Scott Berkun is the author of Confessions of a Public Speaker. If you’ve ever wondered why speakers earn thousands of dollars for their gigs, he breaks it down in this excerpt from the book:

I’m worth $5,000 a lecture, and other speakers are worth $30,000 or more for two reasons: the lecture circuit and free market economics. People come up after I give a lecture and ask, “So when did you get on the lecture circuit?” And I respond by asking, “Do you know what the circuit is?” And they never have any idea. It’s a term they’ve heard before, despite the fact it’s never explained, and it somehow seems to be the only reasonable thing to ask a public speaker when you’re trying to seem interested in what he does for a living. Well, here’s the primer. Public speaking, as a professional activity, became popular in the U.S. before the Civil War. In the 1800s – decades before electricity, radio, movies, television, the Internet, or automobiles – entertainment was hard to find. It explains why so many people sang in church choirs, read books, or actually talked to each other for hours on end: there was no competition.

In the 1820s, a man named Josiah Holbrook developed the idea of a lecture series called Lyceum, named after the Greek theater where Aristotle lectured his students (for free). It was amazingly popular, the American Idol of its day. People everywhere wanted it to come to their town. By 1835, there were 3,000 of these events spread across the United States, primarily in New England. In 1867, some groups joined up to form the Associated Literary Society, which booked speakers on a singular, prescribed route from city to city across the country. This is the ubiquitous lecture circuit we hear people refer to all the time. Back then it was a singular thing you could get on. “Bye, honey, I’m going on the circuit, be back in six months,” was something a famous lecturer might have said. It took that long to run the circuit across the country on horses and return home. Before the days of the Rolling Stones or U2, there were performers who survived the grueling months-long tours without double-decker tour buses, throngs of groupies, and all-hour parties.

At first there was little money for speakers. The Lyceum was created as a public service, like an extension of your local library. It was a feel-good, grassroots, community-service movement aimed at educating people and popularizing ideas. These events were often free or low priced, such as 25 cents a ticket or $1.50 for an entire season.² But by the 1850s, when high-end speakers like Daniel Webster, Ralph Waldo Emerson, and Mark Twain dominated the circuit, prices for lectures went as high as $20 a ticket – equivalent to about $200 a seat in 2009. Of course, free lectures continued, and they always will, but the high end reached unprecedented levels for people giving speeches. In the late 1800s, it was something a famous person could do and earn more than enough money to make a comfortable living, which is exactly what many famous writers did.

Soon the free market took over. Air travel, radio, telephones, and everything else we take for granted today made the idea of a single circuit absurd. Lecture series, training conferences, and corporate meetings created thousands of events that needed new speakers every year. Some events don’t pay, even charging speakers to attend (as it’s seen as an honor to be invited to give a presentation), but many hire a few speakers to ensure things go well. For decades, there’s been enough demand for speakers that speaker bureaus – talent agencies for public speakers – work as middlemen, matching people who want to have a lecture at their event and speakers, like me, who wish to be paid for giving lectures. If you want Bill Clinton, Madonna, or Stephen King to speak at your birthday party, and you have the cash, there is a speaker bureau representing each one of them that would like to make a deal with you. Which brings us pack to whether I’m worth $5,000.

My $5,000 fee has nothing to do with me personally. I’m not paid for being Scott Berkun. I know I’m paid only for the value I provide to whoever hires me. If, for example, Adaptive Path can charge $500 per person for an event, and they get 500 people to attend, that’s $250,000 in gross revenue for Adaptive Path. Part of what will allow them to charge that much, and draw that many people, are the speakers they will have. The bigger the names, the more prestigious their backgrounds, and the more interesting their presentations, the more people will come and the more they will be willing to pay. Even for private functions, say when Google or Ferrari throws an annual event for their employees, how much would it be worth to have a speaker who can make their staff a little smarter, better, or more motivated when returning to work? Maybe it’s not worth $30,000 or even $5,000, but there is some economic value to what good speakers, on the right topics, do for people. It depends on how valuable the people in the room are to whoever is footing the bill. Even if it’s just for entertainment, or for reminding the audience of important things they’ve forgotten, a good speaker is worth something. Think of the last boring lecture you were at: would you have paid a few bucks to make the speaker suck less? I bet you would.

The disappointing thing is, for these fees, speakers often don’t do very well. After all, they’re not being paid directly for their public-speaking skills. The raw economic value proposition is in drawing people to the event, and it’s more likely people will come to an event featuring a famous person – even one they suspect is boring to listen to – than to hear the best public speaker in the world if that’s his only claim to fame. Two of the worst lectures I’ve attended were given by famous people: David Mamet (playwright, screenwriter, and director) and Nicholas Pileggi (author of Wiseguy, the novel Scorsese’s Goodfellas was based on). Both occasions were author readings, which are notoriously boring and bad bets for good public speaking. Yet, in both cases, they filled their respective rooms impressively well. However, I bet no one in attendance got much from the experience of listening to them, except the right to say they saw a famous person speak, which perhaps is also worth something.

Read the full excerpt here.