Millennials and The Double Whammy

A number of years back, demographers tagged those born between 1981 and 1996 as a generation that they called Millenninals.  When any new generation is defined, most of us have high hopes for them. Millennials were particularly interesting as they grew up with digital technologies and had little or no fear of them. The thought among many of us is that they could blaze a trail faster and better than those of us born decades before. Some of them did. Many of them, however, got hit by two financial crises that have put their long term prospects in jeopardy. 

The first crisis was The Great Recession of 2008-2009. Unemployment jumped from about 4.8% to 10.8%. Detailed studies from major institutions have shown that if you begin your career during a recession your earning power may be stalled for a decade or more and you may never catch up with those somewhat older than you. Adding fuel to the fire was that companies could be stingy with raises given the low or no inflation environment coming out of 2008-2009.  Once burned Millennials knew the importance of steady employment and were often timid about pushing for higher pay. Prior to the Great Recession, home ownership in the U.S. hit an all time high of about 68%. During the recession, it fell to about 60% and has never returned to the pre-crisis high. Why? Well, Millennials were not as confident as previous generations and also could not save enough to put down a 25% down payment on their first homes. Also, the average student loan debt was at $36,000— a huge millstone around a young person’s neck. You could declare personal bankruptcy but you still owed on your student debt.

In recent years, many Millennials dug themselves out of their financial holes. Things were looking up. All that changed this spring when Covid 19, a once in a hundred year event, hit the global economy hard. Many who lost their jobs in 2008 are again unemployed. Yes, government had provided a safety net for many although further help is in limbo as I write. Many Millennials have to be discouraged. Looking at every net worth statistic that I could find (and I love to dig), Millennials are behind previous generations in terms of net worth at the same age.

Yes, the stock market has rallied back smartly from the March lows so many of us are whole again financially but remember, some 50% of those 55+ have NOTHING saved for retirement so the current spike in equity prices has not affected them at all. Even Millennials who dutifully contributed to their 401k or 403b plans are behind many slightly older Americans. Also, if you are unemployed you are no longer building wealth via contributions to retirement plans and you likely are tapping what you did have to cover living expenses. 

I vividly remember reading Malcolm Gladwell’s first two books, OUTLIERS in 2008 and THE TIPPING POINT in 2010. He alluded to that when you are born has more of an influence on your success in life and your attitudes than you might think. As a Canadian, he gave an example of how junior hockey leagues put small fry born on January first in the same group as those born in late December. The January kids tend to be bigger, stronger, and more coordinated and get more attention and often how more success than those born late in the year. 

I think of my own life as an early baby boomer. Yes, I had to worry about Vietnam and the deep recession of 1974 when entering the job market but the booming 80’s and roaring 90’s more than leveled the playing field for me and my contemporaries who took their work seriously. Certainly, there will be a few million Millennials who will shrug off the Covid 19 deep recession and be great success stories. Realistically, however, I fear that there may well be several million more who will be left behind.

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

A Mild Defense of Wall Street

 In some quarters, it is fashionable to trash Wall Street. The media keeps hammering financial executives for their large compensation packages and politicians love to go after them. In 2016, the colorful Bernie Sanders, Senator from Vermont, and an avowed Democratic Socialist, basically gave the same speech at every rally and in every debate. In essence, he repeated the same spiel in his 2020 run for the White House. One line in Bernie’s stump speech that I heard and read so much I memorized. From memory, the lively Senator said, “Greed, fraud, dishonesty and arrogance, these are the words that best describe the reality of Wall Street today.” 

Senator Elizabeth Warren of Massachusetts also has Wall Street as a target and is far more disciplined in her comments and does a lot of digging before she launches a broadside at Wall Street. While I think she goes too far in her attacks, I must say that I was glued to C-Span when she took apart Wells Fargo executives among others at a Senate hearing a few years back. She moved methodically and relentlessly and would not accept the way that squirmy titans tried to rationalize their actions. At the same time, her solutions, to me, are way too broad. Break up the big banks, put in confiscatory taxes and lay on big regulation. Directionally, she is correct. Something is indeed wrong at times. Yet we need reform, not revolution.

