Author Archives: ghotchkiss

Addicted to Tech

A few columns ago, I mentioned one of the aspects that is troubling me about technology – the shallowness of social media. I had mentioned at the time that there were other aspects that were equally troubling. Here’s one:

Technology is addictive – and it’s addictive by design.

Let’s begin by looking at the definition of addiction:

Persistent compulsive use of a substance known by the user to be harmful

So, let’s break it down. I don’t think you can quibble with the persistent, compulsive use part. When’s the last time you had your iPhone in your hand? We can simply swap out “substance” for “device” or “technology” So that leaves with the last qualifier “known by the user to be harmful” – and there’s two parts to this – is it harmful and does the user know it’s harmful?

First, let’s look at the neurobiology of addiction. What causes us to use something persistently and compulsively? Here, dopamine is the culprit. Our reward center uses dopamine and the pleasurable sensation it produces as a positive reinforcement to cause us to pursue activities which over many hundreds of generations have proven to be evolutionarily advantageous. But Dr. Gary Small, from the UCLA Brain Research Institute, warns us that this time could be different:

“The same neural pathways in the brain that reinforce dependence on substances can reinforce compulsive technology behaviors that are just as addictive and potentially destructive.”

We like to think of big tobacco as the most evil of all evil empires – guilty of promoting addiction to a harmful substance – but is there a lot separating them from the purveyors of tech – Facebook or Google, for instance? According to Tristan Harris, there may be a very slippery slope between the two. I’ve written about Tristan before. He’s the former Google Product Manager who’s launched the Time Well Spent non-profit, devoted to stopping “tech companies from hijacking our minds.” Harris points the finger squarely at the big Internet platforms for creating platforms that are intentionally designed to suck as much of our time as possible. There’s empirical evidence to back up Harris’s accusations. Researchers at Michigan State University and from two universities in the Netherlands found that even seeing the Facebook logo can trigger a conditioned response in a social media user that starts the dopamine cycle spinning. We start jonesing for a social media fix.

So, what if our smart phones and social media platforms seduce us into using them compulsively? What’s the harm, as long as it’s not hurting us? That’s the second part of the addiction equation – is whatever we’re using harmful? After all, it’s not like tobacco, where it was proven to cause lung cancer.

Ah, but that’s the thing, isn’t it? We were smoking cigarettes for almost a hundred years before we finally found out they were bad for us. Sometimes it takes awhile for the harmful effects of addiction to appear. The same could be true for our tech habit.

Tech addiction plays out at many different levels of cognition. This could potentially be much more sinister than just the simple waste of time that Tristan Harris is worried about. There’s mounting evidence that overuse of tech could dramatically alter our ability to socialize effectively with other humans. The debate, which I’ve talked about before, comes when we substitute screen-to-screen interaction for face-to-face. The supporters say that this is simply another type of social bonding – one that comes with additional benefits. The naysayers worry that we’re just not built to communicate through screen and that – sooner or later – there will be a price to be paid for our obsessive use of digital platforms.

Dr. Jean Twenge, professor of psychology at San Diego State University, researches generational differences in behavior. It’s here where the full impact of the introduction of a disruptive environmental factor can be found. She found a seismic shift in behaviors between Millennials and the generation that followed them. It was a profound difference in how these generations viewed the world and where they spent their time. And it started in 2012 – the year when the proportion of Americans who owned a smartphone surpassed 50 percent. She sums up her concern in unequivocal terms:

“The twin rise of the smartphone and social media has caused an earthquake of a magnitude we’ve not seen in a very long time, if ever. There is compelling evidence that the devices we’ve placed in young people’s hands are having profound effects on their lives—and making them seriously unhappy.”

Not only are we less happy, we may be becoming less smart. As we become more reliant on technology, we do something called cognitive off-loading. We rely on Google rather than our memories to retrieve facts. We trust our GPS more than our own wayfinding strategies to get us home. Cognitive off loading is a way to move beyond the limits of our own minds, but there may an unacceptable trade off here. Brains are like muscles – if we stop using them they begin to atrophy.

Let’s go back to that original definition and the three qualifying criteria:

  • Persistent, compulsive use
  • Harmful
  • We know it’s harmful

In the case of tech, let’s not wait a hundred years to put check marks after all of these.

