Wednesday, December 30, 2015

On a National Cultural Bank

This excerpt is from my regular column, Culture & Kibbitz, at The Clyde Fitch Report. You can read the entire post, which more fully develops and details the need for a bank and how it would function, here.

In its Taking Note post on Nov. 5, the National Endowment for the Arts (NEA) research staff analyzed some high-level economic data prepared by the Bureau of Economic Analysis (BEA). Looking at the nationwide investment in “long-lived artworks” -- which the government defines as artworks “exploited” in physical media for more than one year -- the data indicates that over the past 15 years, we have invested in some sectors much more than in others. Without other, corresponding data however -- such as whether more movies are being created, or that fewer movies with bigger budgets are being made -- this high-level data cannot draw an accurate picture of whether investments in the cultural sector are ensuring a rich, flourishing sector, or how they impact individual artists. (See my more detailed look at the data here.)

The nonprofit sector, especially the cultural sector, is perpetually undercapitalized. This is understandable since the sector’s financial structure does not provide mechanisms for capital investment like the for-profit sector does. Nonprofits must rely on earned revenue and tax-based incentives to philanthropic giving for its capital because the underlying reality is that nonprofit markets generally cannot and do not generate sufficient surpluses of earned revenue -- which would be a source of needed capital for investment -- to sustain itself over time.

While we cannot know what the future will look like, this much we do know: the “traditional” institutional and industrial pathways for funding the creation and distribution of artistic product that existed during the latter half of the 20th century is largely gone. While artists are adjusting and finding new ways to express themselves, they are, at the same time, shouldering economic burdens formerly handled by others. Data such as that analyzed by the NEA can help us understand the macro trends in our creative sectors, but it cannot really tell us where investments need to be made. This can only be ascertained by a thorough analysis of the entire ecology of how artists are creating, distributing and making sure there is an audience for their work. But even if we did have, or did develop, such an analysis, we would still then need a mechanism to fund the capital necessary to deliver systemic support and relief.

When we talk about “systemic investment support where it is needed,” we are indeed talking about a national scale -- a monumental effort that may seem impossible in an era of partisanship infecting all conversations, cultural or otherwise. But assuming we could one day have such a conversation, a self-sustaining National Cultural Bank offering investment capital where a particular sector’s need can be demonstrated could provide the necessary systemic support and investment.

Read the entire fully developed post in Culture & Kibbitz at The Clyde Fitch Report here.

Tuesday, December 29, 2015

NEA Analyzes the BEA

Last month, the National Endowment for the Arts (NEA) released some detailed analysis of national economic data related to the arts. In its Taking Note post at the NEA Blog on November 5, the NEA research staff detailed their conclusions drawn from some aggregated national data on the creative sector. In that post, they presented the capital investment in “long-lived artworks” created from intellectual property in the major arts industries: television, motion pictures, book publishing, and music, as well as “other materials” (theatrical scripts, greeting cards, and commercial stock photography). This data captures the amount of annual new investment in creating cultural products that are disseminated through physical form and that can be exploited over the long term (longer than one year). Additional costs in exploiting these artworks, such as marketing, copying, and distribution, are not considered investments but are part of annual national industrial expenses. Once calculated, the annual investment is added to our national “balance sheet” assets and tracked over time against the revenue the assets generate as the initial investment is depreciated. The result is a “value” of our national long-lived artworks assets each year.

Dance and theater are notably missing from this data as choreographic creations and plays produced are not generally embodied in a physical manifestation and, therefore, cannot be exploited over time without some additional expenditure of resources. One assumes that these activities are bundled with our annual expenses, which are tracked in other data records.

The capital investment figures, assembled and projected by Bureau of Economic Analysis (BEA) economists, show “that investment in new movies [over the past decade and a half] has generally increased, while production of new television programs has strongly increased. The production of new books, alternatively, has been flat. As for investment in new music, that has been in decline throughout the time period over which BEA reports real investment in entertainment and artistic originals.”

The methodology used to determine the investment when actual investment numbers are not available, as in the case of music, is a complex formula that projects the investment made each year based on a projected ratio of investment to revenue, as detailed in a BEA report, Research Spotlight – Artistic Originals as Capital Assets, published in 2011.

As with all such aggregated data, it is essential to remember that the data does not reflect the experience of one or of any given artist, that a data point alone does not demonstrate a causal connection of any kind, and other data may conflict and need resolution. For example, the data in these reports shows that there is an increased investment in the creation of new films over the past 15 years, yet anecdotal evidence is pretty strong, with well-known filmmakers such as Spike Lee turning to crowd-funding, that traditional funding sources are investing in fewer but bigger budget movies, not more movies. Similarly, in the music area, despite the significant decline in investment in new music, we hear that there is abundant activity creating new work, though it is often being funded by musicians directly or through new avenues such as crowd-funding. If both are true, it would seem that either more music is being created at a lower cost, which would seem to fly in the face of Baumol’s cost disease, or the alternative funding mechanisms are not captured in the BEA methodology. And just this past week, the Financial Times reported a significant drop in cable television viewers despite the dramatic increase in investment that the data reports, indicating that some real shift in the ecology of television is occurring or there is very serious over-investment. As these examples show, it is essential for us to integrate this kind of high level aggregated data with other data to reconcile contradictory information, variations, and other trends as part of understanding what is truly happening in creative areas.

