No Advertising; Not Much Media

Very recently, I was in a library doing some research. On the table in front of me I had several books out with topics including branding, growth of media, social media, and advertising history. A young man perhaps in his early thirties walked by, stopped for a minute and said, “Are you some type of ad guy.”

I smiled, stood up, offered my hand and said, “Guilty.” We shook hands but he then asked me “don’t you feel guilty about it.” If you were expecting me to get upset, forget it. No one can spend decades in advertising without at some time being referred to either directly or subtly as a huckster, immoral/amoral, snake oil salesman, exploiter, and other names not fit to print. Even David Ogilvy said that Queen Elizabeth was not excited at his knighthood ceremony when she found out his occupation. So I simply let the young fellow fire a few verbal bullets.

But then he said something that did annoy me. He stated, “What I hate about advertising the most is that it has ruined the media”. Well, that was a bit much even for me. As he walked away, my mind began racing at the breathtaking ignorance of his statement.

Simply put, without advertising, there would be very little media as we know it in existence. Woodward and Bernstein were able to bring down the Nixon White House because Katharine Graham’s Washington Post was an enormous advertising cash cow and she could therefore afford to pay a few young reporters to track down a story over many months and pay travel expenses for the young team as well. Without advertising revenue, most media, as we know it, would go kaput pretty fast.

About 40 years ago, as a student, I came across an amazing book by David Potter. Written in 1954, it was out of print when I found it in a used bookstore. There is a passage which sums up my feelings beautifully. In PEOPLE AND PLENTY: ECONOMIC ABUNDANCE AND THE AMERICAN CHARACTER he writes: “Students of the radio and the mass circulation magazines frequently condemn advertising for its conspicuous role, as if it were a mere interloper in a separate, pre-existing, self-contained aesthetic world of actors, musicians, authors, and script-writers; they hardly recognize that advertising CREATED modern American radio and television, TRANSFORMED the modern newspaper, EVOKED the modern slick periodical, and remains the VITAL ESSENCE of each of them at the present time.”

Amazing! He published those words in 1954! Just the year before, 1953, we crossed the threshold where 50% of American households had television sets. Yet, in many ways, I could argue that no one has articulated the role of advertising in the media world better than Potter did in the 57 years since then. He understood the symbiotic relationship between advertising and virtually all forms of mass communication very clearly.

Think about today. Everyone talks (rightly) about Google being the game-changer in the communications world. But how can it afford to continually innovate or buy existing companies? It is pretty simple. Much of their projected $40 billion in revenue comes from advertising. Without advertising dollars, Google could never have been Google. And virtually every little website in existence is looking for ways to monetize via some form of advertising revenue.

So if you are ever accosted as I was this past week, let the naïve ill-informed bozo talk but do not let him raise your blood pressure. Without advertising, the media choices that we have in abundance here in the US and on the Web would simply not exist.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

The Mirage of the Global Middle Class

On October 31st, the United Nations announced that the global population was projected to be at seven billion people. Right after that, many of us began to see and hear financial prognosticators talk about how, due to economic growth, some 850 million people were now middle class. So, in other words, 12.1% of the world in late 2011 could be described as middle class.

A recently released book puts these and other relative wealth factoids in sharp perspective. It is entitled THE HAVES AND THE HAVE NOTS with the subtitle “a brief and idiosyncratic history of global inequality” (Basic Books, 2011). The author is Branko Milanovic who is the lead economist at the World Bank’s research division. He also does double duty as a professor at the University of Maryland.

Milanovic breathes life into global demographics, which, if not handled adroitly, can be a breathtakingly boring subject. In the book’s best chapter, he questions the concept of a global middle class. Oh yes, it exists but not necessarily in terms that a U.S. marketer or private investor would see it.

The problem is that middle class is a term that tends to be defined LOCALLY. Most nations use it as plus or minus 25% of the countries median income (to refresh the memory of some of you 40 years away from a statistics course, the median is the 50th percentile; approximately half of the population is above that statistic and half below).

So, India has a median income which is somewhere between one 15th and one 17th of the United States. Middle class in India, thus, would translate to dire poverty in the U.S. Adding more fuel to the demographic fire is that the cost of living, especially housing, varies widely across the globe.

Milanovic makes a marvelous point about many in the financial world who use superficial analyses to measure a middle class lifestyle. He rails against those who look at cell phone penetration as the silver bullet to determine entry into a middle class existence. I am told that in parts of West Africa, for example, many have cell phones. But, their villages have no electricity. So, when the phone runs down, they have to travel to a city to re-charge it. They do not have the $100 to buy a solar phone charger. They are hardly middle class.

So, what does this mean to you? If you are brand manager and your boss wants you to go hell bent for leather in Latin America, be careful where you place your media dollars. If the product has broad appeal such as Tide, you may do fine. But, if you are selling dishwasher detergent, the odds are good that a Brazil or Chile, for example, will generate per household sales five to seven times most other countries on the continent. Should you be a private investor, just be careful period. Yes, the middle class is growing and certainly faster than in the United States these days. Just keep in mind that there is no way that one eighth of the world is what we consider to be middle class yet. Caveat emptor!

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Are Companies More Powerful Than Countries?

Lately, many of us are seeing and hearing people comment on how big multi-national companies are simply too powerful. Some are said to have bigger revenues than the Gross Domestic Product (GDP) of some fairly large countries. Recently, I have seen that McDonald’s $24 + billion in sales is larger than the Latvian economy. Exxon Mobil with over $35 billion in revenue is larger than Thailand’s GDP and would be the 30th country in the world were it a sovereign economy. Finally, Wal-Mart with over $42 billion in sales is larger than oil rich Norway and would be the 25th largest economy in the world were it a free standing nation.

Does it really matter? Some say yes; others no. Companies have influence but they do not carry weapons and, other than a handful of security guards, they do not have anything resembling a standing army. One difference is that of leadership—if people in a free society do not like a leader’s positions or policies they can vote him or her out of office. Most CEO’s tend not to be subject to a similar democratic mandate. Yes, they answer to their boards and shareholders but, if they keep earnings and a stream of dividends growing, most can have pretty long tenures on top.

Capital always has and I believe always will move to where it can earn the best return. That is why developing countries often work very hard to make themselves attractive to foreign investment. Money truly talks and many a non-democratic regime has been “told” to establish a more stable government, encourage rule of law and have accounting practices that are transparent and honest. In short, the country should be a place where international businesses can operate and are comfortable doing so.

So, why do big companies continue to get bigger? Is it because they are all sinister? I feel that the power often attributed to them is really not there. Today, we have a globally competitive economy and companies are constantly and ruthlessly pursuing efficiency. As they improve their performance they reward thousands with jobs and benefit stakeholders with higher dividends and eventually rising share prices. This focus on constantly striving for efficiency is significantly different than most governments around the world.

Governments, on the other hand, are often at the mercy of the tyranny of various special interest groups and to keep their political lives intact, many representatives vote the way the special interests want them to lean. Yet, big companies are often largely where they are due to the power of consumers—they got big by listening to customer needs and meeting their wants at a competitive price.

There is no question that corporations have had their way with Washington, DC in recent years. And, the rants of the Occupy Wall Street crowd make a wonderful criticism of “crony capitalism” and institutions that have become too big to fail. If they are too big to fail, then they are simply too big in an authentic free market model.

For a moment, let us look at two huge multi-national companies, not in energy or finance where influence can be outsized, and see how they have grown.

Henri Nestle was a pharmacist in tiny Vevey, Switzerland. In 1867, he came up with an infant formula. With steady even plodding growth it is now the largest food company in the world. After several decades of slow growth, they merged with the Anglo-Swiss Milk Company in 1905. During World War I, they provided canned and powdered milk to troops. After World War I, flush with cash (Switzerland had been neutral), they branched out into chocolate. World War II was rough on business but by then they had invented instant coffee that became wildly popular.

After World War II, they bought British company Crosse and Blackwell. They then added Libby’s, Carnation, Ovaltine, and Dreyer’s Ice Cream. Water became a hot item and they scooped up Perrier, San Pellegrino, Poland Springs and dozens of smaller players. They continue to buy up companies around the globe and now that the west has an aging population, they are looking at “wellness” as a big growth area.

Several years after Henri Nestle got started, Dr. John Pemberton, an Atlanta physician known for selling patent medicines began selling Coca-Cola (Coke) out of his drugstore. Sales were slow for a few decades and several people sold different versions under the same name. A local businessman, Asa Candler, saw big potential in the product and bought out all parties and consolidated all claims on the product, the name, and the now magic formula. Sales took off and they began a slow steady build across the U.S. For years, they fought back competitors who tried to ape the name. They won most of the suits but lost one against an upstart called Pepsi-Cola.

Today, Coke is sold in over 200 countries. Recently, I read an interview with a financial analyst who said that Coke even makes money in Zimbabwe, arguably the world’s greatest economic basket case. How do they do it? I am not sure but one reader of the blog tells me that they probably deliver to retailers in Zimbabwe who pay with an American Express card issued from a foreign country. They get their money instantly and the local retailer then takes responsibility for making money in a country with the highest inflation rate in the world.

I do not own shares in either of these global giants and have no plan to do so. My point is simply that private companies that are focused on growth and efficiency will likely continue to get larger no matter what happens to the American or European economies. They are not as powerful as some alarmists say but many will likely get a lot bigger as many Asian countries and Latin America emerge as economic powerhouses.

As an old acquaintance one said to me, “Conservative investors, you will sleep well.”

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Is PowerPoint the Enemy?