 

 

To Buy or Not to Buy: The Touchy Subject of Mobile ECommerce

A recent report from Akamai indicates that users have little patience when it comes to making purchases on a mobile device. Here are just a few of the stats:

  • While almost half of all consumers browse via their phones, only 1 in 5 complete transactions on mobile
  • Optimal load times for peak conversions ranged from 1.8 to 2.7 seconds across device types
  • Just a 100-millisecond delay in load time hurt conversion rates by up to 7%
  • Bounce rates were highest among mobile shoppers and lowest among those using tablets

But there may be more behind this than just slow load times. We also have to consider what modes we’re in when we’re interacting with our mobile device.

In 2010, Microsoft did a fascinating research project that looked at how user behaviors varied from desktop to tablet to smart phone. The research was headed by Jacquelyn Krones, who was a Search Product Manager at the time. Search was the primary activity examined, but there was a larger behavioral context that was explored. While the study is 7 years old, I think the core findings are still relevant. The researchers found that we tend to have three large buckets of behaviors: missions, explorations and excavations. Missions were focused tasks that were usually looking for a specific piece of information – i.e. looking for an address or phone number. Explorations where more open ended and less focused on a given destination – i.e. seeing if there was any thing you wanted to do this Friday night. Excavations typically involved multiple tasks within an overarching master task – i.e. researching an article. In an interview with me, Krones outlined their findings:

“There’s clearly a different profile of these activities on the different platforms. On desktops and laptops, people do all three of the activities – they conduct missions and excavations and explorations.

“On their phones we expected to see lots of missions – usually when you use your mobile phone and you’re conducting a search, whatever you’re doing in terms of searching is less important than what’s going on with you in the real world – you’re trying to get somewhere, you’re having a discussion with somebody and you want to look something up quick or you’re trying to make a decision about where to go for dinner.

“But we were surprised to find that people are using their mobile phones for exploration. But once we saw the context, it made sense – people have a low tolerance for boredom. Their phone is actually pretty entertaining, much more entertaining than just looking at the head in front of you while you’re waiting in line. You can go check a sports score, read a story, or look at some viral video and have a more engaged experience.

“On tablets, we found that people are pretty much only using them for exploration today. I had expected to see more missions on tablets, and I think that that will happen in the future, but today people perceive their mobile phone as always with them, very personal, always on, and incredibly efficient for getting information when they’re in mission mode.”

Another study, coming out The University of British Columbia Okanagan, also saw a significant difference in behavioral modality when it came to interacting with touch screens. Assistant Professor Ying Zhu was the principal author:

“The playful and fun nature of the touchscreen enhances consumers’ favour of hedonic products; while the logical and functional nature of a desktop endorses the consumers’ preference for utilitarian products,” explains Zhu.

“Zhu’s study also found that participants using touchscreen technology scored significantly higher on experiential thinking than those using desktop computers. However, those on desktops scored significantly higher on rational thinking.”

I think what we have here is an example of thinking: fast and slow. I suspect we’re compartmentalizing our activities, subconsciously setting some aside for completion on the desktop. I would suspect utilitarian type purchasing would fall into this category. I know that’s certainly true in my case. As Dr. Zhu noted, we have a very right brain relationship with touchscreens, while desktops tend to bring out our left-brain. I have always been amazed at how our brains subconsciously prime us based on anticipating an operating environment. Chances are, we don’t even realize how much our behaviors change when we move from a smart phone to a tablet to a desktop. But I’d be willing to place a significant wager that it’s this subconscious techno-priming that’s causing some of these behavioural divides between devices.

Slow load times are never a good thing, on any device, but while they certainly don’t help with conversions, they may not be the only culprit sitting between a user and a purchase. The device itself could also be to blame.

The Assisted Reality of the New Marketer

Last week, MediaPost’s Laurie Sullivan warned us that the future of analytical number crunchers is not particularly rosy in the world of marketing. With cognitive technologies like IBM’s Watson coming on strong in more and more places, analytic skills are not that hot a commodity any more. Ironically, when it comes to marketing, the majority of companies have not planned to incorporate cognitive technologies in the near future. According to a report from IBM and Oxford Economics, only 24% of the organizations have a plan to incorporate CT in their own operations.

Another study, from Forrester, explored AI Marketing Readiness in Retail and eCommerce sectors. The state of readiness is a little better. In these typically forward thinking sectors, 72% are implementing AI marketing tech in the next year, but only 45% of those companies would consider themselves as excelling in at least 2 out of 3 dimensions of readiness.

If those numbers seem contradictory, we should understand what the difference between cognitive technology and artificial intelligence is. You’ll notice that IBM refers to Watson as “cognitive computing.” As Rob High, IBM’s CTO for Watson put it, “What it’s really about is involvement of a human in the loop,” and he described Watson as “augmented intelligence” rather than artificial intelligence.

