Chapter: Healthy, Wealthy, Wise, and. . . . (Part One)

A Way to Think about Transformation Businesses

Apr 01, 2024

NOTE: I’ve broken this post up into two, because it’s too long to fit into one email on most systems (102KB Substack tells me, which is around 3,000 words I think, depending on images). So you’ll get the second (much shorter) part on Thursday, April 4. The good news for my free subscribers is that I've made this entire Part One post available to everyone, because I’m very excited about the concepts here!

While there’s much more to come in this chapter, it outlines the four “spheres” of transformation, as I’m calling them, that together comprise all transformation businesses (or so I think; you tell me if otherwise). Part One here gives you the first three, with Part Two offering the fourth one — plus how they come together into the fundamental purpose of business itself.

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A number of years ago I was preparing for a session with a client that was as focused on transformations as it was experiences, and I was thinking in particular about what makes any transformation a true economic transformation: charging for demonstrated outcomes. It was obvious from the very beginning of my thinking (ie, the mid-1990s) that transformation ~~elicitors~~ guiders should charge for the actual outcomes their customers (aspirants!) achieve – for inputs don’t matter, only outcomes. And since you are what you charge for, you will only create a truly effectual transformation offering if your income is dependent on your aspirants’ outcomes. [This subject will get much greater treatment at some point in this book; in the meantime, see pp. 248-252 in Chapter 10 of The Experience Economy: Competing for Customer Time, Attention, and Money, or the equivalent passage in whatever edition you have.]

So as I was thinking about this, it hit me that the “industries” most in need of charging for outcomes and explicitly putting themselves in the transformation business are those that, to borrow Ben Franklin’s famous phrase, are in the business of helping people become healthy, wealthy, and wise. I asked my trusty illustrator, Kevin Dulle of Wonder Mint, to draw this up for me, and so I presented it like this:

(I always love how Kevin gets to the heart of my ideas and makes them sing!)

Healthy, wealthy, and wise. Each one truly describes what I’ll call a sphere of the Transformation Economy, as “industry” or even “sector” are so set in the old Industrial Economy. But each of those terms don’t quite go far enough to describe the opportunities in the nascent Transformation Economy.

Healthy+

Think about healthcare. Expenditures on it have been growing astronomically in the US for at least five decades, far outpacing increases in the Consumer Price Index (CPI) and Gross Domestic Product (GDP) growth across the rest of the economy.[i] In 2022, in fact, spending in healthcare was almost $13,500 per person in the US, making up 17.3% of GDP.[ii] Some of this growth is due to what I call the “original sin” of the healthcare business, that who should be the customers – patients – are not in fact the ones paying the money; rather, it’s insurance companies and governments. This screws up price signals and incentives, offering precious little motivation to improve the quality-to-cost ratio – or, rather, the outcome-to-cost ratio, which would happen if people had more control over what happens to them.

A large reason for the increase in healthcare spending is the value people place on being healthy

However, a large reason for the increase in healthcare spending – if not the majority one – is that over the past few decades the value people place on being healthy has grown more than the value they have for other economic offerings! It’s not (primarily) about inflation as we commonly think of it, as an increase in prices due to a rise in underlying costs such as raw materials, labor, and equipment. It’s valueflation, an increase in price because of the higher value customers place on the offering relative to others that we increasingly see for both experiences and transformations.[iii]

So part of the increased value with hospitals and other healthcare companies is the focus placed in the past few decades on the patient experience, which has arisen for the simple reason that research shows that the better the patient experience, the better the outcomes.[iv] Which provides the majority reason – we don’t want to be sick, encumbered by injury, or otherwise unable to fully enjoy the experiences that have blossomed with the rise of the Experience Economy. As Ralph Waldo Emerson said, “The first wealth is health”[v] – if we do not have our health, then it can much more difficult (although by no means impossible) to gain wealth, or become wise, or have the experiences we want to undergo.

But it’s not just about staying healthy; it’s about having health & wellbeing.

