The late Rudiger Dornbusch was a long time economics professor at MIT. He was generally considered a global expect on monetary theory and, to economic theory junkies such as I, he was something of a rockstar. He became well known outside of the arcane world of academic economics during the Tequila Crisis of 1994-95 when the Mexican peso collapsed and it impacted markets for quite a while. The good professor articulated what became known as Dornbusch’s Law. It goes like this—“Crises take a much longer time coming than you think, and then it happens much faster than you would have thought.”
He died in 2002 just as the media world was finally seeing sweeping and long anticipated changes. I kept thinking of Dornbusch’s Law as I saw things evolve and double back to it even to this day. A few examples:
1) Newspaper—as the internet grew, many people began forecasting the death of daily newspapers. Yet, newspaper ad spending stubbornly hung on a decade longer than many of us thought possible. Suddenly, with the Great Recession hitting hard in 2008, newspaper billing collapsed by double digits in back to back years and has never recovered. The industry was way too slow to move to digital and did not know how to monetize it. Millennials have no interest in waiting for a hard copy of a newspaper today as they want news instantly. Sadly, many depend on Facebook for much of their information.
2) Radio—the argument for radio’s durability has often been “it will always be there.” True so far but time spent listening especially among upwardly mobile young adults is in sharp decline. Tech improvements have propped up stations nicely in terms of staffing and sales expense but there are too many musical options giving listeners total control which should block any strong comeback in the medium.
3) Cable TV—back in the 80’s, many would say that all cable had to offer was HBO, some Gomer Pyle reruns, and Braves Baseball games. Over the air networks did not react fast enough and suddenly saw their audience shrink significantly. Later, the big players purchased cable networks and that hedged their revenue picture nicely. Now cable and the major over the air networks are reeling from streaming services such as Netflix, Amazon Prime Video, Hulu, and the upcoming Disney +. Yet, as late as 2011, people were telling me that Hulu would be gone in a year and never get traction.
4) Magazine—very few titles are thriving these days and survivors seem struggling. Today, I subscribe to a few publications and I am amused how after a subscription lapses, they often add another six months to a year. It appears that they are protecting their advertising rate base.
5) Ad Agencies—as retail shifted via Amazon et al, agencies often talked about doing better commercials. Some pivoted in time, embraced the digital world, and became more focused on consulting, forecasting, new video options and analysis.
The next recession, whenever it hits, will take down a number of properties and, similar to Dornbusch’ Law, they will fall quickly in my opinion.
What about now? Well, think about it. Big Data is the rage right now and certainly helps marketers. Yet, if the Blockchain catches on with consumers quickly, will Big Data dry up to a certain degree as more transactions become private thanks to the new technology? Perhaps 10 years from now, the Cloud will be a relatively minor player.
It always has surprised me how people do not act on the obvious. The Internet was not a “flash in the pan” as some forecast but after the dot.com crash of early 2000’s many marketers did not embrace it for a few years. Streaming services spread like a prairie fire, people saw the danger in other video disciplines, but did not do much of anything to evade the herd of charging buffalo coming right at them.
As an aside, this ignoring the obvious is not limited to media. As I type, Congress is raising the debt ceiling and guaranteeing trillion dollars deficits for years to come. Despite snarky comments about politicians, I am confident that most can do simple arithmetic. Yet, talk to people about the dangers of the huge national debt and their eyes glaze or they tell you that you are way too gloomy. How about the global water crisis? Capetown is in trouble again as is Mexico City. Parts of Africa are no longer viable for agriculture and millions have no choice but to move. How will countries handle this? Our infrastructure is in terrible shape. Bridges and roads are unsafe and our airports are antiquated. People and politicians shrug and kick the can down the road knowing that it will bite and bite hard and expensively some day. Finally, the big one—climate change. The world gets hotter and hotter, air gets dirtier, the oceans keep rising. If not now, when?
Dornbusch’s Law is alive and well. As a young adult, I followed closely a small northern New England town and their need for a new water system. They issued bonds and established a “sinking fund” to redeem the bonds in 25 years. Money was added to the sinking fund each year and earned market interest. At the end of the term, the bonds could be redeemed in full with no increase in taxes to cover the large bill. A few newcomers at the town meeting suggested not creating the sinking fund. The flinty old Yankee running the meeting was having none of it and neither were the long standing residents. They were not Wharton MBA’s but saw a clear problem down the road and dealt with it immediately accepting minor pain but avoided a larger problem years in to the future.