That “human in the loop” is a critical difference between the two technologies. Whether we like it or not, machines are inevitable in the world of marketing, so we’d better start thinking about how to play nice with them.

 

I remember first seeing a video from the IBM Amplify summit at a MediaPost event last year. Although the presentation was a little stilted, the promise was intriguing. It showed a marketer musing about a potential campaign and throwing “what ifs” at Watson, who quickly responded with the almost instantly analyzed quantified answers. The premise of the video was to show how smart Watson was. But here’s a “what if” to consider. What if the real key to this was the hypotheticals that the human seemed to be pulling out of the blue? That doesn’t seem that impressive to us – certainly not as impressive as Watson’s corralling and crunching of relevant numbers in the blink of an eye. Musing is what we do. But this is just one example of something called Moravec’s Paradox.

Moravec’s Paradox, as stated by AI pioneer Marvin Minsky, is this: “In general, we’re least aware of what our minds do best. We’re more aware of simple processes that don’t work well than of complex ones that work flawlessly.” In other words, what we find difficult are the tasks that machines are well suited for, and the things we’re not even aware of are the things machines find notoriously hard to do. Things like intuition. And empathy. If we’re looking at the future of the human marketer, we’re probably looking at those two things.

In his book, Humans are Underrated, Geoff Colvin writes,

“Rather than ask what computers can’t do, it’s much more useful to ask what people are compelled to do—those things that a million years of evolution cause us to value and seek from other humans, maybe for a good reason, maybe for no reason, but it’s the way we are.”

We should be ensuring that both humans and machines are doing what they do best, essentially erasing Moravec’s Paradox. Humans focus on intuition and empathy and machines do the heavy lifting on the analyzing and number crunching. The optimal balance – at this point anyway – is a little bit of both.

In Descarte’s Error – neurologist Antonio Damasio showed that without human intuition and emotion – together with the corresponding physical cues he called somatic markers – we could rationalize ourselves into a never-ending spiral without ever coming to a conclusion. We need to be human to function effectively.

Researchers at MIT have even tried to include this into an algorithm. In 1954, Herbert Simon introduced a concept called bounded rationality. It may seem like this puts limits on the cognitive power of humans, but as programmers like to say, bounded rationality is a feature, not a bug. The researchers at MIT found that in an optimization challenge, such as finding the optimal routing strategy for an airline, humans have the advantage of being able to impose some intuitive limits on the number of options considered. For example, a human can say, “Planes should visit each city at the most once,” and thereby dramatically limit the number crunching required. When these intuitive strategies were converted to machine language and introduced into automated algorithms, those algorithms got 10 to 15% smarter.

When it comes right down to it, the essence of marketing is simply a conversation between two people. All the rest: the targeting, the automation, the segmentation, the media strategy – this is all just to add “mass” to marketing. And that’s all the stuff that machines are great at. For us humans, our future seems to rely on our past – and on our ability to connect with other humans.

Is Google Slipping, Or Is It Just Our Imagination?

Recently, I’ve noticed a few articles speculating about whether Google might be slipping:

Last month, the American Customer Satisfaction Index notified us that our confidence in search is on the decline. Google’s score dropped 2% to 82. The culprit was the amount of advertising found on the search results page. To be fair, both Google and search in general have had lower scores. Back in 2015, Google scored a 77%, it’s lowest score ever.

This erosion of customer satisfaction may be leading to a drop in advertising ROI. According to a recent report from Analytic Partners, the return on investment from paid search dropped 27% from 2010 to 2016. Search wasn’t alone. All digital ROI seems to be in decline. Analytic’s VP of Marketing, Joe LaSala, predicts that ROI from digital will continue to decline until it converges with ROI from traditional media.

In April of this year, Forbes ran an article asking the question: “Is Google’s Search Quality Starting to Decline?” Contributors to this decline, according to the article, included the introduction of rich snippets and featured news, including popularity as a ranking factor and ongoing black hat SEO manipulation.

But the biggest factor in the drop of Google’s perceived quality was actually in the perception itself. As the Forbes article’s author, Jayson DeMers, stated;

It’s important to realize just how sophisticated Google is, and how far it’s come from its early stages, as well as the impossibility of having a “perfect” search platform. Humans are flawed creatures, and our actions are what are dictating the shape of search.

Google is almost 20 years old. The domain Google.com was registered on September 15, 1997. Given that 20 years is an eternity in internet years, it’s actually amazing that it’s stood up as well as it has for the past two decades. Whether Google’s naysayers care to admit it or not, that’s due to Google’s almost religious devotion to the quality of their search results. That devotion extends to advertising. The balance between user experience and monetization has always been one that Google has paid a lot of attention too.