The BEA research spotlight notes an additional point, which intuitively appears to be positive but really only shows how difficult it is to extrapolate trends or definitive answers to specific questions from high level aggregated data. According to the spotlight, from 1980 through 2009, on an inflation-adjusted current-dollar basis, capital investments in this area grew from 0.21% of the nation’s Gross Domestic Product (GDP) to 0.35% of GDP, an increase of 67%. The data, which taken on its face could lead one to assume that the culture sector is booming, can really only be taken to say that culture takes up a larger piece of the economic activity in our country in 2009 than in 1980, but this does not tell us anything about the impact on individual artists, how they do their work or make a living, or how the GDP has grown or diminished.

After reading this data, I was thinking about how such data, not directly tied to how an artist today makes a living, should be considered by those interested in cultural policy. By trying to reach an understanding of the entire ecology of a sector, it is more likely to be able to develop policy and, where necessary, direct support and an investment of resources to ensure a flourishing cultural sector, but we cannot rely only on these high level aggregated figures.

An easy way to see the importance of understanding the entire ecology is to look at the dance field, which is not captured in these numbers. In recent decades, the number of dance-only presenters in the United States has dramatically decreased from more than three dozen to less than ten. At the same time, domestic policy in light of the end of the Cold War and internal domestic policies in other countries, mainly in Europe, dramatically reduced touring funding for US dance artists as well. Touring has always served as a backbone of dance companies, generating sufficient revenue to support a company and produce new work while also providing opportunities to “distribute” the new work. The reduction in touring opportunities caused by fewer presenters and the diminished funding for such activity has directly altered the scope of activity for many companies and decreased the overall stability of the field. While not specifically a capital investment like the others already discussed, this revenue stream was a critical piece of the lifecycle of dance artworks and its diminishment has made a negative impact on the overall environment for dancers and dance creative works.

Perhaps what is most revealing about the NEA analysis and the BEA data is just how much the economic underpinnings of our creative sectors are changing. What it fails to illuminate, however, is the actual impact the changes are having on the lives of individual artists and if considered alone, it can, in fact, be misleading. While we might rightly assume that the nature of music and “filmed” entertainment creation is changing because of the increased investment the data shows, we would be hard pressed to find anyone in the publishing world who will tell us that their industry has not changed dramatically despite the investment we have been making remaining flat over time. In short, as I have noted in other comments, high-level aggregated data such as the NEA presents is illuminating and interesting, but only marginally helpful in understanding the actual impact on artists’ creative process and practice. To understand changes in these, we need a much fuller and robust understanding of the entire ecology in which artists’ create and exploit their work.

Friday, December 4, 2015

Beware the Metrics System

This excerpt is from my regular column, Culture & Kibbitz, at The Clyde Fitch Report. You can read the entire post here.

Last week at a committee meeting (I sit on the board and nominating committee of an arts organization), we were asked what metric we should use to measure our progress on equity, inclusion and diversity. The organization strives to serve the entire complexity of its field and with a limited number of board seats to replace each year, assembling a proper slate can be likened to a jigsaw puzzle, where pieces can form many pictures instead of just one.

Metrics qua metrics are tricky: by trying to capture a complex phenomenon in a simple number, they tend toward the reductive and are more subjective than we think. The Czech economist Tomas Sedlacek has cogently critiqued the idea that economic measures are objective, because they are actually normative -- related to good and evil because we apply value judgments to a measured number; surpassing the desired metric is success, not meeting or surpassing it is failure. And to paraphrase Nate Silver in his consideration of data, metrics need a direct connection to specific strategic goals or they will be less effective and we may miss an understanding of the impact our actions have. Moreover, relying solely on supposedly objective metrics often incentivizes behavior in unintended ways that do not advance the underlying imperative.

Metrics to measure success at building diverse communities may quantify how a “picture” is changing, but, in and of themselves, metrics do not effectively measure success as they do not get to the heart of the matter. These issues require an ongoing and evolving conversation because what underlines them are questions of community -- from who participates to the way the group treats its members. Therefore, the snapshot of a simple metric, at best, can only indicate the state of a group at a given moment in time. While a snapshot can be informative, -- and when compared to past and future snapshots it can document change -- it exists outside the context of a continuum that has a starting point and a goal. Standing alone, a metric is only a data point floating at sea.

For this reason, I suggest that any metric aiming to measure the success of a group’s efforts toward equity, inclusion and diversity must begin with a clear articulation of the intentions and goals of that group. As with any strategic imperative, a clear concise and comprehensible statement of the organization’s goals and intentions should provide sufficient guidance for an institution if it persistently measures and evaluates this statement through self-examination and adjustment—which metrics can aid. Unless considered in this way, metrics are potentially harmful, becoming fixed goals resulting in judgments rather than signposts along a journey towards organizational fulfillment. While metrics can play a role in organizational dialogue, it is the dialogue that matters, not the metrics, especially for a strategic imperative like equity, inclusion and diversity, which is rooted in communal relationships and dynamics.

Read the entire post in Culture & Kibbitz at The Clyde Fitch Report here.