Is It Different This Time?

There is an old saying in the stock market that  shrewd players say should always be avoided. It is simply "this time it is different." Time and time again, market prognosticators have been proven wrong as they claim we are in a new paradigm and yes, this industry or specific stock will grow to the sky.


Well, when it comes to structural changes in the economy, I would say that this time things will truly be different.


My topic, of course, is mechanization joined by robotization. Changes are beginning to take shape that may well open up a unique labor situation in the developed world.


Prominent socialists led by Marx and Engels forecast that mechanization in the mid-19th century would lead to massive displacement of middle class labor. They projected that people would revolt and socialism would take the place of the free market. They were wrong. They did not foresee Carnegie's steel mills, Rockefeller's inexpensive oil, or Henry Ford's $280 roadster fueled by gasoline. Additionally, they did not see the emergence of millions of white collar and clerical jobs emerging and the growth of educated professionals as well.


What now? Here is where I think things could be different. This time around the while collar jobs will be eliminated. True, new technology does create new jobs to a certain degree and some small new sectors job-wise will emerge from our new wave of technology. * Yet, the losses inevitably appear to be greater than the new positions (for humans) created.


Joseph Schumpeter popularized the term "Creative Destruction." His thesis was that new improved technology and products wiped away the old and were major sources of profit. Can anyone argue that Microsoft, Apple, Amazon, Facebook and Alphabet (Google) have not been wildly profitable? Now, what gnaws at me almost daily is that the changes to come will be profitable for stakeholders but the number of new jobs will not replace the millions lost as old markets are destroyed.


Everyone understands that self drive trucks will eliminate maybe 350,000 jobs in the U.S. over the next 20 years. Yet, what about the office jobs lost with the new tech?


Ad agencies will need far fewer people. Some day (will not forecast when), the broadcast market will be replaced by online exchanges similar to what is happening with online advertising trading. Far fewer people are needed and the "bust your chops negotiators" from central casting may find themselves unemployable sooner than you think. Big Data analytics will take some or much of the fun out of advertising and marketing but why spend $375,000 to shoot a high quality commercial and $10 million to run it on programming where attentiveness is very low? As Big Data improves, Amazon and fellow travelers will help us reach the Holy Grail of marketing--reaching the right people, with the right message, at the right time for far less money than now.


I have another conclusion regarding the rise of robots et al that invariably generates a lot of flak from existing marketers, media salespeople and emerging entrepreneurs.


My thesis is that in addition to the elimination of millions of white collars jobs over the next two decades, existing global brands will be in an even more powerful position than they are right now. With so many platforms out there, young and questionably funded upstarts cannot build brand awareness or trial easily. Yes, a few upstarts will break through as they always seem to do. Those success stories will be even fewer than today.


Big players such as Nestle, General Mills, Coke, Pepsi, P&G, Colgate-Palmolive, Unilever and Kraft may simply resort to line extensions to expand their brand families.


Now, if million of white collar or middle class jobs are eliminated, how will our economy be affected given that some 72% of it is consumer driven?


Some people are saying that the robot revolution will take the entire economy down as far fewer people will be able to purchase many consumer products.


A solution of sorts has been floated in recent months by many people including Mark Zuckerberg of Facebook, Ray Dalio of Bridgewater Associates (large hedge fund) and Sir Richard Branson of the Virgin group of companies. It is Universal Basic Income. The concept is that everyone gets an income whether they work or not. These three billionaires are essentially saying that as Robotics and Artificial Intelligence grow, there will be huge and unprecedented dislocations in the labor market. Millions will be out of work with no hope for employment. So, a basic income must be provided.