But it’s not the presence of ads that has led to this perceived decline of quality. It’s a change in our expectations of what a search experience should be. I would argue that for any given search, using objective measures of result relevance, the results Google shows today are far more relevant than the results they showed in 2008, the year it got it’s highest customer satisfaction score (86%). Since then, Google has made great strides in deciphering user intent and providing a results page that’s a good match for that intent. Sometimes it will get it wrong, but when it gets it right, it puts together a page that’s a huge improvement over the vanilla, one size fits all results page of 2008.

The biggest thing that’s changed in the past 10 years is the context from which we’re launching those searches. In 2008, it was almost always the desktop. But today, chances are we’re searching from a mobile device – or our car – or our home through Amazon Echo. This has changed our expectations of search. We are task focused, rather than “browsing” for information. This creates an entirely different mental framework within which we receive the results. We apply a new yardstick of acceptable relevance. Here, we’re not looking for a list of 20 possible answers – we’re looking for one answer. And it had better be the right one. Context based search must be hyper-relevant.

Compounding this trend is the increasing number of circumstances where search is going “under the hood” – something I’ve been forecasting for a long time now. For example, if you use Siri to launch a search through your CarPlay connected device when you’re driving, the results are actually coming from Bing but they’re stripped of the context of the Bing search results page. Here, the presentation of search results is just one step in a multi-step task flow. It’s important that the result that is on top is the one you’re probably looking for.

Unfortunately for Google – and the other search providers – this expectation stays in place even when the context shifts. When we launch a search from our desktop, we are increasingly intolerant of results that are even a little off base from our intent. Ads become the most easily identified culprit. A results set that would have seemed almost frighteningly prescient even a few years ago now seems sub par. Google has come a long way in the past 20 years but it’s still losing ground to our expectations.

 

 

GE: A Different Company for a Different World

One week ago today, John Flannery took over as the new CEO of General Electric. He’s only the 3rd person in the past 36 years to have held the role. He takes over from Jeff Immelt, who in turn inherited the post from the iconic Jack Welch in 2001. Welch started his reign in 1981.

GE has been around for a long time. It actually predates the Dow Jones Index by 4 years (having been founded in 1892) and is the only one of the 12 original companies listed that still exists. It – perhaps more than any other company – serves as a case study for the evolution of the multi-national mega corporation. But GE is in trouble. Share prices are down. It’s struggling to retain its considerable grip on the industries in which it competes. Flannery has his hands full.

The GE story is also interesting because Jack Welch was the first rock star CEO. In 1981, when the Welch reign began, we were still very much in the era where sheer bulk equaled success. Size bestowed a considerable advantage on companies like GE. Welch recognized this and introduced the now famous “Number One or Number Two” strategy; where he pared down GE’s portfolio to just the industries where they could be either first or second in the world.

Ironically, given that he was lionized as one of the great corporate strategists of his era, Welch was relatively unimpressed with the classic interpretation of strategy.

“Forget the scenario planning, yearlong studies, and 100-plus page reports that “gurus” suggest. They’re time consuming and expensive, and you just don’t need them. In real life, strategy is very straightforward. You pick a general direction and implement like hell.”

It was this embracing of flexibility in planning that eventually led Welch to rethink the rigidity of his “One or Two” dictum. Jeff Immelt followed the same playbook, shutting down portfolios like finance and placing a heavy bet on high tech infrastructure. But despite Immelt’s best efforts, GE’s market cap dramatically eroded, shedding almost 30% and $150 billion in value over his 16-year stint as CEO. When you stack it up against Welch’s numbers – a 2790% increase in market cap in the 20 years his hand was on the steering wheel – it’s hard not to come to the conclusion that Immelt was a horrible CEO and Welch was a super star. But as logical as this seems, it’s based on faulty logic – what Phil Rosenzweig calls the Halo Effect. That fact was, the world of Immelt’s GE was a vastly different place than was the world of Welch’s GE, even setting aside mega events like 9/11 and the financial meltdown of 2008.

In those 16 years, many of economist Ronald Coase’s original reasons why a corporation exists disappeared. Most of them had to do with the market friction that came from a rapidly expanding physical market place. If you want the exhaustive analysis of this, go ahead and plow your way through the 600 plus pages of Alfred Chandler’s seminal work – The Visible Hand. But to pare that down to the barest essentials: it was much more efficient to actually build physical things and distribute them to a geographically dispersed market when you had a vertically integrated corporation where you could manage every step of the process. This was the world in which Jack Welch became the CEO of GE.

