Author Archives: pmarca

Patrick Goldstein of the Los Angeles Times on Hollywood owner/entrepreneurs

Top-notch entertainment reporter Patrick Goldstein picks up the baton:

Hollywood is a town awash in hyphenates. TV is loaded with writer-producers. The movie biz is full of writer-directors. There’s even a legion of actor-filmmakers like Clint Eastwood and George Clooney. But as the writers strike enters its third week, I think the future belongs to a tantalizing new hyphenate: the writer-entrepreneur.

Visiting a UCLA film class the other night, I was asked to name the most influential filmmakers of our era. The choices were pretty obvious: Steven Spielberg, Peter Jackson, John Lasseter, George Lucas. . . . As the names spilled out, I realized they all have something in common. They’re filmmaker-entrepreneurs, artists-turned-businessmen who helped start their own companies to further their work, became financially independent and created a world that operates under a radically different set of rules from the vacuous studio assembly lines. It’s telling that the current strike is about new media yet both sides seem to be following old-school models.

Writer Guild members, listen up. There is a lesson here. Just ask Tony Gilroy, the writer-director of “Michael Clayton,” a nervy thriller that’s won critical raves this fall. Gilroy had a script that was dead in the water until a total outsider — a Boston real estate developer named Steve Samuels — said if Gilroy could get a star and stick to a budget, he’d bankroll the film.

Gilroy didn’t see himself as an entrepreneur. He just had a script that was burning a hole in his pocket. “I’d say the experience was more about my wising up than becoming a visionary,” he explained the other day. “But the moment I started chasing private-equity money, it didn’t take me long before I’d realized that I’d short-circuited the formula for getting a greenlight. I didn’t need studio approval. All I needed was one guy who believed in the movie.”

Gilroy is now a convert. “The studios have got to be hoping that this idea about being entrepreneurs doesn’t sweep over the TV show runners, because once you start seeing really good production values on the Internet, I mean, what does Larry David really need HBO for? This is all everybody is talking about on the line. They’re not talking about healthcare. They’re going, ‘Wow, is there a different way to get our movies and TV shows made?’ “

It’s the kind of talk that’s contagious. Scott Frank, who wrote hits like “Minority Report” before directing “The Woodsman” this year, has been speaking with Samuels about financing a new film. David Twohy, writer-director of “The Chronicles of Riddick,” has lined up financing for a new thriller, “A Perfect Getaway,” from Relativity chief Ryan Cavanaugh, who also bankrolled “3:10 to Yuma.”

Steve Zaillian, who wrote “American Gangster,” has a deal with Mandate Pictures to make under-$10 million character-driven films where he is a 50-50 partner in all the projects. Mandate has a similar partnership with writer-director Sam Raimi of “Spider-Man” fame. Mandate also has a writers program in which, in return for initially cutting their fee, writers can get 25% of the gross after a film goes into profit and have approval rights on hiring the movie’s cast and director.

“Writers who create something rare — a story with great, original characters that movie stars will cut their price to play — have a real value,” says Mandate production chief Nathan Kahane. “But that value doesn’t get unlocked in the studio system. If writers are willing to share our risk, then we’re willing to give them a lot of control and share in the profits too.”

This kind of entrepreneurial formula couldn’t have existed in the era when the studios had a stranglehold on every facet of the business, notably talent, money and distribution. But those days are gone. The stars became free agents long ago. In the last few years, with billions of private-equity dollars flooding the business, the studios have lost their lock on financing too.

All that’s left is marketing and distribution. It’s hard to equal the way studios launch their summer popcorn extravaganzas with a $40-million marketing blitz. But as more entertainment migrates to the Internet, where distribution is basically free to anyone with a computer, the studios will lose that monopoly as well. If the last couple of weeks are any indication, with clips from out-of-work comedy writers popping up every day, the Web could be littered with new must-see video sites by Christmas. Remember: After barely a year in existence, YouTube was bought by Google for $1.65 billion. On the Internet, good ideas travel fast.