Yes, it is human nature to procrastinate. Yet, hurricanes of all kinds are coming. We need to board up the doors even if it is a few years early.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, July 31, 2019
Tuesday, July 23, 2019
Immigration and Demographics
You hear a great deal about immigration these days. Most of the discussion is heated and there appears to be great polarization on the issue. If you look at American history, there has never been a rational process for immigration in perhaps the last 150 years. I will not get on a soapbox and discuss the current political debate other than to say that, as both a father and a grandfather, separating families, especially little children from their relatives, disturbs me more than anything in my lifetime. The media focus on the current controversy but mostly ignore the big issue to come.
Okay, let’s get in to my wheelhouse—demographics. We need immigrants in the United States now and, in the future, the need will become even more acute. It does not have to do with politics. The issue has to do with two wonky terms—The Age/Dependency Ratio and Zero Population Growth (ZPG). In 1980, there were 19 people 65+ for every 100 aged 18-64 in the U.S. Now, there are 25 persons 65+ for every 100 who are 18-64. By 2030, census projections are that there will be 35 persons 65+ for every 100 of traditional working age 18-64. Already, this is putting a strain on Social Security and Medicare as those systems are basically “pay as you go” meaning that taxpayers pay in but the outflow goes largely to the rapidly growing 65+ demographic.
Coupled with the Age/Dependency ratio is Zero Population Growth also known as ZPG. In order for a population to remain stable, the fertility rate need to be 2.1 children per couple. During my youth as an early baby boomer, it was 3.7 children on average. In late 2017, it fell to 1.76 meaning that America will face a decline in population along with workers paying in to Social Security, Medicare and the IRS in the years to come. Bring this up even with erudite people and they agree but say that we are in much better shape than Italy and Spain which now have a fertility rate well below ZPG at around 1.0. That is true and will let us observe what will happen to Western countries along with Japan that are below ZPG. Yet, our problem gets worse even though intelligent people see it coming and do nothing.
In 15 years or so, America will be faced with some tough choices:
1) Cut benefits in Social Security or Medicare (or means test Social Security and tax much of it away from the affluent, raise the age for eligibility, or raise Social Security taxes). These would all work in some combination but are they politically viable?
2) Raise taxes sharply across the board and not just on the top 1-5%.
3) Allow more immigration.
Throughout our history, immigrants have been a driver of growth in America. Today, they tend to be eager, hard workers and many are entrepreneurial. They are coming from places that were struggling or dangerous and buy into the American Dream big time. We need them now more than ever as demographics are an unstoppable trend or, as I have often said, “Demographics are destiny.”
For me, America has always been an idea even more than a place. You have the freedom to fail or to make something of yourself. My tough minded Irish catholic mother once said to me—“Foreigners often are taught to know their place—in America, you make your place.” I was 22 when she said that and it has stuck with me. Perhaps that is why people who are American immigrants tend to be so aspirational.
Years ago, I finished a client meeting and some clients and I were at an airport. The senior client bought us all a drink. He asked us all our ancestry. When my turn came, I said that I was largely Irish and a bit English. He then asked when did our families come to America. I was a bit uncomfortable but told the truth. James Cole came to Plymouth, MA in 1631 ( a few ships after the Mayflower). One of the clients, not the boss, said: “Wow, you are more of an American than the rest of us.” I replied carefully that no, we are all Americans and someone who took the oath of allegiance that morning was every bit as much of an American as I. They called their flight and the clients scattered. As I picked up my roller board and headed for my gate, a man stopped me. “I heard what you said (I was at the next table), and wanted to shake your hand. I became a citizen two years ago and am very proud but people sometimes tell me that I am not really an American.” I said, “they do not know what an American really is, I suppose.”
We need immigrants. Demographics do not lie. They can save us from a lot of pain.
If you would like to contact Don Cole directly, you may reach him at doncolemedia.com or leave a message on the blog.
Okay, let’s get in to my wheelhouse—demographics. We need immigrants in the United States now and, in the future, the need will become even more acute. It does not have to do with politics. The issue has to do with two wonky terms—The Age/Dependency Ratio and Zero Population Growth (ZPG). In 1980, there were 19 people 65+ for every 100 aged 18-64 in the U.S. Now, there are 25 persons 65+ for every 100 who are 18-64. By 2030, census projections are that there will be 35 persons 65+ for every 100 of traditional working age 18-64. Already, this is putting a strain on Social Security and Medicare as those systems are basically “pay as you go” meaning that taxpayers pay in but the outflow goes largely to the rapidly growing 65+ demographic.
