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For more than 200 years, American commerce has unfolded like a good drama. In Act I, we extracted resources from the earth -- cotton, coal, coffee -- and sold them as commodities. Then, in Act II, we fashioned commodities into consumer goods -- that can of ground coffee on a grocery-store shelf. And in Act III, we turned goods into services -- that 50-cent cup of java that you bought on the way to work. With each transition, the source of economic value changed. New jobs and industries bloomed; old ones shrank.

In The Experience Economy, business consultants B. Joseph Pine II and James H. Gilmore argue that the curtain is about to open on the next transition: Act IV, in which service turns into an experience. "When a person buys a service," they say, "he purchases a set of intangible activities carried out on his behalf. But when he buys an experience, he pays to spend time enjoying a series of memorable events that a company stages -- as in a theatrical play -- to engage him in a personal way." That's why we'll pay four bucks for a latte -- to enjoy the experience of drinking it in the entertaining environs of our local Starbucks. According to Pine and Gilmore, the experience sector will gobble up the service sector just as surely as the service sector has reduced the size and influence of the manufacturing sector. Ethel Merman, meet the new economy: Pretty soon, there'll be no business that's not like show business.

It's a provocative argument. And while the experience of reading this book often feels more like finishing your math homework than like yukking it up at a hot Broadway show -- two-by-two matrices, to put it mildly, are not quite cutting-edge stagecraft -- Pine and Gilmore do make an intriguing case.

In particular, they implicitly challenge two ideas that have recently hardened into conventional wisdom: that giving away your product is the path to profit, and that casually clad tech-heads who inhale pizza and who write code until dawn represent the future of work.

Ready, Set, Charge

In the information economy, software makers like Netscape have built their market share by offering their wares for free. But in the experience economy, Pine and Gilmore argue, businesspeople must ask themselves, "What would we do differently if we charged admission?" Consider Sharper Image. Most customers stroll into that store, vibrate in the massage chair, shoot a little miniature pool -- and then leave empty-handed. More than they value any product, they value the shopping experience itself.

So why not charge for it? "That would force the company to stage a much better experience to attract guests, especially on a repeat basis," the authors write. "The merchandise mix would need to change more regularly -- perhaps daily, even hourly. Demonstrations, showcases, contests, and a plethora of other experiential attractions would complete the sharpened experience of a visit to Sharper Image. . . . And as a result, the retailer could very well sell more goods."

Ditto for a place like NikeTown. Instead of waving in potential shoe buyers for free, that store ought to charge guests "to go at it one-on-one with past NBA stars or play a game of H-O-R-S-E against a WNBA player." On sale would be shoes, yes, but also items like customized commemorative T-shirts and photos of little Sally draining one against Rebecca Lobo. Retailers, in other words, should begin to sell memorabilia -- the artifacts of various memorable experiences. (Just imagine the souvenirs: "My parents went to Wal-Mart, and all I got was this lousy T-shirt.")

Acting Up at Work