Below is the second of a series of podcasts interviewing practitioners in nightlife. This will explore their business models, attitudes to risk, and approaches to marketing and experience design (with emphasis on Fluency Vs Disfluency). Practitioners tend to learn ways of working from practical experience, driven by financial forces governing their actions. So whilst concepts discussed in this research project (such as Extremistan Vs Mediocristan, Optionality, Antifragility, Cognitive Fluency Vs Disfluency etc) might not be in their vocabulary, it exists in their actions.
Jason uses an extreme form of optionality, creating events online, then cancelling them if interest is insufficiently high. He never books talent, instead using only musical themes as the draw (often even DJing himself at the events). In many ways his approach is the opposite to that of John Burgess. His approach to risk is to virtually eliminate downside, and to aggressively scale when he finds a popular event. Of course, there are fixed limits to scale (he never goes above 500 capacity events), and this is explained by how easy it is to copy what he does. By using musical themes only, the has no ownership of those themes. This has allowed him to be a very successful sole-trader, with the caveat that there is a limit to the size his business can grow.
Below is the first of a series of podcasts interviewing practitioners in nightlife. This will explore their business models, attitudes to risk, and approaches to marketing and experience design (with emphasis on Fluency Vs Disfluency). Practitioners tend to learn ways of working from practical experience, driven by financial forces governing their actions. So whilst concepts discussed in this research project (such as Extremistan Vs Mediocristan, Optionality, Antifragility, Cognitive Fluency Vs Disfluency etc) might not be in their vocabulary, it exists in their actions.
John Burgess has been a music promoter for 24 years, promoting DJ-led club events in cities all over the UK and Europe, and is now based in London. He is founder and director of Field Day Festival (one of London’s biggest and most established music festivals), The Mighty Hoopla (a pop-music inspired LGBTQ festival), and Bugged Out! Weekender.
This was a fascinating conversation, with two main topics in particular germane to my study.
The first was the negative effects of relying on talent, particularly in an environment of intense competition. Burgess discusses the increased power of booking agents (the representatives of DJ talent), and the ever-increasing prices of such talent.
If the audience is given the name of an artist as the primary attraction of a night, then obviously it is that name creating the value in the eyes of the audience; since the promoter is one of many willing to promote such talent, an agent is able to command most of the value; if a promoter like Burgess baulks at the price, there is a queue of others willing to step in.
This explains why after 24 years Burgess discusses how tough things are – events one does not own do not add any cumulative value to the promoter, only to the artist. The promoter is essentially spending advertising revenue on making an asset more valuable which they themselves will subsequently be in an auction for.
Burgess discusses how the artist Disclosure played Field Day despite higher offers from elsewhere, because of the reputation and credibility of the festival versus a rival. The reputation of the event adds value, which is the essential point – promoters are paid in accordance with the value they add – hence the power of a narrative or experience created and owned by the promoter. They then cease to be merely a conduit for an external commodity.
Second is Burgess’ attitude to risk. Traditional economics, and behavioural economists such as Sunstein &Thaler assume risk is (or should be) accepted or rejected on the basis of the absolute odds of success. Taleb argues that it is the absolute downside which is the real driver or risk tolerance – that is, how ergodic the downside can be. Can this risk end one’s operations in the future?
Burgess’ story is illuminating. On the basis of selling 4000 tickets per week in Liverpool, he created a weekend festival which broke even at around that number, with what he describes as ‘a killer line-up for the time’. The absolute odds of success for this event were very high by his own assessment. His losses were huge, to the point of wiping out all savings he had, and having to take out an additional loan to cover these losses. The event was almost catastrophic, and by his own admission led to a risk averse attitude going forward. Now, ergodicity is the key to his risk assessment – literally checking the downside of any given venture against his bank balance – and not taking on potentially lucrative opportunities if they fail that test.
How does this relate to my study? Optionality. Burgess is governed by talent costs, and having to commit to an event with high downside for this reason – therefore his only mechanism of risk management is to pass on potentially lucrative opportunities. Therefore the business model lacks optionality and is fragile.
The next podcast will demonstrate a radically alternative model.
Turning once again to the ‘sustainable’ aspect of my question, it is time to tackle the Talebian concept of Antifragility or it’s weaker cousin optionality.