That’s not the world we live in today. Because transactional friction has been ruthlessly eliminated by technology, the efficiencies of the open market usually equal and sometimes exceed that of a corporation. Need a massive international transactional platform? The emerging blockchain commons can provide that. Need marketing capabilities that weren’t even dreamt of by even the biggest multinationals just a decade ago? Take your pick of almost 5000 MarTech vendors. Your start up office grown too big for your garage? You can even rent a corporate headquarters, complete with all the bells and whistles.

So the biggest question facing Flannery in 2017 is this: Are mega corporations – and, by extension, GE – even relevant any more? If we stick to Coase’s strict definition, the answer is probably no. But perhaps there’s another reason for corporations to exist: the critical mass of innovation.

Although she was vilified for it, I believe Marissa Mayer was on to this when she herded all of Yahoo’s teleworkers into the same physical location. In the infamous memo, Yahoo’s HR Director, Jackie Reses, said,

“Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.”

Mayer defended her decision by first acknowledging that “people are more productive when they’re alone,” and then stressed “but they’re more collaborative and innovative when they’re together.

Researchers have found that when the population of a city grows, the amount of productivity scales supralinearly. If you double the population of a city, you don’t just get a 100% boost in productivity, you also get a 30% bonus. Cities are the most effective innovation engines ever devised. And the reason is simple. When you pack a bunch of intellectually diverse people into the same space, magic happens. Mayer understood this. Unfortunately, the realization was “too little, too late” to save Yahoo but that doesn’t mean her logic was faulty.

As John Flannery steps into the CEO role, he may run full speed into the realization that the benefits once bestowed by being massive have turned into liabilities. What once made GE great now threatens to drown it. But there are still 300,000 different minds that work for GE. Frankly I’m not sure mega corporations can ever be relevant again in a friction-free marketplace, but if they can, the answer lies in the innovation potential of those minds.

Is Busy the New Alpha?

Imagine you’ve just been introduced into a new social situation. Your brain immediately starts creating a social hierarchy. That’s what we do. We try to identify the power players. The process by which we do this is interesting. The first thing we do is look for obvious cues. In a new job, that would be titles and positions. Then, the process becomes very Bayesian – we form a base understanding of the hierarchy almost immediately and then constantly update it as we gain more knowledge. We watch power struggles and update our hierarchy based on the winners and losers. We start assigning values to the people in this particular social network and; more importantly, start assessing our place in the network and our odds for ascending in the hierarchy.

All of that probably makes sense to you as you read it. There’s nothing really earth shaking or counter intuitive. But what is interesting is that the cues we use to assign standings are context dependent. They can also change over time. What’s more, they can vary from person to person or generation to generation.

In other words, like most things, our understanding of social hierarchy is in the midst of disruption.

An understanding of hierarchy appears to be hardwired into us. A recent study found that humans can determine social standing and the accumulation of power pretty much as soon as they can walk. Toddlers as young as 17 months could identify the alphas in a group. One of the authors of the study, University of Washington psychology professor Jessica Sommerville , said that even the very young can “see that someone who is more dominant gets more stuff.” That certainly squares with our understanding of how the world works. “More stuff” has been how we’ve determined social status for hundreds of years. In sociology, it’s called conspicuous consumption, a term coined by sociologist Thorstein Veblen. And it’s a signaling strategy that evolved in humans over our recorded history. The more stuff we had, and the less we had to do to get that stuff, the more status we had. Just over a hundred years ago, Veblen called this the Leisure Class.

But today that appears to be changing. A recent study seems to indicate that we now associate busyness with status. Here, it’s time – not stuff – that is the scarce commodity. Social status signaling is more apt to involve complaining about how we never go on a vacation than about our “summer on the continent”.

At least, this seems to be true in the U.S. The researchers also ran their study in Italy and there the situation was reversed. Italians still love their lives of leisure. The U.S. is the only developed country in the world without a single legally required paid vacation day or holiday. In Italy, every employee is entitled to at least 32 paid days off per year.

In our world of marketing – which is acutely aware of social signaling – this could create some interesting shifts in messaging. I think we’re already seeing this. Campaigns aimed at busy people seem to equate scarcity of time with success. The one thing missing in all this social scrambling – whether it be conspicuous consumption or working yourself to death – might be happiness. Last year a study out of the University of British Columbia found a strong link between those who value their time more than money and happiness.

