Around the horn

And now for our semi-regular trip around the blogosphere:

• So this is what I'm up against in the philanthropy job market? How very, very sad. It's hard to tell whether the writer of the column (who prefers to remain anonymous) is just feeling sour grapes or actually speaking truth to power, but I'm inclined to believe the latter. If true, it highlights the need for parties that work with multiple foundations (such as philanthropic advisors, community foundations, and executive search firms) to take more of a leadership role on behalf of the field. The 2008 SOM Philanthropy Conference, which I'm spending much of my time right now planning, will seek to address these issues in depth. (h/t Tactical Philanthropy)
  
• Around the same time as discovering the link above, I saw this post on Philanthromedia entitled "Overcoming Board Inertia" as well as a Philanthropy News Digest piece reporting that "a significant number of CEOs at midsize nonprofits are dissatisfied with the performance of their boards." My rant last week defending the nonprofit sector notwithstanding, board dysfunction is one of the huge factors holding nonprofits back from their true potential. This difficulty is not surprising given that most nonprofits tend to identify extremely busy people with their own projects and priorities as prime board candidates. I would be curious to find out if any countries have explored non-board-based governance schemes for their equivalent of nonprofit organizations.
• Fractured Atlas wants to pick your brain. I find this project interesting, not so much for the idea itself (several arts service orgs are already developing this type of content), but for the way in which FA has gone about pursuing it. Specifically, I love the fact that they've issued a Request for Proposals (RFP) for the content. Most nonprofits I know of would have simply chosen a content provider based on reputation alone, or at the most invited a small group of organizations with established track records to submit bids privately. By opening up the process to the public, Fractured Atlas casts its net a lot wider, with potentially much more to show for it. (I also like the idea of giving providers a cut of the profits for advanced courses--way to align incentives there!) The compensation levels, interestingly, are significantly below what a typical consulting firm would charge to create an interactive course, but significant enough that a freelancer or interested amateur would no doubt consider it. I expect we'll see a lot more of this kind of "semi-pro" pricing/compensation structure in content creation fields in the future. More about that later this week.
  

On the culture clash between business school and me

I should have known the very first weekend.

We were all gathered in a huge hockey rink in late August. As part of orientation, the school had hired a team of consultants to come in and train us in the physical embodiment of leadership—in other words, how to act (and feel) the part of a leader in your body—using techniques borrowed from dance, aikido, and other sources. We spent the better part of three days in small groups practicing a basic aikido sequence (complete with jos and everything), applying the randori concept to management practice, and doing two-steps with each other in an attempt to communicate intuitively through body language with people we didn’t know.

I’m not going to claim all of this was perfectly executed, because it wasn’t. The hockey rink was an unfortunate choice of venue for the middle of summer; the various exercises were sequenced oddly and provided with little context; the relentless focus on articulating our “commitments” felt more than a little forced for those who hadn’t figured such things out yet. Nevertheless, I remember being energized by the experience. The physical embodiment of leadership is something I’ve been thinking about ever since studying conducting during my junior year of college. Seemingly minor things like posture, stance, and mindset make a huge difference in how others perceive you and the authority they attach to your presence. The fact that the school recognized this and devoted such a significant portion of orientation to it seemed like quite a bold move to me, and it made me feel proud to be at SOM. Plus, I loved the fact that our first experience at business school was so deeply infused with the arts. Here we were, dancing, practicing yoga-esque movements, watching The Karate Kid, and it was all being integrated into the process of thinking about management. I came out of it wanting to take a class in aikido.

But the rest of my class didn’t feel the way I did. At all. By the end of the weekend, it was already open season on these consultants, and a few weeks into the semester the experiment was almost universally regarded as a disaster. The most common themes were “how does this relate to anything?” and “why are we doing this?” Anyone even the slightest bit familiar with East Asian martial arts is aware of the symbolism and life lessons associated with them, but apparently trying to draw a connection between such concepts and business was a gigantic no-no. The exercises that required us to come into physical contact with a stranger (heaven forfend!) rubbed many the wrong way as well. (As a choral singer, I get offended when conductors don’t ask us to give backrubs to the people around us as part of warmups.) I frequently found myself in the awkward position of having to either go along with the mocking in order to fit in, or defend the program and get blank stares in return. I felt like I was on another planet from my classmates with regard to this issue. It wasn’t going to be the last time.