“The world is about to change,” Frank says. “Anyone with an Apple computer can make a movie now — it’s never been a more democratic medium. The studios should be very afraid. Once the independent financiers start going directly to writers, things could change really fast. I ask myself every week — why aren’t we all working with them? Look at the movies they’ve made. They are the new Medicis.”

While the studios peddle dreary remakes and special-effects extravaganzas, the movies that really get people talking — such as “Crash,” “Brokeback Mountain,” “Michael Clayton” and the upcoming “Juno” — have been financed by outside investors. None of the films had a big budget, but fiscal discipline and artistic autonomy often fuels creativity. “Ten million dollars to $30 million is where ambiguity stays alive, where you can have complexity in storytelling,” Gilroy says. “When you get up to a certain budget number with studio films, the bad guys have to all wear black hats.”

The WGA is fighting the good fight. But the glory days of “Norma Rae” are gone. Real change in today’s world comes from the energy and ideas of entrepreneurs, not from labor negotiations. To take control of their work, writers have to cut out the middleman. Marshall Herskovitz and Ed Zwick, who just struck a deal with NBC to air their “Quarterlife” Web-only dramatic series, will reap most of the rewards, since they own the show. Not every writer has the clout of that duo to attract outside investors. But as the Internet has proved time and again, game-changing ideas are more likely to come from an unknown 26-year-old newcomer than a fiftysomething veteran.

The models are everywhere today, especially in the music business, where economic upheaval has given birth to a new array of artist-entrepreneurs. Radiohead and Prince have both bypassed the soul-killing tangle of retailers and promotion people by releasing their latest records themselves (with Radiohead using the Internet as its distributor, even letting its fans set the price of the record themselves).

Being entrepreneurial isn’t for the faint of heart. If you want a sweet upfront paycheck, you may not have the stomach for it. But after seeing studios bowdlerize their scripts, many writers will swap a big payday for more control. Twohy says that after Relativity read his script, “They told me, ‘Script approved as-is.’ I’ve never heard a studio ever say that.”

This kind of creative freedom already exists in Silicon Valley, where the creators of product are its owners. Software entrepreneur Marc Andreessen, who helped found Netscape, makes an eloquent argument on his blog that a prolonged strike could undermine the studios’ control of production and distribution, ushering in a new showbiz model built in the image of Silicon Valley.

Even if the strike is settled soon, dramatic change is coming. As more outside money pours into Hollywood and as our computers begin to merge with our TV sets, the studios will have less control over content than ever. NBC’s Jeff Zucker can sneer at the paltry dollars to be made from selling TV shows on iTunes all he wants. But if old media keep pulling their product away, surely the day isn’t far away when Steve Jobs will bankroll his own programming to keep our iPods full of compelling entertainment. [He already did; it was called Pixar.]

Whoever enters the fray will still need writers to create this new content. So writers should keep their eyes on the prize. Getting a few more pennies of digital loot is just a beginning, not an end. The ultimate goal should be finding ways to own a piece of your own work.

“If I were someone like Les Moonves, I’d be scared,” Gilroy says. “You don’t want your employees thinking about opening their own store around the corner. We might be really tough competitors.”

Great talk by Stephen Wolfram on starting companies

From Stephen Wolfram, one of my entrepreneurial heroes, who (unlike me) was able to start and run a successful high-tech company in Champaign, Illinois…

A great talk on how to start and run companies. Worth reading the whole thing, but here are my favorite parts.

Motivation for starting Wolfram Research, the maker of Mathematica:

[As a physicist,] I’d been used to using all sorts of separate programs — and custom software — for things I wanted to do. But I had the idea that perhaps I could make one really general computational system that I could just use forever.

And that lots of other people would find useful too.

Well, that was what launched me on building Mathematica. I was pretty definite and determined about it.

And I knew I needed to start a company.

Starting focused, but learning and adapting as you grow:

I had made a little money by then. And quite a few of the first people I collected were basically moonlighters. So I didn’t need any outside money.