“Antifragility implies more to gain than to lose, equals more upside than downside, equals (favourable) asymmetry. … Fragility implies more to lose than to gain, equals more downside than upside, equals (unfavourable) asymmetry.” – Nassim Nicholas Taleb, Antifragile
As discussed, once one has created a nightlife environment which exists in Extremistan (numerous failures and rare, potentially enormous upsides), this isn’t necessarily a superior situation to the previous, talent-led one (of Mediocristan). The variance of outcome has been increased, the opposite of the original motivation of venues and promoters for spending on talent in the first place. Thus we are only half-way to improving upon the existing situation.
Both the ‘Blockbuster Strategy’ (adding multiple ‘product attributes’ and high investment in advertising) as dissected by Anita Elberse, and the use of behavioural psychology in advertising, are ways to increase the likelihood of a given event being successful. Essentially, both are strategies of improving the odds of a specific event’s success, whilst doing nothing to affect the downside of failure – indeed Elberse showed that in Hollywood film studios the downside of failures in a blockbuster strategy are monstrous.
(As an aside, you might ask what is the difference in strategy between a Hollywood ‘Blockbuster Strategy’ and a promoter simply spending big on talent to ensure a blockbuster? The simple answer is upside – upside is necessarily limited in talent-led events. Hollywood actors, comic-book franchises and famous directors all command enormous fees, but in a scalable environment).
Nassim Taleb, in his book Antifragile, proposes the property of ‘Antifragility’ as the solution to the unpredictability. This is not to be confused with robustness, or an ability to withstand failures, rather it is the property of gaining strength, or improving from harm. In his book ‘Black Box Thinking’, Matthew Syed illustrates how the airline industry is Antifragile; any accident involving commercial airlines leads to an improvement in procedures for all commercial airlines.
Taleb shows how the intensive competition leads to improvement – how the failure of the constituent parts of an organism, institution, industry etc lead to it’s improvement – by the clearing out of dead wood, so to speak. He argues that the New York restaurant industry’s constant failure and renewal (with bankruptcies and new entrants) is the reason for it’s excellent food relative to say, a service station in Ukraine.
For the purpose of our study, an ‘ecology’ of events must have a limited downside relative to the potential upside. To be slightly more technical, the ensemble outcomes of events must be non-ergodic. That is to say, that no event can have a catastrophic downside to the whole. When looking at the nightlife industry as a whole this is not a huge problem, but from the point of view of a venue or promoter, the downside must be limited not just in relation to potential upside over a given period of time, but also limited in absolute terms. The below diagram illustrates very well the concept of ergodicity:
In practical terms, we need to introduce ‘Optionality’ into the creation of scalable, immersive events. Both interventions required large scale investment of time and finances to occur. Their popularity was only known after the commitment to the event was made. Instead, I will now take out an ‘option’ on an event, either in absolute terms (not to do the event if there is a lack of interest), and in terms of scale. I have created a Fleetwood Mac-themed event for March 9th, and begun facebook advertising of the event, with ‘Secret Location’ given to the audience. I have pencilled the date at a 220, 700 and 1000 capacity venue. After just a week of adverts, costing just £140, there will be enough information in terms of audience interest (as measured by cost per click CPC) to know whether to proceed. Compare this to a total cost of £11,000.00 to produce The Electoral College Dropout intervention.
Taleb discusses the idea of a ‘Barbell Strategy’, that is hyper-conservatism to avoid ruinous risk (“In order to succeed, one must first survive” Warren Buffet), and hyper-aggressive where risks have potential high upside:
“I initially used the image of the barbell to describe a dual attitude of playing it safe in some areas (robust to negative Black Swans) and taking a lot of small risks in others (open to positive Black Swans), hence achieving antifragility. That is extreme risk aversion on one side and extreme risk loving on the other, rather than just the “medium” or the beastly “moderate” risk attitude that in fact is a sucker game (because medium risks can be subjected to huge measurement errors). But the barbell also results, because of its construction, in the reduction of downside risk—the elimination of the risk of ruin.