As the school year wore on, I found myself running afoul of some entrenched assumptions about economics and other philosophies for how the world works. Time and again I would hear arguments treating rational self-interest as almost a philosophy of life, fitting very well with what game theory tells us about best responses and Nash equilibria (and ignoring all of psychological evidence that non-rational thinking, including altruism, plays a major role in the behavior one can expect from others). I would find myself resenting the knee-jerk hero-worship afforded to leaders of large multinational corporations simply because of the position they held. The times when I felt the most like a fish out of water, perhaps, was when discussion of the nonprofit sector—my past, present, and future—would come up. I cannot tell you how many comments I heard tying tired old stereotypes around the neck of my nonprofit sector: stereotypes of inefficiency, waste, laziness (because employees aren’t properly incentivized, you know), hopelessness (because everyone knows that a model that involves asking people for money is not sustainable), fraud, even moral turpitude. And then people would go around and share war stories at parties about sinister office politics in the banking industry and how long hours in law firms were just for show. Riiiiight. Even allowing that there are problems in the nonprofit sector, instead of thinking about how these issues could be solved, all too often it felt like people were using them as an excuse to dismiss the sector entirely, as if it had nothing to do with them. And, hello! This was all taking place in the halls of a major nonprofit institution!

So, don’t get me wrong. I learned a lot my first year of business school, and I’m grateful. It’s broadened my horizons considerably, helped put my career on the right track, given me much in the way of practical, real-world skills, and forced me to re-evaluate many of my ideas about the intrinsic value that corporations provide to society. What frustrates me is not what I haven’t learned, but what I haven’t taught. I haven’t been an effective enough advocate for the things I dearly believe to be true in class discussions, in casual conversations, in public events with guests. Yale is often lauded, and rightly so, for its strength in teaching nonprofit management relative to its peers and for its unique stated commitment to educating leaders for both business and society. It’s easy to forget, then, that even this most pious of business schools sends less than a tenth of its graduating class to the nonprofit sector every year, and that most students end up taking jobs in large, established corporations.

So my second year’s resolution is to live in my skin as a nonprofit person in business school more effectively. I am working with the Net Impact executive committee; I will try to get people to attend the Philanthropy Conference that wouldn’t otherwise; I will question and assert and communicate.

The nonprofit sector may have its problems, but its effect on my own life has been considerable. I have attended some of the finest schools in the world from 7th grade until today thanks to the financial generosity of others, opportunities that never would have been available to me had market forces had their way. I was able to receive performances of my own creative work and produce a recording for my band because of grants from government, private, and individual sources. And now, I will be able to pursue the career I want instead of a career of convenience because of SOM's Loan Forgiveness Program. Maybe some equation in a book says that I would be more valuable to society if I were some drone working for Goldman Sachs, but I know it's not true. And, in a way, I have my first year of business school to thank for that.

Ding, dong

As of Monday, I have completed my first year of business school. I’m currently occupying my time trying to find a sublet in or around Palo Alto, CA, where I’ll be starting a summer internship at the Hewlett Foundation in the performing arts division.

In the next few weeks, I’m going to try to kick up the blog activity a notch. I’ve found that writing for Createquity has much in common with composing for me: it’s extremely rewarding, but easy to fall down on the priority list. Not surprising that both have been getting pushed aside in recent months, given my more-intense-than-anticipated spring semester at SOM. On the bright side, though, I’m singing with C4 Symphonic Chorus again in their final concert of the year, “hit it,” which will also feature the world premiere of my new piece She Didn’t Mean to Do It.

I’ll be back with some thoughts about b-school later today or tomorrow.

