Creating a hit movie series, television show, or video game is a phenomenon that not only strikes without warning, but can also strike in unexpected places—or fail to strike where it is intended. The creators of these works—despite Mises’s general disdain for what we now call popular or mass culture—can and often do fit his mold of the creative genius:
For the pioneering genius to create is the essence of life. To live means for him to create.
The activities of these prodigious men cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves…. For him there is no leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately.
As Mises observes, often these people are “unfit to accomplish any other work.” They likely lack the skills or motivation required to be competent entrepreneurs. In fact, the interaction between entrepreneurs, creative geniuses, and those who pose as creative geniuses is complex, requires special entrepreneurial skills, and can help us understand how great media empires rise, and why they fall.
Building an Empire
Many popular mass media franchises started from humble beginnings. The Indiana Jones movie series started with Raiders of the Lost Ark in 1981, which made a box office return of $367 million on an investment of $20 million. Not a bad return for a project with only a year between the beginning of principal photography and release! The series flourished for a time, but eventually collapsed, with the most recent entry—Indiana Jones and the Dial of Destiny, making $384 million in the box office with an official production budget of $294 million. (These budgets typically do not include marketing costs and the cut for theaters).
The first Ultima game was produced after Richard Garriot’s Akalabeth was a surprise success. He and Ken Arnold released Ultima in 1981, and it sold 20,000 copies in just one year, going on to be ported to different systems and to sell tens of thousands more. The series continued through over ten more games, including the main series and spin-offs, and became a commercial juggernaut in the computer role-playing market. However, the series has been essentially defunct since 1999, when the ninth game in the main series was released to a somewhat negative reception. Since then, there have been a few attempts to revive the name, but nothing approaching the commercial success of those early years.
This is a familiar pattern in many of these media empires. A small group of dedicated creative geniuses produces the early entries on relatively small budgets, leading to massive—often surprisingly so—profits. This leads to entries with higher budgets and sometimes even greater success. Eventually, the quality of later entries declines and the series collapses into relative silence.
Economists examining new industries observe a similar pattern. A new industry garners high profits at first, attracting capital investment. Over time, the profitability of the new industry relaxes toward the typical margins elsewhere in the economy, so that the incentive for entrepreneurs to move funds in its direction is reduced. However, an industry does not typically collapse unless a much better substitute arises.
The key difference is that the natures of entrepreneurs and creative geniuses play a powerful role in creating this trajectory. The strengths and shortcomings of both groups, along with their interactions with others, leads to this common arc.
Geniuses, Entrepreneurs, and Fakers
Creative geniuses have two characteristics that contribute to the rise and fall of pop culture empires. First, they are more interested in the fulfillment of their creative impulses than receiving the full value of those impulses. As Mises explained, creating is not labor for the genius, it is an end in itself. This distinction means that the genius is more likely to underestimate the value of his contribution to the final product. In short, there is an opportunity for people to help ensure that the creative work is funded, marketed, etc. They can profit from the genius’s indifference. Many creators toil for years and produce nothing that the general public likes. The discovery of a new and profitable formula is often an instance of serendipity, opening a new frontier for entrepreneurs.
Second, creative geniuses often have extremely abrasive personalities, often failing to recognize other geniuses right next to them. They are often too engrossed in their own work to recognize when another artist’s creations have broad appeal. History is replete with examples of quarreling geniuses, just in music: Brahms and Liszt quarreled through the War of the Romantics, Stravinsky and Prokofiev once nearly came to blows, and Debussy and Saint-Saëns famously panned each other’s works.
The first characteristic attracts capital investment and, for a time, feeds the growth of the pop culture empire. As long as the creator has new ideas and maintains his interest in continuing work on a particular property, and as long as the public continues to cherish his output, the empire grows.
Entrepreneurs can provide valuable services during this time, estimating the audience size for the next entry, making suggestions based on the movements of the market, and helping to decide how to budget for a particular work; all things that the creator may find totally uninteresting, but that help to maintain the empire’s commercial success.
However, eventually the creator either decides to move on to a new project, or the creator’s impulses move in a direction which the public dislikes. The holders of capital and entrepreneurs are left with a property that has no good creative direction. They must look for new creators.
This is where the second characteristic contributes to the fall of the empire. The entrepreneur may be able to estimate audience sizes and calculate budgets, but he may not be so skilled at distinguishing true creative geniuses from fakers with terrible ideas. These fakers masquerade as geniuses by parroting pseudo-philosophical taglines and having extremely abrasive personalities, but they lack the indifference to compensation of the genius; they want to get paid.
Thus, we see large pop culture empires gradually infiltrated by fakers demanding more and more money for less and less creative products. The entrepreneur—baffled by the inability of these people to produce—hires more of them, ballooning budgets and incentivizing even more fakers to enter the industry and leech off of the empire’s dwindling value.
When the number of fakers is small, new works can be created, but they typically lack the spark that made the older entries beloved. Eventually, the number of fakers grows beyond some critical mass, and the result is a work that is seen as a betrayal of the early vision and sells abysmally, or an incomplete work that cannot sell at all. The great pop culture empire falls.
The Effects of Nostalgia
The lesson here for the economist or entrepreneur is one of caution: distinguishing creative geniuses from posers is not one of the skills the average entrepreneur cultivates. The temptation to treat an empire built upon a creative work like a new industry is tempting, but new industries based on technological innovation or realization of the potential of some new service can often be distilled to reasonably concrete recipes, and march forward without too much reliance on creative genius. For example, the young automobile industry had to rely on objective facts of engineering, often more so than aesthetics. Automobiles had to work. Few buyers of automobiles purchased a new model from a sense of nostalgia.
Media empires can be very different. The love that people have for the earlier entries in some series often convinces them to pay for later entries, even in the face of heavy criticism. As long as the new entry maintains some sense of homage to the originals, we observe a sort of stickiness in demand for the new entries. This stickiness can last through several entries, and often gets stronger in the face of long delays between entries.
This stickiness gives the fakers more time to infiltrate. Eventually, their influence results in a work so divorced from the charm of the original that the audience finally gives up. The empire is dead.
Conclusion
We see that the arc of a media empire is similar to that of a new industry. Creative geniuses’ relative indifference to profit leads to opportunities for entrepreneurs. However, the media empire’s constant reliance on creative genius sets up incentives that can lead to its eventual collapse, instead of falling to profit levels comparable to other empires, as we see in industry.
What we learn is that consistently dealing with creative genius, and identifying true genius, are skills that media entrepreneurs need. Only by keeping geniuses in, and fakers out, can media entrepreneurs ensure their investments continue to make good returns in the long run.
