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Sunday, July 30, 2017

"I Am Not Really Needed"



Like many of you, I do not get a hard copy of a daily newspaper anymore. On line subscriptions to both the Wall Street Journal and The New York Times cover my needs very well. One exception is the Sunday New York Times. It is delivered to my sidewalk each weekend and I devour it with my morning coffee. Given my age, I often linger for a few moments over the obituaries to see if anyone whom I knew or knew of in advertising, broadcasting, or publishing has passed on. Yes, in ten years time, it may become my sports page!

A few months ago, I saw a name that seemed to register a bit in the cobwebs of my memory.   I read the obit carefully and think that I may have remembered this fellow. We met very briefly for a few hours but what he said has stuck with me.

For many years, I traveled a great deal on business. A great deal. While not in real miles, more than one airline gave me over 200,000 air miles to my frequent flyer accounts in the same year. When one travels that much you have your fair share of cancellations and long delays. One such delay occurred in the dead of winter. I was coming back from a client meeting in the upper midwest. The first class cabin was not full and three of us were talking when the first delay was announced. The flight attendant served a round of drinks and we all took things in stride. The captain announced a half hour later that there would an equipment change and we all had to vacate the plane. We would likely not leave for 90 minutes. An unusually well dressed man about 10 years older than I offered to buy us a drink in the airport lounge. We all exchanged what we did for a living. He had a high powered job for a prominent company in the financial arena. The third member of our party exclaimed, “Wow, you must be rich!” Our new drinking buddy shook his head no. “I consider myself successful but I will never be rich.” He went on to describe his life with a brutal candor that almost made me feel a bit sorry for him. As a youngster, like his father before him, he had gone to the right prep school and then college and was now a member of the right clubs in New York. He then went on a tirade about the federal, state and city income taxes that he paid. His real estate taxes in Westchester county were astronomical and his commute was horrendous. Were he to make any real money the Feds would hit him with a gift tax if he wanted to help his children who were now at very expensive prep schools and perhaps a large inheritance tax as well when he died.

I was getting fed up with his pity party for himself and other members of the 1% when he dropped something of a bombshell to both of us. “I am different from my partners. I know that I am not needed. Someone else can help defer taxes or evaluate a security or a new business every bit as well as I can. I am a well paid corporate functionary who leads a boring, upper middle class, unimportant existence. Yes, I am a professional but I am not and never will be a tycoon.”


He then went on to say how if he had his life to live over again he would trash his Northeastern respectable point of view. “I should have taken some risks and been willing to put up with uncomfortable situations. Moved to Africa or Asia and really made a difference with something. Then, maybe I could have been rich, and more importantly, fulfilled.”

A lot of things hit me. First, he had no idea how lucky he was relative to almost everyone in the world. His problems were ones struggling people and most of us would love to have. At the same time, he had a self awareness of how unimportant he was in the scheme of things and had genuine admiration for gutsy entrepreneurs who had a dream and went across the world to make it reality.

Last week, I asked some of my panel members if they were needed. Surprisingly, the broadcasters in senior positions generally said no. The older ones said they had a good run in the golden era of broadcasting and advertising but all felt they could be replaced quickly and easily. Ad agency owners (small to mid-sized shops) were a mixed bag. A few said they were grooming someone to take their places but a small group said almost directly that they were the glue that holds the place together and if they went, the shop would not be far behind. Perhaps broadcasters see themselves as managers while agency heads, even of small firms, perceive themselves to be builders.

We need functionaries everywhere--the state department, law firms, brokerage houses, the Vatican, and at media properties and ad agencies. Can their lives compare to the brave few who help make the desert bloom or pass through the eye of the needle in Silicon Valley and get funding and change our world? I suppose not but, in my life, I have been touched by and learned from any number of functionaries who were kind, helpful and did a good job. They were not “needed” but they were and are important.