I was at a meeting a few weeks ago and a lady was asked to address a group of about 25 of us. As she fired up her laptop, a mature gentlemen next to me whispered, “oh no, not a PowerPoint”. She only spoke for a few minutes and was excellent. It fact it took her as much time to get the PowerPoint started as it did for her to present. She really did not need it as she was really on top of her material. After the meeting broke up, the gentlemen and I had a lively exchange about PowerPoints as we went to our cars. I argued that it was merely a tool that is often used badly; he countered, “Power Point was the enemy.” This is a familiar theme from many these days and having sat through thousands of presentations and given many myself, I felt that it is time to weigh in on PowerPoints.

About a dozen years ago, PowerPoints were getting popular but still considered somewhat cutting edge. You could write a presentation at home on a Sunday afternoon, fan it out to staffers for comments and make changes right up until the presentation. When new, they were so novel that even the boss would read them before meetings. ☺

Now, they have become a worn out cliché at best in business, the military, government and academia. At their worst, PowerPoints are a crutch that does a poor job of providing cover for the lazy, the unprepared and the incompetent. Very often the person presenting the PowerPoint did not write it or research its contents. It may be an executive who saw it for the first time an hour before a meeting or a junior staffer who is given a part to play in a big meeting. This often ends badly.

A sales executive who has deep experience and is very shrewd told me that American business is suffering from “PowerPoint fatigue.” People often bore their audiences to tears with thirty plus slides that are very text heavy. I have seen PowerPoints that are 70-80 slides long with dense text that breath life into the wisecrack “death by PowerPoint.”

So, what is needed? A bit of common sense and a bit more work from some people. Some simple rules need to be observed and are often ignored:

1) Cut down on slides.
2) No more than six words per bullet
3) No more than 3-4 bullets per page
4) No more than six bullet slides in a row
5) Always remember that you cannot present complex analyses on bullet points

If you are a CEO, do not use a PowerPoint when addressing your troops or a big customer or client. The reason is that you will likely lose your aura of power. People tend to fixate on the screen and will not listen to you as much even if you ooze charisma. If you want to show a slide or two to illustrate sales or earnings or share price, do so. But, no slides with text, please. You are the star and you need to command everyone’s attention.

Strange things are happening with PowerPoints in academia. Last semester, a student approached me after a long lecture. He smiled, held his hand out, and I shook it. For weeks, he had been peppering me with questions before, after and during class plus sending me long e-mails with more questions or comments. He was the type of student that every professor dreams of teaching. After thanking me for the lecture, I asked if there was anything special about it. He said, “You don’t know how much I appreciate going to school here and to your class. I transferred from XXXXXXXXX University this semester. There, all my teachers used PowerPoints. I swear that there was one class that I could have taught myself. The instructor rarely looked up as she went through the material and almost never deviated from the PowerPoint. If I asked her a question, she would pause and refer back to a bullet point a few slides ago. Another professor handed out printouts of the PowerPoints for each chapter on day one. I rarely went to class, the tests were all multiple choice questions taken directly from the PowerPoint bullets, and I received an A but I learned nothing”.

Something is really wrong if such cases are widespread in our colleges and universities. I do note that every textbook that I have used has detailed PowerPoints for each chapter often with the dreaded text heavy slides.

People are so sick of PowerPoints that many avoid meetings where they will be used. Several years ago, I had regular dealings with a dreadful marketer. She would ask me and everyone she dealt with, “May I have a copy of your PowerPoint. I am really busy today.” Her rudeness inspired me. I trimmed down my PowerPoints to several slides and made them far more spare in prose. After the meeting, I politely but firmly refused to send the PowerPoint to anyone. Instead, I sent a tightly written memorandum, which was 3-4 pages long that not only covered my PowerPoint but what I actually said in the presentation. To date, no one has ever complained. And, when I lecture at a university, I limit PowerPoint usage to once each semester. A few have suggested that this is more work for me. Absolutely! But, it is several times more effective than leaving clients with a hollow PowerPoint that cannot stand on its own or ripping off students and their parents by not teaching an adequate class by hiding behind a PowerPoint.


The late actor, hoofer, and some time singer James Cagney had a great screen presence. He presented himself as perhaps no one else ever did on the Silver Screen. Near the end of his career, a young actress was intimidated when she worked with him and was stunned by his kindness on the set even though director Billy Wilder was giving her fits and sometimes even going after Cagney. As her comfort level with the great man grew, she asked him his secret for performing. He smiled and said, “It is pretty simple. Come in, plant your feet firmly, look the other fella in the eye and tell the truth.”

So take a tip from the great Jimmy Cagney. Cut down on your PowerPoints, and stand and deliver.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Would Keynes Still be a Keynesian?

Recently, I made a discovery that may be pure coincidence but almost seemed to defy the laws of probability. I noticed that with one exception the individuals whom I considered to be the greatest economists of the 20th century all lead long or unusually long lives. Perhaps studying the nuances of the marketplace gives one a reason to keep going!

For example, the two giants of the Austrian (radical free market) School, Ludwig von Mises and Friedrich Hayek both lived to be 92. Milton Friedman, the elfin, ebullient leader of the Chicago School (Monetarists) died at 94. His ideological sparring partner, six feet nine inch Institutionalist John Kenneth Galbraith, hung on to be 97. Financial journalist and economist Henry Hazlitt passed on at 98 and Paul Samuelson, whose Keynesian oriented textbook introduced millions of college student to economics for two generations died at 94. Robert Heilbroner, author of the brilliant tome on history of economic thought, THE WORLDLY PHILOSPHERS, lived to be 85.

Depending on your politics, most people would rate Hayek, Friedman, and John Maynard Keynes as the greatest and most influential economists of the 20th century. Unlike the other luminaries Keynes died much younger at age 62. That simple fact has made me consider a number of what if scenarios.

John Maynard Keynes, later Baron Keynes of Tilton, was considered Britain’s foremost intellectual in the 1920’s. Even the arrogant and supremely self-confident philosopher Bertrand Russell, always said he came up short when trying to debate Keynes on any subject. Keynes was a brilliant mathematician and economist.

In the late 1920’s, the two leaders of the Austrian school, von Mises and Hayek began to warn of economic danger in the western world, as credit buildup was excessive. When the U.S. stock market crashed in October 1929 followed by a depression a year or so later, they were seen as seers. When asked what should be done, they essentially said “nothing.” The market would self correct as Adam Smith’s “invisible hand” (outlined in 1776 in his WEALTH OF NATIONS) would usher in a return to a normal environment. In brief, the invisible hand is a theory that states that collectively if all individuals in a society act in his or her self-interest, they would produce all the goods or services that are required by society. The invisible hand did not need government guidance of any kind. This pure laizzez faire approach would produce the greatest good and eventually generate economic growth.

By 1933, much of the Western world was out of patience. In the U.S., unemployment was at 25%. New York Governor Franklin Delano Roosevelt was elected president and was sworn in as our chief executive on March 4, 1933. Although he had run on a platform featuring a balanced budget, Roosevelt ran away from conventional economics shortly after taking office. He abandoned the gold standard, confiscated the gold of private citizens, and engaged in a wide array of government stimuli under the umbrella of “The New Deal.” Among these were the Works Progress Administration (WPA), which gave construction jobs to thousands of unemployed young men, and the Social Security system that was an attempt to supplement the income of older Americans.

While purists howled, Roosevelt pushed on with his experiments. Keynes, observing similar suffering in the United Kingdom, penned his THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY (it is a world class boring read, believe me, and is probably the most influential book that has been so rarely read by its supporters) in 1936. With a heavyweight like Keynes endorsing the Roosevelt approach and wrapping some discipline around it, Keynesianism became a mainstream approach and remains so to this day in much of the civilized world. It is amusing to see the GOP presidential hopefuls debate these days. Only the unelectable Ron Paul of Texas is a true free market advocate; he is an Austrian through and through. The others all exhibit varying degrees of Keynesian in their thinking but would deny it vehemently if challenged.

Because so few have read Keynes’ General Theory they feel free to interpret it to suit their needs. Keynes was indeed a champion of government intervention when the market went haywire. He wanted public works projects to kick-start the economy and get people working, spending, and creating demand for products. But he also was in favor of things that politicians choose to forget. After the crisis was averted, Keynes believed that governmental budgets should be balanced over time. What!!! Keynes said deficit spending was fine during the dark days of depression and during World War I and II, but year in and year out you balanced your budgets! So, what would Lord Keynes think of the U.S. with their 47 years of deficits over the last 50. Not much, I would think.

He would certainly have agreed to the TARP bailout of 2008 but what would be have thought of the decades of reckless spending leading up to it?

Like all serious thinkers, he was intellectually honest enough to question his theories. In April 1946 he attended a luncheon at the Bank of England. Everyone else was saying that the US and Europe may fall in to a depression as returning servicemen needed to find jobs at home. Keynes was very upbeat and accurate about the U.S. prospects and felt that it would take more time in Britain, which had serious war damage in major cities. Then he said something fascinating—“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”

A few days later Keynes was dead. Had he lived 30 years longer as many of his fellow economic giants did, I am certain that what we call Keynesianism would look very, very different today.

Also, right-wingers often dismiss Keynes as a socialist. This is utter nonsense. The Labor party always wanted Lord Keynes to join their ranks. He stayed with the Liberals, a centrist party, and was very upset when Clement Attlee, a Labor (Socialist) party M.P. became Prime Minister besting Winston Churchill, the Conservative, and Archie Sinclair, the Liberal leader. He was also a fabulously successful speculator who was worth perhaps $40 million dollars just before World War II. His beloved Kings College at Cambridge let him manage their funds and their endowment exploded upward under his guidance. Were he 35 today, he might well be a hedge fund manager. Some socialist!

