CHARLIE CHAPLIN—IT GETS BETTER
In fact, when it came to capitalizing on the financial potential of new technology, Pavarotti came late to the game. The shift had begun nearly a century earlier, with the invention of the phonograph, the radio, and, crucially, movies. Consider the career of Charlie Chaplin. Born in 1889, roughly 125 years after Elizabeth Billington, he was, like her, a native Londoner with a prodigy’s talent for performance. Mrs. Billington had made her debut at age nine; by the time Chaplin was nine years old he was on the road, rehearsing and performing in two or three shows a day. His appeal, too, was international—he made his first U.S. tour in 1910, traveling the country for two years. But, for all his energy, like Mrs. Billington, in his live performances he was constrained by the physical reach of the human voice and the distance the human eye could see.
But Chaplin was lucky. In 1867 American inventor William Lincoln patented a device he called “the wheel of life,” through which animated pictures could be viewed. The motion picture era really took off after 1895 (six years after Chaplin’s birth), when French brothers Louis and Auguste Lumiere invented the
Chaplin became the first global superstar of this new medium. He had an uncertain start—Mack Sennett, Chaplin’s first studio boss, deemed the actor’s film debut in the 1914 picture
Technology had created a new way for live performers to become superstars. In Alfred Marshall’s world, superstars had emerged thanks to the increased wealth of society as a whole, particularly its richest members. That meant lawyers, doctors, jockeys, painters, and opera singers could demand higher fees of their ever wealthier clients.
But Marshall’s superstars couldn’t benefit from one of the great innovations of the industrial revolution— mass production. They were limited by the reach of the human voice. (Thanks to the printing press, writers were something of an important exception. In 1859, Anthony Trollope, a successful writer but not quite a superstar, was paid ?1,000 for the novel that became
Sherwin Rosen understood that, in the twentieth century, culture had been industrialized, too. Advances in communications technology had allowed talented individuals to take advantage of the same economies of scale: “The phenomenon of Superstars, wherein relatively small numbers of people earn enormous amounts of money and dominate the activities in which they engage, seems to be increasingly important in the modern world.” The key to the shift, Rosen argued, was “personal market scale” and the power of new technologies to increase the size of that personal market. Like nineteenth-century industrialists, the superstars of the twentieth century reached vast markets, and because technology and volume drastically reduced the cost per unit or per performance, they created new markets, too.
New technology squeezed out the old, but it also increased the overall size of the market. Live performance—Mrs. Billington’s only profession, and Charlie Chaplin’s first one—accounted for a smaller piece of the entertainment pie. But thanks to movies and the radio, people devoted more of their time to commercial entertainment, creating a bigger market for the top performers.
Writing in 1981, Rosen, the inventor of the modern theory of what he called “the economics of superstars,” knew the technology revolution was still unfolding. He ends his paper wondering what impact the coming wave of technology would have on his superstars: “What changes in the future will be wrought by cable, video cassettes and home computers?”
The Internet wasn’t featured on Rosen’s list—its commercial introduction was still a few years away—but once it began to make itself felt as a mass phenomenon, there were a lot of good reasons to think this new technology would be the one that would bring an end to superstar economics. This, in the term popularized by its most visible advocate, Chris Anderson, is the theory of the long tail. As Anderson argued in his 2004 essay of that name, the long tail is “an entirely new economic model for the media and entertainment industries, one that is just beginning to show its power…. If the 20th century entertainment industry was about hits, the 21st will be equally about misses.” Anderson’s point was that technology meant the end of the era of the blockbuster and the superstar; instead the new century would be the golden age of the niche artist and small audience.
It hasn’t quite worked out that way. While a great business can be built by bringing together millions of sales along the long tail—think Google—for individuals, the income gap between the superstars and everyone else is greater than ever. We see that in the overall income distribution, with the top 1 percent earning around 17 percent of the national income, and we see it within specific professions—in banking, in law, in sports, in entertainment, even in a quotidian profession like dentistry—those at the top are pulling ahead of everyone else. This superstar economics is one of the reasons we are seeing the emergence of the global super-elite.
ALFRED MARSHALL IS VINDICATED
Part of what is happening is an intensification of the rising-tide effect first noticed by Marshall more than a century ago. As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.
Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through a privately held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar nor a member of the super-elite. But he is both.
Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million—only 2.3 percent of the total—just isn’t that much money. (Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.)
It is this logic of big numbers that is driving up the fees of Boies and a small cadre of elite lawyers. The willingness of richer clients, with more at stake, to pay higher fees is why even those superstars who aren’t directly affected by globalization or the technology revolution can nevertheless benefit from them. Boies has never lived outside the United States, speaks only English, travels overseas for an annual biking holiday in southern Europe, and has never appeared in a non-American court. He is something of a Luddite, as well—he sends fewer than a dozen e-mails a week and was only recently persuaded by his wife to adopt an iPad, which he mostly uses to check stock prices. But because globalization (Hank Greenberg is one of the pioneers of globalization, nearly as at home in Beijing as he is in Manhatten) and technology have made his clients rich, they have made Boies a superstar,
