Jay Z: Start-Up

Welcome back to another installment of Young Economics.  First, I would like to apologize to my readers for not completing my ‘Jay Z Week’ as scheduled.  I actually had a significant amount of schoolwork that had to be done leading up to the Jay Z concert, so I was a little side tracked.  However, it’s never too late to talk about one of hip-hop’s most prolific rappers, plus with the Grammy Awards coming up this Sunday, what better time than to finish the discussion this week.

As I mentioned in my initial post to kick this week off, businesses generally undergo four phases of life during their development.  Today, I would like to discuss the start-up stage, as it pertains to Shawn “Jay Z” Carter.

Businesses don’t just spring up out of thin air (not the good one’s at least), no, every firm has an infancy period where a tremendous amount of effort, time, energy, and practice is needed to jump-start the growth and development of an entrepreneur’s ‘once in a holy shit idea’.  Most people who are familiar with Jay Z know about his story.  We know that he was a highly successful drug dealer out of the Marcy projects in Brooklyn, New York, and we understand how dangerous and how life threatening that life style was to young African Americans during the late 1980s and early 1990s.  For those of you who haven’t heard Jay Z’s story, I strongly encourage you to check out his first albums, and some of his most successful, Reasonable Doubt and In My Lifetime Vol. 1.  I look at this time in Jay Z’s life a little bit differently, though.  I believe the days spent dealing drugs to the addicts and casual users and the days evading rival dealers were integral parts to the development of Jay Z’s business acumen, which made him somewhat of an anomaly in the music industry.

Jay Z and drug dealing partner, DeHaven, understood that to make more money they would have to expand into undeveloped markets in Maryland and Virginia because the clientele and competition was less sophisticated (Greenburg, 37).  Not only does this demonstrates the foresight Jay Z would need in the music industry, but perhaps these characteristics led to certain ventures, like Rocawear Clothing, a topic to be discussed later.  This could also be considered a period during the “ten thousand hours” phase of development.  Day in and day out, Jay Z was on the streets thinking of ways to increase his revenue stream and stay on top of the game.  In a way, this is practice for a bigger, much more lucrative music industry in which Jay Z exemplifies shrewdness and a clear innovative vision.

Further application of Jay Z’s street smarts can be seen as he was just starting to get involved with the hip-hop genre.  Artists like, The Sugar Hill Gang, Run DMC, and Big Daddy Kane were not as savvy as Jay Z with their lyrics and delivery, so the public was not familiar with Jay Z’s style.  This problem is similar to how Jay Z would have to stay out of trouble with rival or enemy dealers while still trying to make a profit.  Jay Z kept a low profile, says his old business partner, DeHaven.  “He was doing the little things, like, you know, a little Lexus here… when all these guys in the street were buying Benzes and BMW’s.  To be smart enough to play yourself down just to keep the paper means you’re doing business properly,” (Greenburg, 40).  Jay Z gained critical acclaim by applying this same principle to his lyrics, “I dumbed down for my audience, doubled my dollars,” (“Moment of Clarity,” Jay Z).  By being experienced in drug dealing code and knowing when to be subtle about his accumulation of wealth, rather than ostentatiously boasting it, Jay Z was able to maximize his profits and become a better-known artist.  Had he not done so or understood this concept, a quick splash in the industry only to never be heard of again may have been in his future.  Moreover, by allowing his audience the opportunity to comprehend his message first, he could then begin to grow and develop as an entertainer trying different rhymes and flows in his later albums.  For any company or entrepreneur, growth is necessary, but not until a substantial recognition and income has been achieved.  This is why many critics and rap aficionados like, Marc Lynch, consider The Black Album and The Blueprint as some of Jay Z’s best work, for he established a relationship with his listeners, which could progress into greater, more complex creations (Lynch, “Jay Z vs. The Game: Lessons for the American Primacy Debate”).

A benefit of Jay Z’s increased popularity was his leverage inside of the boardrooms of record label companies.  Normally, when up and coming artists seek out record labels for album distribution and development, they are given low level deals.  In some situations they receive twenty-five percent of the profit while the record label retains the rest.  At times, they also do not have the ability to re-release their work barring any separation from the company, as their masters are property of the label.  Jay Z was different.  With a lack of support from any record label companies after the debut of his first album, Reasonable Doubt, Jay Z and business partner, Damon Dash, co-founded Roc-A-Fella records.  With the hopes of selling the manufacturing and sales rights of Jay Z’s upcoming second album to a bigger record company, Jay Z and Dash sought out Freeze Records and Priority Records.  Jay Z, a relatively new artist with an infant label was low-balled by the two companies, but ultimately was able to retain his masters and acquire a fifty percent split of the profits coming off of his highly anticipated 1997 album, In My Lifetime Vol. I (Greenburg, 58).  DJ Clark Kent credits this unheard of deal to Jay Z’s experiences in the streets.  He says, “If you did it in the streets, and you made good money in the streets, when you walk into a boardroom you look at everybody in the boardroom like they’re suckers,” (Greenburg, 59).  On a daily basis Jay Z had to confront people in the streets that wanted him dead, for he was a threat to their own business and livelihood.  He conquered the streets and flourished, which is why he persisted and remained steadfast in his entitlement to increased earnings when powerful executive, Will Socolov, tried to exploit Jay Z’s worth.  Jay Z gained the confidence to stand up for his own music and intellectual property because of those life threatening days spent hustling on the streets of Brooklyn.

I think people often look at Jay Z’s stint as a drug dealer as a point in his life where he was lost trying to find his way in the world.  There is no doubt that he was sucked into this lifestyle due to his unfortunate upbringing, and it’s quite a story considering how differently it may have turned out.  However, from a business aspect, these years dealing crack cocaine were anything but unfortunate.  They proved to be beneficial in the development of Jay Z’s entrepreneurial mind and ability.

*I would like to recommend the book Empire State of Mind: How Jay Z Went From Street Corner to Corner Office by Zack O’Malley Greenburg where much of my research for this post came from.

Maxwell

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4 thoughts on “Jay Z: Start-Up”

  1. Insightful! Not many people recognize the business acumen that Jay Z possesses. You have helped to make clear how many entrepreneurs sometimes have to go outside of normal channels to learn their business and to survive. Another great post.

  2. Thanks for commenting on my post on Behavior Economics – my first foray into economics. Love how you use Jay-Z as a living example of the time and sweat and effort it takes to start any profitable business. You might enjoy his autobiography “Decoded.” In the meantime, I’m going to check out Greenburg’s book.

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