And pretty soon I started making deals with companies like NeXT and Sun and IBM to pay up front to have our software for their machines.

And after a year and a half — June 1988 — Version 1 of Mathematica was released, and made a nice splash.

I think I had about 15 employees by then. I hoped I could keep the company really small. A pure R&D company. With the sales and marketing — or at least the sales — left to the hardware companies.

Well, despite lots of good intentions, that didn’t work out. There were too many cultural impedance mismatches. And pretty soon I realized I was just going to have to build everything directly in my company.

And I’m happy to say that that worked out really well. The company’s been going for more than 18 years now. And been consistently profitable.

I’ve been the CEO all the time. I’ve kept the company small. The core of it is still only about 350 people.

On the value of tapping a rich vein of potential development and expansion from a deep core idea:

You know, Mathematica is really based on fairly deep ideas about computation. That particularly come out in the notion of symbolic programming. That lets one unify all sorts of constructs and operations. And manipulate the structure as well as the content of data.

That’s been at the core of Mathematica for 18 years. But it’s a difficult idea, that takes a long time to get absorbed.

But it’s what’s let us build the huge web of algorithms and things inMathematica.

And over the last ten years we’ve gradually realized that it lets us build some pretty major other things. Which are going to be really exciting when they’re finally out. I think a bigger step even than when MathematicaVersion 1 came out.

Why start a company, and why not start a company:

Well, of course, people are all different. And I think what’s crucial is to understand one’s own capabilities, and one’s own motivation.

A lot of what goes into starting companies is turning nothing into something. Starting with a blank slate, and just inventing all kinds of stuff.

You’ll never know if it’s ultimately correct. You just have to use your judgement, make decisions, and move on.

To some people, that’s pretty scary. Not to have any answers to look up in the back of the book. Just to do stuff.

People have different motivations, of course. A lot of people think the big thing with companies is money.

Yes, if you luck out, you can make a lot of money. But it’s really rare that money carries people as a motivation.

You have to actually care about what you’re doing.

For some people, like me, it’s the actual creative content that they care most about. For other people, it’s the act of building the company. For others, it’s making deals. Or winning against competition.

But there has to be something you really care about.

Why the CEO should be a founder:

And I think it’s important that if you’re the one who cares, you should be the one pushing things forward. If you’re smart, there’s a good chance you can learn the detailed skills to run a company. But to make the company really work, you need someone leading it who really cares about it.

You can’t delegate the core motivation.

On the role — or non-role — of business plans, and the sources of real value:

But in the things I’ve done — and all the various CEOs I’ve counseled over the years — I’m not sure if writing a detailed business plan would ever once have been worthwhile. I’m as analytical as anyone. But somehow there are always variables one doesn’t know. That can just turn numbers and things upside down.

Now of course there’s a certain discipline to writing a business plan. And seeing whether someone can actually put together a logical plan can be a good way to assess them.

It’s like whether one has a good website. That looks nice, and is well organized. Or has some educational degree that proves one can finish something.

Well, OK, I could go on for ages about things to do and not to do with companies.

After a while one gets a certain intuition for what’s going to work, and what’s not. I’m always trying to test my intuition, by watching how things actually play out, and comparing with what I expected.

There are certain constants. Get-rich-quick schemes almost never work. Even if they sound really clever. It takes actual hard work to build things. And usually at the core of anything successful is something difficult. It may not be what people talk about. It might be something technical. It might be a business structure. But there’ll be something there that’s sort of a hard idea. It’s always a good exercise to see if you can figure out what it is.

You know, sometimes there are things in business that just don’t seem to make sense. Some deal that’s too good to be true. Some magic solution to a problem. But somehow those never really seem to work out. Somehow in the long run things always arrange themselves to sort of be fair. To get out what gets put in.

Finally, check this out. Wow.

Nixon White House tapes: the gift that keeps on giving

Via David Corn:

President Nixon: What’s your evaluation or Reagan after meeting him several times now.

