Writing in his autobiography, steel industrialist Andrew Carnegie (1835-1919) argued: “no sound judgment can remain with the man whose mind is disturbed by the mercurial changes of the Stock Exchange. It places him under an influence akin to intoxication. What is not, he sees, and what he sees, is not. He cannot judge of relative values or get the true perspective of things. The molehill seems to him a mountain and the mountain a molehill, and he jumps at conclusions which he should arrive at by reason. His mind is upon the stock quotations and not upon the points that require calm thought. Speculation is a parasite feeding upon values, creating none.”
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With the press and the Obama administration making British Petroleum (BP) into an arch-enemy of mankind in the wake of the nation’s worst oil spill at BP’s offshore oil drilling facility in the Gulf of Mexico, I found a couple of interesting counterpoints. “Three Myths About Oil,” a commentary about the oil business by energy analyst Alex Epstein of the Ayn Rand Institute, offers an excellent overview of the relevant facts about demand and drilling for oil that challenges the predominant views.
The other is an interesting 1997 interview with then-BP Chief Executive Officer (CEO) John Browne published in the Harvard Business Review. Mr. Browne comes across as a thoughtful company leader. When asked about the changing rules of competition, he replies, in part: “If we drill each well more efficiently than the last one, we can make a lot more money–which is exactly what we’re trying to do.” His point that the profit motive is the best assurance of quality drilling procedures is well taken and, whatever BP’s decisions since he was in charge, the extent of BP’s role in causing the current spill will undoubtedly affect their ability to make money in the future, indeed, if BP even survives as a company.
John Browne also talked about the difficulty of deep water drilling, which is essentially mandated by the government due to environmentalist bans and concerns about closer offshore drilling. Browne said: “We have a big acreage position in the deep water of the Gulf of Mexico, where drilling is an enormous technical challenge. The water there is between 2,000 and 8,000 feet deep, and then you have to drill 7,000 and 12,000 feet below the seabed to reach hydrocarbons. Because the water is so deep, you can’t affix anything to the seabed, and no human being can go down that far. So you have to use special vessels to drill. They are very expensive, and because it’s fashionable to be drilling in this area, they’re becoming even more expensive. In 1995, we spent 100 days on average drilling deepwater wells. We now spend 42.”
That was 1997 and it certainly sounds as though BP was well aware of the risks and was working to measurably reduce exposure to risk. There is no dispute that government regulations and bans on offshore oil drilling are an integral part of the cause of the current spill and the attacks on British Petroleum by the U.S. government are a deflection based on the government’s guilt in causing the destruction. To whatever extent BP made mistakes, they should make amends, but when it comes to oil, safety, and fixing problems, I trust BP more than I trust the government.
I do not know much about the company’s rich history, but I am generally impressed by Mr. Browne in the Harvard Business Review interview, conducted by Steven Prokesch. Asked about business relationships, echoing banker John Allison’s views on self-interest in business, Mr. Browne explains: “You can’t create an enduring business by viewing relationships as a bazaar activity–in which I try to get the best of you and you of me–or in which you pass off as much risk as you can to the other guy. Rather, we must view relationships as a coming together that allows us to do something no other two parties could do–something that makes the pie bigger and is to your advantage and to my advantage.” He goes on to cite a case involving oil field services company Schlumberger, which developed a logging tool for BP which allowed BP to better gauge drilling horizontal wells.
Browne also offered six points on building distinctive relationships. “The most important aspect of any relationship,” he answered, “is understanding what your partners hope to get out of it and to work hard to help them achieve that goal. It is the key to transforming a contractual relationship into a genuine collaboration.” Point two is that you have to deliver on promises. Third, he said, “you never build a relationship between your organization and a company or a government. You build it between individuals.” Fourth, Browne advised keeping relationships relatively open, flexible and cooperative; fifth, that you approach an opportunity with what he calls humility, by which I think he means an awareness of one’s limitations, and sixth, that you build relationships for the long-term. Responding to the follow up question, he recommended that businesses “instill the belief that competitive performance matters–that producing value is everyone’s job and that to produce value you need to focus so that you don’t get distracted by things that aren’t central.”