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Do You Feel A Little Pinched?

There is an interesting new book out by Don Peck simply called PINCHED. Peck is a features editor at THE ATLANTIC.

I read business and economics books omnivorously but I found this one to be unusually strong. There was little in the book that was new to me but I have never seen all of these issues covered and done so well all in a slim volume of 188 pages.

Peck’s main thesis is that the Great Recession that hit us late in 2008 is no ordinary downturn. Unlike past V-shaped downturns that were rough but short in tenure, this one lingers on. Some 80% of us still believe the economy is in recession even though the Federal Reserve and other august economic sources tell us that we are well on our way to solid though admittedly sluggish growth.

The two things overhanging the economy that Peck keys on are nagging unemployment levels listed at 9% but likely much higher when underemployment is put into the mix plus a real estate market that in some states has yet to touch bottom.

Both of these issues have smashed the American dream in many ways. Virtually all of us have always looked forward to a future in which our children live better or at least the same as we have lived. With unemployment and underemployment among recent college grads at high levels plus many burdened with huge college loans, many seem in a hole with little chance of fast escape. Owing a home has become a fantasy to some 20-somethings despite record low interest rates. No one will give them a mortgage and, a smart banker should not do so.

Peck also raises an issue that has been covered a great deal in the major media in recent weeks but he was on to it months ago when this book went to press. There are pockets of America where there are labor shortages. North and South Dakota, Nebraska and Wyoming top the list. But with 24% of people underwater on their mortgages (the mortgage is higher than the value of the home), many people are stuck in their communities with no hope of moving unless they declare bankruptcy (we touched on this a bit in the Media Realism series, “Mid-Sized Malaise” in October, 2010). Also, many people would not find the cold weather in these states appealing and culturally an unemployed New Yorker might not find people with a similar sense of life in North Dakota.

He touches on the income inequality that everyone is harping on these days but surprisingly, and to his credit, does not offer a simplistic “soak the rich” solution to the issue. He instead is honest and recommends “strong budget discipline and a reduction in the growth of Medicare costs, and somewhat higher taxes for most Americans.” Peck also asks for increased spending on infrastructure and innovation. Whether you agree with this prescription or not, he does not take the unrealistic route of saying that we can easily grow our way out of it or tax our way out of it.

This book is a cool headed assessment of the miserable mess that we are in. If a politician talked this way, he or she would get virtually no traction.

PINCHED will make you think. I highly recommend it.

If you would like to contact Don Cole directly, you may reach him at dcole@doncolemedia.com

Seven Billion and Counting

When I was in 5th grade, I remember reading a story during class in My Weekly Reader that stated there were now three billion people on earth. It was passed over quickly as it was just about time for recess. The concept of a billion kept gnawing at me. As recess was ending, I approached a nun who taught at the school and asked her to explain what a billion was. She struggled and could not do it. I said that I did not understand, and she called me impudent and told me to rejoin my class, which was lining up to re-enter the school. She then told my homeroom teacher how disrespectful I was and the rest of the school day was quite unpleasant for me.

When I got home that afternoon, I kept thinking about a billion. As dinner was ending, I asked my parents. The reception that I received was a lot different than that at school. Both parents pulled out a pad and pencil (no calculators in those days!) and patiently took me through the math until I knew it cold. I remember asking them if there were anyone with a billion dollars and my dad thought there was an American oilman living in England who was definitely worth that much. My oldest sibling ran upstairs and returned with a copy of TIME magazine containing a story about J. Paul Getty.

This past week, the memories of the mean spirited and ignorant nun and the kindness and patience of my family came flooding back to me. The United Nations is projecting that by Halloween (October 31st) the world population will pass seven billion. It was only 11 years ago that we hit six billion. Almost all futurists agree that 14 years from now we will add an additional billion to the world’s population. Beyond that things get a little fuzzy. In past years the U.N. and some think tanks felt that with the growth of family planning the world’s population would level off at somewhere around nine billion. Now virtually every organization forecasting population size has revised that calculation and says that by 2100 we will be at least 10 billion. With a huge base of seven billion a modest change in birth rates can have a dramatic increase in population estimates. For example, were the average woman to have simply a half a child more, the population will be at least 16 billion by 2100. Most of us would agree that the planet’s resources would be strained to the breaking point were that to occur.

Let us look at the next fourteen years as we march toward eight billion. Some obvious things are going to occur:

1) India will pass China as the most populous place on earth (remember the Chinese one child policy in many locales).
2) On a relative basis, Africa will increase and Europe will decrease.
3) Most of Western Europe as well as China and Japan are below Zero Population Growth (ZPG) meaning they will not be able to replace the current indigenous populations.
4) Much of the population growth will come from poorer countries where most of the newborns will live on less than $2 per day.

What does this mean to us? All gloom and doom? No, there is some obvious growth out there. Right now, approximately half of the people hospitalized around the world are there as a result of drinking impure water. So, a huge growth industry will be developing systems to get water to arid areas and purifying it everywhere. Right now, there is a huge effort going on in China to purify water that gets very little attention.

We also have to find a way to feed all these new people. Agriculture should boom as should companies providing fertilizers although some argue that our dependence on phosphorus rich fertilizers could deplete reserves and cause a bigger squeeze than possible energy shortfalls in the years ahead. Machinery used in agriculture should also see a nice run.

For agriculture you need a lot of water and the lack of that most precious commodity is already a big problem around the world. Also, if you are like me and think that there is something to global warming, rising temperatures in recent years have depressed global corn, soybean, and wheat production. That is great for American agriculture that will profit mightily from global production shortages but we still will have a billion more mouths to feed.

As marketers, do not despair. In Asian and Latin America some 50-60 million people per year will be entering the middle class and will buy high levels of package goods, appliances and automobiles. This bodes well for multi-national marketers, ad agency holding companies and selected media. Consider ESPN. If you watch them closely, they are constantly expanding their international footprint. Sports mania should continue to expand and an increasing global middle class should only fuel their continued growth.

Lack of water and especially clean water, pressure on energy and food production, and the global warming threat are all huge problems. But, think of the growth when we solve some of them. As we move toward eight billion people over the next decade and a half, stay positive. Technology will continue to move forward. The world will look different and economic power will do some shifting. If you are prepared and see what is coming, you may actually improve your situation.

If you would like to contact Don Cole directly, you may contact him at doncolemedia@gmail.com

A Fresh Look At You Tube

Just over five years ago (October 9, 2006), Google announced that it had agreed to purchase You Tube for $1.65 billion in stock. Patiently, many of us waited to see if this would lead to Google making big inroads into television advertising budgets. But, actually, to date, little has happened. As best as I can determine approximately 40% of total U.S. advertising budgets remain on some form of television (network and spot, network and local cable) and barely 1% on online video. Recent developments indicate that the lopsided ratio of TV to online video advertising revenues may finally begin to shift.

My interest really picked up recently when Google hired Lucas Watson. He had been Procter & Gamble's director of digital business strategy. Now, he is V.P. of Online Video Global Sales at You Tube. When a packaged goods pro is recruited by You Tube it looks as if they want to make a serious run at pulling significant funds from the TV advertising arena.

Interestingly, some media friends of mine at agencies say that they have tried to pull the rest of their shops into You Tube tests but they are meeting stiff resistance, especially from creative chiefs. In a long e-mail thread with an old friend and creative whom I really admire, I found the same answer my media buddies are experiencing. My friend wrote and I quote with his permission, "to sum it all up, I don't want my team's beautiful work running next to some horrible video that a 15 year old boy might have captured on his cell phone".

My friend has a point but I encouraged him to give You Tube another look and meet with a sales rep along with his shop's media team. Not many people have deep experience in an emerging medium such as online video. Things are changing quite quickly and a notion held a year ago might not hold water today.

To date, music, technology and some entertainment advertisers dominate You Tube placement. Other categories should give it a shot. Also, there is a huge local ad window open to them as You Tube serves their videos to one person at a time. Local retailers could benefit if you targeted certain types of videos viewed in specific locales. This window of opportunity is open now but we all know that Comcast and Time Warner have products in development that will be able to send customized commercials to several homes on the same street. Agencies and advertisers comfortable with local cable will go there without blinking if You Tube does not pick some of them off first and develop a track record of success.

Take a hard look at the quality of You Tube videos. Yes, it is largely homespun material. And, some are in questionable taste. But professional videos are growing and you can confidently place commercials around them.

Importantly, You Tube, by definition, allows an advertiser to ask people to become part of the message. Yes, you lose some control with mash-ups of your spots but it really can easily become a new kind of promotional platform if done right. Also, there are some nice promotional opportunities as well.

If you are a major player with multi-national support, do remember that Google has the deepest pockets in media history. If they produce original programming (Google Tube?), it would have a GLOBAL audience overnight. They now attract almost 800 million unique viewers per month. Even 81 year old Warren Buffett admits to watching You Tube for 90 minutes at a stretch to relax. What if you saw a brief promo for their new programming or series when you went to You Tube? The audience could grow as fast as some of their popular viral videos. And Google can fund it forever if it does not turn a profit initially.

An investment newsletter that I recently read says that You Tube is perhaps marginally profitable now and may add close to a billion dollars a year to Google's outsized revenues. So, the upside for You Tube is huge if Google monetizes it properly. Consider You Tube as a small hedge in your 2012-2013 video allocation. Two years from now you may thank me.

