Marginal Revolution: Speaker fees

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Speaker fees

This reminds me of something I don't really understand: why affluent people will pay unbelievable amounts of money to attend a lecture so they can bask in the (one would think) unedifying physical presence of somebody like Tom Friedman, whom they can see for free on television practically every week.

I take this to be a signaling problem. The quality of the speaker signals the quality of the event, and most of all the quality of the other attendees. Wealthy people and successful people don't want to go to an event full of losers, why should they? So the organizers seek quality speakers, so as to attract quality participants. Such valuable signals have to be scarce by their nature, and that means that the best known speakers earn high rents from their physical presence, whether or not they are edifying.

On related matters, Greg Mankiw posts on live performance.

Posted by Tyler Cowen on February 19, 2007 at 04:36 AM in Economics | Permalink

Comments

That still doesn't explain why people would go see Tom Friedman, who is, if anything, even worse when he talks then his writing. Since the writing is devoid of logic or sense this is pretty bad. I say this from experience though I went to see him only as a favor to those putting on the show (I used to work for them) and for free.

Posted by: Matt at Feb 19, 2007 10:33:41 AM

You can think of this as extremely similar to the reason that movie stars bring in the big bucks, with one difference; if a movie star decides to star in an incredibly crappy film, his future career takes a hit.

Posted by: hrbrda at Feb 19, 2007 11:02:50 AM

When I was in college and law school, I went to hear guest speakers a lot because it required so little effort. (William F. Buckley was especially memorable, at a time when I viewed him as practically the devil.) Now that I'm older and busier, and the options for having almost the same experience virtually have increased so much, I find live events less and less rewarding.

So I'm stumped as to why people incur substantial costs to be in the same room when an expert or celebrity says things that you could hear for a lot less elsewhere. Classical music seems to be one of the few things where being present (at least for now) has serious advantages over getting a performance second-hand.

Posted by: jp at Feb 19, 2007 11:25:42 AM

It's all about being in the club (that sponsors such speakers), with the ability to be both "in" (the club) and also to lay claim to sophistication for attending talks from folks like Kissinger or Kemp.

That's my purely speculative take as someone who is not "in".

Posted by: happyjuggler0 at Feb 19, 2007 11:26:05 AM

I've only read a few paragraphs of Thomas Friedman's book, but perhaps it is indicative. One of the early pioneering examples of his flat world refers to Reuters' offshoring of US company news reporting to India in 2004, I think. This had already been done extensively before 2000, by at least one other of their competitors. Investment banks were also producing US company analysis from India prior to Reuters' departure there, so what was so novel for Friedman?

The reason to go to an event full of losers is that those stories are seldom told. What literature exists on failure tends to be of the catastrophic Enron style, rather than what might be described as productive failure. Business academics/writers who write the case studies prefer to cavort with the winners, because they are more likely to pick up the dinner bill, endow the faculty and are easier to find in the phone book. So your example is one of survivorship bias, as well as signalling, I'd say.

Posted by: knackeredhack at Feb 19, 2007 11:30:48 AM

I think many people go to these events to meet the other people who go to these events.

Posted by: Jacqueline at Feb 19, 2007 11:40:17 AM

Jacqueline's point is closely related to Tyler's, and they're both on the money.

Posted by: ben tillman at Feb 19, 2007 12:07:31 PM

I think that the only reason people will pay to hear a lecture is so they can say that they actually heard the person live. It is one thing to say that you read the article, it is another thing to say you heard it. Just like the Mankiw lectures, you can pay to hear them or you can read them online for free. People pay for something so they can have the hardware. For instance, if you hear Mankiw's lecture at Harvard you pay for the the diploma from Harvard, but if you read the free online lecture you have nothing to show for it. People pay for what they get.

Posted by: Tyler Kirkpatrick at Feb 19, 2007 4:46:06 PM

I think that the only reason people are willing to pay for these lectures is so they can say that the heard the lectures themsleves. People want to say they heard the lecture live rather than just reading them for free on the internet. This is evident when people pay for Mankiw's lectures at Harvard and get a diploma from Harvard and not read the same information for free online. I think that people feel more important going to the lecture rather than just hearing it.

Posted by: Tyler Kirkpatrick at Feb 19, 2007 4:52:21 PM

Well, there is a question of whether or not the individual appears on
TV or on some other media outlet where one can see them speak. If they
do not, then there is the curiousity factor of how they look while
speaking, how they handle themselves and respond to questions, and
so forth.

I would imagine this applies to famous bloggers as well as authors
of books who stay off TV... :-).

Posted by: Barkley Rosser at Feb 19, 2007 5:05:48 PM

At business and professional conferences the attendee is not paying the bill, their organization is. A high profile speaker is a signal to one's boss that this is a reputable conference, and so... please sign my travel authorization!

Posted by: PJ at Feb 19, 2007 7:02:47 PM

Why do people go to rock concerts with crappy too-loud sound and questionable performances when they can hear the perfect thing on the album, which is free?

Posted by: Paul N at Feb 19, 2007 7:57:55 PM

Many speakers represent a "cause" or political movement. By paying big bucks to hear them speak, you are donating money to a cause you support.

I could speculate that other speakers have their fees pulled up by association with the political speakers.

Posted by: doctorpat at Feb 19, 2007 8:26:23 PM

Only a herd could love Tom Friedman.

Posted by: Seabreeze at Feb 19, 2007 10:37:22 PM

1. Nobody looks good in Bermuda shorts. Nobody.

2. I'm 57, have a calm life. But my peers still admire the fact that I went to the Fillmore Auditorium to see Chuck Berry, back in the day.

Posted by: dave s. at Feb 20, 2007 9:55:08 AM

A couple different types of events are being mixed here, and different attendees can, of course, be at the same event for different motivations.

The two main ones that come to mind are

1) Attending to meet people: ie networking. This fits into Tyler's explanation of the speaker signaling quality to attract a crowd worth networking with.

2) Attending to get a good story: This is, IMHO, much more common People are constantly searching for good stories to tell. If I go see someone famous, I have a story to tell. I can call friends, I can mention it in passing at a social event, etc, etc.

Nobody wants to hear that I saw Tom Friedman on the Charlie Rose show last night. But seeing him in person. That's a story. (I find Friedman comically simplistic personally, but he's still famous. My negative opinion of him will carry more weight with people if I say I saw him live.)

Doing something "story-worthy" is a tremendous motivator. It boosts our self-esteem, and increases our social worth. People like being around people with good stories.

Just think of the feeling you get when you do something "story-worthy" and you get that excited feeling where you just have to tell somebody.

...

All that said, I think our minds are more engaged when watching a speaker live. It seems more important so we pay more attention. We are learning more, although much of that learning might be more about the mannerisms of the speaker and crowd than the intellectual meat being offered.

Posted by: jim at Feb 20, 2007 10:21:53 PM

The "story-telling" explanation merely pushes the problem back a step. Why would people be interested in hearing about your up-close, personal encounter with Friedman?

Posted by: Aaron Haspel at Feb 22, 2007 4:55:57 PM

The bigger riddle is why people would pay all this money to hear a speaker who is so wrong so often? Friedman Cheerled us into Iraq, wrote ridiculous commentaries for years signaling things would turn around soon, and never admitted his mistake. This pretentious phony is also a big booster of those aspects of the global economy that smother attempts by labor to obtain decent wages and benefits. Reminds me of Kissinger, the blowhard who needed six years to end the Vietnam War and is still hailed as some kind of guru.

Posted by: Ivan Goldman at Feb 25, 2007 12:34:40 PM

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