Planet Money’s Adam Davidson says serving hyper-niche customers through the ‘passion economy’ is the future of business

Adam Davidson

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According to Planet Money cofounder Adam Davidson, American business is undergoing a fundamental shift toward what he calls the “passion economy.” This new landscape is the result of two diffuse factors acting in concert: automation eliminating jobs and technology creating new opportunities. 

The result: a rising class of entrepreneurs who thrive by solving the hyper-specific needs of a niche, often disparate customer base. To Davidson, this new system is the synthesis of the last two centuries of economic and technological progress.

“The passion economy combines the best of the nineteenth century with the best of the twentieth century to create something entirely new,” said Davidson. 

From the 19th century, the passion economy borrows artisanry and specialization; from the 20th century, it takes economies of scale and commoditization. By themselves, neither approach could succeed in today’s market. But combined, and aided by the technological breakthroughs of the 21st century, the passion economy offers entrepreneurs a way forward in an unstable business ecosystem. 

By targeting an unserved audience, creating an irreplicable product, and finding customers online, passion-economy creators can find success in an economy dominated by megalithic corporations. Davidson calls it finding a “Goldilocks market”: one big enough to make your business successful, but small enough that you can dominate.

Intimacy at scale

There are two essential tenets of the passion economy: create intimacy at scale, and don’t be a commodity. Intimacy at scale refers to the ability of creators to have meaningful relationships with their customers, even if that customer base is just a few thousand people, spread across the world.

In his book, “The Passion Economy,” Davidson illustrates this phenomenon through a number of stories. In one, he chronicles the success of a farm-machinery company, Pioneer, that caters to Amish clientele. 

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There are fewer than half a million Amish in the world, and less than 10% of them are farmers, according to Pioneer. The company’s target audience, then, is some 25,000 people spread, thinly, throughout the country, who don’t use smartphones or websites.

Their needs are also incredibly unique. Amish farmers use horses and beasts of burden to pull their plows, meaning their agricultural tools are a hybrid of 17th-century mechanics and 21st-century materials. 

For most manufacturers, a market of several thousand farmers, using antiquated techniques, scattered throughout the country is impossible to justify pursuing. 

Yet when their buying power is pooled, the Amish represent a $12 billion market, far more than enough to sustain an entire ecosystem of providers. 

When Pioneer realized that the market was small enough and difficult enough to discourage corporations from getting involved, the company discovered that it had a Goldilocks opportunity on its hands. The manufacturer decided to work with the Amish farmers to solve a problem that had been vexing the community for years: underground rocks, or “hard potatoes” as they call them, breaking their plows. 

Pioneer listened to the farmers’ specific needs and began working with a Norwegian company to design a new style of plow. Soon, the company found itself the recipient of millions of dollars of reliable business. 

The story offers a …read more

Source:: Business Insider


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