Kissinger: Well, I think he’s a–actually I think he’s a pretty decent guy.

President Nixon: Oh, decent, no question, but his brains

Kissinger: Well, his brains, are negligible. I–

President Nixon: He’s really pretty shallow, Henry.

Kissinger: He’s shallow. He’s got no…he’s an actor. He–When he gets a line he does it very well. He said, “Hell, people are remembered not for what they do, but for what they say. Can’t you find a few good lines?” [Chuckles.] That’s really an actor’s approach to foreign policy–to substantive….

President Nixon: I’ve said a lot of good things, too, you know damn well.

Kissinger: Well, that too.

President Nixon: Can you think though, Henry, can you think, though, that Reagan with certain forces running in the direction could be sitting right here?

Kissinger: Inconceivable.

President Nixon: Back to Reagan though. It shows you how a man of limited mental capacity simply doesn’t know what the Christ is going on in the foreign area.

If this is true, someone’s going to jail

You heard it here first…

Carol Loomis buries the lede:

At bottom, the countdown to both [Citigroup CEO] Prince’s exit and Citi’s November shocks began in [the] summer crisis period for the credit markets. Citi started then to have ominous dealings with CDOs [financial instruments that consist of bundled debt] that carried a “liquidity put.” Never heard of a liquidity put? Google will give you a few uninformative references. But it is testimony to the obscurity of this term that [Citigroup Chairman and former Treasury Secretary] Rubin says he had never heard of liquidity puts until they started harassing Citi last summer.

What Citi did a couple of years ago was insert a put type of option into otherwise conventional CDOs that were backed by subprime mortgages and sold to such entities as funds set up by Wall Street firms. The put allowed any buyer of these CDOs who ran into financing problems to sell them back – at original value – to Citi. The likelihood of the put being exercised, however, was regarded as extremely remote because the CDOs were structured to be high-grade entities called “super-senior.”

Meanwhile, you might think the existence of the put would make it impossible for Citi to get those CDOs entirely off its balance sheet. [Yes, you might.] But in fact Citi found a complex accounting rationale for doing exactly that, and the CDOs jumped entirely to somebody else’s balance sheet. All that remained in Citi’s realm was this sticky little matter of the puts – which, as we shall immediately see, ultimately worked to get these CDOs right back to their creator, Citi.

Last summer, with the whole world suddenly unwilling to finance CDOs, the holders of the liquidity-put CDOs began to return them to Citi. And that’s where they now reside – $25 billion of them, a very large lump in Citi’s $55 billion of subprime-related securities. That entire package of trouble was the subject of Citi’s Nov. 5 analyst call. This was the third presentation that Citi had made to analysts in five weeks – each of these confessionals more anguished than the last – and in that time Citi’s stock and Prince’s credibility had been punished.

But remarkably, Nov. 5 was the first time that Citi mentioned liquidity puts to the world. CFO Crittenden says the need to make disclosures about the puts did not arise until the last part of October…

Rebuilding Hollywood in Silicon Valley’s image

Last week I posted a rather pointed polemic titled “Suicide by strike” in which I argued that the big entertainment companies were acting suicidally in picking a fight with the writers at precisely the wrong time.

In this post, I more dispassionately outline my theory of why that’s the case, and what I think may happen next.

The writers’ strike, and the studios’ response to the strike, may radically accelerate a structural shift in the media industry — a shift of power from studios and conglomerates towards creators and talent.

First, some context. In Hollywood, the talent — actors, directors, writers — is unionized, and those unions engage in old-fashioned collective bargaining with the studios, also known as “the Man”. That collective bargaining establishes the economic framework by which most of the talent gets paid.

Last week, the writers’ union — technically unions, but I’ll use the singular form for simplicity — went on strike for the first time since 1988 after an acrimonious breakdown in negotiations with the studios over a new deal.