I was surprised to learn from the Oxford English Dictionary that “well-being” (as it once was spelled, and often still is) was used as early as 1609; I thought it was a much more recent construction (like in the past 30 years!). The OED defines it as “The state of being or doing well in life; happy, healthy, or prosperous condition; moral or physical welfare”.[vi] In other words, it is the state that enables us to enjoy life and all the experiences – economic and noneconomic – afforded to us in this world. It is also the state that drives much of the spending on healthcare so-called, where consumers increasingly pay out of their own pockets for health & wellbeing offerings. And here I’m not talking about co-pays, Medicare Advantage policies, or other such insurance add-ons. I’m talking about paying for massages and spas; fitness centers and personal trainers; yoga, meditation, tai chi, and other such experiences; health and wellness coaches; medical tourism and transformational travel; and on and on the list could go. And that’s not to mention tracking devices such as Fitbit, Apple Watch, Ōura, and Whoop, nor all the non-device-specific apps such as Noom, Aura, Calm, and Hallow.

Clearly, health & wellbeing is a huge sphere of the Transformation Economy.

Wealthy+

Wealth is the domain of banks, credit unions, wealth management, and other firms that go under the general rubric of “financial service providers”. Almost all of them describe their offerings with the phrase “products & services”, so often pronounced as if it were one five-syllable word: “productsandservices”. All such enterprises should banish that term – as well as the phrase “financial services” – from their vocabulary, and instead recognize the value in offering financial experiences & transformations.

It's not that there aren’t “products & services” that help people acquire wealth. (Well, in fact by “products” financial firms do not mean physical goods – of which they have no offerings – but packaged services. It’s one of the ways they self-commoditize themselves, treating their services as if they were goods.) But these lower-level offerings should be subsumed into much higher-value experiences & transformations.

People in fact value wealth precisely because it enables everything they want to have, benefit from, experience, and be in life. The key here is to understand the why of each individual client – strike that; “client” is a service word. The proper term, again, is aspirant for those who desire transformational change. So understand the why of each individual aspirant, the reasons they desire wealth. And it’s not necessarily wealth in terms of being rich, but in having enough to achieve the ends they desire for which money is merely the means. Such aspirations include affording a house, taking an annual vacation, college tuition for the kids, starting a business, retiring early, and on and on that list could go, with every aspiration as individual as the person (or family, or business, or community) desiring it.

So it’s not just about becoming wealthy; it’s about wealth & prosperity.

When I think of prosperity, I love the Hebrew word shalom, which of course means “peace”. From Biblical times to today it’s used as a greeting or salutation to signify “Peace be upon you”. And that context includes the meaning of “well-being, tranquility, prosperity, and security, circumstances unblemished by any sort of defect”.[vii] From ancient times to today, one can have such prosperity at whatever socioeconomic level you are at; it is not the province of the rich.

You may have noticed in the definition of shalom the term “well-being”, for yes, there is overlap between wellbeing and prosperity, which means that wellbeing & prosperity can be approached from either or both sides, and from many different angles (due to startups in particular). That further increases the competition – and chances of commoditization – for those who still view themselves as in the financial productsandservices business, rather than in the sphere of wealth & prosperity.

Wise+

As with healthcare, people have long complained about skyrocketing college tuition, which has also far outpaced inflation for decades – around 3 times the increase in inflation over the past five decades, in fact.[viii] A large part of this increase is the cost of greatly increasing the ratio of administrative personnel to, you know, actual instructors, while another large part is the cost of what are generally called “ancillary services”,[ix] which include hotel-like dorms, better facilities, and on-campus events, as well as more and expanding athletic programs, wellbeing support, and healthcare benefits – in other words, experiences & transformations.

But note how people have been willing to pay these increased costs (all too often, albeit, by going into debt via student loans) because they so value a college diploma, presumed to be a ticket to a nice upper middle-class life, and often with higher aims. (There’s valueflation again.) And this too can be classified as prosperity, perhaps allowing me to say, after Emerson, that the second wealth is wisdom.

However, people are increasingly wise to the fact that many of the jobs they can get with many of the degrees with which they graduate do not pay enough to effectively pay back their student loans. And many people – employers in addition to potential employees – recognize that the amount of actual learning gained from a 4- (or 5-, or 6-)year college degree may be scant, with a diploma representing not so much the emblem of a transformation but a signal of mere competence and willingness to go through the process of becoming employable as a professional.