Maybe those Italians are on to something.

Curmudgeon, Chicken Little or Cognoscenti?

Apparently I’m old and out of step. Curmudgeonly, even. And this is from people of my own generation. My previous column about the potential shallowness encouraged by social media drew a few comments that indicated I was just being a grumpy old man. One was from an old industry friend – Brett Tabke:

“The rest of the article is like out of the 70’s in that it is devoid of the reality that is the uber-me generation. The selfie is only a reflection of their inward focus.”

The other was from Monica Emrich, whom I’ve never had the pleasure of meeting:

” ’Social Media Is Barely Skin-Deep.’ ho hum. History shows: when new medium hits, civilization as we know it is over.”

These comments seem to telling me, “Relax. You just don’t understand because you’re too old. Everything will be great.” And, if that’s true, I’d be okay with that. I’m more than willing to be proven a doddering old fool if it means technology is ushering us into a new era of human greatness.

But what if this time is different? What if Monica’s facetious comment actually nailed it? Maybe civilization as we know it will be over. The important part of this is “as we know it.” Every technological disruption unleashes a wave of creative destruction that pushes civilization in a new direction. We seem to blindly assume it will always go in the right direction. And it is true that technology has generally elevated the human race. But not uniformly – and not consistently. What if this shift is different? What if we become less than what we were? It can happen. Brexit – Xenophobia – Trump – Populism, all these things are surfing on the tides of new technology.

Here’s the problem. There are some aspects of technology that we’ve never had to deal with before – at least, not at this scale. One these aspects (other aspects will no doubt be the topic of a future Media Insider) is that technology is now immersive and ubiquitous. It creates an alternate reality for us, and it has done in it in a few short decades. Why is this dangerous? It’s dangerous because evolution has not equipped us to deal with this new reality. In the past, when there has been a shift in our physical reality, it has taken place over several generations. Natural selection had the time to reshape the human genome to survive and eventually thrive in this new reality. Along the way, we acquired checks and balances that would allow us to deal with the potentially negative impacts of the environment.

But our new reality is different. It’s happen in the space of a single generation. There is no way we could have acquired natural defenses against it. We are operating in an environment we have been untested for. The consequences are yet to be discovered.

No, your response might be to say that, “Yes, evolution doesn’t move this quickly, but out brains can. They are elastic and malleable.” This is true, but there’s a big “but” that lies hidden in this approach. Our brains rewire to be a better match their environment. This is one of the things that humans excel at. But this rewiring happens on top of a primitive platform with some built in limitations. The assumption is that a better match with our environment provides a better chance for survival of the species.

But what if technology is throwing us a curve ball in this case? No matter what the environment we have adapted to, there has been one constant: The history of humans depends on our success in living together. We have evolved to be social animals but that evolution is predicated on the assumption that our socializing would take place face-to-face. Technology is artificially decoupling our social interactions from the very definition of society that we have evolved to be able to handle. A recent Wharton interview with Eden Collinsworth sounds the same alarm bells.

“The frontal lobes, which are the part of the brain that puts things in perspective and allows you to be empathetic, are constantly evolving. But it is less likely to evolve and develop those skills if you are in front of a screen. In other words, those skills come into play when you have a face-to-face interaction with someone. You can observe facial gestures. You can hear the intonation of a voice. You’re more likely to behave moderately in that exchange, unless it’s a just a knock-down, drag-out fight.”

Collinsworth’s premise – which is covered in her new book, Behaving Badly – is that this artificial reality is changing our concepts of morality and ethics. She reminds us the two are interlinked, but they are not the same thing. Morality is our own personal code of conduct. Ethics are a shared code that society depends on to instill a general sense of fairness. Collinsworth believes both are largely learned from the context of our culture. And she worries that a culture that is decoupled from the physical reality we have evolved to operate in may have dire consequences.

The fact is that if our morality and ethics are intended to keep us socially more cohesive, this works best in a face-to-face context. In an extreme example of this, Lt. Col. Dave Grossman, a former paratrooper and professor of psychology at West Point, showed how our resistance to killing another human in combat is inversely related to our physical distance from them. The closer we are to them, the more resistant we are to the idea of killing them. This makes sense in an evolutionary environment where all combat was hand-to-hand. But today, the killer could be in a drone flight control center thousands of miles from his or her intended target.