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


Monday, July 24, 2017

The Four Headwinds


A long time ago I was at a client meeting in Florida. One fellow at the sessions was a fellow New Englander who had rarely ventured in to the South or Southwest in his life. At dinner, he mentioned how stunned he was at the amount of construction going on and asked how did Atlanta, Miami, Tampa, Houston, Dallas and Phoenix grew so fast. My clients gave answers such as no state income taxes in Florida or Texas, less regulation, and fewer union issues. My new New England friend asked me directly and I said, “Air conditioning.” The clients were not amused and let me know it after they dropped off the questioner. I stuck to my guns and do so now. In the last two weeks, I have read a book twice over that brought that moment back to me.

The book in question is THE RISE AND FALL OF AMERICAN GROWTH (Princeton University Press, 2016). Its author is Robert J. Gordon, a deeply experienced and prolific writer who is an economics professor at Northwestern University. Gordon’s book is a real tour de force. He essentially covers U.S. economic history from the end of the Civil War (1865) to 1970. It illustrates how the growth occurred and gives great credit to electricity which reduced the drudgery of many household and industrial tasks and was a great catalyst for growth.

Gordon is not an anti-tech luddite. He simply states that for us to have the dynamic growth experienced from 1870-1970 is going to be a steep challenge going forward due to four headwinds:

1) Inequality
2) Education
3) Demography
4) Repaying Debt


One by one, we find, in brief:

1) Inequality--the bottom 80% of the population has suffered wealth stagnation in the span measured from 1983-2013. The top 20% has experienced a doubling of wealth with the infamous top 1% going up several times. Interestingly, he cited studies that showed that the bottom 90% tend to have the world’s worst market timing. Those in stocks in 2008-2009 “bailed out” while the top 10% increased their holdings in 2009-2010 and saw their net worth multiply several fold in many cases. So what, you may say? Well, Gordon illustrates the growing difference between average income and median income (50th percentile). If current projections hold, every 1.0% gain in average income would only translate to 0.6% median growth. The 80-90% at the bottom will get more and more distant from the top 10%. This will effect overall buying power.

2) Education--from 1870-1970 there was a huge surge in people obtaining high school diplomas. Many high school graduates or less earned excellent money with great fringe benefits and were often union members. Today, a high school dropout will likely never earn more than minimum wage over his or her lifetime. And, college degrees are no longer a path to the upper middle class. Many recent graduates are doing work that does not require a college degree. Adding to this problem, is soaring college debt over $1.2 trillion. If a student takes on $100,000 in college debt they may be better off than a high school only graduate by age 34 IF they earn the same amount as the average college graduate. In some fields, that can be very difficult.

3) Demography--my old favorite comes to center court once more. As American baby boomers age (born 1946-1964), they are retiring at a rate over 6,500 per day. Fewer workers put a strain on funding the entitlements net (see post on “The Graying of the West” from 7/21/17).

4) Repaying debt--we have reported debt in the U.S. of over $20 trillion. Some analysts say that is absurdly low as our Social Security and Medicare/Medicaid liabilities push it up to $100-200 trillion. Right now, we have historically and, in my opinion, unnaturally low interest rates. The ratio of federal debt to Gross Domestic Product (GDP) may stabilize for a few years but has to soar if interest rates have a return to normalcy and/or if the Congressional Budget Office (CBO) estimates are too optimistic as Gordon projects.

Professor Gordon is not a “gloom and doomer.” He strikes me as a hard headed realist who sees real problems on the horizon. Electricity and the internal combustion engine changed the lives of most of the world and made the 20th century, The American Century. The four headwinds will get in the way of even the exciting technological changes to come.

The book is amazing. I have read it twice in the last two weeks and it is over 750 pages long. Admittedly, it does not read like a sexy novel but it is not the Statistical Abstract either. I am clearly an economic history and demographic wonk but I found it very absorbing reading.

Too much for you? Okay. Go to You Tube. Professor Gordon has a 12 minute version on a TED talk that sums up his opinions. It is well worth 12 minutes. Not enough? You Tube also boasts a 90 minute presentation that the good doctor gave at the London School of Economics. Finally, You Tube has a few videos of academics trying to refute Professor Gordon’s forecasts.