I have issues with this. Some milennials have told me that a Universal Basic Income will be necessary. Yet, they are excited about it as young people will have a basic income and can pursue entrepreneurial or scholarly ideas. I agree that a guaranteed income could produce the next Hemingway or Fitzgerald or perhaps Steven Spielberg. At the same time, I think that many will become idle and drink too much, watch TV and not accomplish a lot in life. If you think we have an opiate crisis now, image if millions more, especially in economic depressed areas now,  are displaced with little hope for a leg up via a good job?  Also, what type of cycle of dependency would be created if people knew they had an income (very modest) for life? It would seem that income inequality would have to soar far beyond what it is today. Experiments are now going on in both Finland and Ontario, Canada with the Universal Basic Income.

Recently, I ran this idea by someone whom I admire very much but who is far more liberal politically than I (not hard). She surprised me by having the same concern about a long term cycle of dependency. Also, she stated that unless you are old or handicapped, you need to do something. She suggested a revival of something similar to the Works Progress Administration (WPA) from the Great Depression years as a link to Universal Basic Income. Yes, it might create still another bureaucracy but it might save the spirit of millions.

So, the next 20 years may truly be different. Businesses are going to squeeze costs out and answer to shareholders by increasing profits. Robots and Artificial Intelligence will likely not be stopped.

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

*this concept was best illustrated to me in the writings of Professor Randall Collins of the University of Pennsylvania
   

Superficiality

My favorite definition of superficiality is appearing to be true or real only until examined more closely. In the business world, and perhaps even more sadly, the personal one, I have found that superficiality rules.


Over time, I have heard people say that they had made a really "deep dive" into a particular topic. Dig a bit deeper into their "analysis" and it is clear that the analysis they provided was superficial at best. At the same time, if you try to examine a topic from many sides, people are annoyed. I once had a boss who would ask me a question and he would stop to interrupt me and tell me to give him "the bottom line." Sometimes it was okay, but often the issue and my recommendation or analysis was next to impossible to articulate in 30 seconds. I took to sending him a long memorandum as a follow-up. He must have had a reverence for the written word as he would devour it and pass it on to others in top management. I believe it really helped my career and also discovered that he was not a master of discretion. So, after a few years, I would hand him a memo and plead that it would be "for his eyes only." My Machiavellian tactic worked great as, within 24 hours, six or seven people would tell me they had read my confidential report and liked it. I did not do this often but it helped my career and gave me a reputation as being thoughtful.

So these days and for maybe the past two decades, I try to surround an issue. If I am exploring a new topic, I often read five-six books about it. Invariably, my initial thought is wrong. As a follow-up, I always look for articles or new books that refute the position that I have taken after taking the initial plunge in to the topic. I realize that this takes time and often, in business, you have to pull a lot of information together and make a fairly quick decision. All too often, however, people make their initial decision and never revisit or explore new data a year or 10 years later when the landscape has likely changed.  With things happening at warp speed in the new world of media, I am really surprised by what I hear, see and read from alleged media professionals these days. A few examples:

—someone whom I never worked with but have known for years, sent me a draft of a media plan for an important client of his. I read it and initially was impressed by what a carefully crafted analysis he had made. As I worked toward the end, my blood pressure surely must have been rising. He provided TV performance estimates (i.e., reach & frequency projections) that were sky high and would have been questionable 20 years ago. When I confronted him with my concern, he said that it did not matter as people wanted to believe the unrealistic projections. I went in to a long monologue about how today milennials (his target, by the way) rarely watch TV without another device going. So, all performance estimates have to be wildly overstated today as they do not and never have really captured commercial attentiveness which now has to be at an all time low. He left the numbers in and sold the plan.

—more than one person has said that they will not test mobile executions until it gets to a 10% share of advertising expenditures. It will not be too late but why wait and think of what you might learn about this emerging medium in the meantime?

—all too many people still spend a great deal of their budgets in the U.S. even though there are countries where they have solid growth and distribution that have economies expanding at a rate at least twice that of the United States. I never say stop spending at home but with the tremendous wealth shift from the West to the East, this seems very shortsighted.

—in general, many are using media cliches from 20-30 years that no longer apply in today’s world of commercial avoidance and many new platforms.