Significantly, the actors’ and directors’ unions are due to renegotiate their deals with the studios soon as well; some people in Hollywood believe that the studios are being deliberately hostile to the writers in order to send a signal to the actors and directors to not expect much.

The writers are on strike primarily over the terms by which they get paid “residuals”, or ongoing payments, for various forms of distribution of television shows and movies. In a simplified nutshell:

     

  • Due to amazing historical circumstances around the birth of the VCR in the early 1980’s, television and movie writers are currently paid approximately 4 cents for each DVD sold — bearing in mind that the average sale price for a DVD is over $10, and the cost of manufacturing a DVD is less than 50 cents. The writers want that residual rate doubled to 8 cents per DVD, and the studios are refusing.
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  • Currently, writers are not paid for Internet downloads via online video stores like iTunes and Amazon Unbox. The studios want to extend the current 4-cent DVD residual formula to Internet downloads; the writers are holding out for more.
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  • The studios are refusing to pay residuals on Internet streaming of television shows and movies — even when that streaming comes from their very own web sites and contains revenue-bearing commercials. The studios call all such streaming “promotional”. The writers are howling with outrage that if the studios themselves are streaming complete TV shows containing commercials, that’s clearly not just “promotional”. The writers have a good point.
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Taken on their own, these issues are most likely negotiable and solvable. However, trust between the two sides seems nearly nonexistent; the writers feel like they have been repeatedly burned by the studios over the last few decades; and the studios may well have a vested interest in beating up the writers in order to motivate the actors and directors to not push too hard in their upcoming negotiations.

And so, the writers are on strike.

How long will the strike last?

Nobody knows. The strike of ’88 lasted for up to five months. Some people in Hollywood think this strike could last until June 2008 or beyond. Or perhaps it gets settled tomorrow.

What happens if the strike continues for months?

Movie production will apparently be largely unaffected for quite a while; the movie studios have stockpiled scripts and are continuing to shoot new films.

Television, however, is a very different picture.

Scripted television production is already all but shut down. Most late-night talk shows are shut down. Most remarkably, many comedy and drama series are either already shut down or will be within the next several weeks. Why? Two reasons: first, television shows often don’t have scripts in hand for more than a few weeks of filming at any given time. Yes, Virginia, the writers of “24” really don’t know how it’s going to end when they start filming a new season. Second, many television shows are run by so-called showrunners who serve as both writers and producers; many showrunners are now refusing to work altogether — and the studios are already threatening to sue them for refusing to honor their producing contracts, further fraying relations.

If the strike continues into next spring, you won’t see new episodes of most scripted TV shows past Christmas — you’ll see reruns, and reality TV. Some people on Hollywood think this could permanently kill many of the shows currently on network TV — i.e. they may never start back up. (MTV’s “A Shot At Love with Tila Tequila” will, however, be unaffected.)

If the strike continues too far into next spring, it will also disrupt the production of pilots, which will mean that there won’t be any new shows for the fall 2008 TV season, which means you might not see new TV programming other than reality shows until 2009. 2008 may be, quite literally, a dead year for TV.

OK, now let’s get into my theory of how this may play out…

What are the probable long-term consequences of an extended strike?

First, ongoing alienation of a new generation of TV viewers.

The music industry’s war on digital distribution over the last 10 years, starting with their assault on Napster and continuing to all the present-day RIAA fiascos, has permanently alienated an entire generation of consumers, who are now voting with their wallets and not buying music. They’re still going to concerts, buying artist merchandise, buying video games that contain lots of music, even voluntarily paying Radiohead directly for free album downloads — but mainstream recorded music revenue is dropping like an anvil in a Bugs Bunny cartoon, with virtually no hope of recovery.

The TV and movie industry has already been conducting their equivalent war on digital distribution; as a result, most of the new consumers — kids, college students, young professionals — view iTunes and Amazon Unbox downloads as “too little, too late” when it comes to giving them the ability to watch what they want, when they want, on whatever device they want.

