Image source: Xurble

Following current news can help give valuable life lessons. Have you wondered how Exxon recently broke the record for highest US profits in history, yet the rest of America is worried about recession and unemployment?

What recently happened in Hollywood could help explain it. Hollywood may seem like a different world, but the riff between Hollywood studios and the writers is actually quite revealing of how the real world works. As the writer’s strike seem to be coming to a close, there are lessons to be learned for the rest of us.

There is an old adage about those who do not learn history are doomed to repeat it. That’s pretty much why I follow current news. Whether it’s about Microsoft (trying to) acquire Yahoo, or how the NY Giants as heavy underdogs defeated Goliath the Patriots, there’s always events that happen on a grand scale beyond our immediate world, but still can be worthwhile to follow as an observer.

The Hierarchy of Needs for a Business
Earlier I mentioned how Exxon had record profits despite everyone’s fear of recession and unemployment. Is it Exxon’s fault? That question can be a topic for debate, but what this is telling us is that people will still buy gas and oil despite the economic conditions. Whether we like it or not, we are dependent on oil - we as consumers will forgo other stuff first before we give up oil.

Typically in a recession, the first to feel the pain is the service industry, such as restaurants, hotels, and entertainment, because they do not directly contribute to the bottom line necessities. Similar to Maslow’s hierarchy of needs for individuals, there is a hierarchy of needs for businesses as well.

Source: Wikipedia

The bottom tier is physiology, and for a business, this is typically money. Money is needed by businesses to pay for employee salaries, office overhead, and other business expenses, so money is an unavoidable physiological business need. If a business has expenses associated with the service industry, these expenses will be higher in the hierarchy, such as in esteem (paying for lavish holiday parties for employee morale). If a business needs to cut back, the first to go will be things higher on the pyramid, and those that stay will be closer to the foundation.

Same logic applies for internal ancillary services, such as admin staff and customer support. If a business is selling a product, historically these types of jobs are the first to get cut, because they are not directly tied to earning or managing money. On the flip side where a business is successful, the ones that get rewarded first are those that are closest to the earning or managing of money. A good salesperson and the CFO are typically the people that are the most well-compensated people in a company.

No Business Like Show Business? Really?
Although the movie industry is considered “the arts,” it is also a business and the same rules apply. For example, when you watch the opening credits for a movie, when do you see the credit for the screen writer? Only after all the primary and some secondary actors, the producer, and the director gets their credit first. Who always gets credited first in the movie? Not the actor. Not the producer. Not even the director. The first to get credited is the studio, the company that paid for it. Despite the fact that the story is the foundation of the movie, the business foundation for every movie is tied to money.

The writer is directly responsible for the story, which is the value foundation of a movie, but writers are typically far removed to the business foundation for the movie. In the early days, writers had to fight to get residuals (payments based on movie performance), and the current strike is primarily about residuals with new media. Originally the studios wanted to give them a fix fee, but the writers did not budge.

To have the writers union stand up like we did, not give back a single thing and make them give - it was a really great moment to sit in there and listen to everything.
-Michael Moore, member of WGA

There were valuable lessons that everyone can learn from the writers strike:

1. Be close to the life blood of the company: As new media (DVD, internet) was proliferating, there were hardly any compensation given to writers. The main purpose of the strike was to rectify this.
2. Know your true worth: The studios claimed that paying these residuals would put them out of business. WGA knew that not writing stories would put them out of business.
3. Be prepared to say “no”: I actually have been following some of the drama a few months before the strike. Many WGA members earn about as much money as the average worker in the US. They did not want to miss several months of salary, but they knew well ahead of the time of the possible strike and saved up to weather a strike.
4. Think “win-win”: Concessions were made by WGA, but they still walked away with the residuals that they wanted.