Imagine if Wall Street (the financial world as we know it) did not exist. Do you like your I-phone? Apple products? Your cars? Your credit card with the huge credit limit or cash back features? Amazon Prime? Netflix? Disney Plus?  How about 21st century medicine? Without it and the financial backing that Wall Street provided, I am sure that I would have been dead a few decades ago. Wall Street, by providing big time financing has allowed entrepreneurs to grow far faster. Without a strong finance industry, we might still be living in something akin to feudal or colonial times. With all its flaws, I will take 21st century America without any hesitation. We need a robust financial world that fosters innovation and new ideas and entrepreneurs. BUT, the players need to play by the rules.

I have been following this topic for 50 years. Don’t believe me? Read on, my friends. Get comfortable. This will take a few minutes.

Back in 1970-72, I was studying economics. I did not like it; I loved it. To me, the way markets moved was fascinating and still is. I was taking a course in Money and Banking and another in History of Economic Thought. It was a small school so I was able to work on a detailed paper that would apply to both courses. My topic was Swiss Banks. As I dug in to it, I was fascinated by a group of institutions known as private banks. They were not the kind of entities that would want my or perhaps your checking account. They tended to work for high net worth individuals and also, in many cases, operated as investment bankers, raising money for new companies. Names such as Pictet & Cie, Vontobel and Julius Baer topped the list.  What startled me about studying them was a term in the bylaws of the private partnerships—unlimited liability. In other words, if the investment that the private bank made in an enterprise went south, the partners were literally on the hook for the entire amount of money. Even as a young pup, I understood how that they were putting their ENTIRE personal net worth up in to the private banking partnership. It was no wonder that, at the time, Swiss bankers were viewed as careful and very prudent. My profs liked the paper and gave me constant encouragement. They told me that investment banking firms in New York had the same set up—if they had big trading losses or backed a loser of a new company, the partners passed the hat and made good on it. 

Over the summer, insufferable nerd that I was, I kept digging in to the topic. Reading through old copies of The Wall Street Journal, I saw that on May 26, 1969 Lufkin and Jenrette (known as DLJ), a modest sized investment banking house, had asked the New York Stock Exchange (NYSE)  Board of Governors for permission to go public. Their argument was that by turning to the public, they would have the capital to do bigger deals. Prior to that time, the NYSE had to approve all stockholders of a member firm. It was, in essence, a club.

To the surprise of many, DLJ received permission as it appears that the Wall Street insiders recognized that for the economy to keep growing, a cash infusion would help spur expansion. When I excitedly discussed this with my mentors in September, they were, as usual, very polite but did not see it as earthshaking in terms of the industry. So, I got on with my life.

I did notice that some financial people did “eat their own cooking.” Warren Buffett allegedly has some 97% + of his net worth tied up in Berkshire Hathaway stock. A friend once told me he slept well at night owning Berkshire shares as he was casting his lot with Warren. A few boutique mutual funds insisted that their money managers had a large portion of their personal assets in the fund(s) they managed as well.

Being a business news junkie then and now, I noticed over the next 15 years that the DLJ initial public offering  was not a one off. Merrill Lynch went public in 1971 while I was still an undergraduate. In 1981, Solomon Brothers merged with commodities heavyweight Phibro and then went public, followed by Bear Stearns in 1985 and Morgan Stanley the next year. I was busy with a young family and noticed it but shrugged. Finally, the most prominent firm, Goldman Sachs, bit the bullet and went public in 1999 and the super secret Lazard Freres was last to join the party in 2006. All of this got my attention and I noticed one thing. Shareholders of these famous firms received rather stingy dividends while a reading of the annual reports exposed that senior management and some young traders (stock, fixed income or commodity) were taking home multi-million dollar bonuses. It was almost as if they were still partnerships. The shareholders (the public) provided the capital but a disproportionate amount of the spoils went to the management. Far more damning was that when they had a bad year, the stock price tanked but many of the seven or eight  figure bonuses continued. This was often dubbed “corporate welfare” or “socialism for the rich” as either shareholders or, as happened in 2008-2009, the taxpayers had to absorb some of the losses. This really triggered the heated comments of Senators Sanders and Warren.