I think the TV and movie industry is at a turning point where things could go either way — they could repeat the critical error of the music industry and permanently alienate their customer base; or they could get it together and create viable models for the future that make consumers happy and make money.

The situation already wasn’t looking too good, but the one even more effective way to alienate viewers than attacking their viewing options is to actually kill the programs they are watching.

Which is what an extended strike will do.

Second, driving consumers even faster to the new range of activities they can engage in.

We all know the list: the Internet, social networking, user-generated content, blogging, video games, mobile phones, you name it. All the activities that consumers have discovered and adopted since the last writers’ strike in 1988, that they just love, and that have already been siphoning away time, attention, and money from TV and movies even without a strike.

Obviously, the less scripted television and film content that’s being produced, the more alienated consumers will shift over to all the new activities — and the less likely they will ever go back.

Third, and most significantly: catalyzing faster development of new business models for entertainment media.

Here’s where things get really dramatic.

The Internet has already been forcing a rethink of the structure of the media industry, particularly for entertainment. The strike is kicking that rethink into high gear. Here’s why:

The classic Hollywood economic model is built around the existence of a few very large companies — studios — that dominate production, marketing, and distribution.This has been the economic model since the birth of the entertainment industry, for fundamental reasons.

     

  • Historically, marketing and distribution of entertainment properties has been extremely expensive. Running big nationwide ad campaigns and getting distribution into TV networks or movie theater chains is expensive. And production has also been very expensive. Only a small number of very large companies can afford to be in the business.
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  • Because of that, those few very large companies — studios — have been bottlenecks. If you are talent — writers, actors, directors — you have to deal with the studios because otherwise you can never bring anything to market.
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  • The studios have rationally exploited their bottleneck status to demand ownership of the creative product. Writers, actors, and directors don’t own their output; the studios do.
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  • As a consequence, talent gets paid like hired guns, not owners.
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  • As a consequence of that, talent bands together to form unions — actors’, directors’, and writers’ unions — and engage in adversarial collective bargaining to try to extract a share of the ongoing economics of their output. Hence the residual system that’s in dispute today: 4 cents per DVD.
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Let’s contrast all of that to the Silicon Valley model.

In Silicon Valley, there are many companies, large and small, that create, market, and distribute products — and more such companies all the time. In fact, there is a whole industry — the venture capital industry — devoted to creating as many new such companies as possible, as rapidly as possible.

     

  • In Silicon Valley, creation, marketing, and distribution of a compelling new product is not very expensive. And with the Internet, marketing and distribution costs drop nearly to zero. Most successful Internet companies, large and small, use free viral marketing techniques and never run ads. And the whole concept of distribution costs goes away when everything is digital — the next set of bits costs nothing to manufacture.
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  • Therefore, there are no bottlenecks. Many companies, large and small, can afford to be in business — can afford to develop new products and bring them to market, market them and distribute them. And nobody can really block you.
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  • In Silicon Valley, the creators of the product — the talent — are owners: owners of their product, and owners of their company. In fact, the entities that finance the companies — venture capitalists, private equity funds, the public stock market — want the creators to be owners: in a world where there can be many companies, the best creative talent will be drawn to the situations in which they will be owners, and will be compensated as owners.
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  • Because of that, in technology, creators get paid like owners.
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  • Therefore, there are no unions. There is no reason for the creators to unionize — they would be negotiating with themselves. The concept of residuals does not exist — they’d be paying themselves. And alignment of interests between creators and financiers is near-perfect.
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I believe the entertainment industry is in the early stages of being rebuilt in the image of Silicon Valley.

What would a new entertainment media company, producing original content, look like in the age of the Internet?

