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Thursday, July 24, 2014

Technology Will Triumph!

Every day it seems I receive “gloom and doom” direct mail pieces or e-mails from a wide variety of 21st century Cassandras. Oil will hit $200 a barrel by Christmas, the stock market will drop by 70%, World War III is imminent, the dollar will cease to be the world’s reserve currency (by next month), pollution will overtake us shortly, and mass starvation is right around the corner are some of the messages that I have received in recent months.

I generally toss the direct mail missiles into the shredder and delete the e-mails. Why do I keep getting them? It appears that someone with a profile somewhat similar to mine is responding.

Let’s face it. We live in a troubled world. Geo-political tensions abound, ignorance and injustice are widespread, leadership across the globe is suspect and many economies are fragile and debt grows and too much money appears to be printed. It is easy to see how the gloom and doom crowd draws response. Yet, to me, they forget one big thing--Technology.

No, technology will not help us find world peace but it will ease many problems in the years ahead. Just look at a few industries and see what is going on:

1) Energy--until 18 months ago, it looked as if we may be running out of oil across the world or at least oil that could be tapped consistently and safely. That is changing fast. The domestic oil boom is helping our balance of payments and creating good jobs. Technology is making a dirty business safer and less impactful on climate change. The Canadian oil sands were often attacked for their water usage. Now, new technologies allow the companies to recycle almost all of the water. Even coal may look better. A few companies are experimenting with CO2 capture systems in coal fired electricity generation, sending the CO2 to natural gas fracking sites where the CO2 will be propelled into reservoir rock and gas can be tapped. Lots will happen in natural gas and solar and wind power will not stand still either. A windmill today generates, on average, 100 times the power of one produced in 1980. People used to say that geology would trump demographics in energy production and long term shortages would occur. Today, many are stating that technology will trump geology and cleaner and abundant energy is on the way to us.
2) Medicine--when I look back on my life it is stunning to consider the advances that have occurred the last few decades. All of know people who are alive due to procedures and gains in medical technology that did not exist until recently.
3) Agriculture--this is going to be a boom area. It has to! With a billion more people coming on board our little planet in the next 15 years, we will need to feed them. Better fertilizers, use of water, and farmer training should translate to better crop yields.
4) Water--approximately half of the people on earth are currently hospitalized due to drinking bad water. Non-chemical purification techniques along with mineralization technologies with provide water that is clean and tastes great, too. The amazing health benefits will more than pay for an upgrading of infrastructure needs around the world.                                    
5) Media--our field will continue to evolve. The big area will be in what we now call mobile and specifically in applications. Our lives are made easier every day by mobile apps that help us shop, not get lost, send messages, research almost anything, and always stay in touch if we wish. Today, many advertisers boast of pin-point targeting. Well, they ain’t seen nothing yet. Imagine marketing 10 years from now when you can slash wasted audience from current levels and customize messaging far better than you can dream in 2014. The game will change but advertising and communication efficiency will soar.

So, do not get discouraged. Read the gloom and doomers; sometimes they say things that come true and the good ones make you think. Remember, always, however, that the human spirit will always be there and technology will move relentlessly toward a better life.

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

Tuesday, July 15, 2014

Is America Finished?

Nearly half of Media Realism readers tend to be from outside the United States. Over the last five years, I have heard from readers in over 125 countries. I love to read the mail and respond to a great deal of it. Last week, I received a note from someone who lives in an emerging Asian country and comments directly to me several times a year. With his permission, I quote him verbatim: “I really enjoy reading Media Realism. You bring up topics that I do not see anywhere else. But, you need to stop posting so much on US centric issues. You and I both know that the United States is finished.”

He may know it but I certainly do not.  I will be devoting this post to stating that we could be on the verge of an exciting United States turnaround.

If you confronted many Americans with the comment “the United States is finished” you would often get an indignant response. People would conjure up Ronald Reagan’s famous speech where he talked of the shining city on the hill and America’s rendezvous with destiny. When Reagan made those comments back in 1980, it was pitch-perfect. The malaise of the Carter years had Americans discouraged. The upbeat candidate talked of our potential and tapped in to a yearning for imagination, innovation, and greatness. He won by a landslide and did it again in 1984 with a wonderful ad campaign highlighted by the “It’s morning in America” execution. Thirty years later, things are different. Our problems are deeper and institutions such as Congress are far more suspect than they were then. So, we need more than an inspirational message and leader. I believe we may have it.