Congress passed the Dodd-Frank bill to regulate Wall Street. It is an impenetrable 2300 pages. I bet that, other than a bleary eyed Liz Warren, nobody else in the US Senate read the whole thing. Smaller banking institutions are finding compliance onerous and expensive. Dodd-Frank undoubtedly had some good parts. Here is my alternative after my 50 years of observation: Go back to some form of unlimited liability for investment bank senior officers. Think about this. If a bank makes a multi-billion dollar mistake again Chagalls and Picassos would come off walls, the ranch in Montana and the ski lodge in Aspen would go on the block, the beach house in the Hamptons would change hands and god forbid, the duplex on Park Avenue would have to be sold. Bankers would get religion pretty damn quickly.

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

The Scariest Demographic Trend

Not quite five years ago, two well thought of academics, Anne Case and Angus Deaton, published a paper with perhaps the most downbeat title ever: “Rising Morbidity and Mortality In Midlife Among White Non-Hispanic Americans in the 21st Century.”  It was published in a scientific journal with the catchy name of Proceedings of the National Academy of Sciences of the United States of America. I know, my dear readers, that many of you are envious of me, but seeing clearly how I spend my time must make you even more jealous. I can almost hear you saying to yourselves, “why can’t my life be as exciting as Don’s?”

The prose did not read like a best selling novel. Yet, if you fought your way through it, as I did, there was some sad and startling information. What leapt off the pages was that from 1999-2014 there had been a significant increase in the death rate of white Americans of middle age. It almost seemed un-American to many at first blush. Historically, each American generation had thrived relative to the previous one and improvements in medicine had lengthened life spans. 

To oversimplify, the authors attributed the rise to what they dubbed “deaths of despair”—an increase in drug and alcohol related deaths, suicides, and cirrhosis of the liver. Prior to 1999, deaths among 45-54 year old men were falling in the U.S. almost totally in line with other “wealthy” nations around the globe. Since 1999, they have taken a U-turn and gone upward. Also, and importantly, deaths of African-Americans and Hispanic Americans among the same age group in the U.S. are almost perfectly in line with the global trends NOT those of U.S. white males of the same age.

So, what was and sadly still is going on?

Deaton and Case drilled down in to the numbers and found that the large majority of the deaths were among Men without a college education. Fifty years ago, poorly educated men in the U.S. lived only five years less than high income men of the same generation. Now, the gap is an eye-popping 15 years. A British columnist put it this way in October, 2016—“Dying half a generation sooner than you might have is bad enough. Expecting to die younger than your parents is worse. It goes against what Westerners in general, and Americans in particular, have taken for granted.” *

Some have put the finger on growing inequality. Labor unions are much weaker than 50 years ago and we have a post industrial economy centered on services and information which do not make skills of many blue collar workers financially fit. So, the American working class in in decline and Artificial Intelligence can only make it worse. Some forecasters are projecting that within 15 years some 2.5 million truck drivers will lose their jobs as self drive vehicles become widespread. Driving a truck provided a fine income for many without a college degree. Political analysts say that Donald Trump’s upset victory in the electoral college in 2016 was due to his ability to tap in the frustration and even desperation of the middle aged- middle class who felt that they are being left behind. The work of Deaton and Case seem to put the light on that political narrative really well.

What can be done? Well, for my entire adult life politicians talk about job re-training for displaced persons due to technological growth. I have seen little in that arena that is meaningful.  Former presidential candidate Andrew Yang suggests a minimum guaranteed income for all as Big Data and Artificial intelligence sweep away millions of jobs in the years to come. That does not strike me as politically viable or healthy for a lot of people given the opioid and alcohol use that Deaton and Case found among the premature deaths.