Newspapers and Symphony Orchestras

A couple of weeks ago, I wrote up a Stanford case on the San Francisco Symphony for my Nonprofits class. The project was timely, given the recent release of the controversial Flanagan report (pdf) commissioned by the Mellon Foundation that studied the economic environment of symphony orchestras. The Flanagan report has gotten a lot of flak in the corners of the blogosphere that I regularly read, some of it unjustified in my opinion. The report makes reference to Baumol’s cost disease, an economic term that originated with William Baumol and William Bowen’s seminal 1966 book Performing Arts: The Economic Dilemma. Baumol and Bowen argued that unlike some sectors of the economy, such as manufacturing, inherently labor-intensive industries such as the performing arts do not experience significant productivity gains with the introduction of new technologies. In other words, it takes no fewer musicians no less time to perform a Mozart string quartet today than it did in 1791. Yet organizations that employ workers in those industries must compete in the overall labor market with companies that do enjoy these productivity gains and can thus pay workers more. (Indeed, a commonly heard argument for the need to pay musicians in top symphony orchestras six-figure salaries is that “that’s what highly trained professionals in other fields earn.”) As a result, over time a firm suffering from Baumol’s cost disease will have higher labor costs relative to productivity, forcing it to raise prices for essentially the same product. This is particularly an issue for the performing arts and other labor-intensive fields in which revenue generation is difficult anyway, which includes most of the kinds of services provided by government such as education (this is one reason why tuition at private colleges has risen far faster than inflation, for example). One implication of this is that as a society gets wealthier, we can’t rely on that wealth to be distributed proportionately to these labor-intensive, revenue-poor industries through market mechanisms; it can only be accomplished on a large scale through voluntary donations or increasing the tax base.

The Flanagan report confirms that labor costs at the nation’s top symphony orchestras have, indeed, risen faster than earned income, and this has some people upset. They seem to think that the report is a Chicken Little doomsday speech pushed by a cadre of orchestra managers in a conspiracy to build a public case for breaking the musicians’ union. While I can't speak for the motivations behind the report’s origin, the report itself doesn't say anything of the sort. On the contrary, it states on page 87 that,

The trend in total performance plus nonperformance revenue (regression 8) is modestly higher than the trend in total expenses (regression 9), so the overall financial balance improves slightly over time, after controlling for the effect of general economic conditions.

So orchestras (or at least the 63 relatively wealthy ones that were a part of the study) have successfully compensated for their increased labor costs by a combination of raising prices and seeking more donations—exactly what Baumol and Bowen’s model predicts. Now, there is nothing inherently wrong with raised prices and more donations, assuming the market can bear it. And when combined with increased price discrimination, such as in the case of college financial aid programs, the social effects can be quite positive as access is increased rather than limited. However, an increasing reliance on contributed rather than earned income still feels scary, because contributed income just seems less stable. How can we count on people to just keep giving money away, against all rational instinct? Although orchestras have managed to stay afloat these past few decades, with some experiencing genuine financial success, I don’t see these issues going away anytime soon. The entire model is extremely dependent on the orchestra’s ability to find new donors and convince existing donors to give more and more for essentially the same experience. If the bottom were to suddenly drop out of that revenue stream, orchestras would find themselves incredibly exposed.

Now, what does this have to do with newspapers? Well, in addition to my Nonprofits class I’ve also been taking a course called Media Economics and Financing Journalism, taught by a member of the family that used to own the Boston Globe. As the semester has progressed, I’ve slowly become convinced that newspapers are in almost the exact same boat as symphony orchestras. They also face a Baumol effect in that technology advances have had limited benefits for the efficiency of quality original reporting. Furthermore, the most profitable sections of the newspaper (the sports, travel, and health pages) and the section that provides the most public good (the news division) are not the same. Our guest speaker in class yesterday even remarked that the demographics of his newspaper subscribers and subscribers to the local orchestra are virtually identical: aging, upper-income, and mostly white. However, unlike orchestras, most newspapers have had to rely solely on earned income to compensate for their rising labor costs—and so far, it’s not working. As a result, staff positions are being cut at print publications all around the country, with critics (music, dance, theater, and now even film) some of the first to go. After all, why should a paper pay someone to go see a movie and write about it when so many are willing to do just that for free? Even the educational environment in the two fields invite parallels, with both conservatories and journalism schools churning out new graduates at record rates, giving them the highest quality training for jobs that simply don’t exist.

