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
Thursday, December 15, 2011
Friday, December 9, 2011
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
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
Friday, December 2, 2011
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
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
Saturday, November 19, 2011
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
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
Friday, November 11, 2011
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
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
Sunday, November 6, 2011
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
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
Wednesday, October 26, 2011
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
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
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