The other argument is that we can simply grow our way out of it? I have heard this argument used regarding our massive budget deficits in the U.S. That might work if we did not continue to increase spending but politicians lack the will to get draconian. A bigger problem with the issue of growth leveling inequality is that to me it has very little to do with it. A growing economy is fine but it does not reveal a damn thing about how that newfound wealth is being distributed. And, as I have often written in this space, there is always going to be inequality in a free market model although perhaps not as extreme as we are seeing today.

In 1962, Jack Kennedy, trying to sell a tax cut to Congress and the public, said, “A rising tide lifts all boats.” He was wrong then and he would be wrong now. This generation of middle aged men unmasked in the Deaton and Case report is discouraged and increasingly feeling forgotten and their future prospects look pretty awful. Turning around their lives is a big problem that we, as a nation, must deal with. There is no evidence that the situation has turned around in the last five years. It may get a terrible spike as we struggle through the Covid 19 pandemic as well.

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

* Edward Luce, Financial Times, 10/9/16

Marketers, Post a Video!

Way back in 1995, I was doing some unusual things for a media executive. One issue was that I was helping to take some infomercial marketers from Direct Response TV (DRTV) to retail. They were a motley crew of Runyonesque characters but for 18 months or so they broke up the monotony of discussing Reach & Frequency estimates or the pattern of frequency distributions with conventional marketers perhaps far more bored than I. One day, my favorite infomercial guy called me and we had a long talk. He said something very interesting. Apparently, his call center was getting jammed with calls at certain times from people inquiring how his gadget worked. So, he started sending videos of his informercial in with every DRTV sale. Magically, sales continued to grow and the phone only rang a fraction as much as it did a few weeks earlier. He said he planned to do that permanently. I laughed and said it sounded great but told him the TV billing that we did for him might plummet (It did!). My friend asked me what this kind of advertising he was doing and I said it reminded me of an article that I had read recently. I told him that he could call it “content marketing.”

Well, a lot of things have happened since 1995. And, content marketing, truly novel then even when discussed in a package, still has a very nice future. Why? There are a few reasons from my perspective and they are:

1) People watch videos and they like them! Stuck too much at home during this horrendous pandemic. I bet that Netflix, Amazon Prime Video and perhaps Disney + is getting a lot attention from you. Some prognosticators have fragmentary research that says online video viewing is up more than 50% in the last 24 months. It may be a lot higher over the last 90 days.

2) I am an outlier in that I read all the time. Most people do not but their preference for getting information tends to be with videos. They keep their attention, educate in many cases and are considered entertaining. Two recent studies indicate that people learn about a product through word of mouth to a large degree but two thirds say that, all things being equal, they would prefer videos. A textual description only gets the stamp of approval from 18-20%.

3) The track record for videos is strong. Nearly 90% of marketers say that embedding a video in an e-mail increases website traffic significantly. Also, the “pass-along” audience is very solid. It appears that people may not forward a verbal product story to a friend, associate or relative but they will if it is a short video.

4) Videos appear to turbo-charge e-mail marketing. What triggered me to post this is that in recent months, a few readers have contacted me and stated that their e-mail blasts are getting diminishing returns. To a person, none have used a video. In a world where we use FaceTime, What’s App, and Skype with friends, relatives and business associates, a simple video in the mix can certainly help. Amazingly, people are not doing it some 25 years after my friend stumbled upon it.

If this post seems mundane, too bad. Sometimes, people ignore the simple blocking and tackling that all marketers need to do.

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

The Aging Tsunami

So people just will not let go. For a few decades, I have beat the drum saying that essentially “Demographics are Destiny.” Recently, as I was updating some figures, I went back and forth with someone whom I have known for many years. When I told him what I was working on he snapped, “So, Don. You are going to tell me that Republicans are finished as all young people are Democrats and all senior citizens are members of the GOP.” I paused and counted to 50. No, all of any group does not believe to a particular political persuasion. Ronald Reagan, for example, was very popular with young voters as president.

Studying demographics has to be a key factor for all for are marketers or members of the investment class. To me, demographics are a steady and relentless tidal wave that are headed right at the western world. Can they be shifted a bit? On paper, it seems possible but it has not gotten much traction in the real world. Countries as widespread as Singapore and France have provided bounties to families who had more children but the programs have not shifted birthrates with any significance.