Coupled with the Age/Dependency ratio is Zero Population Growth also known as ZPG. In order for a population to remain stable, the fertility rate need to be 2.1 children per couple. During my youth as an early baby boomer, it was 3.7 children on average. In late 2017, it fell to 1.76 meaning that America will face a decline in population along with workers paying in to Social Security, Medicare and the IRS in the years to come. Bring this up even with erudite people and they agree but say that we are in much better shape than Italy and Spain which now have a fertility rate well below ZPG at around 1.0. That is true and will let us observe what will happen to Western countries along with Japan that are below ZPG. Yet, our problem gets worse even though intelligent people see it coming and do nothing.
In 15 years or so, America will be faced with some tough choices:
1) Cut benefits in Social Security or Medicare (or means test Social Security and tax much of it away from the affluent, raise the age for eligibility, or raise Social Security taxes). These would all work in some combination but are they politically viable?
2) Raise taxes sharply across the board and not just on the top 1-5%.
3) Allow more immigration.
Throughout our history, immigrants have been a driver of growth in America. Today, they tend to be eager, hard workers and many are entrepreneurial. They are coming from places that were struggling or dangerous and buy into the American Dream big time. We need them now more than ever as demographics are an unstoppable trend or, as I have often said, “Demographics are destiny.”
For me, America has always been an idea even more than a place. You have the freedom to fail or to make something of yourself. My tough minded Irish catholic mother once said to me—“Foreigners often are taught to know their place—in America, you make your place.” I was 22 when she said that and it has stuck with me. Perhaps that is why people who are American immigrants tend to be so aspirational.
Years ago, I finished a client meeting and some clients and I were at an airport. The senior client bought us all a drink. He asked us all our ancestry. When my turn came, I said that I was largely Irish and a bit English. He then asked when did our families come to America. I was a bit uncomfortable but told the truth. James Cole came to Plymouth, MA in 1631 ( a few ships after the Mayflower). One of the clients, not the boss, said: “Wow, you are more of an American than the rest of us.” I replied carefully that no, we are all Americans and someone who took the oath of allegiance that morning was every bit as much of an American as I. They called their flight and the clients scattered. As I picked up my roller board and headed for my gate, a man stopped me. “I heard what you said (I was at the next table), and wanted to shake your hand. I became a citizen two years ago and am very proud but people sometimes tell me that I am not really an American.” I said, “they do not know what an American really is, I suppose.”
We need immigrants. Demographics do not lie. They can save us from a lot of pain.
If you would like to contact Don Cole directly, you may reach him at doncolemedia.com or leave a message on the blog.
Thursday, July 18, 2019
Is Data All That We Need?
Over the last few weeks, I have put up a few posts regarding some of the strengths of Big Data that were articulated in Seth Stephens-Davidowtiz’s fascinating book, EVERYBODY LIES (Harper-Collins Books, 2017). The two posts generated tremendous response from readers to my personal e-mail and I was pleased to hear from several readers who had purchased and read the book. One person wrote to me with a provocative question that generated this post. He asked, “With Big Data getting so advanced and so quickly, is there any more need for advertising or for media or marketing analysts anymore?”
Well. That is quite a question. Let me attempt to do it some justice.
There can be no question that the quantity and quality of information available to marketers is the best ever. And, it will continue to improve going forward. Marketers who can observe how often an individual visits their sites, how much time and money they spend and what appears to be the price point that will encourage a visitor to pull the trigger and purchase have to be in an enviable position going forward. But, as Peggy Lee once famously sang, “Is that all there is” to 21st marketing and promotion?
A few things seem to be missing here. Over the years I have seen all kinds of business analysts—marketing, media, financial, currency, precious metals, energy, and real estate. The good ones certainly did like good and plentiful data. And, importantly, they were able to interpret it pretty well. Other characteristics certainly entered the mix. The first one to me was curiosity. People who are curious tend not to make for superficial analysis. They dig for details and seem to enjoy what they are doing. The best employees and students that I have enjoyed being around are not those with a natural aptitude necessarily. It is those who are on fire with the topic and never stop wanting to learn and understand more. People who perpetually ask “why” often make the best analysts.
The next issue is harder to pinpoint and it is creativity. Can someone be a creative coupon or natural gas analyst? Absolutely! I have seen it. So, as Big Data grows the batting average for promotions and finding the optimal pricing of an item will likely get better—sometimes much better. Yet, laying creativity and curiosity on top of the real world data could likely turbo-charge marketing return on investment.