If you would like to contact Don Cole directly you may reach him at doncolemedia@gmail.com

Mises, Galbraith and Bottled Water

For the better part of 50 years a lively debate has taken place in some advertising and marketing circles. Essentially, the battle lines are drawn between Austrian theorist Ludwig von Mises and his concept of Consumer Sovereignty and John Kenneth Galbraith’s The Affluent Society, which tried to refute it very strongly.

In brief, Mises postulated that, in a free market economy, the consumer was king. The consumer made poor men rich and rich men poor. If the public found a product that was comparable and less expensive or of better quality they would vote with their cash and move to the new product. Galbraith took the tact that many of us who could be described as marketers were very manipulative. Due to marketing tactics, particularly advertising, consumers were often persuaded to buy things that they neither wanted nor needed (for a detailed explanation see Media Realism, 9/15/2009).

Over the years given my free market leanings, I have tended to side fairly strongly with Mises. Having worked on several new products that failed in the marketplace (as has any long term ad executive), I always questioned the concept that marketers were so smart and manipulative. Were advertising and marketing tactics so powerful why do most new products continue to fail?

In recent times, one category has sort of made me review my position. The category is that of bottled water. Most of us who are a bit mature in years remember Perrier as the first bottle water of any substance. It basically invaded the U.S. in the early 1970’s. Since then, bottled water has exploded and is often associated with social status and healthy living.

What most people do not realize is that approximately 40% of bottled water sold in the U.S. is really tap water that has been put through an extra filter or perhaps fortified with a mineral or two. The profit to the purveyors is enormous as tap water is very inexpensive. Often when you buy bottled water you are paying up to 1900 times what you pay for tap water. And, is it purer? Well, the bottled water from tap is usually more than okay. But for those claiming that they are selling spring water or mineral water, there is less regulation and supervision than there is for municipal tap water. In the western world, there are few places of size where the water is not safe. In developing countries, caution is a good idea and drinking a brand name bottled water makes great good sense in remote areas.

Interestingly, major beverage companies control bottled water sales in the United States. Coca-Cola owns Dasani and Pepsico sells Aquafina. Global food giant Nestle owns a fistful of brands including: Arrowhead, Deer Park, Ice Mountain, Ozarka, Poland Springs, and Zephyrhills. So these players have hedged their bets beautifully. If government cracks down on sales or raises taxes on sugared sodas, they will pick up much of the resulting shift to water products. Nestle waters website had a compelling argument that if one gave up a cola habit and switched to water you could save 50,000 calories per year. In a country worried about obesity, it is not an empty comparison.

The marketers have succeeded in creating more than an aura of health when you drink bottled water. There is a certain cache to it—have you ever noticed young people carrying a bottle everywhere? It has almost become a fashion accessory to some and is ubiquitous as a mobile device. In some upscale areas and at very fashionable universities, the branded drink has given way to a refillable bottle presumably filled with clean healthy tap water.

Given my strong free market bias, I clearly still believe in Mises concept of Consumer Sovereignty. The case of bottled water, however, has made me think that the Galbraithian notion of consumer manipulation is not always bankrupt.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Sizzling Singapore

If you follow world business at all, you are hearing and reading a great deal more about Singapore. This tiny city-state on the southern tip of the Malay Peninsula has been growing rapidly for decades. It covers a scant 253 square miles but packs an increasing financial wallop around the world.

There are 5 million people in Singapore with the great majority being of Chinese, Malay, or Indian descent. English is an official language but the majority also speak a Chinese dialect. It is something of a dream for entrepreneurs and businesses. There is no place in Asia where there is such ease of business registration, governmental support, plus all important favorable tax rates and incentives. And, perennially, the World Bank usually ranks Singapore as the easiest place in the world to do business.

Often referred to as the Switzerland of Asia, it is a pulsating financial center that holds it own with Tokyo and the increasingly powerful Shanghai. The savings rate is among the highest in the world so there has been extraordinary capital formation. After independence from Britain, lead governmental minister Lee Kuan Yew arranged for compulsory contributions in the 25% of income range to government controlled pension funds. While unappealing to American spending tendencies it was a big contributor in making the tiny nation rich.

With a shift away from the U.S. and U.K. in terms of media billing, I believe that in a decade or so Singapore may well become the world’s advertising hub.

Consider these facts—

Singapore is centrally located in Asia and as global billing tilts toward the east, they will literally be perfectly positioned.

Westerners are more comfortable in Singapore than anywhere else in Asia. Part of it is the ubiquity of English but also the appearance counts. The place is crammed with people but immaculate. It took Wrigley decades to get the government to allow them to sell chewing gum there! Senior management of holding companies would be comfortable here as the adjustment to Asia would be far easier than other choices.

Unlike other Asian powerhouses such as China or Korea there are no exchange controls. You may easily move capital in and out of Singapore or repatriate profits.

Advertising has made strides in Singapore. Arguably it is the Asian leader in outdoor, mobile and digital advertising. As the world moves to digital, the existing talent pool can help.

Many Singaporeans are of Chinese descent. As China grows, it might be easier for Singaporeans to deal with China than those from other nations.

So, we forecast confidently that Singaporean agencies will not remain as branch offices for the mega-shops much longer. By 2020-2025 they will be in the epicenter of global advertising and a few of the world’s top 10 holding companies will be headquartered there.

If you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Promotion Smothers Advertising

Over the years, there has been a quiet revolution going on in communications. It probably started in the 1980’s, but in recent years, with a weak U.S. economy, it has really increased dramatically. It is simply the growth of consumer sales promotion. From a total of about $56 billion in 1991 it could be as high as approximately $400 billion for calendar 2011. On top of that eye-popping amount, US marketers will also spend an additional $175 billion on promotional activity targeted at retailers and wholesalers. When you think of promotions, you generally think of activity by packaged goods companies. Look at it a bit closer and you see health care, consumer electronics, computer companies and even some service firms leaning on it.

The high water mark for conventional media advertising occurred somewhere in the 1980’s. After a lot of number crunching, that is as precise as I can get to it. Since then, many if not most consumer products companies have changed the way in which they market their products. Amazingly, for those of who have lived and breathed conventional advertising, approximately 50% of packaged-goods support in 2011 among my admittedly small sample of publicly traded companies is for trade promotion, a little more than a quarter for consumer promotion, and slightly under a quarter to what we would define as media advertising. Additionally, a fair amount of the media advertising is focused on promotional messages regarding rebate offers, contests, sweepstakes or games.

Why is it happening? Why is it a surprise to many of us in the advertising world? Will the pendulum ever swing back?


What are sales promotion activities? The list of types of consumer promotions would include: coupons, premiums, refunds, bonus packs, price-offs, loyalty programs, sampling, and event marketing. Trade-oriented promotions are co-op advertising, trade shows, point-of-purchase displays, trade allowances and dealer incentives and contests.


For years, those of us in the ad game believed that brands were built and maintained with media advertising. Promotion was an afterthought. Junior art people would grind out coupons. Sometimes the client had an internal group that handled promotions. Firms that only did promotions made inroads but many people were asleep at the switch and did not realize that ad budgets were not increasing due to the growth of promotions as a percentage of the total marketing budget.

Structurally, several things have occurred in recent years that are making promotional activity more prominent:

1) Retailers have muscle today—40 years ago, the manufacturers such as the major soaps, P&G, Colgate-Palmolive, and Unilever, had the influence. The retailers were almost treated as distributors. The brands received heavy media support and the occasional promotion. On their own, the retailers were not into sales analysis. The scanner at checkout changed all that. At their fingertips, retailers now knew what was selling and how quickly each product turned over. Wal-Mart and Target got bigger and bigger and power shifted to the giant retailers. If a manufacturer would not provide trade support for their brand, they might get their shelf facings reduced or, in a few cases, dropped. Today Wal-Mart alone is 25% of the sales of some brands. A manufacturer has to meet their needs or they jeopardize their brand’s franchise.
2) Brand Loyalty is sagging—with a weak economy, people are looking at price and value more than ever. Some of us have certain brands that we will buy regardless of price or competitive promotion. But, with money tight, many now will buy brands that are close to parity at a nice discount.
3) Time Crunch—virtually all Americans say that they live under a time crunch. Working Moms and especially single Moms top the list. Some 70% of purchase decisions are said to occur in the store. Buying what is on special cuts decision time and usually saves money.
4) Promotional activity is accountable—for years, we have told people that advertising does not guarantee success. We know that it contributes to sales growth but it takes time and there are other factors (state of the economy, competitive action, etc.) that are part of the mix. Results from sales promotion activity are almost always easier to measure than those from conventional media advertising. Ad campaigns may hit their stride after a few months; a few well-placed coupons give you instantaneous sales boosts. Retailers monitor their scanner data and put pressure on underperforming brands to run more promotions. Results are often tracked daily.

Should the advertising industry be concerned about this move toward promotion? The loss of potential billing is and has been significant.

There are broader issues out there, which some agencies do not address adequately. If you wish to charge a premium price for your product you need to differentiate from the competition. Advertising helps greatly in maintaining a strong franchise by honing your image, maintaining brand loyalty, and talking up your brand’s benefits.

Yet, the world of 2011 is a short-term world. The average marketing director at a US company lasts under two years. I do not have a precise figure for brand managers but it is not much longer for sure. So, promotion is tempting for a short-term fix for the hired guns in the world of marketing. Also, and importantly, the compensation of many brand managers is based on quarterly sales data. So, dropping some coupons or doing price-offs or bonus packs can be irresistible for many. How many 28 year olds care about the long-term value of their brand’s equity when they can get their first nice bonus with a few successful promotions? Top management needs to work on this as promotions almost become like a drug to some staffers.