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

Friday, July 21, 2017

The Graying of the West


This is a topic that I have touched on in posts a few years ago. It needs a revisit as the demographic urgency has increased yet virtually no country affected by it has taken any meaningful steps to reverse the situation.

Aging has been increasingly evident in many Western nations for some time. Also, it is a long standing even drastic situation in Japan, and a big problem in Russia and China as well. It all starts with ZPG.

ZPG stands for Zero Population Growth. You need fertility rates of approximately 2.1 children per woman to replace each existing generation. As a young person, I never was much concerned with it but now, incredibly, some 60% of the world’s population lives in nations with fertility rates below ZPG.

So what, you may exclaim. This is good. Fewer mouths to feed and fewer people to pollute Mother Earth. One cannot argue with that although it shows a lack of faith in technological advancement. The problem is that since World War II ended in 1945 virtually all Western nations have created some form of social safety net. In the U.S. we have Social Security, Medicare and Medicaid. In Europe, it is often referred to as retirement schemes and universal health care. All good in many people’s eyes but can the West continue to pay for it?

The European Commission published a paper a few years ago, that made even an experienced demographer such as I reel. By 2060, the German population will drop by a fifth and people of working age will plummet from approximately 52 million now to 36 million! Some dismiss problems with a smaller workforce saying that increased productivity will bail us all out. It will certainly help but caring for the massive increase in the elderly will put tremendous new pressure on the finances of even the most solvent governments (yes, there are a few left)!

To be blunt, what is going is a generational Ponzi Scheme of epic proportions. It is not brain surgery--it is simply demographics and plain arithmetic. As life expectancy increases and fertility declines, those younger people who are still working will have to pay a great deal more to take of the elderly in many, many nations.  Many will have to depend on immigrants to assist the elderly. Looking ahead a decade or two, these entitlements for the elderly will likely suffocate even the most robust economies.

Keep an eye on Spain and Italy. Both countries have had economic challenges for some time but as the societies continue to get older, the strain on their “provider state” will get intense. In the US, we have SOME breathing room. Social Security will stay solvent until 2034. Medicare/Medicaid is anyone’s guess as both Republicans and Democrats argue over health care. What both sides fail to address is the rising cost of healthcare. How will an aging population pay for it?

China is really facing a ticking bomb. Candid Chinese analysts refer to their “4:2:1” problem. Mao’s limit of one child per family in many provinces decades ago has created a situation where an adult child is asked to care for both parents and sometimes four grandparents. The World Health Organization projects that China will likely have more patients suffering from some form of dementia than the rest of the world combined by the year 2040. Think about it. It is frightening.

The nations of the world need to shift gears. Here at home we need to means test Social Security and raise the age for distributions or the system could collapse. Also, some health care proposal has to be crafted that whittles down the Medicaid burden and does not try to place it on the backs of the poor who simply cannot pay for it. Will we react in time?

Separately, a few words about senior marketing. Looking around the world, many countries seem to be doing a better job hitting the 60+ demographic than we do. In Canada, I have seen commercials aimed at the mature touting private label goods in supermarkets. Seniors are often financially challenged and are more careful shoppers, than younger adults. Also, they have more time. In Singapore, a flagship company, Singapore Telecom, known as Singtel, ran a highly imaginative campaign called Project Silverline a few years ago. The telecom behemoth asked for contributions of old iPhones and then retrofitted them by adding apps designed with senior users in mind. Very attractive plans were set up for seniors who might be on a tight budget. I would be interested in a similar plan at some point and will likely love a phone with larger keys as I get increasingly far sighted with each passing year.

In the U.S, many products aimed at seniors are almost comical. A few years ago, I was looking for CNBC and hit the wrong digits on my remote. Up popped The Andy Griffith Show. I watched for a few moments and realized it was my favorite episode ever, “Barney runs for sheriff.” For 20 minutes I was back to 55 years ago and laughed heartily at Don Knotts and Griffith. The commercial breaks were another story. Clearly, the DRTV advertisers realized that the viewership was old. A two minute spot appeared for the questionable reverse mortgages with a spokesperson actor whom I had not seen in years. Hemorrhoid remedies and denture adhesives followed finished by a spot for an alert bracelet for the elderly living alone. So, we seem to have a need for more nuanced marketing to the growing legions of the elderly in America. Some upscale players for financial institutions and luxury vacations do a nice job but few others are adequate.

