When George Lucas made his Star Wars pitch in the 1970s, three major studios turned him down. Universal passed, and the executives at United Artists saw little potential in a sci-fi film that would require costly special effects. Plus, Star Wars didn’t align with UA’s Oscar-winning films like One Flew Over the Cuckoo’s Nest and Midnight Cowboy. Although Lucas had had a profitable hit with American Graffiti, UA declined to gamble on a saga of good vs. evil set in a faraway galaxy.

20th Century Fox decided to take a chance. Studio president Alan Ladd, Jr. liked American Graffiti and was willing to bet on Lucas’s talent and his vision of a “space opera.”¹ As we know, Star Wars was a massive hit for Fox and Lucas, who forfeited upfront director’s fees for merchandising and sequel rights, ultimately making Lucas a billionaire.²

Meanwhile, United Artists (after passing on Star Wars) greenlit Heaven’s Gate, an epic western UA saw as a reliable prestige project, given director Michael Cimino’s critically acclaimed The Deer Hunter. Unfortunately, production costs spiraled out of control, and the film drew scathing reviews upon release, earning a mere $3.5 million against its $44 million cost.³

In the same decade, 20^th Century Fox, which had stewarded Star Wars, rejected Steven Spielberg’s idea for a film called Close Encounters of the Third Kind. Columbia Pictures picked up Spielberg’s story, which became the studio’s most successful film of the decade.

What can we learn from cautionary tales of hits and misses? Common wisdom holds that predicting whether a film will turn a profit is extremely hard.⁵ Making a movie is a collaborative art, involving many hands to bring the narrative to life. A lot can happen during production to impact costs. There may be legal issues. Audience tastes may be shifting. Studio executives must be adept at evaluating potential and assessing risk, traits that can serve any investment decision, whether backing a real estate project, a promising start-up, or an IPO.

Unlike filmmaking, most business decisions don’t create headlines. If decisions backfire, we won’t receive public credit or blame as Cimino and Lucas did. Our level of financial risk may be somewhat less than that of Fox or United Artists. Still, risk exists to some degree in every enterprise, particularly in a hyperconnected world likely to experience accelerated change and geopolitical volatility.

Business leaders in every industry must consider and prepare for risk, including the potential of “novel risks” that are “difficult to quantify in terms of likelihood or impact.”⁶ COVID spread farther and faster than anyone could foresee. AI may do the same. While we can’t anticipate all eventualities, Star Wars and Heaven’s Gate remind us to avoid complacency and a reliance on familiar tactics or “proven solutions.” We need to study markets closely and remain alert, nimble, and adaptable.

1. hollywoodreporter.com/movies/movie-news/alan-ladd-jr-greenlighting-star-wars
2. hollywoodreporter.com/news/general-news/george-lucas-star-wars-288513/
3. goldenglobes.com/articles/forgotten-hollywood-making-heavens-gate-1980
4. nytimes.com/1981/01/06/movies/heavens-gate-accents-studios-woes.html
5. washingtonpost.com/news/arts-and-entertainment/wp/2016/05/16/its-hard-to-predict-a-movies-profitability-but-you-learn-some-lessons-along-the-way
6. hbr.org/2020/11/the-risks-you-cant-foresee