Increasingly, there is an analysis paralysis setting in. If you can look at daily promotional data, you lose sight of the long-term value that advertising can provide. And, Wall Street does not help as when quarterly sales are down a few pennies due to increased advertising investment, the stock gets hammered and you have disgruntled shareholders and maybe an unhappy board of directors who should know better.

Can advertising fight back and get a larger share of advertising dollars? With some firms it certainly will and, when the economy gets strong again (someday☺) it should claw its way back a bit.

But remember, technology might not help. Social media options like Groupon and Living Social are making coupon users out of young adults. In the mobile arena, the Cellfire’s and other fellow travelers are delivering promotions (largely coupons) to the 20 somethings and often highly successfully.

The power of brands has to be diminished under this scenario, as there appears to be very little residual advertising value to promotional activity. And, many of your loyal buyers love them as they get a discount when they cheerfully would have paid full price. This is impossible to measure accurately but hurts your bottom line.

A friend whom I interviewed for this piece is a very talented creative director. He e-mailed me back after seeing an outline of this post “do you mean to say that my team will have to do more crappy coupons and POP displays than we do now.” Well, yes in most cases. These days you have to find revenue where you can and if you stick only to conventional advertising, there will be no shortage of people who will siphon off the promotional projects and hurt your income.

For the moment promotional activity will keep growing in the U.S. Established brands might want to shift their advertising emphasis overseas where brands, especially American ones, have cache and growing power.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Procter & Gamble and the Hourglass

On January 21, 2010 I posted a Media Realism piece entitled “The Gini Coefficient and The Future.” The Gini Coefficient is a means of measuring inequality in income or wealth in a country. I raised a mild alarm that American income distribution was beginning to look like the array one would see in a repressive regime or a developing country. The post generated a great deal of mail. A few people accused me of being a socialist (!) while left wing friends loved it. Well, this past week we received an unofficial update on the current Gini distribution.


The New York Times provided a very nice analysis of Census Bureau data that was released on Tuesday, September 12, 2011. Some 46. 2 million people or 15.1% of Americans were living below the poverty line. This is the highest number in the 52 years that the Census Bureau has been calculating it. Even more tragic is that some 22% of American children are living below the poverty line. Here are few factoids from the Times coverage and the Census Bureau itself:

--The top 1% of Americans control just under 25% of the country’s income. This is the highest figure since 1928.
--The U.S. ranks #3 among all advanced economies in the amount of income inequality.
--The top 5% of Americans by income account for 37% of all consumer purchases.
--Median annual income adjusted for inflation is at 1973 levels.

An economist friend e-mailed me that the census data is unfair, as it does not include noncash assistance such as food stamps or the earned-income tax credit. So, in his opinion, poverty rates are overstated. He may be literally correct but the poverty line for a family of four is $21,340. Does it make sense to quibble over another $8,000 in food stamps being added to income? If a family of four is making less than $30,000 per year, they are struggling in ways that most of us cannot fully imagine.

While millions are struggling, top end retailers who cater to the elite portion of America are doing just fine. Tiffany’s and Nieman Marcus seem to be thriving. Internationally, the company with the unwieldy name of LVMH Moet Hennessy is doing great with their remarkable stable of luxury brands. Known as LVMH, this French purveyor of the world’s best owns Louis Vuitton bags and luggage, Tag Heur watches, Dom Perignon champagne, Emilio Pucci, Donna Karan and Hennessey cognac. The last quarter Hennessey sales jumped 24% in Asia (excluding Japan) as a large moneyed class is emerging on that continent.

At the other end of the scale, the "dollar stores" are gaining in volume and share while even Wal-Mart is seeing sales declines in the U.S.

Meanwhile, this past year nearly 3 million more Americans fell out of the middle class. The day before these data were released one of America’s premier marketers, Procter & Gamble, announced a marked change in their United States promotion efforts. The Wall Street Journal stated, “The world’s largest maker of consumer products is now betting that the squeeze on Middle America will be long lasting.” Today, P&G, as it is known, has at least one product in 98% of U.S. households, which equals the penetration of TV! P&G chief Bob McDonald is now adopting an “hourglass strategy” with products and marketing support clustered at high and low end consumers but not as much in the middle. This fundamental change recognizes that the middle class is struggling and that emphasis needs to be placed on the “dollar store” downscale market that is growing and the upper end of their market that is stronger than ever. Now, please be let me be clear. The upper end of the P&G market is not nearly as wealthy as the LMVH audience. Yet, it is still growing for P&G. The stagnant area for P&G appears to be that broad group in the middle that has always been the company’s bread and butter market in the United States (P&G is doing well overseas, particularly in Asia and Latin America).

It will be interesting to study the P&G media mix for 2012. Will there be a different mix of cable networks in their buys and what programming will they change? Will they cut back on online action for the low-end brands and beef it up for their more upscale products?

My main takeaway from this is simple. P&G is shifting marketing gears because they do not see a middle class rebound in the United States for the foreseeable future. When arguably the world’s most sophisticated marketer feels this way and acts on it, we should all take notice.

If you would like to contact Don Cole directly, you may reach him at doncolemedia @gmail.com

Globalization and Advertising

Back in March 2005, I was sitting in my office one nice morning grinding out a letter to a difficult client. I stopped to take a phone call and then noticed an update on my on-line news. WPP Holdings of London had purchased Grey Advertising. While publicly traded, Grey was largely considered to be the last of the great independent players. Financial analysts would often joke that their shares traded by appointment only as senior management controlled a huge amount of the stock’s float. The sale to WPP struck me as a watershed moment. Now, four holding companies, Omnicom, WPP, Interpublic and Publicas appeared to control the advertising world. Sure enough, the next time the data was published, those four mega-shops or holding companies controlled more than have of global advertising billing. Today, it hovers around 57-60%. Globalization has now hit our industry and there is no turning back.

To read the business press, you would think that Globalization is a new process. Yet some economic historians place its origins in 1492 when Columbus landed in the Western Hemisphere. Others argue that there was international trade between Europe and the Far East hundreds of years before that (re-read "The Adventures of Marco Polo" and you will see that they are correct).

Today, however, Globalization is beginning to gallop. Just what is it? Essentially, it is driven by two factors:

1) Comparative advantage
2) Economic specialization

Comparative advantage is the simple concept that some countries or effective elements within that country can do something faster, better or more cost effectively than those in any other place.

Specialization usually means that you are so good at something that you are a leader in that field. Computer programmers are expensive in the U.S. Go to India and there are thousands who speak English and work for a fraction of the cost of their U.S. counterparts. Much of Asia has an abundance of skilled and unskilled manufacturing labor. Taiwan has great heavy industrial foundries and first-rate semiconductor manufacturing facilities. So, those places keep growing.

Globalization, in brief, takes advantage of whoever can do something the best. Capital has always moved where the returns are the largest. Globalization has saved businesses and consumers trillions Vis a Vis the old model where technology and trade were largely restricted within a single nation.

At the same time, increased Globalization has caused problems. Certain industries in the U.S. face chronic unemployment and several million workers have been displaced.

Why has Globalization grown in recent decades? We have identified five reasons:

1) The growth of free trade—over the last 25 years, countries across the globe have lowered many barriers and/or tariffs on imports or exports. The most famous and far reaching was China, which continues to move away from its communistic model. China and some of its Asian neighbors have flooded the world with cheap goods due to their low wage for local labor.
2) Outsourcing—many UK and US firms have saved billions by shifting production facilities to Mexico, China, or Malaysia, Indonesia, and increasingly, Vietnam. Service companies have tended to migrate to India. If you have a problem with an appliance, the odds are good that a peppy and very well educated service rep based in Bangalore province in India will try to help you. Both manufacturing and service workers in the developing countries accept lower wages than American or British workers. The controversy beyond lost jobs at home is that many say working conditions are poor especially in the industrial sector.
3) Containerization—I bet that you did not think of this one! Most goods are now transported across the globe in standard sized containers. This has tended to speed up delivery times; eases customs issues, and, of course, cuts costs.
4) The Internet—as things blew up in the dot.com boom in early 2000, many start-ups went bust. However, the billions spent on international fiber-optic networks were not all wasted. The networks remained in place and brought inexpensive connections to a few billion people. Some small and savvy marketers took advantage of this. Many business units exist now in a very narrow niche space. The Internet allows them to advertise GLOBALLY to the several thousand people who are prospects for the service. With the old model, you could never afford to advertise because even if you could come close to identifying your prospects you could never pay the freight to reach the majority of them. Not so any longer!
5) Legal Agreements—increasingly, but not always, more countries are recognizing patents from other nations. The same is true of intellectual property. This can stimulate trade significantly.

So, there have been big gains for people across the globe. The BRIC (Brazil, Russia, India, China) countries have seen exports boom although Russia’s are largely tied to energy and other natural resources.

