one of the law firms with a nine-to-one differential between its star partners and the rest, in 2011 poached Jamie Wareham, a high-profile Washington lawyer, partly thanks to compensation of reportedly about $5 million in his first year.)
Globalization is having a similar, two-speed impact on lawyers. For the superstars, it is one of the forces creating richer clients, bigger cases, and fatter fees. But at the bottom, cheaper emerging market lawyers are undercutting the salaries of Western lawyers, just as outsourcing has brought down costs—and wages—in manufacturing and more routine services like call center work. One example is Pangea3, an Indian legal process outsourcing firm, which recently opened offices in the United States. Employing hundreds of lawyers who work around-the-clock shifts, Pangea3 does basic, repetitive legal work like drafting contracts and reviewing documents. Its clients have included blue-chip companies like American Express, GE, Sony, Yahoo!, and Netflix. This is “Manhattan work at Mumbai prices,” as the
In the age of the global super-elite, even dentists can be superstars. That’s the only way to describe Bernard Touati, the Moroccan-born French dentist who has parlayed fixing the teeth of the plutocrats, starting with the Russian oligarchs, into a superstar career of his own. Roman Abramovich, the Siberian oil oligarch, paid Touati to fly regularly to Moscow to fix his teeth—and installed a dentist’s chair in his office specially for the job. Dr. Touati treated Mikhail Khodorkovsky, once Russia’s richest man before Putin sent him to Siberia, and he brightens the smiles of oligarchs’ wives, like oil and banking baron Mikhail Fridman’s. He treats the Western super-elite, too—New York–based designer Diane von Furstenberg is a patient, as is Madonna.
Touati’s super-rich patient list is an example of how, thanks to the Marshall effect, the plutonomy is a self- sustaining global economy, largely insulated from the rest of us. Russian oligarchs create a superstar French dentist; Wall Street bankers and Arab sheikhs, superstar interior designers. Whether your skill is tooth enamel or fabric swatches, if you make it into the superstar league you can benefit from the concentration of wealth in the hands of a small, global business elite. And whether you got your start in western Siberia or the American Midwest, once you join the super-elite you patronize the same dentist, interior designer, art curator. That’s how, from the inside, the plutonomy becomes a cozy global village.
SHERWIN ROSEN IS VINDICATED, TOO
Providing superstar services to the plutocrats is one way to join them. But an even more powerful driver of twenty-first-century superstar economics is the way that globalization and technology have allowed some superstars—the Mrs. Billingtons—to achieve global scale and earn the commensurate global fortunes. This is the superstar effect that Sherwin Rosen was most interested in, and it is both the most visible and the easiest to understand. These superstars are the direct beneficiaries of the twin gilded ages.
Thanks to the Internet, Lady Gaga reaches hundreds of millions more listeners than Mrs. Billington did. Her 2011 single “Born This Way” sold one million copies in five days. In 2011, when Lady Gaga topped the
There isn’t much mystery to why Lady Gaga is worth four Mrs. Billingtons. Each one was the leading diva of her time, and each one had an international reputation. But the only way to listen to Mrs. Billington was in person; Lady Gaga can be heard and seen by anyone with an Internet connection. Technology and globalization have given Lady Gaga access to a much bigger audience and she is consequently a much bigger star.
Superstar actors and athletes are beneficiaries of the same forces. In his own lifetime, Charlie Chaplin went from the physical stage to the silver screen and his earnings accordingly multiplied a thousandfold. But he was underpaid compared to today’s movie stars. Contrast Chaplin’s $670,000 income in 1916–1917 with Leonardo DiCaprio’s $77 million payday in 2010–2011—adjusted for inflation, DiCaprio earned six times as much. Economies of scale have similarly enriched sports stars. Mickey Mantle, the New York Yankees star hitter, earned about $100,000 a season in the mid-1960s. Compare that with Alex Rodriguez, the Yankees star fifty years later, who made $30 million in 2012. Adjusted for inflation, Rodriguez’s earnings are fifty times more than Mantle’s. The gap between the superstars and the rank and file has increased, too. Mantle earned less than five times the baseball average; Rodriguez earns ten times more than the average major leaguer.
What is particularly striking about these Rosen superstars is that they have become richer even as the Internet has weakened the businesses that once supported them. Singers like Lady Gaga have never done better, yet the music business has been eviscerated by the Internet. Movie studios have also been weakened even as their stars do better than ever. Athletes can earn millions while their teams go broke.
Superstars have stayed on top partly by cashing in on their technology-driven celebrity with lucrative in- person performances. Lady Gaga earns much of her income from her live acts. The same is true of the other best- paid singers of 2011—U2, Bon Jovi, Elton John, and Paul McCartney. All of them earned more than $65 million, and all of them depended heavily on the revenues from live shows.
What we are seeing is the Rosen effect and the Marshall effect enhancing each other. Cheap and effective communication has allowed a few performers to achieve global celebrity more quickly and at a greater scale than ever. At twenty-five, Lady Gaga had sold sixty-four million singles around the world. But she had a slow start compared to Justin Bieber, who, at sixteen, produced a video that has now been viewed nearly 750 million times.
The paradox is that much of the technology that has made Justin Bieber and Lady Gaga famous doesn’t make them rich. In 2012, the most powerful way the two stars connected with their fans was Twitter—Lady Gaga had more than twenty-five million followers (known as “little monsters”); Bieber had more than twenty-three million “Beliebers.” Those tweets don’t make money, but they create an audience for the live acts, which do.
And those in-person performances are an example of the Marshall effect on a global scale. Just as an England that was growing rich could afford to fund lavish productions at Drury Lane and Covent Garden—and a competition between the two that drove up Mrs. Billington’s fees—so the rising middle class in emerging markets and the rising global super-elite are creating affluent audiences for today’s celebrity performers. Global scale is essential to the economics of today’s superstars: in 2010, Lady Gaga performed in twenty-nine countries, U2 in fifteen, Elton John in sixteen, and Bon Jovi in fifteen. We may think of these musicians as products of mass culture, but their shows are elite events. The average ticket price at Lady Gaga’s
In a study of concert ticket prices, economist Alan Krueger found that in the two decades between 1982 and 2003, a time when first music videos, especially as celebrated on MTV, and then digital sharing technology, as pioneered by Napster, extended the reach of top performers, the share of concert revenue taken by the top 5 percent of entertainers increased by more than 20 percent, from 62 percent to 84 percent. The top 1 percent did even better: their share more than doubled, from 26 percent in 1981 to 56 percent in 2003. (By contrast, the top 1 percent in the United States overall earned 14.6 percent of the income in 1998.)
More intimate deals with the billionaire class are a smaller, but significant, source of income for superstar performers. Arkady, a Russian businessman in his thirties, reportedly paid Lady Gaga $1 million to appear in her “Alejandro” music video. And even stars a little past their prime can earn fat fees for personal appearances for the plutocrats. This seems to have become the standard for the big birthdays of private equity chiefs, their equivalent of baking themselves a homemade birthday cake. In 2011, Leon Black, the founder of private equity group Apollo, celebrated his sixtieth with a birthday bash that included a million-dollar performance by Elton John. (In a global economy, these gigs can sometimes go badly wrong, as Hilary Swank discovered when she agreed to attend Chechen strongman Ramzan Kadyrov’s thirty-fifth birthday celebrations in Grozny, in exchange for a six-figure fee. She was roundly—and rightly—denounced for sharing a stage with a warlord notorious for torturing and killing his opponents.)