This evolved constraint on unethical behavior – the social check and balance of being physically close to the people we’re engaging with – is important. And while the application of the two examples I’ve cited; One – the self-absorbed behavior on social networks – and Two – the moral landscape of a drone strike operator, may seem magnitudes apart in terms of culpability, the underlying neural machinery is related. What we believe is right and wrong is determined by a moral compass set to the bearings of our environment. The fundamental workings of that compass assumed we would be face-to-face with the people we have to deal with. But thanks to technology, that’s no longer the case.

Maybe Brett and Monica are right. Maybe I’m just being alarmist. But if not, we’d better start paying more attention. Because civilization “as we know it” may be ending.

 

Live, From Inside the Gale of Creative Destruction

Talk about cognitive dissonance…

First, Mediapost’s Jack Loechner writes about a Forrester Report, The End of Advertising as We Know It, which was published earlier this year. Seeing as last week I starting ringing the death knell for advertising agencies, I though I should check the report out.

Problem One: The report was only available on Forrester if I was willing to plunk down $499. American. Which is – I don’t know – about 14 zillion Canadian. Much as I love and respect you, my readers, there’s no friggin’ way that’s going to happen. So, I go to Google to see if I can find a free source to get the highlights.

Problem Two: Everyone and Sergio Zyman’s dog has apparently decided to write a book or white paper entitled “The End of Advertising as We Know It.” Where to begin researching the end? Well, here’s one deliciously ironic option – one of those white papers was published by none other than WPP. You know I have to check that out! As it turns out – no surprise here – it’s a sales pitch for the leading edge cool stuff that one of WPP’s agencies, AKQA, can do for you. I tried to sift through the dense text but gave up after continually bumping into buzz-laden phrases like “365 ideas”, “Business Invention” and “People Stories.” I return to the search results page and follow a Forbes link that looks more promising.

Problem Three: Yep! This is it. It’s Forbes summation of the Forrester Report. I start reading and learning that the biggest problem with advertising is that we hate to be interrupted by advertising. Well, I could have told you that. Oh – wait – I did (for free, I might add). But here’s the cognitively dissonant part. As I’m trying to read the article, an autoplay video ad keeps playing on the Forbes page, interrupting me. And you know what? I hated it! The report was right. At least, I think it was, as I stopped reading the article.

I’m guessing you’re going through something similar right now. As you’re trying to glean my pearls of wisdom, you’re tiptoeing around advertising on the page. That’s not Mediapost’s fault. They have a business to run and right now, there’s no viable business model other than interruptive advertising to keep the lights on. So you have the uniquely dissonant experience of reading about the end of advertising while being subjected to advertising.

My experience – which is hardly unique – is a painful reminder about the inconvenient truth of innovative disruption: it’s messy in the middle of it. When Joseph Schumpeter called it a “gale of creative destruction” it made it sound revolutionary and noble in the way that the Ride of the Valkyries or the Starks retaking Winterfell is noble. But this stuff gets messy, especially if you’re trying to hang on to the things being destroyed when the gale hits in full force.

Here’s the problem, in a nutshell. The tension goes back to a comment made back in 1984 from Stewart Brand to Steve Wozniak:

“On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

In publishing, we not only have the value of the information itself, but we have the cost of wrapping insight around that information. Forrester’s business is industry analysis. Someone has to do the analyzing and there are costs associated with that. So they charge $499 for a report on the end of advertising.

Which brings us to the second part of the tension. Because so much information is now free and Google gives me, the information consumer, the expectation that I can find it for free – or, at least, highlights of it for free – I expect all information to be free. I believe I have an alternative to paying Forrester. In today’s age, information tends to seep through the cracks in pay walls, as it did when Forbes and Mediapost published articles on the report. Forrester is okay with that, because it hopes it will make more people willing to pay $499 aware of the report.

For their part Forbes – or Mediapost – relies on advertising to keep the information available to you for free, matching our expectations. But they have their own expenses. Whether we like it or not, interruptive advertising is the only option currently available to them.

So there we have it, a very shaky house of cards built on a rapidly crumbling foundation. Welcome to the Edge of Chaos. A new model will be created from this destruction. That is inevitable. But in the meantime, there’s going to be a lot of pain and WTF moments. Just like the one I had this week.

Sir Martin and the Terrible, Horrible, No Good, Very Bad Week

Sir Martin Sorrell must feel like he’s trying to hold water in his bare hands.

First, the normally bullish European Investment Bank Exane BNP Paribas – double whammied Sorrell’s WPP last week with a double downgrade – from “outperform” to “underperform” – and dropped their target price for the stock by a whopping 27%. The analyst quoted in the release, Charles Bedouelle, said, “Marketing is driven by mobile, nimbler brands, ecommerce and automation. These areas are dominated by platforms where agencies are sparse, raising the risk of lower mid-term growth.”