My friends and acquaintances need to work a bit harder and take an authentic “deep dive” in to a host of issues. One fellow told me that I am too intense and I should imitate him and “coast to retirement.” That is not I and it is not a good way to go out.

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

Media Deals and Scale

In recent weeks the business press and the three business oriented cable channels in the
U.S. have been buzzing about possible mega-media buyouts of famous names.

The most prominent has been 21st Century Fox selling part of its asset base to Disney. Why would they want to do that?

Well, their entertainment business is not overly profitable as most movie studios are not. They appear to want to keep their broadcast network, Fox Sports, and Fox News and Fox Business. Why would Disney want their movie studio, perhaps FX and a few other properties? Soon, Disney will launch their own exclusive streaming service. They could use the huge backlog of films that Fox has in their library. If Disney wishes to take on Netflix, they need lots and lots of content. Some things they cannot buy from Fox. Disney owns ABC so the Fox Network is off limits legally. Given that they own ESPN, Fox Sports is a non-starter as well.

The issue that many talk about regarding the the legacy media companies is that they lack “scale”.  In today’s world, bigger is invariably better (with very few exceptions) and “content is still king” proving that Sumner Redstone was right about 30 years ago when that term was attributed to him. Speaking of Redstone, how much longer is CBS viable as an independent entity? For decades, CBS was “The Tiffany Network” that dominated the Nielsens most years and made executives and shareholders a fortune. They still have an impressive lineup of assets including everything with a CBS in front of the name plus Showtime, CW, Smithsonian Channel, and Simon and Shuster among others. Yet, they are increasingly becoming a small player in the scheme of future media. Their market capitalization as I write is $22.6 billion. Impressive compared to thousands of publicly traded companies. Yet, according to both The Wall Street Journal and CNN, Apple has $262 billion in cash parked overseas. So, technically, they could purchase CBS whole without effecting their cash on hand much and with no debt.

We live in an unusual era where the greatest companies that have ever existed are literally busting with cash. In addition to Apple, Alphabet (Google), Amazon, and Facebook all in the position of buying out almost anyone. So, what does all of this mean? To me, Disney is doing the right thing to possibly buy portions of Fox simply to stay viable in our brave new world of media. CBS does not appear long for this world. In recent weeks, both Apple and Facebook have announced that they will be producing original video content. This has to make Netflix a bit nervous as these monsters may lose a few billion a year on their video ventures for a long time and never run out of funds. Also, Alphabet has never fully monetized You Tube although they appear to be making small steps in that direction.

One thing few people are talking about is that with more players such as Apple and Facebook getting in to creating content (likely without commercials), this has to be another body blow to advertiser supported TV. There are only so many hours in the day and Netflix, Amazon Prime Video as well as non-commercial stalwart HBO continue to grow. When viewers are given more options from Apple, Facebook and YouTube, TV, as we know it, has to suffer.

My forecast is not particularly prescient or brave—the ultra big will only get bigger and legacy media companies will likely have to sell out fairly soon to survive.

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

I Am Too Old To Change

I have been involved in the world of business for well over 40 years. In that time I have heard a line from dozens of people that really annoys me or makes me sad in some cases. It is simply, “I am too old to change.” The world is changing at a faster pace than ever before. Using the “too old to change” excuse strikes as a stalking horse for completely giving up.  I have heard people use it for refusing to lose weight, start an exercise program, stop spending so much, and, of course, not embracing our digital age either personally or professionally.

A particularly poignant example came from someone in the advertising agency business who felt that his days were numbered. He is a deeply experienced creative who has won numerous awards for his TV creative and great print executions. When he wrote to me and said he was too old to change, I laughed out loud. “How old are you, I fired back? 53?” He replied, slightly wounded “51.” I told him that he was much too young and too talented to be throwing in the towel and waiting for the end. “We are all dinosaurs”, I went on, but “even I, far older than you, have shifted gears a great deal in recent years. If I can do it, so can you.”