Later in the interview, he relates the story of how BP’s step-by-step approach to horizontal drilling resulted in oil wells he calls “the longest drilled in the history of the oil industry” that saved the company $ 75 million. Mr. Browne concluded: “So, contrary to what some may believe, you can institutionalize breakthrough thinking.” [Emphasis his]. Yes, you can, if you are free to compete in business, to drill for oil, and, first and foremost, to think.
Earlier this month, I pondered whether Disney’s deal to buy Marvel Comics signaled an end to Walt Disney’s legendary commitment to creating wholesome stories—with characters in motion pictures and theme park attractions that evoke childlike wonder. Now that Disney Studios Chairman Dick Cook has apparently been ousted by Disney’s Chief Executive Officer Robert Iger, we may be closer to having an answer.
The most interesting report comes from CNBC’s Julia Boorstin, who suggests that Disney’s movie slate may rely increasingly on others, reinforcing my concern that Walt’s original creative philosophy is being incrementally phased out or rejected by Mr. Iger. This would be a mistake in creative and in commercial terms, leaving Disney no more distinct that any other Hollywood studio and making the Burbank, California-based studio merely another entry in delivering me-too cultural cynicism. Disney was already well on its way with a mediocre slate of forgettable movies—Enchanted, Up, Pirates of the Caribbean—while Dick Cook was in charge but the honorable chairman, who worked his way up from Disneyland cast member during his 38 years at Disney, understood Walt’s benevolent sense of life and the need to make movies in a private, proprietary artistic system that nurtures and cultivates the individual’s creative vision (Frank Marshall’s man-dog Antarctica adventure Eight Below comes to mind). He built solid relationships with artists based on trust and respect and he deserved better than an abrupt departure.
If Boorstin’s sources are correct that a scaled back studio leaves Disney free to create fewer bigger, better movies, I see no reason why Dick Cook could not have made that happen—unless Cook had some fundamental objection to corporate plans for the studio. Movies such as The Proposal prove that quality pictures can be made, marketed, and sold to the public and Disney can’t be counted out. The number of recent missteps—overexposing its products and depleting the sense of magic and mystery at the recent self-promotional D23 exposition, bland, bleak movies such as Up and Wall-E and the dreadful decision to release Mel Gibson’s primitive horror movie Apocalypto after his anti-Jewish tirade—is offset by good calls on High School Musical, dumping Walden Media’s Christian Narnia movies, and remaking Disney’s California Adventure as a tribute to Walt Disney and early 20th century Americanism. That mixed record and risky moves such as Disney’s train tour for the expensive A Christmas Carol, pushing cash-strapped consumers to buy movies on the pricey Blu-Ray discs, and upcoming remakes Tron, 20,000 Leagues Under the Sea (with Terminator: Salvation director McG on board, it might be good) and the new picture, Surrogates, Disney’s future as a great, American movie business might be in jeopardy. Dick Cook’s departure makes that look more likely. Knowing who replaces Dick Cook, who worked his way from Disneyland to promoting the studio’s most imaginative recent achievement, The Little Mermaid, and creating Disney’s Soda Fountain and Studio Store, will provide a leading indicator. In the meantime, Disney has lost one its best minds.
Disney Chief Executive Officer (CEO) Robert Iger, briefly profiled in Newsweek in this gushing piece, announced yesterday that the Walt Disney Studios is acquiring the lucrative new Hollywood mini-studio Marvel Comics (Spider-Man, Iron Man, X-Men) for $ 4 billion. Marvel’s a solid player with potential and Disney is one of the best studios and both have their own relatively consistent brands.
