services are from goods.


It's basically when you use goods as props and services as the stage to engage each and every individual in an inherently personal way, and thereby create a memory. So experiences are the basis of an experience economy, but they're not a new economic offering. Now, we've always had storytelling around campfires, for example. We've always had concerts, troubadours, and so forth, sporting events, plays, add in movies, radio, and all the new genres of experience. So they've always existed, but what's happened is that now we can identify them as a distinct economic offering. Instead of lumping them into services, as the government still does, and recognize that they've become the predominant economic offering today.

 

Charlie Melcher:

Let's use, for example, this cup of coffee I'm holding. It's always my great pleasure when I do a podcast is to have myself a latte. So explain what you mean by going from commodities to goods, to services, to experiences, with coffee as a metaphor.

 

Joe Pine:

Yeah. So you think about coffee at its core is beans. It's beans that farmers grow in the ground, extract out of the ground, and sell them on the open marketplace. And if you convert the future price of coffee... And there's a clue, anything that has a future price is a true commodity. You convert that future price from per pound to per bushel. What you find is that coffee as a commodity costs about two or 3 US cents per cup of coffee. That's how much beans are in there.


But if you take those beans, and you roast them, you grind them, you package them, and put it on a grocery store shelf somewhere, now you can get five, 10, 15 cents per cup. Right? That's what manufacturers get. If you then perform the service of brewing it for a customer in a vending machine, a corner diner, bodega, kiosk, or 7-Eleven somewhere, now you get 50 cents, $1, $1.50 or two per cup of coffee. But surround the brewing of that coffee with the ambiance and the theater of a Starbucks, and now how much you paying? $3, $4, $5.

 

Charlie Melcher:

I know that you've described business being partially theater. Right? And I'd certainly think of that when you talk about Starbucks, this idea that you would go in there, and the barista is kind of an actor, and putting on a show, and a personalized one for you to boot. Tell us a little bit more about the book and some of the other key ideas in that book. I know that you also talk about the importance of time.

 

Joe Pine:

Yeah. So one, so as you said, the original book, The Experience Economy: Work is Theater & Every Business a Stage, came out in 1999. We updated it in 2011. And then in 2020, we re-released it in hardcover again with a new preview based on the subtitle of competing for customer time, attention, and money. And in the last 10 years, one of the things I really discovered is that the essence of experiences are about time. We have tables in there that the compare across all these different dimensions of all the different economic offerings, but if you sum it up, experiences are about time. That in fact, what experiences do is that they offer time well spent, that people value the time that they spend with you. That's what they're paying for with an experience.


Services on the other hand are time well saved. That you buy a service from somebody because they can do it better than you can. They can certainly do it more quickly than you can. It's an activity that provides you time well saved. And in fact, one of the things that's going on as we make this shift is that people want goods and services to be commoditized. They want to buy them at the greatest possible convenience, time well saved, and the least possible cost. Why? So they can spend their hard earned money and their harder earned time on the experiences that they value, that, again, provide that time well spent.

 

Charlie Melcher:

I'm just curious where the idea for The Experience Economy book came from in the first place.

 

Joe Pine:

Well, it was one of these serendipitous flash of insights. My first book came out before that was called Mass Customization, about how you efficiently serve customers uniquely, give everybody exactly what they want at a price your willing to pay. Customization automatically turns a good into a service. If you look at the classic distinction between goods and services, goods are standardized, services are customized. They're done just for an individual person. Goods are inventoried after production, but services are delivered on demand when the customer says, "This is what I want."


So when you customize a good, whether it's a Dell computer or a Lutron Electronics lighting control, or a drink of Coke in one of their Freestyle machines that allow you to customize all the options to you, whatever it might be, what you're doing is that you're working with that individual customer to define what they want. Then and only then do you make it for them, and deliver it to them individually with no inventory. So it is a service. I actually wrote that book when I was at IBM, but after I left, I was still doing some work teaching at the IBM Advanced Business Institute.