So, the West has some challenges ahead and, while few will dispute the facts that I have laid out, even fewer feel moved to do something about it. Someone told me not to concern myself with it as “you will be dead before this really kicks in and, meanwhile, you get all the benefits.” Maybe so, but what kind of answer is that? If you have children or grandchildren, you have to care about the demographic cliff.

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

Friday, July 14, 2017

The Stealth Disruption


A few months ago a young adult approached me who said that he was working on a research paper for a graduate course. He asked what my opinion was on the most disruptive forces affecting businesses around the world. I assumed, and I was right, that he expected me to talk about advances in technology in the years to come. Instead, I threw him a curve ball that, as an American, he did not expect.

The big disruption that I mentioned to him was the shifting center of economic growth. The significant changes are going to be in emerging markets and, more subtly, to new cities within those countries with likely explosive growth.

Where did this concept come to me? Over 15 years ago, I woke up ready to go to work. A snowstorm was in progress. Not severe as the ones that plagued my native New England but one which paralyzed the southern city that I was working in at that time. So, I poured another cup of coffee and decided to wait a couple of hours before trying to  head to the office. As I relaxed, I picked up a neglected copy of FORTUNE magazine that had hanging around for several months. It was their annual issue highlighting the Fortune Global 500 and, with time on my hands, I studied the membership roster carefully. The list showed that well over 90% of the world’s largest companies were domiciled in developed countries dominated by the U.S., Japan, and Western Europe. Since then, I have tracked the list each year with a bit more caution. Dozens of newcomers have joined the international 500 as is typical of the creative destruction present in our 21st century world. Last year, I read a report from the McKinsey Global Institute that projected by 2025 China will have more billion dollar revenue companies that either the United States or Europe and that more than half of the 2025 large players will call an emerging market home. So, economic power is going to shift and perhaps faster than we can imagine to selected countries in Asia, Latin America and the Middle East.

There is a real sleeper in all of this and I tried very hard to articulate to the earnest young graduate student. It is not just that countries are seeing explosive growth relative to the developed nations of the West. A key issue is that entire new cities are emerging in these fast growing markets. On 5/22/12 I put up an MR post entitled URBANIZATION, GLOBALIZATION, AND MEDIA. A key take away from that post was that, amazingly, EVERY DAY, some 180,000 PEOPLE around the world moved from a rural area to a city. McKinsey has estimated that some 65 million people get urbanized annually. To put it in to perspective for American marketers, that is the equivalent of seven new Chicago DMA’s being formed annually. Marketers and reasonably informed citizens have all heard of Hong Kong, Shanghai, Dubai and probably Mumbai. Yet, the real dynamic growth will come from cities that most of us have never heard of ever. Again, quoting McKinsey, they are forecasting that 46 of the top 200 cities in the world will be in China by 2024. Can you name 46 Chinese cities? How about 10? I know that I could not prior to attacking this issue.  Soon Tianjin, Shenyang, Harbin, Chengdu, Taiyuan and a host of others will hit the radar screens of astute marketers.

Think of the possibilities of this growth. The UN has projected that between 1990 and 2025, some three billion people have or will become members of what has been dubbed “the consuming class,” meaning that they will have $10 of disposable income per day. A large proportion of these new consumers will be living in the cities of emerging economies. By 2030, they will account for half of the world’s spending!

All this will impact media as well. How will you reach all these new consumers? Within large countries, everyone will not be speaking the same language. An acquaintance told me to forget about it--advertise on You Tube and other global properties as everyone speaks English. He is clearly not a seasoned traveler as people everywhere, especially this new breed of consumers who are newly arrived urbanites, likely speak only their native tongue. Mobile advertising has to be a huge beneficiary of this rapidly growing trend.

So, quietly and steadily, these new cities will emerge and join the million population club. Perhaps, more importantly, they will have many newly minted members of the consumer class.