Let us use an example from vulgar finance, where it is easiest to explain, but misunderstood the most. If you put 90 percent of your funds in boring cash (assuming you are protected from inflation) or something called a “numeraire repository of value,” and 10 percent in very risky, maximally risky, securities, you cannot possibly lose more than 10 percent, while you are exposed to massive upside. Someone with 100 percent in so-called “medium” risk securities has a risk of total “ruin from the miscomputation of risks. This barbell technique remedies the problem that risks of rare events are incomputable and fragile to estimation error; here the financial barbell has a maximum known loss.
For antifragility is the combination aggressiveness plus paranoia—clip your downside, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself.We saw Seneca’s asymmetry: more upside than downside can come simply from the reduction of extreme downside (emotional harm) rather than improving things in the middle.
A barbell can be any dual strategy composed of extremes, without the corruption of the middle—somehow they all result in favourable asymmetries.” Nassim Nicolas Taleb, Antifragile
The above strategy is optionality at work. I will take out low-cost options on potentially enormous, scalable events. Achieving Antifragility would need a systematic way to improve the subsequent event as a direct result of a failure (other than intuitive learning) – I will work on this now.
In August I described my second intervention, an immersive event themed on the premise of a U.S. Election Party in which Kanye West was running as in independent candidate, to my former colleague and business partner. I gave a blow-by-blow account of how the event would play out, and he was seemingly very impressed. About a month later, I ran into a member of my former promotions team who shares an office with my old partner, and told him that my intervention was not selling well, and that the concept had failed to capture people’s imaginations online. He told me that the general consensus in that office was that I had failed to explain fully what exactly the event was, and if only I could spend five minute with every prospective customer I would surely have no problem selling the event. It started to strike me then that the presentation of the event during marketing need not be any form of exposition of what would happen on the night; after all, the musical theme was always intended to be what sells tickets; the experience on the night what made people come back. One cannot build a loyal fanbase from those who have experienced a new concept without first tempting them to try it.
The above story is meant as a primer for the following essay on the role of cognitive fluency / disfluency on decision making and social contagion, and some context in which to place it.
We start with the godfather of behavioural psychology, Daniel Khaneman, and his descriptive method for how our brains make decisions; what he calls System 1 and System 2 Thinking.
System 1 is fast, automatic, effortless thinking; we would use it to answer 2+2, and we would use it to make a decision to jump out of the way if a car was suddenly speeding towards us. System 2 is deliberate, analytical, logical, effortful and slower. We use system 2 if someone were to ask us 17×34 or to determine the validity of logical complex reasoning. In Nudge, Thaler & Sunstein describe System 1 as our internal Homer Simpson, and System 2 as our internal Dr Spock.
Khaneman and Tversky showed a set of systematic errors (or biases) we make in thinking, some of which are caused by our use of system 1 when system 2 is needed – as a way to save energy. We are not able to concentrate (use system 2) for long periods of time, so we will allow system 1 to make (sometimes illogical) decisions. For example if you ask a person ‘How many of each type of animal did Moses bring on the Ark?’, most people will answer ‘Two’, when they know that it was Noah, not Moses who had an Ark containing pairs of animals. Our subconscious detects an easy question and gives an effortless answer, without stopping to engage system 2. To repeat, we prefer to use system 1 whenever possible, because it preserves energy.
How does this relate to our question of Fluency Vs Disfluency in advertising? It begins with the ‘Mere-Exposure Effect’ (coined first by Robert Zajonc), in which we have been shown to prefer something – without rational reason to prefer it – simply by being exposed to it more frequently than its alternatives. What is the explanation for this? Some theorise it is evolutionary (‘if I have seen it before it hasn’t eaten or poisoned me). More pertinent to this study is the idea that if something is familiar, it is easy to process, and our subconscious has positive affect (happiness) as a result of this. Since it is not effortful, does not require system 2 thinking, we are naturally not repelled by it.
In a now famous (and replicated) study, people are asked “If a bat and ball cost $1.10 together, and the bat cost $1 more than the ball, how much does the ball cost?”. The most common answer is 10 cents, a natural-sounding answer, but one made by system 1. If we stop and think for a second the answer is obviously 5 cents. In the study, half the respondents were posed the question in an easy to read font, half in a difficult to read font. Those with the more difficult to read font fared far better – the disfluency of the operation of reading a difficult font engaged system 2, slowed down the thinking, and resulted in the correct, more logical answer. The fluency of the presentation of an idea dramatically affects our perception of it.
