All you need to make an amazing “Switchboard Profit” Model

The Short Version:

What if there was a magic model to become rich and powerful. That anybody could use – without any talent. What if this model could make you one of the richest and most powerful people in the history of Hollywood (with no acting, directing, writing or producing talent)? What if you could use the exact model to facilitate the hottest and biggest investment banking deal of the time (with no experience as an investment banker)? And then use the model to conquer Madison Avenue to make one of the most memorable campaigns for Coca Cola? What if you could just use the same model over and over again on whatever took your interest, and have unprecented success?

This post will show you exactly how to do it. Well, at least, how one guy exactly did it.


I was introduced to the absolute magic of Michael Ovitz’s  business model from a book called The Art of Profitability by Adrian Slywotsky. I loved the concept, so bought his prescribed book Power to Burn by Stephen Singular which chronicled Ovitz and his company Creative Artists Agency (CAA) in the 1980s and 1990s.


Slywotsky uses Michael Ovitz’s CAA agency model to describe “Switchboard Profit” model:


Sellers: Actors, Writers, Producers, Directors

Middle: Micahel Ovitz (Agency)

Buyers: TV Studios

Switchboard profit is to act as an intermediary between buyers and sellers. A match-making service. Think any kind of agency – real estate, recruitment, sports agents, even investment banking.

“TV Packaging” was when an agency packaged a group of actors, writers, producers and directors to sell a new show to a studio. Most TV you saw from the 1960s on was done this way.

So what was so special about Ovitz?


Ovitz took the model for TV packaging and applied it to movies –  never done before successfully.

Then he applied this to Investment Banking: He sold the media company MCA/Universal to Matsushita, a job usually pinned for investment banks – and collected bankers’ fees along the way. And successfully annoyed investment banks.

Then he applied this logic to become a sports agent. Then to TV Commercials.

But how did he gather such momentum? How did he keep the supply?


Before each meeting with a potential client to sign up, Ovitz researched the target heavily. He knew the background of each actor, director, writer – everything they had accomplished. He even applied this when he was trying to win the design of famed architect I. M. Pei for his LA Headquarters – and won it despite Pei’s complete reluctance to take a project like that on.

He knew all the gripes, the insecurities, the anxieties that his customer segment had. Actors are always worried about their next job – where was it going to come from? Ovitz built confidence that he would take on the “work” pipeline, and they just had to concentrate on what their art – the acting. How did he do this? Like this:


His transition from the model from TV to Movies wouldn’t be easy. He signed up veteran of the film industry Marty Baum and made him a partner at CAA. When he was building the model for movie packaging, he probed Marty constantly. What are the fears and insecurities of stars, directors and producers? What makes a good script? Where did the money come from to make a movie?


Ovitz kept clear goals and ruthlessly executed them. He redefined goals month by month.


Ovitz was not always doing deals. He called around town constantly to find out which business manager and lawyers were representing which actors and directors. He was not always selling. He found out which networks and studio executives were looking for work and asked if he could help them find employment now or in the future.


Ovitz knew that the model required the right clients and quickly learned that signing literary agent Morton Janklow would be key to sell TV packages to networks (it was…)


He acted like he owned the place and exuded confidence, even when the agency was nothing. When courting the literary agent Janklow, he told them that his agency was going to be the biggest in the world, despite the fact that at the time they were barely even a company. Despite getting laughed at, he got their attention.


Despite Janklow’s lack of enthusiasm, he persisted by calling again and again. He flew to New York to get half hour of the agency’s time, and literally put the watch on the manager’s desk. He then said he’d call twice a week asking for a manuscript.


It’s hard to imagine in current days of endless self-promotion via Linkedin posts, podcasts and interviews that someone would opt to take a quiet profile. Ovitz was obsessed with keeping himself out of the spotlight. Why? He didn’t want to reveal his strategy, his secrets. Though continually pestered for interviews, he refused most of them – he even refused Stephen Singular’s request to help write the book for a while.

There’s no credible quick way to riches in busines. But before you start anything, the first thing you should do is look at your “profit model”. This is not the business model – it goes way beyond this.




Nobody is believable.

“Remember that believable opinions are most likely to come from people 1) who have successfully accomplished the thing in question at least three times, and 2) who have great explanations of the cause-effect relationships that lead them to their conclusions.”

I love this quote from Principles: Life and Work by Ray Dalio.

Too often at work we believe the wrong people. People who lack credibility. People who are dangerously overconfident in themselves yet completely unqualified.

So wrong decisions are made. Things fall over. Blame is allocated elsewhere.

The above quote is a quick and easy lens to apply when you’re trying to do something that you have no idea about (which is most of the time).


“The Goal” and its implications for creative production

I’ve talked previously on The Goal by Eliyahu Goldratt.

The book was aimed at manufacturing but it has larger implications.

To recap what “The Goal” is:

The Goal = to make money


“To reduce operational expense and reduce inventory while simultaneously increasing throughput.”

Operational Expense = What it costs (e.g. labour) to make a product

Inventory = Work in progress (WIP)

Throughput = Sales

Let’s look at this at something I’m trying to do – write music.

The Goal = to write great songs

(full disclaimer – i’ve just embarked on this journey and haven’t yet done this or even got close)

Operational Expense = My time and effort

Inventory = Song ideas (riffs, lyrics, melodies, etc.)

