Deep down, I think every business is really a version of the entertainment business. This is partially because I only know about the entertainment business, and when you only have a hammer, every problem looks like a nail.
But on the other hand, the recent news from the financial markets has seemed pretty familiar. It's hard to hear phrases like "huge losses," "cash hemorrhage," and "colossal mismanagement" alongside "enormous executive pay packages," "whopping year-end bonuses," and "platinum parachutes," and not think, hey! Rewarding failure! That's just like in show business!
Of course, the past few years in the entertainment business have been challenging. The country-club years of the 1990's and early 2000's are gone. The huge cash tide has receded, and along with it the fat studio deals. The business looks leaner these days. Which has benefits: leaner industries take more, cheaper, risks. And they also start exploring real growth areas, rather than just pumping money into maturing businesses.
Reading today's Financial Times, this jumped out at me. A European investor who runs a private equity fund had this to say about the future of the private equity business:
Guy Hands, chief executive of London-based Terra Firma Capital Partners, told a Hong Kong conference that over time "there will be less people working in the industry and they will get paid less and that is not necessarily a bad thing."
And he went on to say:
"Private equity firms were incentivized to earn as quickly as possible as much as possible, and raise as much as possible and to spend it as quickly as possible."
Spend it as "quickly as possible?" And just when I was about to say Dude! That's just like in show business! he goes and does it for me:
Mr. Hands, whose firm bought the troubled EMI music group last year, drew parallels between the music and banking industries.
"Both employ too many people on too high compensation and are facing a customer base which is not as predictable as it used to be. My guess is that the music business will take longer to reform because it does not have a regulator forcing change."
And here he's right, but he's wrong. Show business doesn't have a regulator, per se. But it does have a young customer with an iPhone, an MP3 player, whip-fast broadband access, a zeal for copying music files for free, an unwillingness to watch television without zapping through the commercials, and a preference for spending two hours a day on Facebook, not watching primetime television or sitting in a movie theater.
And here's the difference: a middle-aged regulator will bail you out. A young customer will leave you to die.
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