So, why bother to study the topic? It is an excellent, and some say the best, long term forecasting tool. Consider this—United State population growth has slowed to the lowest level in 80 years. The under 18 population is actually lower than it was in 2010 when our last formal U.S. census was taken. Many pundits saw the birthrate decline beginning in 2007 and shrugged saying that it was due to the Great Recession of 2007-2009. Well, the birthrate has not snapped back. The U.S. fertility rate is now the lowest in history. And, a survey on family growth recently found that more than half of U.S. Women with one child said that they would not be having another.

You have all heard of Zero Population Growth (ZPG). Women are now having their first child at 27. When I was in college, it was 21. America is now below ZPG (2.1 children) so we cannot replace our existing population. We have now joined most of Western Europe as a rapidly aging society. Census adjusted figures indicate that US residents under 18 have fallen about 1% since 2010 but those over 55 have moved up 8 percent. The New England states and parts of the industrial midwest are getting older the fastest.

Another factoid has come to the fore which surprised me. The mobility of Americans are at a historic low. I understand it now during the Covid 19 pandemic but even before this crisis, people were not moving for jobs as much. Perhaps the high cost of living is keeping people out of San Francisco, Seattle, Boston and New York even though that is where the super high paying jobs are.

What does all of this mean? The math is scary. Our health care system is buckling at present due to the pandemic but what about 30 years from now? How can we keep the current Social Security system going (fewer people paying in and more taking out) not to mention Medicare/Medicaid and some provisions for senior housing? Estimates say that the shortfall for these items is as low as $70 trillion up to $210 trillion. Can these relatively few young bail out us greybeards? The math does not work. We will need reform in entitlements and higher taxes. And, we cannot grow our way out of demographic shifts.

One answer is heightened immigration but that tends to be a tinderbox political issue with many Americans who sadly do not realize that we are a nation of immigrants and young hard working immigrants could really help bail us out of this mess.

Villages in the Great Plains are becoming ghost towns and the trend is showing no signs of slowing down. What happens to small isolated towns when the few youngsters move away and schools close and the nearest doctor is 40 miles away? These are issues that are upon us.

So, the future demographics of the US and Western Europe are nearly set in stone. People who dismiss it as a political hot button miss the point. It will affect the media world, the marketing world, healthcare and stunt economic growth if it considers on its current path.

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

Mediocrity is the Enemy

A long time ago, I was about to graduate from college. I went to say goodbye and thank a man who had encouraged me and mentored me for two years. It was very pleasant and, as we were wrapping up, I asked if he had any advice for me. He said he did not like to give life advice but I persisted. “Okay, Don. Here it is. Don’t live a mediocre life.” Surprised, I promised him that I would try not to. He got a bit stern and said, “Don’t be mediocre. Most of us are.” I did not think a lot about it but, as I have gotten older, I see what he was telling me.

Let’s face it. Most of us do live mediocre lives. We get up each day and go to a job that pays the bills but we do not really love it. In many cases, we are “underemployed” and spend our days doing tasks below our skill level. We never have an impact on our industry or community and more damning, we never achieve our dreams. People start talking about living for the weekends and vacations. They have effectively given up and I have heard them refer to themselves as survivors. It is sad but normal. And, some of them are not even 40 years old.

I have observed a lot of mediocre people and see a dreary sameness to how they spend their free time. They watch too much TV, party a lot, or escape in to a ridiculous obsession with sports. They also (sadly) have certain things in common:

1) They never think big. Not mindless daydreaming of winning the lottery but they have no life plan. They do not live life—it happens to them. And, they wind up bitter.

2) They rarely take thought out and calculated risks.

3) They surround themselves with people who have the same fears of unemployment or winding up broke and with few friends.

So, my young friends out there, may I offer the following advice that I  was given. Don’t live a mediocre life. Look at your environment. Are you friends and family holding you back? Do those close to you tell you that you are lazy or not good enough? Do you go to the same websites all the time? Are you in a comfortable rut? Maybe that is a large part of what is holding you back. Remember the old adage—“If you always do what you’ve always done, you’ll always get what you’ve always gotten.” A cliche, yes. That does not mean that it is not true.