Throughput = Published Songs

So to maximise creativity, I need to optimise the above three things. Anchoring it to the original sentence in the book:
“To reduce operational expense and reduce inventory while simultaneously increasing throughput.”
What does this mean for my song writing?
Inventory – Don’t spend too long trying to perfect a song or section. WIP must be shipped out quickly!
Operational Expense – With every iteration of making a song, I get faster, Creativity is a process as much as it is a conjuring of ideas.
Throughput – This will increase as I manage Inventory and Operational Expense (Song pipelines)
Then next time and next time I’ll be able to do it faster and faster and then I can spend more time optimising inventory and writing better songs more quickly.
I’ll write more as I see how I go.

One Sentence To Describe (Successful) Art Investing

“It is a masterpiece by a very important artist in a sector of the market especially popular today with active collectors in great condition and trading in a liquid market“.

This is a quote from Doug Woodham’s  book Art Collecting Today

In later posts I’ll go through each phrase in bold.

People buy art for two reasons:

  1. They like it
  2. They believe it is a good investment

It’s usually more of 1 than 2 which means they usually buy utter rubbish and is a waste of money.

People pay too much for crap art that they buy on holiday and display the works at home to show off how worldly cultured and cosmopolitan they are.

Each work completely contradicts each other (why wouldn’t it? It was made in different countries by different artists belonging to different categories) – making the whole house look confused, pretentious and ironically, uncultured.

They buy from overpriced tourist traps who make all kinds of semi-believable claims about the work up for grabs. People believe them for whatever reason.

As a result, as I go through many people’s houses I’m increasingly aware that there are no themes and no specialty in the art that they are displaying. You need to have these not just for aesthetics but to know how much you should (or shouldn’t) pay for art.

I’m too scared usually to ask them to tell me about a work. Their “narrative” is pretty weak.

Art investing is like any other investing. You need to specialise in specific areas where you have an advantage over other people. Otherwise you’ll not be able to know (and exploit) the underlying facet of successful investing: the difference between price and value.

You need a “narrative” – that is a story of why the art is valuable. Just like buying shares.

The above quote serves as a checklist before you should buy anything – especially if you treat it as an investment (which you should).




Don’t Believe the Hype vs. Being a Contrarian

Peter Lynch’s One Up On Wall Street stresses to not follow “trendy”new industries.

Why? If it’s trendy, it’s being analysed and over-analysed by investment firms. One analyst at least from each firm is covering the industry.

This is bad – the price is therefore distorted (inefficient if you dare say!) and it’s probably way too expensive to even consider buying. If you compare the earnings vs. share price (Earnings Per Share), a ratio continually uses throughout his book, you’ll find it’s probably not worth buying.

So Lynch’s solution: Find companies that do something dull, ridiculous, disagreeable, a toxic waste, and depressing. Analysts don’t follow it. Institutions don’t follow it.

But before you go out and buyout a commercial carpet tiling business remember one thing: it needs what Warren Buffett describes as a “moat”

The company must have a sustainable advantage over its rivals. What is to stop a carpet tile flooring business to not get undercut by cheaper rivals? What do you know about their industry / landscape / product?

Sometimes companies aren’t followed – and for good reason.


Preston Pysh and Stig Brodersen in their fantastic book: Warren Buffett Accounting Book lay out all the principles of value investing.

Principle 3: A company must be stable and understanble Rule 2: It must have a Sustainable Competitive Advantage (Moat)

This is the best book I’ve read on understanding financial statements. I hold and MBA and have not understood it so easily until I read this book.






Do you REALLY KNOW what your goal is?

I’m reading The Goal by the late Eliyahu Goldratt. The book for me is about measures. Having the right measures.

It’s great to have a new piece of technology, machine or process. But what is it improving? Is that relevant to your goal?

Better question – What IS your goal?

“The Goal”, as the protagonist discovers, is:

“To reduce operational expense and reduce inventory while simultaneously increasing throughput.

Operational expense = What it costs (e.g. labour) to make the product

Inventory = Work in progress (WIP)

Throughput = Sales

Three dynamics. They’re pretty simple – and in his role he can affect these. Only these are worth worrying about as only they will lead to the plant’s success.

If a company was doing an activity based on the above metrics, it was working towards the goal. If it wasn’t, then it was wasting time.

Beforehand he thought it was “increase market share” or “increase efficiencies” or “ROI” or “net profit”. Problem was – there was no goal.

What are the three goals of your life? Are you always working towards them?

These are the questions I now ask myself.


Australian companies can’t compete.

Peter Lynch’s timeless book One Up On Wall Street outlines five main ways that companies reward investors:

  1. Share buybacks
  2. Raise Dividends
  3. Develop New Products
  4. Start New Operations
  5. Make Acquisitions

Lynch defines the new way of “rewarding investors” as increasing Earnings Per Share (EPS). This increases the share price.

Australia’s companies, as veteran financial commentator Alan Kohler recently wrote, have been on a dividend distribution binge. Australia has twice dividend yield of US, at 4%. This is great for revenue investors. It’s not good for growth or value investors. Moreover, it’s not good for Australian firms’ prospects to compete.

Australian companies need to do more 3, 4 and 5 of the above or risk being left behind from the new era of technology. Whilst “Dividend imputation” was a great thing in 1987 when Paul Keating introduced it, it is not serving a purpose for the future for Australian companies now or in the future.

Vigilant Leadership is a cornerstone of value investing. Warren Buffett bases this largely on Strong and Consistent Return on Equity. If cash is used to pay dividends and not to develop new products, start new operations or make acquisitions, what chance do Australian companies have?