This is part 1 of a 6 part series that introduces an economists understanding to entrepreneurial ventures that have cultural value , entertainment, or social influence.
1. Why is demand surrounding culturally impactful or creative endeavors uncertain?
2. Is there a way to mitigate the risks of uncertainty?
Listen to the audio for the full experience or read the outlined notes below.
Takeaway One: Any creative endeavor for entrepreneurial gain is high risk.
Producing and delivering culturally impactful and creative outputs to bring to market is largely distinct from traditional industry sects like: finance, health, hospitality, and manufacturing. The high risk resides in the uncertainty surrounding if the outside world will actually value the work (want to exchange money/resources) .
Thought point: When a first-time movie is produced, how does the studio know they will make a return on their investment?
Takeaway Two: Economist Perspectives To Understand About Demand Uncertainty
1. The breakdown of asymmetric information is disadvantageous for cultural/creative entrepreneurs. Asymmetric information is an imbalance of awareness. It occurs when the creator (or seller) has a greater knowledge of the production value than the audience, which can lead to inconsistencies in valuation. I know there are all sorts of ethos around if you have product or not, but if you’re making a presentation to an audience you’re selling something— a new way of thinking, belonging, community, a product, a process, ect.
2. When a creative project has commercial success it can rarely be properly explained, which makes duplicating the success and planning harder.
Thought point: Analysts will review the success of Beyonce dropping a surprise project, and give their advisement on what you can do to mimic the success. But there are so many distinct and unique factors to the success of Beyonce that it is very difficult to duplicate even at a smaller scale.
Final Takeaway: 4 Approaches To Confronting the Uncertainty of Success
1. Allocating or sharing risks. This is important to the production of creative outputs for capital gains. When able, ask for help. Build a tribe/team/contractor outsources that are in agreement about the creative vision, or will accept lesser input in the execution to share in the production or risks.
Note: It is very important that you know your autonomy limits as a creative. Don’t sell people dreams. Some people will desire some autonomy over their parts in your vision, and some won’t. Know where you are flexible and know where you are not, so roles and responsibilities can be clearly formed for a mutual agreement.
2. Research, pre-testing, validation. These tools can be used to merit/gauge an adoptable interest only. They shouldn’t be used to gauge the extent to which an audience will value or purchase the offering; or to predict the success of the project.
3. Create in stages. If the production of an idea is complex, plan production processes around the resources that you have. Consolidate, simplify, execute well, and share part of the process at stages where it does not compromise the integrity of the concept.
4. Option contracting : If this, than that. If a creative output requires complex moving parts, contract or make agreements in a way that will allow options and places for pivots when new information/direction is revealed.
References: Caves, Richard E. "Creative Industries: Contracts between Art and Commerce. Cambridge", Mass: Harvard University Press, 2000. Print.
Necessary Provocation to sharpen your entrepreneurial education and inform successful start up development outside the mainstream.