To me, the important thing is to not pretend to have an overnight conversion. You can, however, be seen as shifting how you spend your time, and getting current over a fairly brief period. It requires quite a bit of reading, perhaps attending a conference or two on your own nickel, and asking questions to younger staffers who may look at you as a person whom the business has passed by.

The habits of a lifetime are deeply embedded in most people. Yet the business landscape, especially, the media world is changing rapidly and no one can sit tight and try to ride it out until retirement. Success is largely a matter of perception. If you say that you cannot do something new, then you surely cannot.

My attitude, perhaps a bit simplistic, is that if you are still breathing, you can change. All of us have seen people who have changed for the worse in many ways, but honestly, I have seem a number that I have seen change for the better as well.

One person whom I know very well says that he is working tooth and nail to restore his relationship with every member of his family. It is tough going and his wife tells him that he can never achieve it given his years of mistakes and former broken promises. I wish him well and sense a greater determination in him than ever before.

As C.S. Lewis wrote, “You are never too old to set another goal or dream a new dream.

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

Demographic Update

For years, I have been pounding the drum telling people that demographics should be the first line of analysis for media placement, marketing, investment and societal issues. I use them everyday and any forecasting that I do is usually tempered by a heavy dose of demographic scrutiny. Last June, the US Census Bureau released some updated figures across several financial measures that I would like to share with you. What I like about the Census Data is not simply the size of the sample. It is that they often provide the median for many things that they measure.

You have all heard the old line that “you can drown in a river with an average depth of six inches.” The average, of course, is the arithmetic mean. I do not find it particularly useful when looking at many demographic characteristics and especially so when it relates to income, net worth or wealth. The median makes far more sense to me. It is the 50th percentile so it takes out the extremes at both the top and the bottom.

So, here are a few Census factoids:

In the U.S. median household net worth is $80,039. Take out equity in their primary residence (if they have one) and it drops to $25,166. So, in other words, sans house many American families have $25k or less in assets.

We all check our retirement accounts regularly. The median value of retirement accounts was reported as $58,500 (it has to be higher now with the recent record breaking rally on Wall Street). Still, not a fortune especially if you are over 50. And, some one third of working Americans have a retirement account balance of zero.

Some good news came from the Federal Reserve recently. Median household income hit an all time high by the end of 2016 and was at $59,039. The problem is that it was at $58,665 in 1999. So, when pundits say that the middle class is stalled or disappearing they are not exaggerating. It has been a tough slog back for millions of American families to recover from the Great Recession of 2008-2009.

What about earnings? The Census tells us that just under 45% of U.S. households have an adjusted gross income or taxable income (after exemptions and standard deductions) of under $30,000. Some 80% have a taxable income under $100,000 and approximately 5% over $200,000.

In the U.S., the Federal Reserve tells us that the top 1% of households have 38.6% of the net worth. The bottom 80% have 23.8% of U.S. assets.  Credit Suisse measured it globally and the top 1% control  almost exactly 50% of the world’s wealth. Credit Suisse also projects that the top .7%  worldwide are millionaires in U.S. dollars.

As marketers who are in the higher echelon of both income and net worth, can we truly relate to these data? Our economy has clearly improved, albeit slowly, the last few years, but financial markets have done very well. Yet, only 51.9% of Americans have any holdings in equities. So, the bottom half has benefited not at all from a 23,000 Dow Jones Industrial Average.

I hate to end on a sour note but I cannot resist mentioning a new and, to me scary, milestone regarding the national debt. This year the national debt is crossing the $20 trillion dollar mark. It will be 7% more than our Gross National Product(GNP) this year. So what, you may say, that is just a number. Well, economic historians often place an 80% national debt to GNP ratio to be a danger zone. Yes, we are lower than Greece, Japan and many European nations. It still, however, gives me pause. Will our new tax reform or cuts, if they pass, be revenue neutral? It seems unlikely. And, my friends, what about the unfunded liabilities in Social Security, Medicare and Medicaid?  They are somewhere between $100-200 trillion without reform. How about  one more zinger? If we ever have real interest rates again, not 12%, but let us say, 5%, the annual budget deficit will soar out of control as most of our national debt is now short term at artificially low rates.