Does Globalization have any critics? You bet! I greatly admire Nobel Laureate Joseph Stiglitz. His analysis of the 2008 financial crisis is the best and most lucid that I have seen. He, a bit surprisingly, is not a big fan of Globalization. Reading some of his work and tracking down interviews on the topic, he has three big issues with Globalization:

1) Culture—in past posts, we have identified that American Pop Culture travels well. Stiglitz agrees but argues cogently that as Western brands become more dominant, indigenous cultures lose some of their identity. Is this a bad thing or simply progress? We remain on the fence on that one.
2) Inequality—yes, Globalism is creating wealth but it is not shared evenly. Across the world, inequality levels are getting higher (see Media Realism, The Gini Coefficient and the Future, January, 2010). Also, many of the poor remain desperately so in 3rd world countries even as their countries expand. There will always be inequality in a free market environment. His point is that it appears to be getting more extreme as Globalization expands.
3) Human Rights—most glaringly in apparel but it other industries as well, it seems that big multi-nationals use sweatshops staffed with young people (and some children) who work for peanuts in horrible and unsafe conditions.


Others argue that, while it is imperfect, many are better off. Each year, some 30 million Asians join the middle class; 20 million in China alone. Tom Friedman in his book THE WORLD IS FLAT argued that no two countries with a McDonald’s have ever been to war. His thesis is that if you build up economic links, hostilities will not break out very easily (Russia did invade former satellite Georgia in 2008 but I give Tom a pass on that one).

So where does this leave us in advertising? The dynamic global growth over the next few decades will come from Asia, Latin America, and perhaps a few nations in the Middle East. The big Mega-Agencies are beautifully positioned no matter which countries come out on top. Long term, I feel that China will face big problems due to weak demography. Other Pacific Rim nations are very young in terms of average age and have robust futures.

Increasingly, U.S. brands will focus their advertising dollars on their overseas growth and stay in maintenance mode in the US and Europe. This will harm the middle-sized ad agencies in the US but really help the major holding companies.

Undoubtedly, some nationalistic pride will raise its head and there will be more major local agencies emerging in the BRIC countries and other explosive growth areas. Nevertheless, the mega-shops are in a good spot with their financial resources, management depth and decades of experience. And, they will find a way to buy some of the stronger local shops.

A few people have expressed concern about working at one of the giants. I stressed resources and the great experience that you can obtain by a stint with one of them. But, as one young friend asked, “where do I go?” To put it in perspective, when I started at Ayer in the early 1970’s, Marshalk and Marsteller, both fair sized shops, were in the same building. People could sneak to an interview simply by taking a different elevator bank. Now, if you work for a major, can you shift easily within the agency family? Some one can look up your precise compensation and, if you do not get the new job, will your supervisor be notified or will your shop’s HR department? You may be stuck somewhere for a while but people will know that you are disgruntled. This may not be a major issue but more than one person has asked me about it.

On balance, I see Globalization as a positive despite some imbalances that will occur that are part of the fabric of any evolving market situation. British financial writer Edmund Conway describes Globalization as “the adrenaline of capitalism.” A great definition!

If you would like to contact Don Cole directly, you may reach him at docncolemedia@gmail.com

Why Aren't Companies Spending?

In recent weeks, if you follow the business news at all, you have been pummeled with the statistic that for the first time in history U.S. corporations are sitting on over $1 trillion dollars in cash. Several of my friends at both advertising agencies and in media sales have asked me why companies are not investing some of that record cash hoard into conventional advertising.

Well, instead of looking at it from the perspective of an ad agency or media executive who would benefit directly from a spike in media spending let us take a look at it from the view of a CEO of a fairly large corporation.

The recession that began in 2008 was deeper and scarier than any since World War II. Generally, in our lifetimes, recessions have been V-shaped, meaning there was a sharp downturn with a quick and equally sharp recovery. This time it truly is different. We continue to bump along with a recovery so tepid that some observers say that we really never pulled out of the recession of a few years ago. This past week, revised figures for 2nd quarter say that GDP grew by a paltry one percent. So, there is a very real risk that we could slip into a double dip recession.

All this makes even the most successful CEO nervous and cautious. Historically, management often is guilty of fighting the last war when it comes to recessions. But, as this malaise drags on month after month, it is easy for me to see why many remain in the “bunker mentality” of 2009. Then, many were worried about survival. Now, some question if there will ever be a return to normalcy.

Where did this cash hoard come from? When things got tough in 2008 and tougher in 2009, companies engaged in layoffs, downsizing, and when possible, leaving marginal businesses. Productivity rose as frightened workers put in longer hours with no raises and often no complaints. So, companies began to operate more efficiently than ever. On top of that even loosely managed companies got into fanatical expense reduction and suddenly the balance sheets started sporting fabulous cash hoards.

This may be controversial but I feel that Ben Bernanke’s monetary policy is at fault as well. With interest rates at or only a tad over a corporation’s cost of capital borrowing makes more sense than drawing down your cash. So you often move to expand via these cheap external funds that were never available before.

As this goes on month after month, management faces several choices:

1) Keep building up cash in the event a 2008 calamity hits again. This is not prevalent but off the record some seem to admit it.
2) Increase dividends. This keeps shareholders happy and rewards them for sticking with you. This year, according to my rough and unofficial tabulations, over 240 companies have raised dividends while only three have cut them.
3) Buy back shares. This automatically lifts earnings per share as the number of shares shrinks. If you think that your shares are seriously undervalued and cannot find any other good opportunities, this can be a fine allocation of cash.
4) Wait for a market pullback and then pounce on opportunistic acquisitions or craft a merger. We are seeing much of this recently and likely will have more over the next year if things do not pick up.
5) Hire more people. Many say not yet. Workers are more productive than ever by some measures so few new hires and no raises only helps your financial position. At some point, many firms will reach a breaking point and have to add staff. But, no one thought that it would be this long.
6) Invest in advertising to build your brand(s). Historically, this was how Kellogg became the leading cereal manufacturer and Crest, for decades, the #1 toothpaste. There does not seem to be that type of boldness prevalent among marketers especially with consumer confidence levels weak.

Another reason that the conventional media are not seeing it is that many firms are shifting some funds to social media and other alternatives. Some are hard to track so it is not always clear what is going on. Also, promotion has eclipsed advertising expenditures for many firms and while it has a weak record on brand building it does provide fast sales which Wall Street wants to see at the end of each quarter.

Pulling it all together, we will likely not see advertising come roaring back until after we are in a strong recovery and we have no idea when that will be (the sooner, the better). You can bet that share buybacks will continue especially when share prices dip, dividends will rise nicely, and acquisitions may break records in terms of number and size. But the “bunker mentality” is hard to shake off and will remain in place for many for the immediate future. Remember, debt-encumbered nations with traditionally high incomes like the US and Western Europe all have economies that are very fragile. And, investors and advertisers appear to have next to no confidence in the ability of policymakers and politicians to resolve the challenges that these nations face. With that backdrop, why invest heavily in your brand?

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Google + vs. Facebook

There has been quite a buzz over the last several weeks about Google’s entry into the social media space. Their new product is dubbed simply as Google +. Pundits all over plus many in private conversations are trying to determine if Google + can do to Facebook what Facebook did to MySpace.

There is no question that Google is a formidable contender. Globally, they have over a billion users compared to 700 million for Facebook. In the U.S., the distance is narrower with Google tipping in at 155 million users and Facebook 140 million. On the revenue side, Google is way ahead with close to $30 billion ($25 billion in ad revenue) while Facebook weighs in at $1.8 billion. Given its smaller base, Facebook is growing much faster than Google.

Views on the competition tend to be polarized. A few digital media specialists have told me that Google will pull the plug on Google + by Christmas. Others say that it will be a battle and Google will eventually come out on top.

Talking to users of Google + is interesting. Most really like it. All refer to the “Google Circle” which allows you to put together groups of friends that you can organize by topic. There is a “drag and drop” feature that makes it easy to manage different groups. So, if you have a wide circle of contacts or varied interests it makes it easier than Facebook to manage different groups. You can also exclude individual people from getting updates, which may give you more privacy or perceived privacy.

Others tell me that they like Google + as it does not accept advertising. I have to smile. You can bet that when Google + hits what they consider to be critical mass that can be packaged as a media vehicle, advertising will appear!

Reading between the lines a bit, Google + appears to be greatly assisted by the parent company’s credibility. The whole Google mantra of “Don’t be evil” resonates with many people. And clearly, Mark Zuckerberg, while admired, has far less credibility than Eric Schmidt and Company. Google knows a lot more about you—Facebook only knows what you tell them. Yet, as we all know, perception carries a big stick.

We will watch Google + carefully and you should too. A friend wrote to me today saying “Facebook. That is so 2009. I am a Google + man these days.” Google hopes that millions join him and fast.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Clinton's Balanced Budgets--A Look Back

Today, I am asking you to indulge me a bit. I am going to vent in this post.

The other day, I was walking through a very large building on the way to an appointment. I passed a large meeting room with an open door. At the front on a podium was a fellow complaining about how the debt ceiling negotiations were a circus and how disgusted he was with both sides in Washington. Being a few minutes early for my meeting, I hung out in the hall to listen for a few moments.

Then he said, “What we need is the return of Bill Clinton. He balanced the budget a few times in the late ‘90’s and did it basically on his own. That is the kind of leadership America needs now.” Several people applauded. I imagine that my blood pressure shot up a bit as I walked toward my session one floor up.

Obviously, I do not agree with the analysis that I eavesdropped on that day. Here is my take on how it happened and why even the sainted Bill Clinton would find today’s problems very difficult or impossible to surmount.

Full disclosure—I never voted for Bill Clinton but I admit that he was a very effective politician.