What does one add to the other in creative terms? Disney’s driving philosophy had been, until recently, an American, which is to say benign, sense of life expressed with positive characters in story-driven material, whether in a theme park (Disneyland or Disney’s California Adventure) or in a movie. Marvel’s brand of comic book characters is rooted in marginally heroic, or at least not completely anti-heroic, cartoon figures (The Incredible Hulk) with broad appeal. Both derive success from plots that seem to attract general audiences.
Unlike Pixar Animation Studios, which Disney also acquired under Mr. Iger, Marvel’s catalog does not possess a quality that can easily or identifiably be assimilated into Disney’s wholesome, family entertainment. Sure, the Marvel pictures are noticeably less cynical than the competition, but that’s not saying much. This move further dilutes the Disney brand and may make the studio more relevant in the short term at the expense of being markedly less original in the long term. It has been 15 years since The Lion King, 20 years since The Little Mermaid, and 65 years since Disney released the classic Dumbo in movie theaters. I doubt that the un-Disneylike Enchanted, Pixar’s middling Up, or anything with Hannah Montana will be remembered with as much affection. While Marvel makes good popcorn movies, their stories hardly express childlike wonder, adventure, and innocence, something Disney used to imagine and reimagine in timeless tales. Besides, with politically correct Disney’s ban on smoking in movies, it’s hard to imagine Iron Man’s alter ego, Tony Stark, lighting up the occasional cigar, which raises the question of whether this hyped deal may end up as a lose-lose proposition that signals the end of the legendary Walt’s creative influence in an age of dying Americanism.
Blogger Aaron West’s first blog post is an excellent tribute to an historic city of capitalism, Pittsburgh, Pennsylvania, where the businessman once thrived. The post is a desperately needed reminder about what makes America great. Once a bustling boomtown, Pittsburgh is no longer at the center of American industry. But the metropolis evokes the best of our nation’s Industrial Revolution. Built into the rolling, green hills of western Pennsylvania, Pittsburgh rises as a triangle of skyscrapers at the intersection of two rivers, which merge to become one, wide river, the Ohio, which flows into the West. Aaron’s post, citing industrialists Andrew Carnegie, John D. Rockefeller, and J.P. Morgan, pulls an excerpt from a book published in 1907, which captures the spirit of Pittsburgh: “Without a single exception, the steel kings and coal barons of to-day were the barefooted boys of yesterday. In this respect no other city is as genuinely republican, as thoroughly American, as Pittsburgh.”
Another byproduct of Pittsburgh capitalism, Carnegie Mellon University (CMU), bearing the names of Andrew Carnegie and banker Andrew Mellon, recently sponsored a thoughtful discussion about making money in arts and entertainment, “The Future Business Model of Television” (Pittsburgh is also the site of the world’s first broadcasting station, KDKA). The event was hosted by Heinz College’s Master of Entertainment Industry Management program in Hollywood and included NBC Universal’s Chief Marketing Officer John Miller, Fox’s Marcy Ross, William Morris Agency’s Steven Selikoff, head of the Academy of Television Arts & Sciences John Shaffner, and producer and former Warner Bros.’ executive vice-president for production, Judith Zaylor.
The event, held at the Warner Bros. studio in Burbank, California, was moderated by Wayne Friedman. Miller recalled that, when Dallas aired on CBS, everyone freaked when they learned that Larry Hagman, who played the male lead, earned $ 50,000 per episode, and he observed that the government might invoke national security and take over local television programming, which is struggling. Zaylor explained how the Sarbanes-Oxley law, which imposes regulations on business, has seriously damaged the ability to produce TV content and everyone talked about the success of Fox’s American Idol, studio cost-cutting and so-called reality TV programming, which, as Shaffner reminded those in attendance, echoes the early days of TV, which was dominated by wrestling, boxing and talent competitions. TV is experiencing a tremendous business model change and the panel reflected the current state of the industry as a work in progress, ripe for new opportunity.
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