In other words, we increasingly decry the actual outcomes of a college education. Let’s face it, schools at all levels of education today impart precious little knowledge, much less wisdom. It’s often up to the personality, commitment, and aspiration of individual students (and so often their parents) to excel – not relatively, but absolutely, truly excel in school. People more and more turn to other means to learn, including technical colleges, apprenticeships, certification courses, and other non-standard educational experiences, often made available by employers. They want actionable learning that actually improves their lives, that fulfills their aspirations for learning, working, and living.

So think of it not just about being wise, but having wisdom & understanding, a much broader sphere of transformation.

Wisdom can be as hard to define as it is to attain, but the OED does a rather good job of it: “Capacity of judging rightly in matters relating to life and conduct; soundness of judgement in the choice of means and ends; sometimes, less strictly, sound sense, esp. in practical affairs”.[x] Notice that wisdom is not about learning or knowledge in and of itself; it is about the outcomes we derive from that knowledge in our lives.

But to gain wisdom, as well as the learning on which it depends, we must first have understanding. The OED offers several good, related definitions: “Power or ability to understand; intellect, intelligence”; “The faculty of comprehending and reasoning; the intellect”; “The intellectual faculty as manifested in a particular person or set of persons”.[xi] That’s not to say wisdom & understanding depend totally on innate intellectual ability; comprehending and reasoning are skills that can be taught.

The lack of such teaching is a core failing of our current educational institutions in fact. It’s not only that they don’t teach subjects very well – or care whether or not students actually learn from them – but that they don’t impart the thinking skills required to learn in the first place.

But that doesn’t in any way decrease the value of wisdom & understanding. Hence the opportunity for companies to create transformation offerings to guide people in achieving the outcomes they desire through learning experiences.

When I hit on this tripartite construction and what each of the three spheres entail, Kevin Dulle created a new illustration for me that I think captures it well:

Joe Pine

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[i] Matthew McGough, Aubrey Winger, Shameek Rakshit, and Krutika Amin, “How has U.S. spending on healthcare changed over time?”, Peterson-KFF Health System Tracker, December 15, 2023, https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/.

[ii] “Historical”, Centers for Medicare & Medicaid Services, https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical.

[iii] I first used this term in this LinkedIn Post: https://www.linkedin.com/posts/joepine_opinion-inflation-and-the-experience-economy-activity-7171880230989639681-P062, which referred back to when I first wrote about this factor for experiences – that they outpace CPI and growth because people value them more highly than goods or services – in B. Joseph Pine II, “Inflation and the ‘Experience Economy’”, The Wall Street Journal, January 6, 2022, https://www.wsj.com/articles/inflation-and-the-experience-economy-consumer-values-costs-services-time-disney-cpi-monetary-11641416593. If you cannot access it there, visit https://strategichorizons.com/what-inflation-measures-miss-about-the-experience-economy/.

[iv] There are many individual articles that could be cited, but a great resource here is Stephen Trzeciak and Anthony Mazzarelli, Compassionomics: The Revolutionary Scientific Evidence that Caring Makes a Difference (Pensacola, FL: Studer Group LLC, 2019), where “compassion” is principally the enabler of engaging experiences.

[v] Ralph Waldo Emerson, The Conduct of Life (1860), “Power”, cited in “Health”, Oxford Reference, https://www.oxfordreference.com/display/10.1093/acref/9780191826719.001.0001/q-oro-ed4-00005287.

[vi] “well-being”, The Oxford English Dictionary (Oxford: Clarendon Press, 1989), Second Edition, Volume XX, p. 122.

[vii] “Shalom: Peace in Hebrew”, My Jewish Learning, https://www.myjewishlearning.com/article/shalom/, among many other references that could be cited.

[viii] For example, see: Jessica Bryant, “Cost of College Over Time”, BestColleges, https://www.bestcolleges.com/research/college-costs-over-time/.

[ix] Ryan McMacken, “The US Is Already Spending More on Higher Education Than Many Countries with "Free" College”, FEE Stories, https://fee.org/articles/the-us-is-already-spending-more-on-higher-education-than-many-countries-with-free-college/.

[x] “wisdom”, The Oxford English Dictionary, Volume XX, p. 421.

[xi] Ibid., Volume XVIII, p. 986.