So, we face growing wealth inequality and huge debt and how do we market to the struggling 50th percentile and below?

Time for a drink. Cheers!

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

Can It Go On Forever?

Herbert Stein was Chairman of the Council of Economic Advisors until both President Nixon and Ford (He today may be more famous for being the father of writer, humorist, sometime actor and investor Ben Stein). Urban legend credits Stein with saying, “If something cannot go on forever, it will stop.”

Over the last ten years, two weeks have not gone by where someone has not asked me something close to this: “TV just does work as well as it used to. When will it stop getting so much advertiser money?”  Usually, if it is in person, I break in to my version of a Mona Lisa smile and say simply that I just do not know. If it is in an e-mail, I often conjure up Herb Stein’s alleged quotation.

Years roll by and people foolishly say that this year will be the last of the network upfront market. Yet, each spring the cavalry charge begins anew and smart people place big bets on a declining medium where all of us admit attentiveness to commercial messages is at all time lows. I stay silent. Yes, the bomb is ticking but the fuse is longer than most of us suspected. Or, as Lord Keynes put it, “Markets can stay irrational longer than many can remain solvent.”

Why does TV still get such a large share of advertising funds? Well, to me, it is pretty simple. Social media is exciting but does it move the needle for most products? Mobile may have the most potential but is still in its early stages of development and the message has to be very spare. TV is a safety blanket for marketers. You know it still can move sales but ratings are lower and over-state attentiveness more than ever. It is still the gold standard for many and Nielsen, though tarnished, remains the currency by which the medium is measured and attentiveness be damned.

For years, I have encouraged advertisers to branch out and test other platforms but not abandon TV altogether for many products. Each year, it seems the case for a substantial investment in TV gets weaker. Yet, as the economy rebounds, so do broadcast revenues.

I suppose that the great late American philosopher, Lawrence Peter “Yogi” Berra said it best—“It ain’t over ’til its over.”

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

Letting Go

A few years ago, I ran in to a former colleague at a store. It had been perhaps 15 years since I had seen him. We spent a few minutes catching up and then he asked if I ever ran in to Mr.X, whom we had both worked with at the same time. When I told him that I saw him every few years accidentally,  just as we were meeting now, he exploded saying that he hated the bastard and would like to punch his lights out.


I smiled and he did not think it was funny. He went off on a long riff as if it were yesterday of all the horrible things the man had done to him. "He was awful to you, too.  Remember the day he threw you under the bus at the client meeting so he could look good?" I agreed that I remembered it.


He was annoyed that I seemed so calm about it all. I gave him my standard speech about not looking at life through a rear view mirror. He shook his head rather violently. "What are you going to say next, Don? That I should do some expressive writing and get him out of my system or chant and meditate? Get a personality transplant?"


I told him pretty directly that this was hurting him a lot and not the person with whom we both had serious issues. Stealing a well worn line, I told him that he "was swallowing poison and expecting the other guy to die."


This broke the ice and I pulled out another platitude. Life has been good to both of us and we survived and prospered over the last few decades. I went on to say that you cannot live in the past or the future but only in the present. That jerk will not likely be part of our day today or tomorrow so let’s move on.


Letting go is hard to do. We all need to do it. I find that I can forgive and have done so on a number of times but forgetting is a lot harder.  People have also forgiven me. As I get older, I also find that I try to see the issue from the point of view of whomever was my nemesis. Was I wrong? Was he or she going through significant personal turmoil at the time so they lashed out at  those beneath them corporately (That proved to be true several times)?

Living in the present is liberating and, candidly, it is all that we have. If you are holding a long standing grudge, why not give it a try?

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.