If we can agree that journalism does provide an indispensable public good, in the form of in-depth, factual information not available anywhere else, I can’t help but see it gravitating toward a contributed income model in the coming years. No matter what steps the current industry giants take to shore up revenue streams, whether it be the Washington Post buying Kaplan or the New York Times Co. grabbing a piece of New England Sports Ventures, their core journalism operations will remain loss leaders, and thus vulnerable to cost-cutting pressures. Absent a significant change in industry dynamics, I would not be surprised if nonprofit journalism models become more common in coming years.

late-April update

Some news and notes from Createquity land here. First, as I mentioned a few posts back, I gave a presentation at school on April 2 about economic development and the arts. I'm happy to email the slides to anyone who's interested, but basically the takeaways are as follows:

1. Artists can be a driver for economic development. I have to do more research to be able to say it with scientific certainty, but there is certainly plenty of anecdotal evidence to suggest that a thriving arts community can cause land values to rise faster than they would otherwise.

2. The market is not good at delivering value created by the artists back to the artists. This is because most artists in urban environments do not own the spaces in which they work, and so the positive externalities created by their presence and activity end up generating economic benefits for others.

3. It is difficult to impossible to create an artistic community out of a vacuum. Most successful artist colonies that have grown organically seem to have done so in areas that possess the following attributes: availability of large, interesting, affordable spaces; strong existing infrastructure, especially transportation infrastructure; and reasonable proximity to other centers of cultural activity. Basically, spaces that would be attractive to anyone were they not adversely affected by industrial decay or above average crime, the most common reasons why the spaces are cheap to begin with.

4. The presence of artists in an area is not enough to make a difference on its own. What really pushes a neighborhood or city past the tipping point is the development of storefront space that takes advantage of the arts community's talents, meaning galleries, performance spaces, museums, theaters, or even college campuses. This kind of small-scale infrastructure is critical to identifying the area as a destination for local tourism.

With these in mind, I proposed a microfinance model for the arts, which a philanthropic organization could use to provide targeted funding to these infrastructure levers and have a community-wide impact on a relatively small investment. I'll write more on this subject in the next few weeks.

In the meantime, next week is looking to be an exciting one. On Thursday, my piece Three Miniatures for Violin and Marimba will be given its Connecticut premiere at the IGIGI New Music Marathon. IGIGI is the undergraduate student ensemble at Yale that grew out of the Yale College Composers' Group, which I founded in my junior year. My memories of the all-night new music marathons, which generally begin at 8pm and end with Terry Riley's In C as the sun rises in the morning, are some of my fondest from my college days. It'll be fun to be back. The previous day, I'll be in Rochester, NY speaking at the Great Lakes Conference hosted by the Association of Fundraising Professionals Genesee Valley. I'm serving as a panelist on a discussion about the landscape of philanthropy. Looking forward to it!

Update: John Zebrowski has written a really nice article on this presentation for the Yale SOM website.

Liveblogging the Yale SOM Arts & Culture Conference, Part 2

Back here in A60 for the second Arts & Culture Club panel on intellectual property. The panelists include Gigi Sohn, President of Public Knowledge; Jeffrey Cunard, a partner at Debevoise & Plimpton, LLP; and Robin Batteau, an independent singer/songwriter/producer. The discussion is moderated by Sergio Muñoz Sarmiento, Esq., Director of Education for Volunteer Lawyers for the Arts.

The panel got off to a lively start, dividing along predictable pro-control/anti-control lines with Gigi Sohn representing the copyright reform viewpoint and Cunard carrying the banner for law and order.