But surely it isn’t quite as straightforward as simply feeding people what is obviously familiar to them? Derek Thompson argues that there must be a balance between novelty and familiarity:
“familiar surprises: ideas that strike us as original when we confront them, but in investigating them, it’s like stepping through a door and seeing an old friend on the inside. Discovering a feeling of familiarity within products and discovering a-ha moments is what all consumers are looking for throughout the cultural landscape.”
There is also a degree to which we all exist on a scale between Neophilia and Neophobia – the desire for, or fear of, the new. Older, more conservative people are less neophilic than younger, more liberal people. It makes sense evolutionarily speaking that people will be a mixture of cautious and risk-seeking of course. From the perspective of my events, they are a combination of the new (immersive original stories in a club setting) and familiar (musical themes).
In the context of advertising an immersive event with an entirely new (and thus disfluent) premise and concept, underpinned by a familiar musical theme (familiar to the audience because they are being specifically targeted based on explicit musical tastes – for example you would have to have ‘liked’ Kanye West’s facebook fan page in order to see the adverts I was running), the answer seems obvious – emphasise the music first and foremost.
My first video adverts for intervention 1 and 2 were both over 2 minutes long, and teased out the premise of the event in an elaborate way, attempting to build anticipation. Both videos performed poorly in terms of cost per facebook event attendee (both over £1.25 per attendee in the first 3 days of adverts). Could the reason potentially by that I am engaging system 2 and causing cognitive disfluency as a result? I have launched another event with a deliberately vague theme, simply pushing the musical theme and the name of the event, with little more than an image of the artist in question, to test this hypothesis.
The advert, essentially advertising a Prince-themed event with a title hinting at some depth beyond simply his music. As shown, the cost per attendee is 31p for the first 72 hours, less than a quarter the cost of previous adverts. Of course, Prince is more popular than ‘Nu Rave’, and so this accounts for some of the effect (though not proportionately, since Facebook uses an auction system to allocate adverts); however the collective targeting for the Kanye West adverts was approximately equal to the Prince adverts.
We have seen how narrative and musical themes can be combined in an original way in order to make events subject to power laws (Extremistan, Pareto’s Law, 80/20 rule etc). We have also seen how the enormous upside of a ‘Blockbuster’ environment also comes with large numbers of flops (in the case of my own events, both commercial failures).
My research has now turned to ‘What Makes A Hit?’ in creative endeavours. Much of the literature on this topic is understandably rooted in behavioural psychology and its cousin behavioural economics. The psychologists Daniel Khaneman and Amos Tversky were the modern founders in this discipline, and my previous research has utilised their work.
In addition I have re-read ‘Nudge’, by Nobel Prize winner Richard Thaler and Cass Sunstein. This takes Khaneman and Tversky’s findings on the systematic errors we make in decision making (‘Biases & Heuristics’), and suggests subtle ways to affect behaviour based on our natural decision making processes. Both have influenced my thinking on this topic, but first I will go back slightly in the question of ‘what makes a hit’.
In his book ‘The Tipping Point’, Gladwell outlines three major causes of social epidemics.
The Law Of The Few – This is the idea that in the distribution of information, not all channels are equal. The channels used and the source of information are key in how an idea spreads, far more than we realise. Derek Thompson in his book ‘Hit Makers’ goes further – he contends that what we deem to be ‘viral’ is often not strictly the case. That information doesn’t keep spreading because each person receiving it tells more than one person (in the way that an actual virus spreads), but that certain key nodes of information distribution are responsible for the vast majority of people hearing about it. The idea that one tweet from Kim Kardashian is worth more than millions of ordinary tweets is a fairly simple one, but the point is that ‘Blockbusters’ usually have benefitted from a cascade of information from a small number of sources, rather than evenly distributed spread. Peter Thiel in ‘Zero To One’ puts it succinctly, by simply saying ‘Advertising distribution is subject to power laws’.
2. The Stickiness Factor – This is the question of why an idea (or in our case, an advert or product) resonates. This is the biggest and most difficult question, as it relates to people’s taste. Of course there is no formula which can predict what will definitely work, but there are psychological theories and studies as a starting point. Derek Thompson puts forward the idea of a balance needing to be found between the familiar and the novel – or the intersection of Cognitive Fluency and Disfluency. He argues that we are simultaneously Neophobic and Neophilic (we want the new and familiar), and that a sweet spot must be sought. Raymond Loewy (one of the most famous and successful industrial designers of all time) called his method MAYA – ‘Most Advanced Yet Acceptable’, the idea that he should design for the future, but only as far as people were currently willing to accept based on their present tastes and experiences.