How was the budget balanced on Clinton’s watch? Here are several events that I think came together to make it happen:

1) In 1993, the newly inaugurated Clinton with his party controlling both houses of congress passed an increase in taxes on the upscale without a single GOP vote in support. Despite the protestations of some of my libertarian buddies to the contrary, it really did raise some revenue.
2) Clinton dubbed himself “a new kind of Democrat” in the 1992 elections. This proved true to a certain degree. He did end welfare, as we know it, and was enough of a policy wonk to understand that spending could not go wild long term.
3) In 1985, Congress passed the Graham-Rudman-Hollings act that put in automatic spending cuts if the White House and Congress could not reach established spending targets. The bill was ruled unconstitutional so in 1990 a new version was passed that focused on spending control.
4) In fall, 1994, the GOP took back the House of Representatives with their “Contract for America” that talked loudly about a balanced budget. Clinton was now boxed in. He wanted to get re-elected in 1996 but he now had a bunch of deficit hawks on the other side of the aisle. Speaker Newt Gingrich took and received a lot of the credit. In reality, others did much of the heavy lifting. Congressman John Kasich of Ohio and some other young GOP congressman who pushed for serious cuts and a lot less pork (Kasich left Congress and is now governor of Ohio) carried the day. Clinton could negotiate but he had to play ball.
5) To Clinton’s great credit, he did not get involved in any long-term foreign entanglements. There were not that many American boots on the ground overseas in harm’s way. Of course, he was lucky in that he did not have to deal with a 9/11-style event.
6) During the late 1990’s, the tech bubble was in full swing. It triggered the greatest bull market in history. Billions poured in to the Treasury in the form of capital gains taxes. Note that capital gains taxes averaged 28% then and 15% now.
7) Demographics—as usual they played a role. Demographers will tell you that most people’s prime earning years (discounting inflation and some specific expenses) usually fall around the ages of 46-48. Well, in the late 90’s, more people were 47 years old that at any other time in history as baby boomers hit their best earnings. If you make a lot of money, you pay a lot in taxes so the Treasury benefited significantly.

So Clinton did some good things like keeping us out of war and he worked with the GOP Congress because he had to. Importantly, he was a bit lucky with demographic trends at his back swelling the Treasury coffers and the greatest bull market in US history stoked by the tech revolution. They all came together to balance the budget for the U.S.

Could Clinton do the same thing today? Well, he may have been more successful than the current management but he would face some demographic headwinds that did not exist in 1998. Now, some 5,000 baby boomers turn 65 EVERY day. Social Security has been stunned at how many boomers are taking payments at age 62. They urge people to wait a few years for a higher benefit but many need the money now and cannot wait. So the entitlement bomb of Medicare and Social Security is about to drop on us unless some meaningful changes are made within a few years or some means testing is put in place.

So, yes, Clinton balanced a couple of budgets. It was done by a combination of luck, pluck, and co-operation that is not in place in Washington these days. Don’t believe in luck? Read “Outliers” by Malcolm Gladwell. He illustrates clearly and succinctly about how where and when we are born is a key determinant in our lives.

Thanks for listening—I just felt compelled to try to set the record straight.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

The Pulse of the Local Broadcast Economy

Over the last two weeks, I have canvassed a wide variety of media professionals on the state of the local broadcast marketplace. My sample consisted of TV and Radio station sales executives or general managers, local cable players, regional spots mavens, advertising agency media teams, buying services and a few independent media consultants.

The results were interesting but not overly surprising. The only thing that took me by surprise was the wide differences in broadcast and cable performance by region of the country. But, it made sense. There was a direct relationship between unemployment rates in a state and the vibrancy of the media markets within.

In capsule form, the questions asked were:

1) How is your market performing?
2) Why are advertisers holding back if things are soft?
3) Is corporate understanding if things are below budget?
4) Where do you think things will be in your market in six months?


On the broadcast and cable side, the overwhelming majority said that billing is below quota and that the marketplace is fairly to very soft. About 60% said that advertiser business was below expectations so they were not spending. Several stated that automotive was down sharply and attributed some of that to the Japanese Tsunami. Toyota and Honda, major players, have held back, but many felt that before the end of the year billing will pick up smartly. One executive reported that many Mercedes and BMW parts come from Japan and the slowdown there had a ripple effect on the availability of the premier German brands. Hence, less spending for blue chip vehicles.

American companies are doing well right now. As we write, they have a record two trillion dollars on their balance sheets. They continue to not hire aggressively if at all, raises are few and far between, and, other than their commitments to network TV and network cable, they are VERY cautious about advertising commitments.

This held true with my sample. One executive sent me an e-mail stating, “A month to month marketing mentality is taking place locally.” Another a thousand miles away echoed that sentiment by saying “buys are coming in at the last minute. We have scads of inventory so the money is most welcome. But, we cannot plan ahead at all and it is difficult to explain to the bean-counters in New York”. A third said, “Local retailers are scared. We cannot push many for a quarterly commitment. They go month to month.”

National business is very weak. The broadcasters and cable people almost all are below budget with their national projections. An east coast broadcaster with his feet on the ground says his corporate focus is to develop new business locally to offset disappointing national sales.

Radio is suffering pretty much everywhere. Also, scrappy sales teams are bringing in new clients by knocking on lots of doors but the new players tend to be very small players so the labor intensity of making sales goals is very high. A few markets reported sports formats are their bright spot in their radio station group.

How is headquarters reacting? This is a family oriented blog so I will not give verbatims on comments. ☺ Some say that corporate listens politely but then repeats the magic number that they want for the year. A friend told me that she has joined an organization in the last year known for pressuring their sales management. “I had been around for a while and thought how bad can it be? Well, now I know. When I missed 1st quarter, they began sending a jerk in from corporate to observe things. He looks at every expense item and I swear he counts paper clips”. Another told me that if he misses his numbers for the year, “I will be selling shoes by February.” Sales managers say that their local general managers get it but corporate does not. They still prattle on about debt service and shut them down when they try to discuss their local economies.

Regional differences are extraordinary. Right now, North Dakota has the lowest unemployment in the country at 3.2%. My few contacts there reported that things are fine. Local retailers are confident and investing in TV and radio. Citizens do not fret about losing their jobs so they buy new cars, go out to eat, and splurge on new clothes. A similar pattern comes from Nebraska and Oklahoma although not so strongly. An old friend in California who always saw the glass as half full is now a sourpuss. “Business is awful. I am way below budget and know that things will not turn around here soon.”

In Texas, which has been the strongest of the very large states, things are humming along nicely. Most Texans say things will be about the same six months from now but two see chinks in the armor and think the year will finish weaker.

Agency and buying service teams say that they are getting good deals. Most express surprise that the economy has not improved more by now since the 2008-2009 debacle. A few admitted that they are taking savings from a weak broadcast market and doing more in social media and mobile.

How does the future look? Some say it has to get better or work will be intolerable along with corporate pressure. A good friend says, “I have never worked harder. Things look a little better for the next few months but we are running hard to stay even.” The majority says things will be about the same by the end of the year with a few saying that it “will get worse before it gets better”.

Economic indicators continue to be weak. While each market is unique, it appears that most will not see any uptick until the record breaking political spending hits next year. In the battleground states for the Presidency and those with big Senate races, things may be pretty good even if there is no real business recovery. Right now the president’s re-election team is projecting a billion dollars for 2012 for Obama alone.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Make Your Children Wealthy

Urban legend has it that financier Bernard Baruch was playing some form of 1920’s “Trivial Pursuit” in a posh Manhattan apartment. A question was posed to him—“What are the seven wonders of the modern world?” He answered, “I have no idea but I can tell you the 8th—compound interest.” A few years later, Albert Einstein was quoted as saying, “the most powerful force in the universe is compound interest.”

Today, we provide a rather offbeat post aimed at parents and grandparents. It is a ridiculously simple way of transferring substantial assets to your children and grandchildren without setting up elaborate trusts, convoluted wills, or other means that only make the lawyers money.

What I am talking about is giving your children a Roth IRA. A Roth, named after the late Delaware Senator William Roth, is an Individual Retirement Account (IRA) with a twist. If you earn less than $109,000 as a single person or $169,000 for a couple and are under 50, you can put $5,000 into a Roth IRA each year (over 50? You can ramp up to $6,000). The benefit of the Roth is that when you withdraw money from a Roth after age 59 and a half, there is no income tax due.

As a result, many parents of young adults are gifting Roth IRA’s to their children each year. They are doing their children a tremendous favor. Today, most young adults, even of affluent families, fear that they will not be as prosperous as their parents. This is the first time that this has happened in U.S. history. If a young person puts $5,000 away each year in a Roth starting at age 22, works steadily until age 65 and gets an average appreciation of 8% per year, he or she will have $1.29 million accrued. And, they can withdraw it tax-free!

Of course, not many 24 year olds have an extra five grand lying around and some lack the discipline. So many affluent, caring and imaginative parents are doing the job for them by gifting them a Roth each year. Many people of modest means do it as well. Some open an account for $1,000-1,500 and then add whatever they can afford each year. They will not give their children millions but can they help them big-time. Bernard Baruch called compound interest the 8th wonder of the modern world. I would posit that TAX-FREE COMPOUND INTEREST via a Roth IRA is even more powerful.

Some people are real visionaries about Roth’s. A man I know of but do not know personally is a retailer who puts his three-year-old granddaughter in his print ads and commercials. He pays her a salary as an actress. With real income, the apple of his eye is eligible for a Roth each year. He makes the maximum contribution each year and she will have a burgeoning next egg by the time she hits adulthood. By the time she is 60, grandpa will be long gone, but his gifts will sustain her forever.

