Is It Smarter To Invest In Silicon Valley Or Hollywood?

Illustration for article titled Is It Smarter To Invest In Silicon Valley Or Hollywood?

If there's one thing I know about Gizmodo readers and staff, it's that we all have a bunch of excess money that's stressing us out. What should we do with it? Where should we invest it? Tough questions. But even if the whole tech startup vs. blockbuster investing question doesn't quite apply to you it's still kind of fascinating. The bottom line is, unsurprisingly, that they're both super risky, but for different reasons.


Over at the Bits Blog, Nick Bilton describes the strengths and pitfalls of each industry. He points out that in 2012 "The Dark Knight Rises" made $1 billion in box-office sales while Facebook bought Instagram for the same amount. But both are glittering exceptions, not the dreary norm. The main economic similarity between movies and startups is that they both tend to flop.

Hollywood has some advantage because it can predict certain hits by hyping movie versions of beloved franchises, like Harry Potter. In Silicon Valley it is much harder to predict which startups will hit the right trend at the right moment. On the other hand, movies that have big returns on their investments still tend to only deliver profits in the millions of dollars, while hit startups sell for billions. And it gets even more nuanced. Movies must pay box offices, but make money back on residuals. Startups can launch with very little overhead, but at the same time most tech investors are richer on average than movie investors.

Bilton does draw the ridiculous conclusion that there is more fame in Silicon Valley than the place defined by famous people aka Hollywood (based on the clearly skewed fact that Mark Zuckerberg has more Facebook followers than Leonardo DiCaprio). But in general it's just satisfying to think about which perilous and potentially dynamite investment you would make. Or, you know, will make. [The New York Times]

Image credit: Shutterstock/Leszek Maziarz


That's easy: Hollywood. Everything Hollywood produces is a known quantity. Sure, movies underperform here and there, but by and large they rake in profits. The number of abysmal bombs over the entire lifetime of the movie industry could probably be counted on two hands. That's why the big examples, like Heaven's Gate, are so notorious, and famous all on their own really, because they are relatively few in number. I would gladly invest in almost any Hollywood release if I could, in lieu of investing in nearly any Silicon Valley start-up. Movies are a proven mass entertainment medium, so their utility is well-known and Hollywood executives have gotten very good at determining proper budgets. Silicon Valley start-ups, on the other hand, are usually far, far overvalued based on the profit potential of what they produce. The bulk of the value is almost always placed on the blood running the company—its young executives and talent, and therefore is only of use to pre-IPO investors and the big players (Yahoo, Google, Microsoft, Apple, etc) who end up purchasing these tiny companies, not the smalltime investors who might manage to get their foot in the door at IPO, or whatever.