What the Cultural Sector Can Learn from Enron
First Monday

What the Cultural Sector Can Learn from Enron by Bernard F. Reilly, Jr.

In recent months the gleaming office tower of glass and steel in downtown Houston that embodied the awesome power and wealth of one of the world's largest energy trading companies has been exposed as an empty shell, a screen for the evaporation of the Enron Corporation's assets in the heat of merger negotiations. Organizational collapses on such a dramatic scale are uncommon enough in the world of commerce. But the potential has been quietly growing in the non-profit sector for large portions our cultural and intellectual heritage to vanish just as quickly. The stewardship of this heritage by our art museums, libraries, archives, performing arts companies, and other cultural organizations is challenged by changes in artistic and knowledge practice, and our collective investment in these areas is threatened in a worrisome way.

At first glance free-market energy titans like Enron seem to have little in common with the more modest museums, libraries, historical societies, and archives that populate the cultural sector. The former exist in the world of global trade and their activities are driven by money and profit. Until relatively recent times museums and other cultural organizations have operated in a far remove from this world, caring for and fostering our cultural heritage and quietly striving to increase the amount of knowledge in the world. During the last century, however, both sectors have evolved from commerce in tangible resources to trade in intangible ones.

Energy companies, until well into the twentieth century, dealt largely in material assets. They traded in coal, oil, and natural gas, either stored in the ground or traveling about through pipelines and via railroads and tankers. Eventually industry leaders realized that they did not need to own the ground in which those deposits were located, just lease it or better yet simply control drilling rights to it. Finally, companies found that they could trade not only the resources themselves but also the rights to those resources, and even the value of future and undiscovered resources. By the time Enron came under the scrutiny of the Federal Trade Commission (FTC) in 2001 in connection with its acquisition by Dynegy, it had become less an energy company than an investment association trading in energy futures and derivatives, as well as a host of other commodities, such as paper, bandwidth, and even weather. The day-to-day efforts of those who worked for Enron were mostly devoted not to the resources themselves, but to the leases, rights, options, and futures that pertained to those resources.

In addition these activities are necessarily distributed, that is, the various duties are carried out wherever they can be done most efficiently and inexpensively. The international communications network and global labor market make this possible. And the economics of the corporate world encourage outsourcing and leasing, rather than hiring and buying.

Our networked economy and the new technologies that permit trade in knowledge assets to dominate that economy have similarly liberated art and culture work from its bondage to the concrete. Increasingly, our learning, research, and cultural experiences take place on the World Wide Web and on other networks, where an enormous amount of knowledge creation and artistic activity now occur. The coin of that realm is digital. Dance and classical music performances are now recorded directly in digital media; artists create digital works that have no counterparts in solid materials; writers' manuscripts go from their hard drives to editor to press before getting "memorialized" on paper. And electronic journals, databases, and digital libraries are becoming the favored, if not the exclusive, vehicles for delivery of the world's information and knowledge.

Like the energy industry we in the cultural sector are now dealing heavily in intangibles, and discovering that the distinction between materials, information, and money is not fixed but fluid. The new environment has intensified the "unbundling" of property rights in creative works, a phenomenon that had only begun to occur in the analog realm. As a result digital works can, like Enron's disappearing assets, easily slip through our institutional fingers. Keeping a work of art that is "born digital" is not just a matter of storing it safely and away from heat and light: it must be migrated to a new platform when the software to run it becomes obsolete or unsupported.

Artistic and cultural products are no longer objects, like books, paintings, sculpture, with the degree of immanence that the physics of the natural world imparts; nor are they discrete, self-contained events in time, like musical performances, dance performances, and so forth. They will not stand alone, but depend on the presence of a network of activities, relationships and contingencies, that must be maintained. Necessarily the performance and maintenance of these activities are distributed, requiring partnership roles to be fulfilled. The servers on which these works are stored must be maintained and kept connected; the licenses for software and for use of content must be secured and updated; the networks through which these works are accessed must be kept active. For museums and libraries these cultural and knowledge resources are often be maintained outside the walls of their museums, or at least outside of curatorial space. In this way, "curatorial space," the space over which curators must exercise control, has been enlarged.

The failure of any of these functions can be threatening [1]. Today, when the Guggenheim Museum commissions a digital work of art, a complex contract is drawn up between museum and artist spelling out the museum's rights (and obligations) for maintaining the work as technology changes. The museum respects the artist's desire that the spirit and aesthetic of the work remain intact through future migrations, while insuring that the artwork can be preserved. Physical possession of the work is not enough. Absent this contract, obsolescence could very well terminate the work.

How this "unbundling" can threaten even critical historical materials was illustrated in the long struggle of the National Archives and Records Administration, a U.S. federal agency, to secure full ownership of the Zapruder film of the John F. Kennedy assassination. While the film itself was remanded to the National Archives by a 1972 law on Presidential investigation materials, the copyright to the film was withheld by the owners. Consequently, the government owned the film, perhaps the most critical piece of American historical evidence of the twentieth century, but was unable to make use of it. The right to broadcast, mount on the Web, or otherwise disseminate the film had to be purchased by the federal government for $13 million dollars in 1999 [2].