Even some extremists are into it. One fellow wrote to me “the dollar is toast. If we keep spending recklessly, our money will be worthless in a generation. So, I buy my son a Roth each year and put it in an emerging markets mutual fund. If the US stumbles, my son will be okay.” Another gloom and doomer says, “We have to stop printing money. Each month I add to my daughter’s Roth. I keep the money in a gold share fund.” Now, I am skeptical of people who are not well diversified. But, the point is that no matter what you think about the current economic climate, you can find a way to help those whom you love with this neat trick.

You may never be a multi-millionaire yourself, but you can get your children a lot closer than you might think.

If you would like to contact Don Cole directly, you may write to him at doncolemedia@gmail.com

The Great Wealth Shift

These days we hear and read a great bit about the possibility of a shift in wealth away from the United States. The pundits all say that we need to get our financial house in order soon or we will be in deep trouble. I agree about the urgent need to get our house in order but I do not see the problem as new as many seem to be saying.

Let us go back a few decades. In 1967, one of my brothers and I spent virtually an entire summer in Europe. We mowed lawns, shoveled snow and did other odd jobs to pay for the trip. People laughed at our audacity but everyone wished us well when we boarded the flight to Paris. The trip clearly changed my life. I realized that there was a world beyond my New England roots; there were people vastly different from me who also had dreams but had a completely different sense of life than I. Today, I attribute my willingness to pursue investment opportunities globally and to see other nations points of view on political issues to what I learned on that amazing trip.

The country that impressed me the most was Switzerland. It was stunningly beautiful, squeaky clean, and everything seemed to work efficiently which was not what I experienced in other European countries. The other striking thing about the country was how inexpensive things were. Their currency, the Swiss Franc, was worth 22 U.S. cents. When I returned to Zurich in late 1973, the Franc was worth 30 cents and Switzerland was no longer such a bargain. Today, the Swiss Franc is worth approximately $1.20. That is a five and a half fold increase in the Swiss Franc relative to the US dollar in 44 years. Admittedly, in recent weeks, with Greek, Portuguese, Spanish, Irish, and Italian money woes making the news, Europeans have bid up the value of the mighty Swiss Franc as a safe haven for their cash reserves. But setting that aside, the appreciation of the Swiss Franc has been five fold relative to the dollar.

How does this tiny landlocked country with virtually zero natural resources do it? Well, they are famous for their work ethic and thrift. Internationally, they mind their own business. In fact, they have not been involved in a war since Napoleon marched through a portion of their turf early in the 19th century. Taxes are fairly low but it is hardly a tax haven. They have many thousands of foreign workers but no illegal immigration. After your term of a few years is up, you go home. Citizenship is not an option except for the occasional film star or wildly successful businessperson. The federal government is pretty weak and does not spend much. Balanced budgets happen far more often than not. People are affluent and the schools are first rate with very high standards.

Some countries have emulated many of these features. Take the four Asian Tigers—Korea, Hong Kong, Taiwan, and Singapore. All have shown spectacular growth in recent years. A vibrant middle class is emerging across Asia and portions of Latin America. China and India add 20 million new middle class consumers each year but proportionately these smaller players along with Malaysia, Indonesia, and Vietnam may be doing equally as well.

In the United States, it seems, our middle class is dwindling, with a huge group of maybe 15 million households hanging on to a middle class lifestyle by their fingernails. One more dip in housing prices could drop several more million out of the middle class over the next 18 months.

So, yes, the problems that we face are daunting. But, remember, that they did not happen overnight. Just, as the Swiss Franc has appreciated steadily vis a vis the dollar with some ups and downs, the same thing can be said for our world economic dominance. It has slipped away gradually and not in a straight line but it has been relentless.

Right now, the news media and politicians are obsessed with our Federal debt limit and raising it by August 2nd. To me, this is a distraction from the real issues (yes, it should be raised to calm already jittery international markets). But the core issue is making us competitive again and that is no easy chore. Singapore, increasingly referred to as the Switzerland of the East, is basically a city-state. Policies can be enacted quickly. They and others are highly maneuverable. In China, freedom is lacking. If the government promulgates a change (i.e., a massive shift to wind generated power), it gets done. Part of the charm and strength of our democratic system is that everyone has a say so things happen more slowly than in smaller countries or autocratic ones.

Here are some ideas, all mine, but hardly original, that we might undertake to change things:

1) Start making things again—most of you who read this make or made your living as I did in some form of marketing endeavor. We are the best in the world at it. But, we need an industrial policy again in America. It will be hard to implement but all of us cannot be cable sales people, media directors, writers, day traders or gigolos.
2) Stop playing adventure around the world—virtually all of us applauded when George W. Bush invaded Afghanistan. We had been attacked and we were going after the people who did it. Well, 10 years later, we seem to be “nation-building” on paper but really supporting a corrupt regime to the tune of $2-3 billion per week. And, some American kids are still dying. From now on, we should never put a boot on the ground unless it is absolutely imperative to our domestic security. Trade with more nations, talk with everyone, make unlikely friends but be very spare with formal military intervention.
3) Education needs a facelift—every president in recent memory has talked about how he was going to “be the education president.” What nonsense. The states and counties control their schools-- not Washington. Here are two ideas sure to annoy a lot of people but also to me the ONLY way to make the American educational system competitive again:
a. Lengthen the school year—I dare you to take a look at all the countries around the globe that have better math, science, geography, history and reading scores than the U.S. Without exception, they have longer school years. Our school year is approximately 180 days per year (some schools may go to a four day school week next year due to lack of funding!). The better performing school systems abroad tend to be open 210-230 days per year. It makes sense. If you are in school longer, you can cover more material and get a stronger understanding of it. Some say that we must have 9-10 weeks off in the summer. Absurd. That was put in during the 19th century when our country was largely agrarian and there was no air conditioning. Today, less than 3% of Americans live and work on farms. So, the kids do not have to be home to help with planting and harvesting.
b. Pay teachers a lot more money—Did you ever notice how some of the best teachers are now near retirement age? Well, they have nearly 40 years of experience, which is a big plus. But, also when they entered teaching it was considered a profession and relatively speaking, the pay was okay. If you want to get the most talented, imaginative, and dedicated young people to go in to teaching, then jack up their pay big time. Is your child’s teacher as important to society as your tax accountant? I would say yes so pay him or her accordingly. Right now, many naturally gifted teachers are doing something else simply due to financial imperatives.

Can these suggestions be implemented? With many states and counties facing bankruptcy, it will be tough. But, the kids are our future and they need better than what they are getting now in many cases.

4) Energy Independence—since 1973 when Dick Nixon called for energy independence, every president has embraced the concept. No one has done anything. In Europe, renewables are up to 22% of total electricity production and Sweden claims that they will be not importing a drop of oil after 2020. We have done very little—the corn based ethanol effort of recent years was nothing more than an agricultural subsidy. Yet, we could do a lot more in wind, solar and nuclear, as well as sugar based ethanol plus use our vast domestic natural gas holdings to cut back on importing oil from countries who do not like us and share our values. If we spent our energy dollars here, it would create hundreds of thousands of jobs and improve our dismal balance of payments.
5) Close loopholes in the tax code—get this straight, kids. Closing a loophole is not an increase in taxes. It is usually just enforcing or tightening up the existing code. Some big corporations are paying little or no taxes. Hedge fund managers hold a position for under a minute and get to claim the profit as a tax favored capital gain rather than a short-term fully taxable gain. This can raise some money and not hurt economic growth. Emotionally, people will like the fairness of it.
6) Cut back on entitlements—this is political dynamite and I applaud President Obama and Speaker Boehner for trying to address it. Social Security could be fixed in an afternoon if several of us sat at a table and ran a few what if scenarios on a laptop. Raise the retirement age gradually over the next forty years, means test it so those with a high net worth get most of it taxed away, and soften the cost of living adjustments. Also, you could gradually raise the income ceiling on Social Security contributions. Presto! The system is saved. Most people under 30 will tell you that they will never get Social Security anyway. So, why the big stink when people want to raise the benefit to begin at age 68 forty years from now?
How about Medicare? Congressman Paul Ryan of Wisconsin wrote a bold plan that would attempt to balance the U.S. Federal budget over the next two decades. It was trashed as many people thought his treatment of Medicare was too draconian. I have only read snippets of it so I cannot in fairness say much. One thing he did shine the light on took great political courage. He said that the average American would pay out about $150,000 in Medicare payments in their working life but receive about $450,000 in benefits. That is not sustainable over the long term but most Americans blithely ignore the arithmetic. There is another sacred cow that almost no one brings up. Let us say that Granny is 92 years old and terminally ill. In the last six weeks of her life, perhaps $1-1.5 million will be spent to prolong her life. Were she in Norway, Denmark, Sweden, or Great Britain where socialized medicine has existed for generations, she would be made comfortable but extraordinary means would not be employed to keep her alive. This will be a huge issue in the U.S. in a few years. Right now we spend 17.3% of GDP on health care and many are not covered. In the Netherlands, they spend 8.2% and everyone is covered. If we are to contain health care costs, some terribly hard decisions will have to be made. When to pull the plug will be the biggest one.

7) Immigration—this topic generates a lot of hysteria. We are keeping out engineers, doctors, computer experts, and entrepreneurs because we lump all immigrants as people working in the underground economy. America should never turn away the talented and the eager. Why did our ancestors come here? A rational policy is needed.

Will we implement some or all of these changes? I just don’t know. But if we ignore them all, I can assure you in 10 years, the Swiss Franc will be $2.00, the Singaporean dollar will double, and our middle class will be a lot smaller.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com