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Welcome to running a business

Welcome to running a business

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This article was originally published by Adam Smith Blog

The Guardian tells us of the perils of being a touring pop musician:

“It’s possible to make money over a festival season, but with touring, most people I know are really lucky if they break even,” says Alexandra Denton, better known as Shura. After she released her second album, Forevher, in August 2019, her planned promotional campaign around a run of 2020 festivals “evaporated overnight”. With paltry royalties from streaming, touring is now seen as musicians’ primary income. But from the 30 tour dates Shura performed before lockdown, she estimates her overall profit at £2,300 – after takings had been chipped away by the expense of a live band, accommodation and staging, all paid at a fixed rate. “Genuinely, if you can finish a tour and say: ‘We didn’t lose any money’, it’s a real win,” she says. “But for 30 shows, as a single-entity musician, I’m making less than anyone else working on the tour.”

This being precisely and exactly how every business in the world is run. The entrepreneur faces those costs determined by others – the market prices for labour, premises, equipment – and it’s the bit left over, if there is any, which is their income. Or, as we also call it, the profit of the enterprise.

We can go further, this is also how all capitalism works. Here the capital is the human capital of the lead singer/musician. The income to capital is what is left after everyone else has got paid at those market prices. If there is no value added then there ain’t no money for the capitalist nor the entrepreneur.

The rest of the piece is about how we’ve got to work out some manner of shovelling more money to these capitalists. Which really is an odd thing for The Guardian to be recommending really, even though we do agree that if the capitalists don’t make money then things provided by capitalists won’t be provided. You know, that larger lesson that the newspaper will never agree applies.

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Author: Tim Worstall

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