Several things appear to me to be coming together. They are:

1) The Energy Advantage--Observers have often said that the 20th century was the American century and that was helped by low energy costs. Also, as a result, Americans became addicted to cheap energy, particularly oil.  Things got a bit tougher as Americans were importing up to $250 billion dollars a year in oil largely from the Middle East, Venezuela, and Nigeria, which were areas of the world not particularly friendly to US interests. In recent years, thanks to new technologies, we are now producing more oil domestically than we have in 30 years. Steadily, the balance of payments regarding energy is turning around and much of the money that leaves the U.S. goes to our friendly neighbor, Canada. New technological gains have allowed us to tap in to our vast holdings of natural gas and production is so strong that costs are very low (one-fourth of Western Europe and one-fifth of Japan). This energy renaissance is creating thousands of good paying ($70-100k) blue collar jobs which have been sadly missing in our economy over the last decade.  
2) The other benefit to the domestic energy boom is that it is helping our moribund manufacturing base.  We have all heard of offshoring where American companies moved operations offshore to take advantage of lower wages and lower taxes than they faced at home. Now, a trend is beginning that is known as “reshoring” where manufacturing is coming back to our shores. Some 15 years ago, a Chinese factory worker might get 90 cents per hour. Now, the average rate is over nine dollars per hour. With energy costs less in the U.S. and transportation a fraction of what it would cost to transfer finished goods to the U.S. markets, companies are often deciding it is easier and more economical to manufacture at home. This can be a big help to the unemployed in America. The only fly in the ointment is will the jobs be very low paying?  To stay at parity with Asian outposts, will domestic manufacturers keep wages down really low? One of the big problems of our slow motion recovery is that many of the new jobs created each month tend to be hovering around minimum wage.  (Also, and I know that I am a distinct minority on this issue, but I worry a bit about natural gas as our one fits all solution to environmental and economic issues. In his 2012 State of the Union address, President Obama said the following: “We have a supply of natural gas that can last America nearly one hundred years.” Relax. I am not going to attack the president or even the Department of Energy. What I will say is that I have been following natural resources and their equities for 42 years. From my early days of reading Canadian trade journal THE NORTHERN MINER to annual reports and press releases today, I am always amused by the somewhat breathless projections of natural resource experts. The unsolicited e-mails are even funnier. A sample of recent entries sound like-- “Bigger than the Bakken. America’s newest and largest energy field” or “A Gold Strike So Large It will catapult this junior to one of North America’s top 10 producers.” You get the idea. If the trend continues of companies shifting to natural gas to heat their plants and run their fleets plus utilities shifting to gas from dirty coal for their electricity generation (a good thing!), will we have enough gas for 100 years? Companies are furiously lobbying to get permission to export liquified natural gas to Asia and Europe. I thought that I was the only person worried about this until Charlie Munger, Vice Chairman of Berkshire Hathaway, voiced the same concern. Others say that exports will never be more than 10% of US production.). So natural gas, is for the moment, a game changer. It can help lower CO2 emissions as it burns cleaner than oil or coal and is quite plentiful. Some say it will be the bridge that will lead us to renewables in a few decades. Clearly, low cost gas will help manufacturing here. The gas boom is creating thousands of good paying jobs and makes home grown manufacturing more globally competitive.
3) Americans are still the world’s best marketers and, I would add, salespeople. We seem to tap in to what people want. Also, American Pop Culture travels well (see Media Realism, “The Triumph of American Pop Culture”, May 31, 2011) and the newly minted middle class around the world love American products. Author Daniel Gross has dubbed some products “Inports.” These are products produced by American companies overseas using local or non-American ingredients or components. So, Starbucks is exploding overseas. From the coffee to the cups to the pastries everything is produced outside the U.S. Profits, however, are repatriated home hence his term Inport.
4) People are finally seeing the importance of improving our infrastructure. Landing at grungy Kennedy airport some weeks back, I was struck by what a foreign tourist’s first impression of America might be compared to the efficient and state of the art airports that they came from at home. I vividly remember as a child President Eisenhower lobbying for the national highway system. It was positioned as a “defense highway system” so in case of foreign attack, thousands could escape an attack area quickly via the new superhighways. Well, the Soviets never bombed us but the infrastructure improvement was very real. Salespeople could cover hundreds of miles more in their territory. Contractors and tradesmen were not limited to their home cities any more and people in remote rural areas could get things shipped by truck almost as quickly as those in major cities. Would Wal-Mart have grown so large without the interstate highway system? The highways gave us an international leg up and increased business volume all over America. The Panama Canal is now getting a multi-billion dollar facelift and larger ships will be passing through it soon. Can all American ports handle the larger vessels or will they simply go to China or other nations who can accommodate them? Our state roads and bridges vary wildly in quality from place to place. Some are funded with gasoline taxes so we should not hold our breath regarding a quick fix there. Infrastructure is one place where government and business need to work together. If they will, it can sharpen our competitive edge significantly.
5) Tax and entitlement reform--you may say good luck on this one. I was excited when the Simpson-Bowles reforms were presented. If we could get a resolution on Social Security and Medicare that would protect our safety net for generations to come, businesses and individuals could plan better for the future. This would help us. We need a simpler, fairer tax code that does not punish success but squashes crony capitalism.