Both Sohn and Batteau pointed out the advantage to artists of removing the gatekeepers and marketing to fans directly, with Sohn citing Radiohead's In Rainbows as an example. Sarmiento asked about the tendency among artists and arts organizations to work without a contract. Both Cunard and Sohn (who has a legal background herself) said that they understood the motivations behind this tendency, but nevertheless urged caution and documentation whenever possible. A famous case along these lines was the controversy between Martha Graham and her company that erupted after the famous choreographer passed away.

Sarmiento next brought up an instance of a museum publishing actual Pollack images in its catalog for an exhibition of Pollack fakes, against the wishes of the Pollack estate. The consensus on the panel seemed to be that this was a pretty audacious invocation of fair use and might not hold up in the legal process. Batteau countered with the reality that companies will generally not spend a lot of money suing people who don't have any money. There are two famous cases, both involving the artist Jeff Koons, that have served as benchmarks for establishing fair use. The key issue tends to be the extent to which an artistic work is transformative of any underlying work.

At this point the conversation turned to rap music and samples, and by extension, peer-to-peer file sharing. Sohn mentioned that Warner Music has just hired Jim Griffin, who has been advocating for a while for a system in which consumers would pay ISPs an extra fee every month to download all of the music they want, which apparently the RIAA has to this point been resisting. (Similar measures have been adopted or proposed in France and Canada). Cunard claimed that copyright bodies treat all works of art similarly except for music, because music ownership is so complicated. (More complicated than film? That would be surprising.) Sarmiento next asked about legal ramifications associated with blogging. The Electronic Frontier Foundation apparently publishes a legal guide for blogging, which should be helpful.

An audience member asked about orphan works, which are works that are still under copyright but whose owner is deceased or out of business. Using the work in such a situation involves a risk management calculus that recognizes that, should the copyright owner unexpectedly come out of the woodwork, the owner could sue for statutory damages (i.e., punitive fines that can reach up to $150,000 per count for willful infringement) or seek an injunction against the display or performance of the work. There is a bill coming before Congress that would tweak the copyright code to limit damages from such a situation to reasonable compensation arising from the use of the work. The bill might also contain some measures to establish some form of a small-claims copyright court, for relatively obscure artists who nevertheless want to protect their rights.

Another question from the audience asked how artists can best be educated about their own rights, and specifically about preventing theft via the internet. Batteau claimed that this theft actually doesn't happen that much, because the only real way to make money off of an obscure artist's work is through advertising, but advertisers are very scrupulous about getting rights because of fear of litigation. In fact, this kind of theft can actually be somewhat beneficial to an artist's career through an exposure perspective. (I am assuming they're not including plagiarism in this definition of theft.) Sohn commented that artists need to start thinking differently about how they are compensated, and advocated the virtual tip jar model as a more market-oriented solution.

In response to another question about the theater and dance worlds, Cunard said that directors are increasingly asserting copyright privileges in certain works. This brought the conversation back to the question of written contracts defining roles for the creators involved. Sohn wrapped up the panel by talking about how many more items than you may think are copyrighted, including furniture, textiles, wallpaper, and there is even a movement now to copyright fashion design. However, panelists pointed out that a lawsuit is not necessarily the end of the story--in the case of overreaching by the suing party, the internet can be a great tool to rally public opinion against the action and convince the plaintiff to reconsider.

That's it for the Arts & Culture Conference! Hope you enjoyed the real-time account. If you think this is a format I should consider in the future, do say so in the comments.

Liveblogging the Yale SOM Arts & Culture Conference

Hello everyone, I'm experimenting with a new format today: liveblogging! I'm here in room A60 at the Yale School of Management where the Arts & Culture Club is holding its first ever "Issues in the Arts" conference. The first panel is moderated by Assistant to the Provost at Yale University Jack Meyers and tackles the subject of audience development. Panelists include Donna Walker-Kuhne, President of Walker International Communications Group; Elena Park, Assistant Manager for Editorial & Creative Content at the Metropolitan Opera; Jennifer Kiger, Associate Artistic Director of Yale Repertory Theatre; and Jurgen Weiss, Executive Director of Snappy Dance Theatre.