And at full day class with a bunch of IBM consultants, and when I said that, one of them in the back of the room, he was sort of a smart aleck. He raised his hand, and he said, "Well, hold on a sec, you talked about services that you can mass customize too. What does it turn a service into?" And I shot back that mass customization automatically turns a service into an experience. And I went, "Whoa, that sounds good."

 

Charlie Melcher:

That's good.

 

Joe Pine:

That's good, right? Hold on a sec, I got to write that down. And so I wrote it down. I thought about it. I said, "Well, if that's true, then experiences are distinct economic offering. And if that's true, you'd have an economy based off of experiences." And that's where it all began by recognizing that customization is the antidote to commoditization.

 

Charlie Melcher:

So you anticipated that this would be an entire economy, right? That this would not just be a flash in the pan. Here we are 20 years later. Do you feel like you've been proved out? Are we still just at the beginning of this experience economy?

 

Joe Pine:

We're still sort of in the early stages, but absolutely it's been proved out that it's not that we, my partner, Jim Gilmore, and I, identified a fad, but a fundamental change in the fabric of the economy. Again, and you can go back in history, and you can look at how, again, experiences have always been around, but in the 20th century is where they really began to increase. You could in fact go back to, if I remember the day properly, July 13, 1955. Right? You know what happened that day, Charlie?

 

Charlie Melcher:

No idea.

 

Joe Pine:

No idea at all? Come on. Disneyland. Disneyland opened, right?

 

Charlie Melcher:

Disneyland, of course. Right.

 

Joe Pine:

That was a demarcation point, where all of a sudden, everybody identified that this is different. Right? This is distinct. Something different is going on. And of course, it's been a huge influence. So ever since then, you've seen just a huge rise in experiences. You can't keep track of every new experience that's coming out. You hope to discover the genres. I can still remember when I first heard of escape rooms, to see that wave of continued innovation. Of course, one of the biggest things that happened since we wrote the book is the rise of digital technology, and the ability to tell not just stories, but to immerse people in narratives inside a digital technology, and use it to create new and wondrous experiences.

 

Charlie Melcher:

We had a guest on the show, on the podcast, not long ago, Vince Kadlubek from Meow Wolf.

 

Joe Pine:

Meow Wolf.

 

Charlie Melcher:

And he obviously is a huge fan of yours, and the work that they do at Meow Wolf creating immersive experiences, immersive spaces, is entirely inspired by or owes a tremendous amount to The Experience Economy, as do so many other fields that we celebrate at FoST, like immersive theater. As I look at it, and as I've learned more about your book having read it, I really felt like maybe what you did was to study storytellers, and to take some of the lessons from these crafts, these fields, whether it was theater or some of the newer things, immersive entertainment of other forms, and learn from that, and think about how to apply that into a business side. Is that true?

 

Joe Pine:

Yeah, that is exactly true. We remember the conversation that Jim and I had, but we still can't remember who said it, that one of us said, "Well, you know then work is theater." And that's really stuck with. Work is theater. And again, it's not a metaphor, work as theater. I literally mean that whenever workers are in front of customers they're on stage, and they need to act in a way that engages the audience. And so one of the key elements of that is that it needs to have a dramatic structure. Right? And that's where story comes in. The dramatic structure that rises up to a climax and comes back down again. And there are many different dramatic structures you can look at, but the one I use most is, and everybody in theater will learn, a Freytag diagram. Right?


Freytag diagram comes from 19th century German performer Gustav Freytag, who was the first one to model the structure of plays and the drama. And so the X axis [inaudible 00:11:39] is time, because again, experiences are about time, and the Y axis is the complications that ensue, or I like to call it the intensity of the experience. And he talked about seven stages that rise up to that climax and come back down again. A lot of people have trouble keeping seven stages in mind and that, so we developed a five stage model that's easy to remember, because it's five Es. That it's about enticing, entering, engaging, exiting, and then extending. How do you entice people to want to be part of your experience? What's the first impressions you give them on entering? The main meat of it, where that full dramatic structure will come up to a climax of engaging. Although, of course, all five stages need to be engaging. And then exiting.