For years, if you have wadded through the hundreds of MR posts (thank you!) you will notice that a theme that I have returned to several times is that entrenched companies will increasingly have a huge advantage over new enterprises when it comes to introducing a product. Colgate can simply do a line extension into oral care and get distribution, consumer acceptance and market share often without an enormous dollar commitment to marketing. Don’s toothpaste, made in a tiny lab, will face a much more precarious road to success and will likely disappear or, if the firm is lucky, can be bought out by a giant.
So, Big Data can be helpful. Yet, how do reach the people not buying from your site currently or from Amazon? Word of mouth can only carry you so far.
My conclusion, then, is that we need more than just data. The Big Data information is accurate and marketing gold, for sure. Even as conventional advertising is cut back in the years to come, savvy analysts will still be needed to make clever judgements to maximize results.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.
Well. That is quite a question. Let me attempt to do it some justice.
There can be no question that the quantity and quality of information available to marketers is the best ever. And, it will continue to improve going forward. Marketers who can observe how often an individual visits their sites, how much time and money they spend and what appears to be the price point that will encourage a visitor to pull the trigger and purchase have to be in an enviable position going forward. But, as Peggy Lee once famously sang, “Is that all there is” to 21st marketing and promotion?
A few things seem to be missing here. Over the years I have seen all kinds of business analysts—marketing, media, financial, currency, precious metals, energy, and real estate. The good ones certainly did like good and plentiful data. And, importantly, they were able to interpret it pretty well. Other characteristics certainly entered the mix. The first one to me was curiosity. People who are curious tend not to make for superficial analysis. They dig for details and seem to enjoy what they are doing. The best employees and students that I have enjoyed being around are not those with a natural aptitude necessarily. It is those who are on fire with the topic and never stop wanting to learn and understand more. People who perpetually ask “why” often make the best analysts.
The next issue is harder to pinpoint and it is creativity. Can someone be a creative coupon or natural gas analyst? Absolutely! I have seen it. So, as Big Data grows the batting average for promotions and finding the optimal pricing of an item will likely get better—sometimes much better. Yet, laying creativity and curiosity on top of the real world data could likely turbo-charge marketing return on investment.
For years, if you have wadded through the hundreds of MR posts (thank you!) you will notice that a theme that I have returned to several times is that entrenched companies will increasingly have a huge advantage over new enterprises when it comes to introducing a product. Colgate can simply do a line extension into oral care and get distribution, consumer acceptance and market share often without an enormous dollar commitment to marketing. Don’s toothpaste, made in a tiny lab, will face a much more precarious road to success and will likely disappear or, if the firm is lucky, can be bought out by a giant.
So, Big Data can be helpful. Yet, how do reach the people not buying from your site currently or from Amazon? Word of mouth can only carry you so far.
My conclusion, then, is that we need more than just data. The Big Data information is accurate and marketing gold, for sure. Even as conventional advertising is cut back in the years to come, savvy analysts will still be needed to make clever judgements to maximize results.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.
Monday, July 8, 2019
Land of Opportunity?
If you are of a certain age, as I am, you grew up being told and probably believing that America is the land of opportunity. For many of us, it certainly has been. The combination of working hard and steadily, saving, and playing by the rules has paid off for many. Yet, as a person who deals almost daily with demographics, I have often had a gnawing feeling when I looked at income, education and lifestyle distributions. Is this still or was it ever really the land of opportunity?
My last post was about Big Data and I recommended that readers get a copy of Seth Stephens-Davidowitz’s EVERYBODY LIES and devour it. A study that he mentioned in that book will be the topic of this post.
Most of us have looked at hundreds or, in my case, thousands of research studies both long and short, superficial and occasionally profound. One question I always need answered is how large is your sample, how was it drawn, and what geography did it cover? People often brag about the number of observations that they have—500, 800, 1000! Well, Seth found us the veritable mother load of observations. A study from Raj Chetty at Harvard tracked the tax records of all Americans over a period of several years(using actual IRS data). This treasure trove of data gave them a staggering 1.2 billion observations. Now, the knee jerk reaction of many who hear of that kind of any unwieldy base is to say that a traditional survey would have given them remarkably similar answers. They are probably correct. Yet, what Professor Chetty did with the data was different—with so many observations, he was able to drill down and deep GEOGRAPHICALLY. What he found was enlightening, disturbing, yet made a great deal of sense.