     

  • Starting from the end of the process: you know distribution is now nearly free. Put it up on the Internet and let people stream or download it.
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  • Marketing is also free, due to virality. Let people email your content to their friends; let people embed your content in their blogs and on their social networking pages; let your content be searchable via Google; let your content be easily surfaced using social crawlers like Digg. All free.
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  • Production is very cheap. Handheld high-definition video cameras cost nearly nothing. You can do almost every aspect of production and post-production on any Mac. Hell, you can even score an entire movie for free — there are hundreds of thousands of bands on the Internet who would love to have their music embedded in a new entertainment property as promotion for the bands’ concerts and merchandise.
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  • The creators of the content are the owners of the company. The writers, actors, directors — they are the owners. They have a direct, equity-based economic stake in the company’s success. They get paid like owners, and they act like owners.
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  • Financing is straightforward: venture capital, just like a high-tech startup. We live in a world in which financing a high-quality startup is simply not difficult — not for a high-quality technology startup, and increasingly not for a high-quality media startup. Modern financiers love being co-owners of a new company with the talent that will make the company successful — and that’s how it will happen here.
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This is not a difficult thing to envision. And in fact, it’s already happening. Will Ferrell’s Funny Or Die, in which I am a minority investor, is one early existence proof of this model. And there are a ton of other such new companies either already underway, or currently being incubated, or currently being negotiated.

And in fact, there are a lot of historical precedents even in the media industry for the model of talent as owners, going all the way back to the original United Artists in 1919. Some of those precedents worked great — George Lucas, for example. Some flamed out. Of course, they were all up against the bottlenecks.

But here we are, living in a world in which the bottlenecks have suddenly become irrelevant.

I don’t think there’s any question that this is the logical model to pursue in the age of the Internet — the age of free distribution and marketing.

Suppose the writers’ strike continues for months to come — and even beyond that, suppose the actors or the directors also go on strike. In such a scenario, it is hard to see how many companies based on this new model won’t be created extremely quickly — after all, if you really can’t work for the Man, why not start your own company, if you can?

And if you are a primary creator in Hollywood, the model for starting your own company is suddenly becoming very clear.

Which brings me full circle to why I’m even writing about this topic in the first place.

As consumers — even alienated consumers — it would be sad to see the TV shows and movies we love not get made during a protracted strike. And certainly many people throughout the extended ecosystem of the entertainment industry — most of them not rich and not famous — will suffer financially.

However, in the event of a long-term strike, out of the ashes of the traditional model would — I believe — come the birth of certainly dozens, maybe hundreds, and possibly even thousands of new media companies, rising phoenix-like into the global entertainment market, financed by venture capital, creating amazing new properties, employing large numbers of people, and rewarding their creators as owners.

As an entertainment consumer, I’m ready for it, and I suspect you are too.

Hollywood, rebuilt in Silicon Valley’s image.

Building a state-of-the-art Emergency Room for Silicon Valley

Today I’m extremely excited to tell you about a philanthropic gift that my wife Laura and I are making:

We are giving $27.5 million to Stanford Hospital, for two purposes:

First, to significantly enhance and upgrade Stanford Hospital’s current Emergency Department.

And second, to fund the creation of a new state-of-the-art emergency facility in the new hospital that Stanford will build — assuming it is approved by the city of Palo Alto — over the next several years.

As you can imagine, Laura and I are unbelievably excited by the opportunity to make this gift. In fact, we are so excited that I am going to tell you all about it at some length in this blog post!

For us, this gift is a great fit between a clear immediate need, and the prospect of helping to change the way the system that serves the need operates.

And we think the impact on Silicon Valley can be tremendous.

Why?

Stanford Hospital’s Emergency Department is the core emergency room for Silicon Valley. For example, the Stanford ER is the only Level 1 trauma center between San Francisco and San Jose. Most people who live in Silicon Valley have either been to the Stanford emergency room or have a close friend or family member who has — it’s the great equalizer; you go in at 2AM and you need it to be there, and you need the care to be outstanding. In short, the Stanford Emergency Department is an absolutely essential community resource — and while it has historically been underfunded, we hope that this gift will fix that.