And then how do you extend that experience into the future? Something that I know you do wonderfully with the things that you provide to people after many of your storytelling and explorer sessions. If you can't remember that, there's the three stages I often talk about. Well, it's a story. Right? It's a beginning, a middle, and end. Right? That's what a story is. You got to have a beginning, a middle, and end, or use Disney's terms of pre-show, show, post show.


And then also a one stage model that if you only do one thing, then do this. And that's what your signature moment. Right? What is climax? What's the one thing that people remember from you? Whether it's showing the badge of your Geek Squad special agent, or throwing the fish at Pike Place Fish Market, or getting up and singing and dancing on the tables at Ed Debevics, whatever that signature moment is, then at least you've got that drama element into your experience.

 

Charlie Melcher:

How important is that these experiences be multi-sensorial?

 

Joe Pine:

It's incredibly important, because we take experiences in through our senses. And so the more of the five senses you engage, the more particular you engage each sense, then the greater level of engagement, and the greater the experience then, and the greater the memory. Right? It's not to say that in all experiences you have to engage all five senses. Right? Okay. How can we? Or can we evoke a sense of taste, or evoke a sense of smell even in a physical experience if we don't have it?


There are some experiences where you don't want to engage all five senses, the most obvious example being a sensory deprivation environment, where you're trying to disengage all senses on purpose. Or there other things like salt breath rooms. Right? Where it's really the salt air and so forth that you're really focused on. You don't want to have any tastes. You don't want to have... Well, maybe the salt gives you a taste on your tongue. And others where you're being very particular about what senses you engage, but engaging with all five senses is a basic design principle.

 

Charlie Melcher:

Joe, what's an example of a company that you helped to get from understanding that they were not in the services or products business, but into understanding that they're in the experience business?

 

Joe Pine:

There are so many companies. Well, it's easiest to start with manufacturers. Right? Manufacturers have done that, and think about how they've created all these flagship experiences. So you've got the World of Coca Cola in Atlanta. You've got the Heineken Experience in Amsterdam, the Guinness Storehouse, one of the best in Dublin, and on, and on, and on the list could go.


One of my favorites that we have worked with is in fact Whirlpool Corporation, where they've done a number of things. One, they had for five years an insperience studio in Atlanta, where they'd sell their kitchen appliances. Right? The KitchenAid stuff, and then they brought in kitchen books and that sort of thing. They had cooking demonstrations, and so forth. And what I loved about it is behind the scenes it was actually the place where they did a lot of training for their channel partners. Right?


They had classrooms back there in the same place. And they learned a lot about finally being able to talk directly to consumers. The basic principle, particularly for manufacturers, but also applies to other companies, including even the experience stagers, that if you get your customers to experience your offering before they buy it, the chances they will buy it go up. And Whirlpool even create a wonderful employee experience called the Real Whirled.


Charlie Melcher:

Yeah. I love that.

 

Joe Pine:

Right? They named it after MTV's Real World program, except they spelled W-H-I-R-L-E-D.

 

Charlie Melcher:

Right. Whirl.

 

Joe Pine:

Right. So just like the MTV program, they take all their new sales trainees, they house them in a condominium house that they bought, don't let them leave. They don't reimburse for meal expenses. You've got to make your own meals, cook your own meals there. They don't reimburse for laundry expenses. You've got to wash your own clothes and so forth. And they do all the training in the commons area. And you actually do walk away with a video of your appearance at Whirlpool's the Real Whirled. And they said sales retention rates have gone up over 50% since they did this.

 

Charlie Melcher:

Wow. Now that's a great example. All of this I feel just keeps going back to creating experiences that are memorable. Right? And if they are multi-sensory, if they are personalized, if they're immersive, if they're emotional, all of those things are what reinforce it as a memory. And then that lives inside the person.

 

Joe Pine:

Right. In fact, I would say memory is definitional. If you did not create a memory, you did not stage an experience.

