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.
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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 Born This Way show was more than a hundred dollars.
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.)
The people a previous generation might have called public intellectuals also make much of their living by leveraging the Rosen effects of mass popularity and the Marshall effect of earning lavish fees from a plutocracy that can afford to pay them. Malcolm Gladwell, the world’s most influential business writer, is an example. He is paid millions to write books. But he makes almost as much—and with less effort—by giving $100,000 speeches. Groups he has addressed include a gathering of Blackstone’s investors and the Pebble Beach legal conference, the Davos of the world’s top lawyers.
You don’t have to top the bestseller list to profit from the super-elite speaking circuit. Charlie Cook, the political analyst and editor of the twenty-eight-year-old Cook Political Report, “subsidizes” his journalism by giving speeches, an activity he says is “very, very lucrative,” even if it can be wearing to “haul my tired old ass to three different cities a week.”
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This interplay of Marshall effects—in-person performances for a society growing more affluent—and Rosen effects—the power of technology-driven scale—is creating a superstar effect beyond what we are accustomed to thinking of as the performing arts.
Consider chefs. The rise of culinary superstars is certainly an example of Alfred Marshall’s trickle-down wealth from the super-rich. Plutocrats not only insist on the best barristers and the finest jockeys, they also want to dine at El Bulli, with its €250 prix fixe meal (or at whatever its successor turns out to be). And there, you might think, it would end. After all, preparing a delicious meal, like arguing a case in court or riding a racehorse, is a hands-on service, which can’t be duplicated and scaled in the way an aria or a drama can be.
For superstars, that is a serious financial constraint. One way celebrity chefs are getting around it is by transforming their trade from a high-end personal service to a scalable mass performance. Thus Mario Batali first shot to fame as the iconoclastic founder of Po, a trattoria in New York’s West Village. But, even at fifteen dollars a plate, physical dishes of ravioli can get you only so far. Batali became a real superstar in 1997, when he signed a contract to host his own show, Molto Mario, on the Food Network. The celebrity his TV show created not only sent diners to his restaurants, it allowed Batali to go mass retail—as the author of bestselling books, producer of his own line of pasta sauces, co-owner of a vineyard, and partner in Eataly, an Italian grocer, wine store, and cluster of restaurants kitty-corner to Manhattan’s Flatiron building. If your client is visible enough, superstar cooks don’t even need a retail presence to build a second career in the mass media. Consider Art Smith, Oprah Winfrey’s personal chef until 2007, who used that pedigree to publish three cookbooks, open three restaurants, and rent out his celebrity by writing menus for other restaurants.
You could observe how superstar chefs benefit from both the Rosen and Marshall effects at a super-elite meal
hosted by consulting firm Booz Allen Hamilton on a balmy late June evening in 2011 at the Aspen Meadows Resort during the Aspen Ideas Festival, where this evening’s guests included, among others, Alan Greenspan. “Curated” food has become part of the super-elite lifestyle, so for this “meal of a lifetime” the consulting firm flew in Craig Stoll, co-owner and cofounder of the Delfina group of restaurants in San Francisco, so he and his kitchen staff could prepare supper. Each course was “narrated” by Corby Kummer, a senior editor and food writer at the Atlantic.
There was a lot to narrate. The second course, for example, of Berkshire pork arista with butter beans and grappa-preserved cherries, was served along with the commentary that the meat came from Niman Ranch, a producer so ethical its founder’s third wife was a vegetarian and author of a book called Righteous Porkchop. The sour cherries had been purchased at the San Francisco farmers’ market by Delfina staff—a particular coup because this year’s crop was poor and cherries were therefore scarce—and marinated in homemade Delfina grappa. The blackberries and raspberries served for dessert—the frutti del bosco accompanying Delfina’s buttermilk panna cotta—had traveled from San Francisco to Aspen that morning in carry-on bags packed into the overhead luggage compartments by Delfina staff. Most of the diners applauded when Kummer related that final detail.
Cooking a private meal for Booz Allen Hamilton and its guests is one way that Craig Stoll and superstar chefs like him benefit from the broader rise of the super-elite. But in an aside that revealed the extent to which simultaneously catering to a mass audience has become part of the everyday menu for celebrity cooks, Kummer concluded the meal by informing the replete audience that Stoll hadn’t written a book “yet,” so as a keepsake of their meal of a lifetime—their ricordi del soggiorno—the diners would have to make do with colorful Italian-style ceramic plates depicting a signature Delfina seafood dish. The wife of one diner, who was traveling back to Westchester the following morning on a private plane (“wheels up at nine a.m.”), was persuaded to take the dish home when she was shown that Delfina had encased it in bubble wrap and packed it tightly in an air-travel-friendly cardboard box.
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Cooks are just the latest tradesmen to understand that the most powerful way to cash in on superstar talent is to strike the right combination of very expensive personal service for the elite with a cheaper, mass-produced version. Tailors probably got there first. Their first revolutionary was Charles Frederick Worth. An Englishman who moved to Paris in 1825, Worth was the Elizabeth Billington of the clothing industry—a superstar who cashed in on the emergence in the nineteenth century of a super-rich European elite. To do that, Worth had to invent a new profession. Born in 1826, Worth started out in London and then in France as a draper. He saw an opportunity to expand the business by sewing clothes for his clients, not just selling them fabrics. Worth persuaded his initially hesitant employers to back his idea, and they opened a small dressmaking department. It became increasingly profitable, and Worth was made a partner in the firm. That success emboldened him to set up his own venture in 1858, financed by Otto Gustav Bobergh, a Swedish investor. Before long Worth had created a new superstar profession—haute couture—and become its first practitioner.
