In my last post, I talked about how suppliers of creative content are (for the most part) declining to exit the industry despite extremely strong competition and unfavorable odds for financial self-sustainability, to say nothing of massive success. The standard explanation of this is that artists, writers and the like are “driven to create”—they can’t imagine doing anything else with their time. That may be true at least in some cases, but a class from my business school core curriculum provides a more interesting way of looking at it. The dean of the school, Joel Podolny, and my Competitor professor Fiona Scott Morton co-authored a study of California wineries and found that hobbyist suppliers—basically, rich people that wanted to run their own winery—concentrated so heavily on the high end of the wine market that they collectively made it less profitable for businesses that were interested in maximizing profit. As a result, businesses that wanted to make money would concentrate more on lower-end wines. Podolny and Scott Morton called these hobbyist suppliers utility maximizers and suggested that these winery owners consumed the quality of their own wines (in other words, were willing to accept a lower profit level in order to possess the identity of a high-quality wine producer). Another study found that investment banks with the best reputations actually did not need to pay top dollar relative to their competitors to attract their targeted employees, because the employees to some degree consumed the status of their employer (and were willing to accept less money in exchange for the prestige of working for a top firm).

Basically, I think that the reason we don’t see more exit from creative industries is because most creative content producers are also consumers of their own status as such, and are therefore willing to put up with a boatload of bullshit—including a very high likelihood of making next to no money—in order to be able to call themselves composers or directors or actors or artists. Because, let’s face it, being a creative professional is fun. It’s virtually guaranteed to get people’s ears perked up at parties, and can serve various aphrodisiac functions (though the whole poverty thing can just as easily kill the mood). The undercurrent of ego is strong, particularly for something like composing—you’re getting other people to pay their own money for the privilege of experiencing something that you created for the fun of it. Not only that, many creative professionals retain a massive degree of control over the final feel and execution of their vision, making the satisfaction level at the end of the process that much higher.

There’s a cultural shift going on in which more and more young people are graduating from high school and college and wanting to do interesting things with their lives, something that reflects who they are and what they think about the world. In previous generations, most young adults would end up working in agriculture, manufacturing, or other labor-intensive mega-industries and form their professional identities around a career that might have been set in stone before the child was even born. Now, having been weaned on a Baby Boomer-influenced education emphasizing self-expression and -actualization, Millennials want creativity to be a part of their professional identity, and more and more that means working in some kind of creative industry.

That leads in to the other side effect of this shift: as more and more people decide that it’s not enough to be an audience member or a reader or a listener and decide to express themselves as well, they have less time to consume the work of others. In other words, as the number of suppliers of creative content increases, their average audience decreases (even if the total audience might be increasing dramatically). Andy Warhol’s prediction that in the future everyone would be famous for fifteen minutes is proving ever more prescient in the Internet age. As universal awareness becomes more and more difficult to achieve and a minimal level of awareness easier and easier, the lines between amateur and professional content creators are becoming increasingly blurred. It may be that we are all pursuing vanity projects to some degree.

Some kind of massive aggregating system will undoubtedly pop up to organize all of this content for us and keep it manageable. What I’m less sure of right now is what it will look like. Until then, I’ll try to keep up with my RSS reader.

You can see where this is going, right? By requiring a return from the IT company comparable to other companies in which it could invest, the VC basically forces it to extract as much profit as possible from its customers. And who are those customers? Why, hospitals, of course. And who pays the budget for hospitals? That’s right, you and me – either through government taxes or, as in our country, through payments to insurance companies. This is why healthcare costs are skyrocketing, and why poor people are being left out of the picture. It’s because there is no attempt, on the business side of the healthcare industry, to capitalize on the good will of people who find meaning in their life from helping those in need.

But even the VC’s hands are tied, because it doesn’t really own most of its money. Its money comes from other stakeholders who invest in it because they think that they will make a profit from doing so. And other people invest in those companies because they think they will make a profit from doing so. And so on and so on.

Which is all fine and great if your primary objective is making money. But if your primary objective is public in nature, you’re not in such great shape.

So taking a hint from Adam on working with markets, instead of against them, this got me thinking: what if there were a way to modify the capital market structure in such a way as to incentivize investors to support socially responsible companies? Or in plain English, what if we made it so that people can make money because they do good things for the world, instead of having to choose between the two all the time?

It would require some kind of government intervention in the way that capital markets (stock exchanges, etc.) operate, either directly or indirectly. My initial idea involved a rather radical proposal to adjust stock prices according to social responsibility scores established by an independent rating agency set up for that purpose. Some friends here at SOM suggested instead a scheme that would try to accomplish the same purpose through manipulation of the capital gains tax. Anyone have other ideas? This is something I’ll be thinking and hopefully writing about more as the semester progresses.