artist as entrepreneur

Artist as Entrepreneur

July 31, 2011Artist Summer Institute

Governors IslandAmy Whitaker

Everyone is an artist, and a businessperson.

Goals:To migrate business thinking to the creative part of your brainTo develop tools for seeing the big pictureTo practice business plan writing as a story-telling device

agenda1. applying business creatively 2. business plans as storytelling frameworks 3. tools for analyzing the big picture [ break] 4. the elements of a business plan 5. conclusions

economic

political

creative

activist art campaigns

entrepreneurshippie in the sky

1. applying business creatively

1. letter vs. envelope

Uniqlo

Warby Parker

Maria Sacarias sports her first pair of glasses alongside Warby Parker co-founders Dave Gilboa and Neil Blumenthal and Amaya Xoch, a local entrepreneur trained by non-profit Community Enterprise Solutions to provide glasses to those in need. San Jorge, Solola, Guatemala

Glasses increase one’s income by 20%. That’s the equivalent of creating an extra day’s work each week. Glasses are one of the most effective poverty alleviation tools in the world.

We have distributed over 50,000 pairs. Glasses distributed by Warby Parker to people in need enable them to become productive members of their families and communities.

1,000,000,000One billion people don’t have access to glasses, which means that 15% of the world’s population is unable to effectively learn or work because they can’t see clearly.

ReCaptcha

Oberonfmr.com

• Take waste that a company has to pay to dispose of and turn it into fish food

• Your negative externality is someone else’s positive, with some investment

Yoyo-Buoys?

2. brick vs. house

Think of everything you can possibly do with a brick. . . .

The Brick

What else can I do with what I have?Where can I go from here?

Sometimes you’re dealing with a brick. Sometimes a whole house.

3. what is your lighthouse?

S.M.A.R.T. Targets

As you move forward with your art, you are trying not just to accomplish known outcomes, but to discover new ones. How do you plan for this?

You focus on what your lighthouse is, your guiding principle. This may be your mission, as in a nonprofit, or your defining question or idea, as in a start-up business.

SpecificMeasurableAchievableRealistic Time-Bound

That purpose—that “lighthouse” goal—is an important part of your story. It is the “major dramatic question” (the MDQ) that compels you forward.

M.D.Q.

• Can men and women really be friends?• What will happen with Harry and Sally?

Harold and Maude

Can love transcend age?

Can you be ordinary and extraordinary at the same time?Can bravery triumph over evil?

2. business plans as story and art

More than anything else, a business plan is a format for telling that story.

It is also a living, breathing, changing planning document for you.

The plan is a basic structure to communicate: what, when, how, whom, where, why:

what are you offering?

when why now?

how what is your business model?

who are you and your partners?

where what is the market you are serving?

why what is your mission and purpose?

What contribution is being made? What need is being filled? What is at stake?

Women’s share of voice:

Total share of public voice 15%

Television Pundits on political talk shows

Wikipediacontributors

HollywoodWriters, producers, directors

Congress

Opinion Writers Top ten print and online outlets

Corporate Boards

What if the solution is simpler?

The Washington Post tracked submissions for five months.

We need more women submitting.

Men 90% of submissions

Men 88% of bylines

Women 10%

Women 12%

Online Community

Radio/TV

Credibility

TV Gigs

Book deals

Policy Consultation Offers

Increasing Exposure and Influence

Expert Citations

Fellowships

Public Influence

Positions of leadership in every field

Ability to Change the World

Op-Ed as a “Front Door” in Thought Leadership

business plans as works of art

You can think of a business plan as being like a painting from before the advent of photography. It must document your business, but it can also express your viewpoint as an artist. Everything is a decision.

Braque

Van Gogh

StructureCompositionContentStylePoint of viewSkill and expressiveness

Van Gogh

Cezanne

3. tools for seeing the big picture

Competitors—Rivalry in the

Industry

Supplier Power

BuyerPower

Availability of Substitutes

Barriers to Entry

Michael Porter’s Five Forces, 1979

Rivalry: Do a lot of other people do what I do? What is special about what I offer?

Barriers to Entry: How easily can someone copy me?

Availability of Substitutes: Is it easy to find substitutes?

Supplier Power: Do my suppliers have power over me?

Buyer Power: Do my customers have power over me?