 

Charlie Melcher:

I had a friend who used to do a lot of LARPing in Europe.

 

Joe Pine:

Yep. Live action role-playing games, for those who are maybe unfamiliar.

 

Charlie Melcher:

Thank you. I'm supposed to be the one that makes sure everyone understands. You're more experienced. Thank you. Right. Live action role-playing games. And they would go into a weekend or a day or two of being in character, and having these adventures in a world. And he said the storytelling of that experience happened afterwards in the pub when it was over. People would get together over a pint, and they would describe the adventures and the experiences that they'd had. They would tell a story.

 

Joe Pine:

Relive them.

 

Charlie Melcher:

They would relive them, but in the codifying, in the retelling, they created the memory of their own experience, the mythology of their adventure. And they had a term for it, which was called frothing.

 

Joe Pine:

Frothing. That's a great term.

 

Charlie Melcher:

Yeah, like the bubbles on the top of the beer.

 

Joe Pine:

Right. Because it really does cement the memories, that retelling of it cements the memories. That's why the extending phase. So what they did is they themselves extended that experience by talking about it at the pub with the frothing going on. I could see where that term comes from a pub. And cement those memories that they will then be able to retail those stories forever.

 

Charlie Melcher:

So that leads me to want to ask you about lessons you've learned from your 20 plus years of writing about and studying the experience economy that you think could be a value to storytellers.

 

Joe Pine:

Oh, okay. View yourself as business people. I mean, if you're an amateur storyteller that's one thing, but if you want to make a living at this then recognize you are in fact a business, if it's a one person business, and your business is one of experiences. The very beginning we've always had this fifth economic offering that we talked about, and it comes from asking, "What next?" Right? Okay. Well, if you could customize a good that turns into a service, you customize a service, you turn it into an experience. What does it turn an experience into?


And recognize that if you customize an experience that's so appropriate for this particular person, exactly the experience that they need, then it can't help but be what we often call life transforming experience. Where we're changed as a result. So transformations is the fifth and final economic offering in this progression of economic value, where you're using a set of generally not one life transforming experience, it's generally a set of experiences to change people in some way. Then storytellers have that capability of just through words of creating an experience that can actually change people.


Customization, again, a key aspect is how can they get to know their audience? How can they change what they do? And the last thing I'll mention we talked about also is technology today. Technology today can add amazing things to experiences. It can increase your reach of the people that you can talk to. It can enhance the level of engagement that you have in experiencing. It can provide new worlds in which you can put your story, as you are so great at pointing out. And you ought to talk. To flip it again a little bit. You ought to talk about the possibilities of technology in the Future of StoryTelling.

 

Charlie Melcher:

Thank you. So I'm so glad to be on your podcast today, Joe.

 

Joe Pine:

Anytime. Anytime.

 

Charlie Melcher:

We definitely champion this idea that in the 21st century, and I do, by the way, I really think that Experience Economy was kind of opening or welcoming us, inspiring us into the 21st century. But that one of the great challenges for storytellers is simply how do we give real agency to the people formerly known as the audience, because now their participants, or they're interactors

 

Joe Pine:

Participants, exactly.

 

Charlie Melcher:

And how do we do that in a way that lets them have a fully personalized, embodied, multi-sensorial, and social, and at the same time, really transformative experience? What we're watching take place in the 21st century is a complete opening up first with the worldwide web of two way mass media. So all of a sudden we can like, and share, and comment, but that was just the first wave. That's just the cracking of Pandora's box. We're about to open it up to a whole new level where we have real agency, and we have real participation.


And the other piece of this also is just getting out of the flatland of two dimensions. We had no choice but to deal in the printed page or the confines of a rectangle screen. Technologies are opening up the possibilities of us doing this in a three-dimensional way, whether that's through sensors or augmented reality, some of the XR technologies. We are actually going to be able to go to a three-dimensional story experience and world. And certainly the explosion of things like escape the rooms, and immersive theater, and live action role playing games, and all these other things are part of this trend of people wanting to live their stories, experience sort of as a sensual media, as opposed to a passive.