Jennifer Kiger, in introducing herself, said that audience development is a fairly new concept for the Yale Rep, and that efforts revolve around enabling audience members to identify themselves as invested with what's going on, as well as the development of new work. Elena Park followed and talked about the Met's transformation under Peter Gelb (whose first work experience there was apparently as an usher when he was a teenager). Said that investment in the previous era was heavier on the artistic side than in education and outreach. The Met needed a brand overhaul--almost all of the marketing materials involved chandeliers, for example! Some measures included showing performances on screens in Times Square, offering $20 rush tickets subsidized by a sponsor, and bringing in more theater directors to mount new productions.

Perhaps the most high profile initiative on the part of the Met was its licensing of its performances to be broadcast live in movie theaters around the country, allowing opera lovers dispersed far and wide to experience the company's productions. We're now being shown a video of media reaction to the opening performance of Gelb's tenure which was attended by movie stars and politicians galore.

Donna Walker-Kuhne is now talking about outreach to African-American audience members. Says that often the problem with audience development is that you don't have anything to work with that will facilitate the easy extension of your work to a new or different audience; thus, an eclectic artistic product is very important. Her consulting group develops strategies to engage communities of color in the activities of specific arts organizations. She notes that the current presidential campaign has pushed racial issues to the forefront, causing arts councils and other stakeholders to seek more connection with these communities. However, the hardest part of her job is managing expectations: it's not like, after making choices in the past about how to spend their liesure time, people are just going to switch over en masse overnight. It takes sustained effort over a period of time to make an impact.

Jurgen Weiss of Snappy Dance Theatre is next. He points out the difference between his company and others on the panel, in that Snappy is a touring troupe that is rarely in one place for more than a few days. To overcome this challenge, his organization pursues innovative strategies taking advantage of the intimate environments in which they perform, such as soliciting audience feedback and incorporating that feedback in real time into the performance.

Jack Meyers asked about specific strategies to attract new audiences. Walker-Kuhne advised giving any new initiatives a name and publicizing them, so that people have a context in which to put your efforts. She also pointed out that the world itself is changing, and that diversity outreach merely reflects that change. Park talked about how South Asian audiences were drawn to a new Philip Glass opera about Ghandi. The rush tickets have also been key to attracting unfamiliar faces, because of the low barrier to entry. Jennifer Kiger noted that there has been an explosion of grant money available in recent years for the development of new work in the theater world, and articulated a vision of a diverse community connected around expecting the unexpected. She reiterated the idea that efforts toward this end have to be sustained and that there will be some natural attrition from longtime audience members as the organization evolves. Jurgen Weiss cautioned against overemphasizing the program itself in marketing efforts, because doing so can serve to divide audiences artificially along the lines of their own expectations. BAM is an example of an organization that has successfully pioneered "destination" marketing that promotes the experience more than the specifics of the program. Jennifer Kiger noted the gradual transition in the industry away from a subscription model, and thus the need to appeal to new audiences on a show-by-show basis.

An audience member who works at the Yale Rep shared his experience of outreach in the Latino community for the Rep's next production by José Rivera. Walker-Kuhne said that it was important not to do "drive-by" outreach efforts that bombard a community for a particular show and then disappear forever. Such practices can actually be insulting to the audience you're trying to reach. Park also pointed out the importance of having a diverse decision making team (staff and board) if you want to preserve authenticity in your efforts.

Another question from the audience asked about online tools for outreach. Such strategies as SMS, blogging, and online social networks can be very cost-effective for these purposes, and Walker-Kuhne mentioned Verizon in particular as being hungry for content with which to reach audiences of color. Weiss pointed out how a single funny clip on Youtube can do wonders for building audience interest. However, Kiger noted that such efforts do have a cost in terms of time.

Another audience comment lamented that there had been so much interest generated due to outreach efforts that the staff was now overwhelmed with requests for information. Organizations need to be prepared for their own success, or the consequences can be more disastrous than the problem they were trying to solve in the first place.

We're breaking for lunch now; I'll be back in the afternoon with the second panel!