Musings on Entrepreneurship and Innovation
Tuesday, July 04, 2006Fooled by Randomness in the Movie Business
Chris Anderson, who has just published a book titled The Long Tail, made a blog post the other day referring to a piece in the Los Angeles Times by physicist/mathematician/screenwriter Leonard Mlodinow titled Meet Hollywood's Latest Genius. I would summarize the essence of the article as follows:
- Movie makers behave as if genius causes success (and success is prima facia evidence of genius), which isn't too surprising given the psychological evidence of the tendency to embrace the illusion of control.
- The socially contingent nature of choice in the movie business means that success is, to a great degree, a function of the apparent randomness of informational cascades.
- The difference between a hit or a miss in the movie business is largely a matter of luck.
I found the following excerpts from Mlodinow's article particularly interesting:
We all understand that genius doesn't guarantee success, but it's seductive to assume that success must come from genius...What the research shows is that even the most professionally made films are subject to many unpredictable factors that arise during production and marketing, not to mention the inscrutable taste of the audience. It is these unknowns that obliterate the ability to foretell the box-office future...
People in the film industry are diligent about gathering data, but are far less skilled at understanding what the numbers mean. The fact is, financial success or failure in Hollywood is determined less by anyone's skill to pick hits, or lack thereof, than by the random nature of the universe...And so, despite a growing body of evidence that box-office revenue follows the laws of chaotic systems, meaning that it is inherently unpredictable, the superstructure of Hollywood's culture - the pervasive worship of who's hot and the shunning of who's not - continues to rest on a foundation of misconception and mirage...
It's not that Mladinow thinks that all is random in the film business. Rather, he sees chance as playing a bigger role than is typically accepted by those who benefit from the attribution of genius that accompanies financial success.
I've been struggling to get a handle on two question as they relate to tangible consumer products, which likewise reflect the power law signature of systems at the edge of chaos:
- Where do such markets lie on the spectrum between control and randomness?
- What to do about it?
I'll take a shot at framing these questions (and suggesting some tentative answers) in a future post.