Worth sewed his label into his dresses. Rather than sewing clothes created by his clients, he invented modern fashion design by presenting his own styles four times a year, then custom producing them for his clients. Worth was an avid adopter of technology. The first reliable sewing machine was patented in Boston by Isaac Singer in 1851, seven years before Worth opened his dressmaking shop, and his seamstresses used sewing machines wherever that was quicker and more efficient than stitching by hand. Worth also enthusiastically used factory-made decorations such as ribbons and lace.
Worth made his name by assiduously courting the European aristocracy. An early client was Princess Pauline von Metternich, wife of Austria’s ambassador to France, and his success was assured when Empress Eugénie, wife of Napoléon III, began to wear his designs. But financially he was as much a beneficiary of America’s Gilded Age as were the Astors, Carnegies, and Vanderbilts, who sent their ladies to Paris to order their entire wardrobes. They would also make the transatlantic journey to buy dresses for special occasions, such as weddings or the lavish masquerades that, as with the 1897 Bradley Martin ball, were a fixture of late nineteenth-century elite social life.
Worth was more than a superstar tradesman. He was an innovator who created a new way of making and selling clothes to the rising European and American super-rich. In the 1870s, at the peak of his career, he was making $80,000 a year; some of his dresses sold for as high as $10,000. That was a fortune, to be sure. But just as Mrs. Billington’s earnings were limited by the number of people who could hear her perform in person, the six thousand to seven thousand gowns the House of Worth produced a year were each tailored to the body of a specific client.
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But just as Charlie Chaplin’s superstardom dwarfed Elizabeth Billington’s since he could perform for the masses, fashion designers became exponentially richer when they expanded from the haute couture business to prêt-à-porter. That revolution happened in 1966, when Yves Saint Laurent opened his first Rive Gauche ready-to-wear store on the rue de Tournon in the sixth arrondissement of Paris, less than two miles away from the original home of Worth and Bobergh, where Charles Worth had gone into business just over a century earlier.
It took the couturiers a long time to reap the benefits of mass production. That was partly because the sewing machine didn’t immediately translate into well-made and cheap clothes for women—the most lucrative designer market. The sizzle of mid-nineteenth-century inventive genius devoted to the sewing machine—call it the smartphone of the 1850s—almost immediately translated into mass production of military uniforms, for the U.S. Civil War and Europe’s Franco-Prussian War.
But factory-produced women’s clothes remained a difficult value proposition. As late as 1920, a study found that it was still cheaper to sew a dress at home, for an average cost of twenty dollars, than to buy it ready-made, for an average cost of thirty dollars; buying a dress from a dressmaker, at thirty-five dollars, was the priciest of all. This was partly because the big technology advance in clothes production—the sewing machine—could be used almost as effectively at home as it could be in the sweatshops of the garment district. As long as your wife’s or daughter’s labor was cheaper than that of an immigrant in midtown Manhattan, and for very many Americans it was, buying ready-made clothes was a luxury—hence Laura Ingalls Wilder’s remembered envy in Little House on the Prairie of the wealthy classmate who could afford a “store-bought” dress. The second problem was fit, more of an issue for women’s clothes than for men’s because they were often tighter and subject to more quickly changing styles.
We still don’t have a perfect answer to the problem of fit—female readers can sigh here—but there was a tipping point in 1941, when, in a government project funded to employ casualties of the Great Depression, the U.S. Department of Agriculture measured almost fifteen thousand women and published the results, creating the first standard dress sizes. Industrial sewing technology made advances, too, and by the 1950s a factory-made dress could be produced in a fraction of the time it took for a lone seamstress using a sewing machine.
As Yves Saint Laurent realized, these two innovations made it possible for superstar designers to benefit from economies of scale. More than acting or singing or cooking, modern fashion design (as opposed to mere dressmaking) was invented as a very expensive service for the Gilded Age elite. Saint Laurent understood that his move into ready-to-wear was a break with that paradigm, and he sought to make his populism a virtue. Fashion, he liked to say, would be incredibly upset if its sole purpose was to dress rich women. (Note, however: the first highly visible client of Rive Gauche, the YSL ready-to-wear was Catherine Deneuve. And in 1987, a few days after the Black Monday stock market crash, the collection included a $100,000 jeweled jac
ket.)
Many of Saint Laurent’s fellow elite couturiers were horrified. Emanuel Ungaro wrote that the opening of Rive Gauche saddened him greatly. Pierre Cardin, who had experimented with, then abandoned his own foray into, ready-to-wear a year earlier, warned that by leveling and standardizing, we are going to fabricate a world where “we will die of boredom.”
Before long, however, it became clear that by producing both an haute couture line and a prêt-à-porter line—offering very costly personal service to the super-rich, and using technology to scale their talent—the fashion designers at the very height of their profession could benefit from both Marshall and Rosen effects. In 1975, Yves Saint Laurent earned $25 million, a hundred times what Charles Worth earned at the peak of his career (when taking inflation into account). Worth was richer than his French seamstresses; YSL, however, is a veritable plutocrat compared with the foreign garment workers who sewed his prêt-à-porter line. As in the law, the performing arts, and cooking, in fashion the chasm between the superstars and everyone else is only getting bigger.
THE MARTIN EFFECT—TALENT VS. CAPITAL
The Marshall superstars and the Rosen superstars—and those who benefit from both effects—are getting richer in two ways.
The first is because they are being served from a larger pie—their super-rich clients are richer than ever, and economies of scale now allow them to reach a mass audience. The second is because they are getting a bigger share of the pie relative to their less elite peers (whether those peers are any less talented is open to debate). Their clients—both the super-rich and the masses—prefer to listen to the “very best” singer, and wear clothes created by the “very best” designer. Even where the service can’t be scaled—as in a courtroom appearance or an original painting—the same force is at work.
Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else Page 14