Competitors—Rivalry in the Industry

Supplier Power

Barriers to Entry

Donors

Sharon Oster’s Sixth Force(from Strategic Management of Nonprofit Organizations, 1995)

Company

Suppliers

Customers

ComplementorsCompetitors

Adam Brandenburger and Barry Nalebuff’s Valuenet(from Co-opetition, 1996)

If my situations is a “game,” who are all the “players”?

What are my goals? What would it mean to “win the game”?

Complementors: If I succeed, who else succeeds too?

Competitors: Who feels that they win only if I lose?

Co-opetition: Is it possible to turn any of my competitors into complementors? Can I change any of the rules of the game?

[break]

4. elements of a business plan

I. Executive Summary – summary of the wholewhat

II. The Marketplace – snapshot of the ‘big picture’when/where

III. Description of Business – what you will do what/how

IV. Financials – start-up costs and operating costs how

V. Management Team – about you and the team who

VI. Supporting Materialswww.sba.gov

The plan is a basic structure to communicate: what, when, how, whom, where, why:

what are you offering?

when why now?

how what is your business model?

who are you and your partners?

where what is the market you are serving?

why what is your mission and purpose?

What contribution is being made? What need is being filled? What is at stake?

Case Study: Norcino Meats

Case Study: OurGoods

tools and frameworks

market sizeHow many people are interested? How many of them can I reach?

Example: Warby Parker donations

• 1,000,000,000 people need eyeglasses. We aim to reach 1%, that’s 10 million people. 10% would be 100 million.

• They have reached 50,000, which is 0.005%

Uniqlo sold 26 million fleeces in a market of 120 million people (22%)

Competitors—Rivalry in the

Industry

Supplier Power

BuyerPower

Barriers to Entry

Michael Porter’s Five Forces, 1979

Fixed Costs: overhead (rent, utilities). Does not vary with level of production.

Variable Costs: materials, hourly workers. Varies with level of output.

Opportunity Costs: the cost of your next best alternative. The value of your time.

Spread fixed costs over many units

Excess Capacity/ Technology Platform

• ZipCar• AirBnB• Kickstarter

financials

Time Value of Money

A dollar today is worth more than a dollar tomorrow because you could invest it:

$1 $1.05 - $1.09 next year

The long-run average U.S. stock-market return is 9%. A treasury bill returns 5%.

Looks like a $10,000 investment leads to $12,000 in income, a $2,000 return.

Apply the “opportunity cost of capital.”

C/(1+r)^t means that the denominator gets bigger.

Expected ValueIf I play poker with Bob and Anne, these three things could happen: • A 50% chance of making $20• A 30% chance of losing $20• A 20% chance of breaking even

Expected value = the probability of an outcome x the value of the outcome

What is the expected value of each outcome?50% chance of $20 = .5 x $20 = +$1030% chance of $20 = .3 x -$20 = -$620% chance of zero = .2 x $0 = 0

Expected ValueExample 2:

I am going to teach a class and charge $30.• If I get great attendance, 100 people will come.

($30 x 100 people = $3,000)

• If I get poor attendance, 20 people will come. ($30 x 20 people = $600)

At 50/50 odds, that is $1500 + $300 = $1800At 20/80 odds, that is $600 + 480 = $1080

Breakeven AnalysisAt what point to I recoup my costs and start making a profit?

Example:

To start a school, I need $5000 for rent, supplies, equipment. For each student, a foundation gives me $150. I have to spend $50 of that on supplies for that student. At what point do I break even?

Break Even = Total Fixed Cost = 5000 = 5000 =

Revenue – Variable Cost150 – 50100

50 students

your business plan

Lighthouse

Market Size

Start-Up Expenses

Budget Year 1-3

5. conclusions

review

Ultimately: •why it’s special•where it sits•what’s at stake

Two types of creativity: letter and envelope

The brick and the house:

material resourcefulness

Finding your lighthouse

Telling the story of your

business plan

Your business as a work of art

“back of the envelope”

making decisions with limited information, iterating, estimating, moving forward

• “The founder of the science of business was one of the most unbusinesslike of mankind.”

- Walter Bagehot on Adam Smith

The founder of economics was an artist.

“Ask what econ can do for you and what you can do for econ.”

It can help your work and life. And you can help shape the creative design problems of the economy itself.

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