 

Joe Pine:

Right.

 

Charlie Melcher:

Well, as we're sort of thinking forward, where do you anticipate the experience economy evolving over the next 20 years? What are you seeing that's exciting?

 

Joe Pine:

Well, first is exactly what we're talking about here, which is the use of digital technologies in ways that fuse the real and the virtual. I think those are the best experiences, that it's not... One of the things, I always remember this one line out of my book, Infinite Possibility, which is that, "Reality will now and forevermore provide the richest of experiences." Right? It's simply the case, right? But there are things you can not do in reality that the tech virtual reality allows us to do. But I still think it's a fusing of those where we have both of those together, like a purpose-built space for virtual reality to happen, where everything physical, where if you there's an object in the virtual world, guess what? You can actually go over and pick up the object, not just a virtual object that you're trying to get with your hands, but a physical object that you can pick up, and you build that story, the environment rather, for the story.


So I think there's great promise in that. And we will continue to see experiences go through virtually all industries. I always say, "No company has to embrace the experience economy, but pretty much every company would benefit by embracing the experience economy. You will see that happen." And in particular, transformative experiences. Right? Those transformations that we talked about I think is sort of hot on the heels of experiences. And one of the reasons is primary buying criteria by which people chose who to buy from and what to buy. Right? And authenticity was exactly related to the experience economy, and it affected all offerings. Like we want organic produce. We want original goods. We want services that are better than we can do ourselves, and so forth.


So it manifested itself across all academic offerings. But I think that the equivalent, what does to transformations as authenticity is to experiences mean is that people says they seek meaning in their lives. And we saw that with the pandemic where the basic thing is we don't need more stuff. It's these experiences that give our life meaning, the experiences that we're missing out with direct family members, with loved ones, with our colleagues at work, communally and socially with people. And so we recognize the importance of that. So again, while all experiences are memorable, as we talked about, I think increasingly there'll be meaningful. Those are the experiences people will seek out.

 

Charlie Melcher:

I think that's really profound and beautiful. It reminds me of something that Vincent Kadlubek said to me on the podcast about how coming out of the Spanish flu a hundred years ago there was the birth of the amusement park.

 

Joe Pine:

Right.

 

Charlie Melcher:

And so in some ways the beginning of the experience economy not til maybe Disneyland, as you said, but the beginning of it as the hunger for the experiences, the roaring twenties and the amusement park.

 

Joe Pine:

Right.

 

Charlie Melcher:

And so I was thinking about, "Well, what's going to come out of this period of COVID?" And I think you're right, it's experiences that create greater meaning.

 

Joe Pine:

Right.

 

Charlie Melcher:

That's really powerful and strong, and I think could be a beautiful place for us to end this. Thank you so much for being here. Thank you for being part of the FoST community, and look forward to anything you write, and being able to read it. So thanks for being with us, Joe.

 

Joe Pine:

Thank you, Charlie. It's been very gratifying to be here. I appreciate it. Thank you.

 

Charlie Melcher:

Thank you for listening to the FoST podcast. If you enjoyed this episode and would like to hear more, please subscribe and share with a friend. I'd like to extend a special thanks to Joe Pine for joining me today. If you'd like to see the experience economy at work, check out our previous episodes with Scott Trowbridge of Disney Imagineering, Vincent Kadlubek of Meow Wolf and Angela Ahrendts, who led both Burberry and Apple through their own experiential retail transformations.


You can find a full transcript of today's conversation and explore more of Joe's work by visiting the link in this episode's description. The FoST podcast is produced by Melcher Media in collaboration with our talented production partner Charts & Leisure. FoST also creates a monthly newsletter that features articles, upcoming events, and original content showcasing the cutting edge of storytelling. Join the FoST community by subscribing at fost.org/signup. I hope you'll join us again in a couple of weeks for another deep dive into the world of storytelling. Until then, please be safe, stay strong, and story on.