This idea chimes strongly with my research and interventions. The adjustment of adverts over time for both interventions shows a progressive move toward simplifying the messaging, and making it increasingly familiar to the target audience. This was not a change based on research (I read the above books late September), but based on what appeared to be working, measured by advert response rates. There is a large amount of academic literature relating to cognitive fluency, and that is the direction my research will now take. I will revisit this topic in greater detail in future posts.
3 The Power Of Context – In The Tipping Point, there is a degree to which Gladwell has used ‘The Power Of Context’ as a catch-all category for the myriad other reasons for social epidemics. One reason is social proof (sometimes called herding), where we use other people’s choices as a shortcut for decision making. Again, this played out in my research, as adverts which had likes and comments tended to fare better than entirely new ones. Secondly, small changes in seemingly inconsequential facets of a message can have disproportionate results. This was demonstrated in a study in which a map to the medical centre (the location of which was known to all students) dramatically increased the number of students who went for vaccinations, more so than the messaging itself (See Howard Leventhal). Thaler & Sunstein call these ‘Channel Factors’.
Whilst Distribution of Information, Channel Factors and Social Proof are all relevant in my study of social contagion and it’s contributory factors, they are each massive fields of study, backed by extensive psychological literature. To attempt to research all factors is beyond the scope of this study, and would lead to only surface-level knowledge of the subjects at hand.
I will now turn to the idea of Fluency Vs Disfluency for my research, since it has shown itself to be highly relevant to the data I have already gathered, and thus a worthy next phase of research based on the interventions I have already carried out.
Some further exposition into the reasons for the direction and evolution of my research.
I have written many times on the justifications for creating forms of nightlife which exist in Extremistan rather than their current position in Mediocristan (remember The Lion King (and other plays) exist in Extremistan, and are wildly profitable). But what about the downside of this shift? Recall that what we call Extremistan is also referred to as Power Laws, Pareto’s Law or ‘the 80/20 rule’. The clue is in the final label; if 20% of events lead to 80% of the profits (often it can be more like 99% comes from 10%, as in book publishing) then logically most events lead to zero profit. Ergo, there is a huge failure rate once events are shifted into Extremistan – including (from a strictly financial perspective) both of my interventions.
From Nassim Taleb’s ‘The Black Swan’
‘Winner Takes All’ effects have huge failure rates by definition. If nightlife is being strangled by high talent costs, there must be more of a reason so many venues and promoters still pay for talent, despite the limited upside discussed previously. The reason is that there is low variance of outcome. An artist is paid so much simply because they offer a degree of guarantee of ticket sales; they justify the cost.
Which leads us to the word ‘Sustainable’ in my original research question. Beyond using storytelling and musical themes in combination to create scalability and upside, it must be possible to structure such events in a way that all profits from ‘hits’ are not drained away by losses from ‘misses’.
This question relates closely to Nassim Taleb’s follow up book to The Black Swan – Antifragile. That is, things which gain from disorder. Below are two quotes from the book which are pertinent to our study:
Limiting downside is extremely difficult with immersive events, because they work at scale, and because so much of the work is done ‘up front’. So the filming is only done once, but it is laborious and expensive if the event fails to sell tickets. For this reason, and because an event can only be experienced after the purchasing decision is made, my study now turns to advertising.
As I learnt from the previous 2 interventions, in an age of social media advertising, there can be real feedback and real-time changes to advertising, for relatively little cost. I iterated my adverts for the October 5th intervention more than 50 times throughout the almost 3 month campaign.
Being able to launch and re-contextualise an event whilst retaining musical themes which obviously have popularity, should mean events are robust if not outright Antifragile. However, iterations of adverts for my previous events were little more than educated guesses based on the previous advert. In the final weeks of the October 5th campaign I started to read about fluency Vs disfluency, and it’s impact on advertising, and this is where I found some success.