Then, just yesterday, Mediapost’s Joe Mandese told us that Pivotal Research Group downgraded the entire ad sector, including Interpublic, Omnicom, Publicis and WPP. This time, analyst Brian Wieser said, “While we continue to expect growth for agencies, challenges that became much more visible by the middle of last year are likely to compress expansion in years ahead vs. prior expectations.”

Or, in simpler terms – “The gig is up Guys.”

WPP and the rest of advertising’s usual suspects have depended on an ad market with a significant amount of inherent friction. Friction creates pockets of value for intermediaries, who turn a profit by dealing with that friction on behalf of its clients. This friction has been relentlessly eliminated from the market in the past two decades thanks to technology. Yes, advertising has become more fragmented, but more significantly, it’s also become more fluid. The advantage once offered by agencies has been flipped into an anchor. Business models founded on the exploitation of friction in markets are not very good at dealing with transparency and fluidity.

When I was heading my own digital service company, we could chart the lifespan of a client with pretty reliable predictability. We specialized in search and most of our clients retained us when they were just starting out. This is the period when there is the greatest amount of friction – starting from standing still. We’d get them up and running and within a few months start delivering some pretty impressive ROI numbers. Over the next few years, we’d expand campaigns and find pockets of unexploited potential. Returns would grow. Budgets would increase. Clients would be happy. Life was good.

For awhile.

But there was an inevitable tipping point. As campaigns matured and Google – bless their techie hearts – relentlessly removed friction from the search advertising market, our perceived value would start to decline. At some point, it became an academic line item decision. When the cost of bringing search in house was less than our agency fees, we knew the end was near. We might prolong it for a year or two but the math was working against us. I remember one particularly somber December 24th when we received word from our largest client that they were not renewing our contract for the coming year. That represented about 16% of our total yearly revenue. And this was a client who loved us to pieces just 12 months earlier. It was not a happy Christmas. But it was pretty hard to argue with their logic.

Now, compared to WPP, we were a pimple on the butt of a flea on the tail of a dog who happened to be riding an elephant. And just like WPP, we were always looking for ways to add value by diversifying in other areas. But I suspect the logic is the same. If you depend on friction to add value, and that friction is disappearing, sooner or later you’ll disappear too. Your business model will slip right through your fingers. Just like water in Sir Martin’s hands.

 

Ummm – America – Did You Forget Something?

Hey Americans – the 2nd most important country in the world for you guys (because – you know – of that whole America First thing) just had a milestone birthday. I hope you remembered to send a card.

Nope..It’s not Russia. Not China. Not the UK.

It’s us – up here – Canada.

Why are we the 2nd most important country in the world for Americans? Well, between us we have the biggest trade relationship in the world – pushing a trillion dollars a year. We’re your single biggest trading partner – by a big, big margin. You rely on us for oil – we export 3 times more oil to you than the number 2 source – Saudi Arabia. In fact, you rely on us for a huge variety of natural resources.

We also happen to share a 5500 mile long border (the longest international border in the world). And it’s a pretty easy border to get across. In fact, much of what you think is American is actually Canadian. Ben Cartright, Captain Kirk, Perry Mason, Captain Von Trapp – all Canadians. Deadpool, the Green Hornet, that jazz pianist in La La Land, the Rock (the actor, not the province) – yep, Canadian (or at least, half Canadian in Dwayne’s case). Saturday Night Live, Superman, radio, telephones, the light bulb, basketball, the California roll, Hawaiian Pizza, you wouldn’t have any of these things if it wasn’t for a Canadian. Hell, even America’s sweetheart was Canadian. We tend to keep track of such things.

So would it kill you to sing a refrain of happy birthday? Especially since we just turned 150.

We can understand if you didn’t hear about it. A quick search on Mediapost (the online blog I write for) turned up just one article talking about our bonne fête – and that was saying how we were going to introduce you to poutine on a maple glazed donut. On behalf of Canada, I apologize for that.

It’s probably our fault. In fact, I’m sure it is. We just don’t demand your attention that much. You probably didn’t even know that July 1 was our birthday. It’s our nature – we like giving and don’t ask for much in return. Then we passive-aggressively make fun of you behind your backs. It’s Canada’s national pastime (and you thought it was hockey). Besides, we know you’ve been pre-occupied with other things – you know – like your own birthday party and the guy you put in the White House..for instance.

But, if you get a chance, drop a card in the mail. It would be a nice thing to do.