MBUS 3000 1st Edition Lecture 5Outline of Last Lecture I. Producers II. Double entry III. Accounting equationIV. LongTail/LongVolatility StrategyV. Volatility VI. Looking at the graphVII. Randomness VIII. Hit machine IX. Wild vs. normal distrubutionX. Scalability at workOutline of Current Lecture XI. Occupations XII. Success narrative XIII. GershXIV. The survivorship bias XV. The narrative fallacy XVI. Thriller by MJXVII. SuccessXVIII. “Success breeds success”XIX. The Matthew Effect XX. Some jobs in the music industry XXI. Road Map XXII. The Matthew Effect and the size of the hit Current LectureA) Occupations: 1) Managers-make money from live performance from artist-get 20-25% gross amount 2) Managers send their artists on the road because they make more money that way These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.B) Success narrative 1) The “success narrative” is usually a fairytale 2) When I say talent is overrated I don’t mean talent doesn’t matter, if you are talented you are more likely to be successful3) Talent is more overrated among music business executives, managers, agents, producers engineers, etc4) talent is a little less overrated among artists and songwriters What I will focus on now is how most of the “success narratives” given to you by successful managers, record executives, producers etc are fallacies. Unconscious fallacies but fallacies nonetheless C) Gersh 1) Definition: to subtly or inconspicuously move away from an artist or project one once championed, often involves passing responsibility for artists or project to a subordinate 2) “success has many fathers, failure is an orphan”(Arab Provei), this means when something successful happens people claim credit no matter how little it is, but when it is a failure people push away from it 3) Examples: The black crows, who signed Nirvana? 4) Gershing artificially increases the win/loss ratioD) The survivorship bias: You look at how a artists became successful-maybe successful artists have a good record company 1. The stock market Dow Jones Average myth. When a company goes bankrupt it is thrown out of the index. The historical rate of return on the dow jones average only measures the survivors. (it’s like getting to change your bet in the middle of a horserace). 2. An executive might explain all of the things that they did to “make” their successful artists successful. They omit from their narrative that they did all these same things for their unsuccessful artists.3. A management company’s roster, booking agency roster, record label roster is usually a collection of survivors with a few current “experiments”.4. E.G. I look at Dangerbird Record’s website and I see Silversun Pickups and Fitz and theTantrums.They look very successful. But they don’t list the bands they’ve signed that have failed. And why would they?E) the narrative fallacy 1. The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding. -Nassim Nicholas Taleb, The Black Swan2. we don’t understand what is going on all the time but we put facts together3. were told stories and we bind them together in sequence? 4. But mostly the narrative fallacy makes us believe that their exists a hit machine: F) Thriller by Michael Jackson: 1. Common narratives for why thriller was so successful2. Walter yetnikoff is a genius and masterfully guided every aspect of the album3. The videos were brilliant 4. Quincy jones masterful production decisions5. Eddie van halens guitar solo on beat made the album appeal to white suburban kids as well as urban teens (Jackson widen his audience) G) Success1. Many successful institutions and individuals in the music business appear successful 2. Accept to fail in the music industry 3. This masks the high failure rate in the music business 4. This also masks high degree of unpredictability in the music5. A successful artists failed only 16% of the time while a unsuccessful artists failed 18% of the time-you just have to fail a little less Part 2 H) “success breeds success” or more accurately “luck breeds success”1. after a manager became successful and got a gold record, people come to them and ask them to manage 2. artists that are talented I)the Matthew effect1. Sociologist Robert Merton observed that in the sciences success seems to accumulate. He called this “The Matthew Effect” after the biblical verse 2. if it happens in the sciences you know its going to happen in the music business 3. If a scientist makes a discovery then they make more money than others4. It basically means once someone becomes successful they’ll become more successfulF) some jobs in the music business: applying the 3 logical fallacies to job 1. managers: Example: fluffy, he attracted more and better artists after one of his artists got a hit record 2. producers: one successful record, get a fair amount of successful artists to make more successful records 3. mix engineers : Matthew effect-your tom lord alge and you mix a hit record, a record label wants a good mix engineers and say Tom already has good hit record so lets get him, so tom mix records for that company that the companies believe will be hits 4. your instructor: produce 1 album that’s successful others want him to produce their albumH) Road map: make lots of bets, want to be on the side of the equation that if demand goes up you get paid more(unlimited volalitiy) I) The Mathew effect and the size of the hit?1. Thriller became popular, so more people heard it and it became more