Most advertising is mediocre. Did you notice now how a good commercial stops you in your tracks even in this age of commercial avoidance? Most people are mediocre at their jobs, most Americans of a certain age are overweight, others are close to broke after a lifetime of work but hurt by bad decisions. If you really care about your life, then you should be insulted if you consider yourself to be mediocre. If something is REALLY important to you, you will find a way to change.

Warren Buffett tells graduate students to not “go sleepwalking through life.” That was what my economics mentor was trying to tell me. Find your passion, follow it, and your life will be anything but mediocre.

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

Imposter Syndrome

Happy Birthday, United States.

Virtually all of us at some point in our careers suffer briefly or significantly from what psychologists often refer to as “Imposter Syndrome.”  We may fear that we are not good enough or do not belong in our job or be the person to give a major presentation to a big client or to an industry forum. This often triggers a great deal of anxiety—some people freeze and procrastinate while others bury themselves in work and then their lives get way out of balance. Over the years, many people came to me about it especially before a major event or on taking a new job. Here are some things that I suggested to them:

1) Stop beating yourself up—most of the time, when you present to a group, you are THE expert in the room (it can get tricky at industry gatherings) and, if you have prepared properly, you should be able to field questions and make a favorable impression. Also, make a list of questions that could be asked and prepare answers so, from the floor, you look on top of your game.

2) Look at real evidence—pull out your resume. Is it all true? Then you should have some confidence about what you are doing. Think of your past successes. Did bosses or clients ever pay your compliments in writing? Re-read them. You are not a fraud.

3) Share your fear with friends is what many tell you to do. I would be VERY careful about that. If you do, make sure it is someone NOT connected to your business or someday it may be used against you. If you want to keep a secret, tell no one has always been my mantra. Sometimes people will slip and tell your fears to others with no malicious intent but it can come back to haunt you. I was flattered when people told me of their fears and I tried to encourage them but it stopped with me permanently.

4) Discount outside sources—people would tell me that they were where they were due to 100% luck. Maybe, if Mom or Dad owned the business but usually you were in the job you have or given a major assignment due to your abilities. There is no question that being in the right place at the right time happens but you still have to prove yourself.

What about the famous advice of “fake it until you make it”?  I have very mixed feelings about that. If you are nervous or awkward socially, then stepping outside yourself and exuding some confidence can be quite beneficial both personally and professionally. Yet, at times, I have seem too many people confuse confidence with competence. Clearly actions can follow feelings but you still have to know your stuff. With some people there is a blurry line between confidence and lies.

About 20 years ago, a media salesperson asked me to attend a meeting with a foreigner who was going to launch a service in the United States. He had a wonderful British accent and made a fairly interesting case for getting Angel investors such as my friend and others present to get on board as financial backers. With him, was a wildly ebullient young fellow who said that he was an investment banker. He took a fair part in the Q&A session after the pitch deck was reviewed. Then, he said that after a brief launch in the states, shares would be available to the general public. I innocently asked if they had plans to issue ADR’s or perhaps an ADS? The young man got flustered and told me that I was not fair and that I was using some new financial term to embarrass him. “When did these ADR’s come in to the stock market”?, he asked. “Last week?” With a soft smile, I answered, “1927.” Getting red in the face, he asked how long  that I  been buying them. “Since 1973”, was my reply. Clearly, the young guy was trying to fake it until he made it. Not that day, and my friend and his associates saved their money. I followed up for a few years and the fledgling company never saw the light of day in the United States. Were they con-men? Hard to say for sure but the young “investment banker” did not pass the smell test.

Finally, the best advice for defeating Imposter Syndrome that I have seen was in Dr. Gay Hendricks book, THE BIG LEAP. The good doctor wrote, “ The things you most love to do reflect your unique abilities. When you are doing what you are really meant to be doing, you don’t have to generate self doubt.

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