Who Needs the Fed?. John Tamny

Hoffman called Ishtar. The movie was awful, and the $51 million invested in it “evaporated.”⁴ Then there was Town & Country.

      A movie about the midlife crisis of a rich New Yorker, Porter Stoddard (Beatty), Town & Country probably seemed like a good idea at the time. The cast included funnyman Garry Shandling, an up-and-coming Josh Hartnett, and female leads Nastassja Kinski, Diane Keaton, and Goldie Hawn. Noted director Paul Mazursky observed that perhaps what attracted Beatty to a project his friends were telling him to pass on was “all the gals.”⁵

      It couldn’t have been the mostly limp script, though in fairness to Beatty and the rest of the Town & Country crew, the making of a movie is often the artistic equivalent of the famous quote about how “no battle plan survives contact with the enemy.” No less than François Truffaut observed that making a film is like taking a stagecoach west. The ride starts out great, but by the end you’ll be satisfied if “you just reach your destination.”⁶ There’s a reason good directors are paid so well. They’re constantly staring monumental failure in the face as they desperately try to turn a concept into something real, let alone watchable.

      By September 1999, 1.3 million feet of film had been shot, but the producers knew they had a disaster on their hands. The film wasn’t finished, yet Diane Keaton, having negotiated a “stop date,” left production altogether. Town & Country’s director literally shot scenes purported to include her but that in fact were her body double from the side.⁷ The release date kept being pushed back.

      Finally, on April 27, 2001, Town & Country, a production that had gone, by some estimates, 200 percent over budget, was released onto 2,200 screens nationwide.⁸ Box-office receipts after a month in the theaters were $6.7 million. Unfortunately, production costs for New Line, the film’s producer, were $85 million.⁹ Beatty had morphed from an eminently bankable star who could get films “green lit” to box-office poison.

      Interestingly, Beatty once commented, “I believe that I can get any movie made. I have always felt that and I’ve never had a movie I couldn’t get made”¹⁰—impressive words that were true for a time but also hopelessly dated. The credit required to produce a film was once easy for the legendary Hollywood ladies’ man. Not anymore. Town & Country was released in 2001. While he presently has another film in production, Beatty hasn’t made a movie since.

      Access to credit (meaning access to the resources required to make a film) in Hollywood is informed by the busts like Town & Country far more than by the box-office successes. Grazer is proof of that. Although his track record when it comes to both film and television is impeccable, finding financing for his projects remains difficult to this day. It took Grazer sixteen years—and the help of Mick Jagger—to get the James Brown biopic, Get On Up, onto movie screens in 2014.¹¹

      As Grazer explains, “I know just how often people get told ‘no’ to their brilliant ideas—not just most of the time, but 90 percent of the time.” Grazer writes that Hollywood is the land of “no,” and 90 percent of ideas are rejected. “Instead of spelling out the word H-O-L-L-Y-W-O-O-D in the famous sign in the Hollywood Hills, they could have spelled out: N-O-N-O-N-O-N-O!” He further points out, contrary to a popular assumption in the industry that no one ever says “no” to him, “Everybody still says ‘no’ to me.”¹²

      Credit is tight in Hollywood even for Brian Grazer. With his acknowledged struggles with financing in mind, what the Fed presumes to do in fiddling with interest rates is, on the surface, of little consequence. No matter the Fed’s obnoxious conceit about how easy or hard it should be to access credit, financing a movie is difficult.

      What economists and politicians too often miss is that an economy is nothing more than a collection of individuals. These individuals frequently make mistakes. As a consequence, the personal “recessions” people endure, whereby credit becomes difficult to attain, are actually quite healthy.

      Consider Robert Downey Jr., best known for the Iron Man films. Thanks to this highly profitable movie franchise, Downey is the world’s highest paid actor, with earnings of $75 million per year.¹³ As one media account put it, Downey “is a walking, talking multi-billion-dollar business.”¹⁴

      What might surprise readers it that 2015’s highest paid actor couldn’t even get a movie made when the twenty-first century began. Downey’s addiction to drugs and alcohol led to jail time, rehab, fights in prison, and even a 911 call from a neighbor who found an out-of-sorts Downey asleep in her eleven-year-old child’s bed. Amid his self-inflicted race to the bottom, Downey couldn’t make movies because the costs involved were too steep. Movies are expensive to make and difficult to finance even for the top producers, and Downey’s habits rendered him wholly unreliable. No sane insurance company would write a policy for a production that had him attached. Put simply, Downey was too much of a credit risk.¹⁵

      This lack of credit turned out to be a blessing for Downey. The expensive credit that rendered Downey unemployed is what forced him to kick his various bad habits and clean up his life. Absent doing so, no source of film finance was going to risk its capital on a talented actor who personified unreliability.

      Never forget that credit is the resources created in the actual economy. For that reason alone, wise minds should rejoice that “recessions” shrink our ability to senselessly waste those resources. No amount of Fed ease would have made it possible for Downey to work. His personal “recession,” whereby he fixed problems of his own making, is ultimately what freed up his access to credit. Credit had to become expensive for Downey so that it could become cheap. This is happily true for everyone in the movie business.

      Returning to Grazer, it’s worth pointing out that not all of his films have been hits. His resume includes duds such as Fun with Dick and Jane, The Cowboy Way, and Cry-Baby. If credit were always easy—as in if the Fed could wave a magic wand to shower us with money capable of commanding resources—then we’d never learn from our errors, because we wouldn’t be forced to. That would be unfortunate, mainly because failure is a great teacher.

      Imagine if failure weren’t allowed to instruct, if government officials constantly excused our errors through bailouts and easy credit. We film lovers would have already aggressively avoided seeing Gigli II, Ishtar Goes Down Under, and Town & Country: Getting Lucky in the Retirement Home. Worse, credit is not finite. To the extent that wasteful economic activity continues to attain funding without regard to market or critical verdict, good, prudent, and artistic variety must get by with less funding. Failure that is propped up is also perpetuated. Moreover, it deprives the productive of the credit they need to fulfill actual market wants. Everyone loses under such a scenario.

      Thankfully, what I have described above isn’t real. The Fed’s role in the economy is surely a negative one. But as the film business makes clear; the Fed’s control over who gets credit is in no way absolute. Thank goodness there are red lights everywhere in Hollywood.

       CHAPTER FOUR

       In Silicon Valley Your Failures Are Your Credit

      I believe so strongly in people that I think talking to the individual is much more important than finding out too much about what they want to do.

      —Venture capitalist Arthur Rock

      FOR SEVERAL YEARS, FailCon was a popular annual event in San Francisco. Attendees were technologists who would get together to talk—you guessed it—about their stupendous failures.

      While Hollywood film directors run as fast as they can from their mistakes—Alan Smithee is the pseudonym directors use to erase their