But it’s not just an emergency room. In the last couple of decades, emergency services has also become a research field — and the doctors in the Emergency Department at Stanford are some of the leading researchers and teachers in that field. As you’d expect from a hospital tied to a major research university, new emergency medicine techniques and technologies can be invented and then directly translated into medical practice at Stanford, and then shared with the rest of the world. And so we also hope our gift will help boost the research and teaching efforts in Stanford’s Emergency Department and help improve emergency medicine throughout the US and worldwide.

Specifically, our gift will help the current Stanford Emergency Department do the following:

     

  • Renovate the current ER and upgrade a broad range of critical technologies, including digital X-rays, ultrasound machines, cardiac monitors, and communication and tracking systems.
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  • Staff for improved efficiency and customer service. We are adding patient advocates and a nurse call-back/followup program, plus more residency positions to increase the number of doctors in the ER and to train more world-class emergency medicine experts who can go on to great careers and lead similar programs throughout the world.
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  • Expand research programs in areas such as wound care, heart attack and stroke, and bioterrorism and disaster preparedness. We are among other things endowing a Medical Director position for Disaster Preparedness.
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Beyond that, Stanford has announced its intention to build a brand new hospital over the next several years, potentially opening in 2015, assuming approval by the city of Palo Alto. Our gift will fund the creation of a new Emergency Department facility and ER within the new hospital.

We think this is a very big deal for several reasons:

     

  • The current emergency room was built in 1974 and designed to serve approximately 24,000 patients per year. It is currently serving more than twice that number. It can’t be moved due to the need to be integrated into the rest of the hospital. The new emergency room, however, will be more than twice as large, and able to handle many more patients without the current overcrowding and extended wait times.
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  • The new Emergency Department will be designed to be state of the art from the ground up, and will incorporate all of the latest cutting-edge technologies. This is a huge opportunity for Silicon Valley — one of the most technologically advanced places on the planet — to have an emergency facility that is similarly technologically advanced, and we plan to seize that opportunity.
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  • The new Emergency Department in the new hospital will be an even more effective focal point of innovation, research, and teaching, looking out to 2015 and beyond. There’s no doubt that emergency medicine 20 years from now will be much different than emergency medicine today, and Stanford can lead the way.
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Finally, it is a perhaps sad fact of our current medical system that in any American community, the emergency room is also the backstop for people who either don’t have health insurance or cannot gain prompt access into a convoluted primary care system. The Stanford ER serves that purpose in Silicon Valley, and we think as long as our health care system works the way it does, that is a purpose that is clearly worth supporting.

Our motivations for the gift are straightforward: Silicon Valley has been unbelievably good to both of us. There is no way my career would even exist without Silicon Valley, and Laura was born and raised here, has lived here her whole life, and has built her career here. This is the most direct way we can think of to help make the community of Silicon Valley a better place. And, due to the research and teaching element of what we are doing, we think that there will also be leverage way beyond our community.

Let me close by thanking some people:

     

  • Thanks to the amazing team of doctors, nurses, and staff in the Stanford Emergency Department, led by Bob Norris and Paul Auerbach. Obviously everything I have described is only possible due to your amazing work and dedication. I look forward to working with you in the years to come to ensure that your environment is fully worthy of your efforts.
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  • Thanks to the outstanding management team of the hospital, as well as the board (on which I am also honored to serve) — particularly Martha Marsh, Phil Pizzo, Denise O’Leary, and Mariann Byerwalter. You are leading a renaissance in health care in Silicon Valley, and the results of your work are going to be wonderful to see over the next decade and beyond.
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  • And — if you don’t mind some mushiness at the end — let me thank my brilliant and lovely wife, Laura. I’m lucky enough to be married to one of the foremost philanthropy scholars and practitioners in the country — Laura teaches philanthropy at Stanford and Stanford business school, is the founder of her own highly successful venture philanthropy organization (SV2, the Silicon Valley Social Venture Fund), and is writing an amazing book called Transformational Philanthropy (and she lets me read the drafts!). Without her love, support, inspiration, and teaching, this gift would not be happening — and it is ours together. My fondest hope is that this is the first of many such gifts we will be able to make in the future.