The first three points that I have outlined are happening and will make American stronger in the years to come. If we can resolve the issues around #4 and #5 then I am very confident that America’s best days are yet to come.

For a quick and easy read on the myth of America’s decline, may I suggest BETTER, FASTER, STRONGER by columnist Daniel Gross (Free Press, 2012)?

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

Monday, July 7, 2014

Storytelling vs. Statistics

Some months back, I gave a presentation to a fair sized audience of budding young professionals. The boss did not attend but sent an observer who sat in the back of the room and watched my dog and pony show very closely. I thought it went well and, as I was leaving, the management plant thanked me and said, “You are a wonderful storyteller. That is 90% of presenting.” As a guest, I merely said thank you but gently added that my stories all were linked to facts that I had presented in a few statistical charts in my show and tell.  She shook her head, smiled, and left. Later her boss told me what a success the session had been.

All of this is a preamble to something that I have observed over the last decade or so. An increasing number of people are making bad business decisions because storytelling seems to have overshadowed statistics or, dare I say, facts in decision-making.  Perhaps I am an exception. I have always considered myself something of a data junkie. Never have I resented tedious number crunching to get to the guts of a financial transaction, a media buy, or a forecast for a concept, a business, or even a country. And, if you know me at all, you realize that demographics often drive the bus.

Why do most new businesses fail? Why do most new products fail even from established marketers? To me, it is not lack of effort on the job or inept management. Much of it is a failure to look at the readily available facts or statistics that are in plain sight or can be researched for a bit of money.  A stunning number of people rely on storytelling as their compass. Their friends like it, they saw someone have success with it in another market or nation and they then make an enormous leap of faith based on hearsay or very limited amount of facts.

Your mind can play tricks on you if you become addicted to storytelling. More than once, I have passed out articles or books on a particular subject to colleagues or clients. And, several times people immediately handed them back saying, “Don, I will never read it. Just give me the headlines. I learn everything by talking to people.”

Well. I am a big advocate of business people talking to their customers and prospects and LISTENING. However, I have seen people bet millions on products or services where the timing is clearly wrong, or their chosen location cannot sustain a new player due to weakening demographics or a poor economy. Few of us want to tell a sincere person, especially a friend, that their idea really stinks.  So, if you merely talk to people, you are missing a lot and may be setting yourself up for failure.

Storytelling is important. It beats a ponderous power-point time after time in terms of audience attentiveness. Yet, the stories, to me, need to be tied to some statistical realities.

Finally, remember that con men are all great storytellers. Think about it.

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

Tuesday, July 1, 2014

Social Security And The Future of Marketing

As it has for several years, the United States Social Security System remains something of a political hot potato. Columnists often refer to it as “the third rail of American politics” meaning that if you touch it, you will die politically. Few in Washington have the guts to face the problems that the system faces (possible cutting of current benefits by 2034) even though the majority of young Americans in poll after poll do not believe that it will be there for them.

Reform may consist of raising the age of when you could collect and increasing the cap on income that could be taxed by social security. Combine that with some kind of means testing (multi-millionaires would see their benefits slashed) and the system could be saved in to perpetuity.

As a marketer, I have different issues with the program. According to the Social Security System itself, the monthly program payments account for 38% of the income for U.S. adults over 65. For couples, the figure is 22% and for single persons collecting a check, Social Security is 47% of their total income.

Dig a bit deeper and the numbers get scarier--a lot scarier. The American Association of Retired Persons (AARP) via their public policy institute recently released Social Security data by state. One chart floored me--it showed the percentage of people Age 65+ who relied on Social Security for at least 90% of their income.

Tennessee was on top at 32.7% followed by Mississippi at 30.8, Arkansas at 30.7, Georgia at 30.6 and Louisiana at 29.9%. Alaska appeared to be in the best shape at 14.5%. Again, statistics sometimes lie. Every Alaskan gets an oil payment each October from their Permanent Fund. Payouts can be as high as $3,269 in 2008 and were $900 in 2013. Yet the cost of living in Alaska is somewhat higher than most of the lower 48 states. So, they appear to be wealthy but, in terms of purchasing power, clearly they are not.

Also, each day some 10,000 Americans turn 65 years old so it is a safe bet that the number of people having Social Security as 90%+ of their income will only increase.

A reader wrote to me an hour ago saying that the Dow Jones Industrial Average hit an all time high. It did and almost closed at 17,000. That is great for all of you with seven figure 401k balances and significant passive income. Yet, for the average American, whose income has been stuck adjusted for inflation for more than 30 years, the Dow’s flirting with 17,000 is a meaningless statistic.

Marketers need to take note. America is getting older. Not as old as Europe, for sure, but far older than Asia ex Japan and Latin America. Increasingly, these people 65+ are going to be struggling. Financial decisions will revolve around food, prescription medicine or rent payments. For too many people, something will have to give.  The base for many products will have to erode. Are you or your clients prepared for this?

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