Does Disney encourage risk-taking?

Michael Madison says (linked by Vic at Conglomerate) that the Disney decision encourages innovation.  I agree. 

One might be skeptical on the ground that in hindsight the Ovitz decisions look more like screw-ups than innovation.  But that’s hindsight. Hiring a talent agent to run an entertainment conglomerate was a counterintuitive decision that might have worked, given Ovitz’ significant reputation in his field, but also had a chance of failing badly.  That sounds ex ante like betting big on a particular technology, even if ex post it looks a little like buying a Clydesdale for racing, to borrow a Delaware supreme court analogy.

Vic is not sure, but he has an interesting point in his response – this would have gone better if handled by a private equity firm.  That’s part of the point here.  The real discipline is financial, not judicial.  That ties into the point I made yesterday about hedge funds. One might say: not every firm should be private.  And I would say, quite right – only the ones that screw up.