Therefore, finding a framework for the rationale behind the success or failure of advertising can lead to ‘sustainable’ nightlife in an environment of Extremistan. Put another way, digital advertising can be tested with extremely low downside and huge potential upsides.
I will now examine the rules put forward by Gladwell and Derek Thompson for successes in selling ideas, as well as the psychological literature surrounding this topic. Much of it stems from the behavioural economics of the psychologists Khaneman and Tversky, from my earlier research.
My original research question was ‘Can Immersive Theatre & Musical Themes Be Combined To Create A New And Sustainable Form Of Nightlife’. This initially had in mind a proposed way for promoters and venues to avoid the trap of competition for talent (DJs and Bands), whose fees drain away all economic profit in the nightlife industry.
Because a musical theme is not own-able, a promoter doesn’t have to pay anyone for it, but it can be copied. Adding a narrative means that the promoter has something original which cannot be copied; because it is owned and produced by the seller, the upside belongs to the said promoter. This is the ‘new’ in my question.
By creating conceptual events which can be scaled (in terms of other locations, other dates, bigger venues and higher ticket prices), this makes a clear shift from nightlife events existing in (to use Nassim Taleb’s parlance) Extremistan, where they used to exist in Mediocristan.
So promoters can now be subject to power laws, and potentially have ‘blockbusters’.
One characteristic of a product which makes it scalable, is the degree to which it can be replicated for decreasing costs after the first unit is produced. Hence e-books and digital music (whose cost per unit becomes virtually zero) are subject to more extreme power laws than their physical predecessors. With this in mind, after my first intervention I strived to make the story almost entirely digital, by pre-filming the story and syncing it to the music of the event.
The implication of this, is that my second intervention (October 5th) exists almost entirely on a hard drive. I can repeat the event in London, or bring it to other cities with minimum cost – this is a real breakthrough in terms of scalability.
Given that this is the case, there is a degree to which a major aspect of my question has been resolved – in that immersive and musical themes can be combined to create a new form of nightlife.
However, the biggest challenge to both of my interventions were ticket sales. Put another way, having shown that an environment in which blockbusters can exist, my research now turns to the question of what factors can help create a blockbuster. This is the ‘sustainable’ aspect of the question.
Previous posts discussed Anita Elberse’ book ‘Blockbusters’, and the concept of ‘product attributes’ which contribute to the likelihood of a blockbuster.
Two books, ‘The Tipping Point’ by Malcolm Gladwell, and ‘Hit Makers’ by Derek Thompson have further informed my thinking on this topic.
The idea of a balance between familiarity (cognitive fluency) and novelty (cognitive disfluency) intersecting to create interest are strong themes in these texts. I was able to test this in the final weeks prior to my second interventions. It became very clear that, given that this is a complicated and new kind of event (and audience feedback reflected this), a truly simple advert performed far better. See below examples (from over 50 iterations of adverts):
My research will now delve deeper into this topic.
My second major intervention took place on October 5th. A immersive event, with a more complete story.
The major iterations I made based on the previous intervention were as follows:
The story continued until 1am (the event ran 8pm-2am), as opposed to 11.30pm previously. Many people previously left after the narrative resolved, so this was my response.
The advertising was simplified, with less of the concept in the initial adverts. As the campaign went on, from August to October, it was simplified further and further.
Further digitisation of the narrative. I pre-filmed the entirety of the story, using a single actor as a ‘news reader’, and with many hours of edited footage (for example subtitles over famous newscasters on previous US Elections, made to look like 2018, doctored tweets by Donald Trump etc). Rather than having just narrative in breaks between music, the story continued entwined with club visuals. This was in response to my learnings previously about the scalability of digital products.
A broader musical theme – Kanye West rather than ‘Nu Rave’, in response to poor sales previously.
Once again there were many practical learnings in the mechanics of creating an immersive / musical themed event, but academically these are less relevant. I would just say that the event was a commercial failure, in that ticket sales were well below expectations; but a huge success in terms of audience feedback (see videos below). I have been approached by several regional promoters who wish to take this show to other cities.
Academic Learnings and next steps will follow in a second post.
I have emailed Rob Da Bank (Radio 1, Bestival) in order to attempt to collaborate on a Prince-themed event (see previous post re product attributes). I am thinking that this will take place on Valentines Day, given it is Prince and the general wedding theme I am planning for the narrative.