Previous global studies found that if one were born in the bottom 20% of a society economically their chance of reaching the top 20% was as follows:
United States 7.5%
United Kingdom 9.0
Denmark 11.7
Canada. 13.5
The U.S. does not do well in terms of upward mobility, it would appear.
Chetty, with his massive collection of cold income facts, was able to break out the U.S. by MARKET.
Here is what popped and is quoted in EVERYBODY LIES:
San Jose, CA 12.9
Washington, DC 10.5
Unites States Average 7.5
Chicago, IL 6.5
Charlotte, NC. 4.4
Amazingly, he also tracked people who moved from a metropolitan area that was a low performer to one that had greater prospects for upward mobility. The results? Over time, people who moved or their children had a higher probability of climbing the rungs of the financial success ladder. Other issues emerged that backed this up. College towns did better despite lack of high wealth as it appears the local professor population demanded and fought for better schools. Low income students did well perhaps due to peer pressure from children of academically advanced parents. So, concluded Stephens-Davidowitz, “some parts of America are better at giving a chance to escape poverty than others.”
Also, a few other trends emerged. The top 1% of women in income live 10 years longer than the bottom 1% of women. With men, the gap is a staggering 15 years! Poor people in a city with a lot of rich people live longer than those not surrounded by the wealthy. Professor David Cutler says it could be due to “contagious behavior.” The wealthy work out, eat better, tend not to smoke, and like less pollution. Poor people in wealthier cities tend to mimic that behavior.
Absorbing all this makes me pause a bit. I am not saying that pre-destination reigns in America. Young men and women can “pull themselves up by their bootstraps” and overcome adversity in many cases. But, it has always been hard and given certain structural issues in our society today, it may be getting even harder.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
My last post was about Big Data and I recommended that readers get a copy of Seth Stephens-Davidowitz’s EVERYBODY LIES and devour it. A study that he mentioned in that book will be the topic of this post.
Most of us have looked at hundreds or, in my case, thousands of research studies both long and short, superficial and occasionally profound. One question I always need answered is how large is your sample, how was it drawn, and what geography did it cover? People often brag about the number of observations that they have—500, 800, 1000! Well, Seth found us the veritable mother load of observations. A study from Raj Chetty at Harvard tracked the tax records of all Americans over a period of several years(using actual IRS data). This treasure trove of data gave them a staggering 1.2 billion observations. Now, the knee jerk reaction of many who hear of that kind of any unwieldy base is to say that a traditional survey would have given them remarkably similar answers. They are probably correct. Yet, what Professor Chetty did with the data was different—with so many observations, he was able to drill down and deep GEOGRAPHICALLY. What he found was enlightening, disturbing, yet made a great deal of sense.
Previous global studies found that if one were born in the bottom 20% of a society economically their chance of reaching the top 20% was as follows:
United States 7.5%
United Kingdom 9.0
Denmark 11.7
Canada. 13.5
The U.S. does not do well in terms of upward mobility, it would appear.
Chetty, with his massive collection of cold income facts, was able to break out the U.S. by MARKET.
Here is what popped and is quoted in EVERYBODY LIES:
San Jose, CA 12.9
Washington, DC 10.5
Unites States Average 7.5
Chicago, IL 6.5
Charlotte, NC. 4.4
Amazingly, he also tracked people who moved from a metropolitan area that was a low performer to one that had greater prospects for upward mobility. The results? Over time, people who moved or their children had a higher probability of climbing the rungs of the financial success ladder. Other issues emerged that backed this up. College towns did better despite lack of high wealth as it appears the local professor population demanded and fought for better schools. Low income students did well perhaps due to peer pressure from children of academically advanced parents. So, concluded Stephens-Davidowitz, “some parts of America are better at giving a chance to escape poverty than others.”
Also, a few other trends emerged. The top 1% of women in income live 10 years longer than the bottom 1% of women. With men, the gap is a staggering 15 years! Poor people in a city with a lot of rich people live longer than those not surrounded by the wealthy. Professor David Cutler says it could be due to “contagious behavior.” The wealthy work out, eat better, tend not to smoke, and like less pollution. Poor people in wealthier cities tend to mimic that behavior.
Absorbing all this makes me pause a bit. I am not saying that pre-destination reigns in America. Young men and women can “pull themselves up by their bootstraps” and overcome adversity in many cases. But, it has always been hard and given certain structural issues in our society today, it may be getting even harder.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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