Welcome to Not Priced In, a newsletter about interesting stories in business and finance. Consider subscribing if you like what you see!
How do you counter self-doubt when you are preparing to disrupt a century old artform, and a billion-dollar industry? Especially when the process of creation takes years, and hundreds of iterations?
In the mid-70’s, George Lucas debuted Star Wars and changed filmmaking forever. Lucas had a unique structure going behind the scenes. Because his films required so much paradigm change in various technical aspects of filmmaking, he could spin off entire divisions of Lucasfilm into load bearing columns of the industry at large – THX for theatre sound, Industrial Light & Magic (ILM) for Visual effects, and most famously, Pixar for animation.
The spin off was far from smooth, and Steve Jobs (yes, that Steve Jobs) was instrumental in keeping the company alive with fund infusions, even becoming CEO and owner eventually.1 In fact, the story goes that Jobs contemplated selling off Pixar many times, even as late as 1995.
Pixar had been working on the first ever fully computer animated feature film for the last five years. Toy Story was finally released in 1995, and made movie history. It did fantastic numbers at the box office, and its appeal extended to adults just as much as kids.
How did they do it? The path they were charting was brand new. Unlike software, you can’t release a film in beta and correct the bugs later. It had to be a complete product, coherent as a film and well made. Then there was the obvious distraction:
The secret is really focusing on the story and the characters. I've done animation my whole life. That’s all I want to do. And it’s not about the technology, 'cause the technology these days could be so seductive, right? It’s about entertaining the audience with great stories and great characters. And I just fall in love with these characters.
- John Lasseter, Pixar co-founder in a 2007 interview.
When artists discover a new medium or tool, the tail often wags the dog, as the artist focusses on their new capabilities, and forgets that the audience doesn’t care about their cool new plaything. How did (does?) Pixar avoid that in the absence of long lead times and delayed audience feedback loops?
The magic pixie dust of Pixar is something they call the Braintrust. In the words of another co-founder, Ed Catmull:
A hallmark of a healthy creative culture is that its people feel free to share ideas, opinions, and criticisms. Our decision making is better when we draw on the collective knowledge and unvarnished opinions of the group. Candor is the key to collaborating effectively. Lack of candor leads to dysfunctional environments. So how can a manager ensure that his or her working group, department, or company embraces candor? By putting mechanisms in place that explicitly say it is valuable.
One of Pixar's key mechanisms is the Braintrust, which we rely on to push us toward excellence and to root out mediocrity. It is our primary delivery system for straight talk. The Braintrust meets every few months or so to assess each movie we're making. Its premise is simple: Put smart, passionate people in a room together, charge them with identifying and solving problems, and encourage them to be candid. The Braintrust is not foolproof, but when we get it right, the results are phenomenal.
This feedback loop of the sharpest animation minds and the best storytellers within Pixar is what led to the Toy Story (1995) being as successful and timeless as it was. The technology never overpowered the story, and character’s journey was always front and center.
Many hits followed, all with the same formula. Disney had been involved in distribution of Pixar films from the very beginning, so when then (and now) CEO Bob Iger was at HK Disneyland in 2005, he was struck by how all the new characters in the parade were from Pixar films. He knew Disney had been disrupted, and he needed to acquire Pixar or risk being made obsolete in animation and derail the Disney flywheel.
The deal was struck in 2006, at a $7.4B implied value, which made Steve Jobs the biggest shareholder in the Disney Corporation at 7%. Pixar is still a subsidiary of Disney, and its films have earned over $15B in cumulative box office sales since inception.
My favorite Pixar film is Ratatouille. But I’ve sort of written about that a few times already. Let’s touch upon another that I absolutely love.
Inside Out (2015) does an inversion of a classic trope- normally, Pixar movies are made for kids but with enough jokes and references thrown in that the adults stay engaged too. I feel like Inside Out does the opposite- it is a film about introspection, self-awareness and mental health that has been made accessible for kids to enjoy too, even if the message creeps up on them when they’re a little older.
The core premise is that each of us is run by a central console, which is piloted by various emotions (Joy, Fear, Disgust, Anger and Sadness). Like the characters, I too once felt that the important thing is to never let Sadness take the helm for too long. It was an emotion to be controlled, and suppressed. That if stayed too long, Depression would set in.
But as I learnt, and the film beautifully demonstrates, Depression is not constant Sadness. It is the inability to feel anything. Look at this scene:
The console greying out is the best depiction of Depression I have ever seen. Inside Out 2 is in theatres now. Check it out!
P.S. Here’s a legendary blogpost that posits that all Pixar films take place in the same universe - The Pixar Theory. Fun read!
P.P.S. This has inadvertently turned into a chronicle of the animation industry. Read Part 1 here.
This post is for information purposes only, and should not be interpreted as investing advice. The author may hold positions in the securities discussed.
This was the period between his ouster and triumphant return to Apple- in which time he co-created NeXT and kept Pixar alive. You know, managing two billion-dollar corporations after being thrown out of the multi-billion dollar corporation you co-founded. Only to return and change the world forever with the iPhone. As one does.
Now that the chronicling has begun, please consider a part 3 on Studio Ghibli.
amazing