This is how we in the cultural sector experience the dematerialization of economic worth that has transformed the commercial world. The most conspicuous and visible activities of cultural stewardship, i.e., recording and performance, and in the library and museum world, the trade in objects in the auction and antiquities market, are now less critical to the survival of our cultural heritage than the brokering and authentication of digital cultural materials. We are only now learning that ownership of our art works, performances, and literary archives can be contingent and partial and, conversely, that one can own something and not fully possess it. It was much simpler when our fiduciary responsibilities applied only to things. Things have an immanence to them that increases their likelihood of survival from one era to the next, even if neglected. Today the preservation of works, performances, and collections depends upon the implementation and conservation of an enabling matrix of licenses, documentation, agreements, and other contingencies that govern the integrity of the digital work of art, knowledge resource, or collection, or keep the aspects of the performance adequately bundled. Increasingly, what we are called upon to "curate" or to preserve is a configuration or a relationship rather than an object or opus.

While these new cultural "assets" are not unlike the options, futures, leases, rights, and other intangibles that defined Enron's portfolio, there are two important differences. First, responsible management of Enron's assets was a matter of import primarily to its employees and investors. In the cultural sector we are dealing with an investment of a different kind. Cultural and intellectual heritage is regarded as the property of society at large, the collective patrimony of whole nations and peoples. Even in strictly monetary terms these are public and not private, assets, since they are created or acquired largely under the privileged circumstances of the use of tax-exempt funds.

Second, the cultural sector has evolved few safeguards to protect it from the loss of those materials. What makes commerce in intangibles possible in energy, banking, entertainment, and other parts of the for-profit sector is a robust apparatus of underwriting and certification. This apparatus consists of regulatory oversight by such bodies as the FTC, Federal Deposit Insurance Corporation (FDIC), and the Securities and Exchange Commission (SEC). It also includes mechanisms for third party auditing and validation, by organizations like Standard and Poor, Dun and Bradstreet, and Price Waterhouse, and underwriting by insurers and standards bodies.

The cultural sector has no such robust mechanisms for valuation and oversight. Within the past few years the Library of Congress, the Council on Library and Information Resources, and the Andrew W. Mellon Foundation have drawn library and university attention to the fragility of the digital record and the need to develop realistic policies and methods for preservation in this realm. Accrediting associations like the American Association of Museums are beginning to pay attention to the problems. But despite the sizable investment in the servers, networks, and other technology hardware that support storage and use of the resources, we have invested relatively little in the infrastructure to support and manage rights and content. Our cultural organizations, many of them small and thinly staffed, are not well equipped to deal with the contract-intensive, legalistic rigors of this environment.

The scale of our investment in digital technology, if not the importance to our society of these works of art, performances, literary works, and the documentary heritage, merits that we pay more attention to this underwriting infrastructure. It should accommodate sound rights acquisition and management practices, and place guarantees for non-obsolescence. As in the for-profit world transparency will be required to lend credibility to this function.

Despite the obvious shortcomings of the commercial sector, the cultural sector can learn from the financial and energy industries things that will help us manage intangible assets.

In this new world, conservation means management. Hence the need to train a new generation of artists, curators, and librarians to appraise and broker knowledge and cultural resources, educate them in the basics of contract and relationship management, and teach them how to identify best practices for licensing and leasing. We have created on and off the Web vast edifices of content, monuments of artistic achievement, in highly perishable digital form. The artists, curators, and librarians of the future will be responsible for building relationships necessary to afford and sustain access and cementing and documenting those access leases to guarantee their survival and, insure the necessary future use and downstream rights.

Providing this underwriting function, a role that government cannot fulfill, because in the area of culture the government will always be suspect. And, if we "follow the money" that supports us to its source we see that it is the community, not the government, that is the primary investor. Our responsibility to this community requires that the cultural sector begin to invest in the underwriting capabilities that will guarantee the survival of worth. Until we do, we are living, as Enron was, a precarious existence. End of article

 

About the Author

Bernard F. Reilly, Jr. is President of the Center for Research Libraries in Chicago.
E-mail: reilly@crlmail.uchicago.edu

 

Notes

1. In late December 1999, for instance, there was great trepidation at the Art Institute of Chicago, then hosting an exhibition of computer-based video installations by an artist, lest the onset of the year 2000 render all of the programs inoperative and the show go dark.

2. A similarly troublesome instance of "unbundling" affected the Philadelphia Orchestra. Last year when the Philadelphia Orchestra was preparing to move into its quarters in the city's new Performing Arts Center, orchestra officials found that by terms of their contract they would relinquish control of their performances in part. Their tenancy agreement gave the Center's management the right to broker recording contracts for the orchestra, by dint of owning the spaces in which those performances would take place. The orchestra thus discovered that acoustics could be "unbundled" from the performance itself, and brokered separately.


Editorial history

Paper received 29 December 2001; accepted 25 January 2002.


Contents Index

Copyright ©2002, First Monday

What the Cultural Sector Can Learn from Enron by Bernard F. Reilly, Jr.
First Monday, volume 7, number 2 (February 2002),
URL: http://firstmonday.org/issues/issue7_2/reilly/index.html





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