Fishermen’s black huts in Hastings
Creative Clusters and their associated angel investment and venture capital is a model which has worked well in global cities such as London and New York where the market dynamics enable a return on investment (ROI) period of 3-5 years. This ROI period requires a relatively fast moving market and favours products and services which can build a paying client base rapidly.
It is therefore not surprising that efforts to build rapid growth in smaller towns, cities and regions where markets are more conservative, access to capital is limited and the labour force skills evolve slowly have been notably less successful. We would argue that the model is a poor fit and to treat them as a ‘mini me’ of the large cities is to misunderstand both the strengths and the weaknesses of these locations and their populace.
The theory of Deferred Value Creation has been used successfully to explain the unique and vital role of smaller arts organisations in the wider arts ecology and has been adopted by the arts sector both in the UK and abroad. We are of the opinion that this model can be used to explain and support the activities of cities such as Sharjah in the United Arab Emirates, Folkestone and Margate in the UK and Lebanon’s capital Beirut where a creative-led, community-backed approach is delivering long term sustainable change whilst avoiding the traps and dead-ends of short-termist political or investor-oriented development.
An alternative to merely downsizing the expectations of investors is required if we are to attract the best brains to solve the challenge of the sustainability and growth of organisations and towns whose profile and market does not fit well with short term profit maximisation. Deferred Value Creation offers as an approach which creates an alternative which is not the poor relation of standard capitalism, indeed it is better suited to harness, rather than merely accommodate, the need for greater environmental responsibility.
What is Deferred Value Creation?
The concept of Deferred Value Creation was developed by Sarah Thelwall with Alan Freeman as a means to explain the ways in which small arts organisations in particular make a long term contribution to the arts and cultural sector and how the contribution of these smaller organisations is notably different to the way in which large organisations such as Tate, the Royal Opera House or the BBC create value.
Deferred Value Creation occurs when an organisation supports the creation of new work where the creation of the work and realisation of the value (through sale, licensing or other transactions) are separated by a long period of time … say 20 years. The reason for deferring the realisation of the value that has been created is that the value at the point of creation is relatively low but will continue to accrue as the work circulates in the eco system for the next couple of decades. It is therefore in the interests of the creators of the value to delay the transaction in order to benefit from the rise in value.
To take an art world example when the Chisenhale Gallery commissioned Rachel Whiteread to create Ghost the insurance valuation at the time of creation would have been little more than the materials costs. Twenty years later now that Rachel is recognised as a significant artist with a global reputation this work (created in an edition of 2) has a price tag of £millions.
To take a town example if we look at how Folkestone has been developing over the last decade due to the intervention and investment of Roger de Hahn we see that the Creative Quarter is now developing as a serious creative centre and the home of a growing number of profitable creative businesses. The timeframe of this regeneration and the sums of money invested (over £100m to date) would almost certainly put this sort of work outwith the scope and reach of the local Council and yet this set of development activities are clearly delivering benefits to Folkestone.
Can we apply this concept of Deferred Value Creation to help us build a serious alternative to rampant capitalism which does not feel like an overly scratchy hair shirt?
To read more about Deferred Value Creation see Size Matters or listen to this podcast by author Sarah Thelwall.