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

Friday, July 7, 2017

Small Town Blues


As many of you know, the Nielsen company divides the U.S. television universe into 210 separate entities know as Designated Market Areas (DMA’s). New York is clearly the largest and tiny Glendive, Montana is the smallest and ranked at #210.

A few months ago, I received an e-mail from a small market operator asking why I did not devote an MR post to markets with a low Nielsen ranking. A bit later I heard from an old associate who still toiled in a tiny market asking basically the same thing.

Hence this post. I contacted several people across the country who were either general managers or sales managers in markets ranked #110 (Ft. Wayne) to #180 (Marquette). For those of you who are amateur detectives, I did not speak to anyone in either Ft. Wayne or Marquette!

Small market TV was once a great business and then it morphed, like all over the air TV, into a good business. Now, according to my wildly unscientific sample of seven small town broadcasters and sales executives, it has a new set of struggles.

Here are some comments (some edited) from all of the participants:

--“When I talk to my competition or players in broadcasting in neighboring markets, they seem to be in a time warp. At a golf outing recently, I told a competitor that he was sleepwalking to disaster. He did not like that but he still seems to think that it is 1977 instead of 2017. The game is not over but big cracks are evident in our facade.”

-- “Last year, a local cable interconnect nabbed my most experienced salesman. I could not afford to keep him despite pleas to our owners to up his compensation. He now is stealing many of our long standing local retailers with zoned buys that deliver far less waste than we can because we cover the entire DMA. Also, he can tap into canned promotions from ESPN and others that we cannot match.”

--“I can tell you what is killing us in one word--Amazon! We lost four retailers on Main Street this year. When I drive to work each day I see the boarded up stores and it kills me. One was a clothing retailer that allegedly had been with the station at some point in every quarter for the past 62 years! Now, with more buying online and the trend toward casual clothes, he had to liquidate. Retail is in real trouble. Our local mall’s days have to be numbered.”

--“Headquarters keeps telling us to improve our news product. I was always proud of our local community involvement but the newscast was always poor. People over 70 watch it and many probably don’t have cable. A U.S. Senator stopped in to town the other day and I told our anchor to ask some pointed questions about the upcoming GOP health care bill (we are in a non-competitive market but this was real news). He did not want to do it. I almost choked when he said he might get a better response if he asked the Senator about the college football season this fall. Furious, I made him ride to the deli that was providing the food for the staff party that we were hosting for the Senator’s visit. I read him the riot act in the car but when we went in to pick up the platters, everyone surrounded him as if he were a movie star. It drives me crazy. We have a crap news product but the locals, who still watch over the air TV, love it.”


--“Technology has helped us a lot. We do not do local weather. A weather man from another one of our corporate markets does it via remote and it seems to work. Also, we can send a reporter out with one other person or sometimes alone to do a story so that cuts down on costs. We are so small that we still do Video News Releases on slow news days. Hell, every day is a slow news day here.”

--“We have never recovered from the Great Recession. I see no hope for turning our town around. Not to get political, but our local hospital may have to close depending on what health care bill the Senate cooks up soon. Why would anyone want to retire here or raise children or give birth to children if the nearest hospital is 150 miles away?”

--“I have had a great run. When I started, I did two years in a top 10 market and that was enough for me. We did a good job for decades for our small clients. Now, I know that TV does not work nearly as well as it once did. I feel guilty sometimes with clients as the returns are sad compared to years ago.”

-- "Automotive has always been our bread and butter. Local dealers make or break us. A dealer who is a close friend is alarmed. Customers have been getting seven year loans for a number of years. The problem is that they return five years later still under water on their pickup truck but need a new one. They have no cash for a down payment but they need a vehicle for commuting to work. He finances nothing but the local bank will as does his manufacturer. He sees a big problem coming. If we lose a chunk of automotive advertising, we will never hit sales goals.”

Are these comments truly representative of all small market DMA’s? Well, three players were from rust belt markets in the Midwest so perhaps the comments are a bit gloomy. One thing is certain, however. The media landscape continues to change and you cannot hide out in rural America on the assumption that Amazon cannot touch you.

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