The Joe Rogan Experiment in Ethical Consumerism

We are watching an experiment in ethical consumerism take place in real time. I’m speaking of the Joe Rogan/Neil Young controversy that’s happening on Spotify. I’m sure you’ve heard of it, but if not, Canadian musical legend Neil Young had finally had enough of Joe Rogan’s spreading of COVID misinformation on his podcast, “The Joe Rogan Experience.” He gave Spotify an ultimatum: “You can have Rogan or Young. Not both.”

Spotify chose Rogan. Young pulled his library. Since then, a handful of other artists have followed Young, including former band mates David Crosby, Stephen Stills and Graham Nash, along with fellow Canuck Hall of Famer Joni Mitchell.

But it has hardly been a stampede. One of the reasons is that — if you’re an artist — leaving Spotify is easier said than done. In an interview with Rolling Stone, Rosanne Cash said most artists don’t have the luxury of jilting Spotify: 

It’s not viable for most artists. The public doesn’t understand the complexities. I’m not the sole rights holder to my work… It’s not only that a lot of people who aren’t rights holders can’t remove their work. A lot of people don’t want to. These are the digital platforms where they make a living, as paltry as it is. That’s the game. These platforms own, what, 40 percent of the market share?”

Cash also brings up a fundamental issue with capitalism: it follows profit, and it’s consumers who determine what’s profitable. Consumers make decisions based on self-interest: what’s in it for them. Corporations use that predictable behavior to make the biggest profit possible. That behavior has been perfectly predictable for hundreds of years. It’s the driving force behind Adam Smith’s Invisible Hand. It was also succinctly laid out by economist Milton Friedman in 1970:

“There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

We all want corporations to be warm and fuzzy — but it’s like wishing a shark were a teddy bear. It just ain’t gonna happen.

One who indulged in this wishful thinking was a little less well-known Canadian artist who also pulled his music  from Spotify, Ontario singer/songwriter Danny Michel. He told the CBC:

“But for me, what it was was seeing how Spotify chose to react to Neil Young’s request, which was, you know: You can have my music or Joe. And it seems like they just, you know, got out a calculator, did some math, and chose to let Neil Young go. And they said, clear and loud: We don’t need you. We don’t need your music.”

Well, yes, Danny, I’m pretty sure that’s exactly what Spotify did. It made a decision based on profit. For one thing, Joe Rogan is exclusive to Spotify. Neil Young isn’t. And Rogan produces a podcast, which can have sponsors. Neil Young’s catalog of songs can’t be brought to you by anyone.

That makes Rogan a much better bet for revenue generation. That’s why Spotify paid Rogan $100 million. Music journalist Ted Gioia made the business case for the Rogan deal pretty clear in a tweet

“A musician would need to generate 23 billion streams on Spotify to earn what they’re paying Joe Rogan for his podcast rights (assuming a typical $.00437 payout per stream). In other words, Spotify values Rogan more than any musician in the history of the world.”

I hate to admit that Milton Friedman is right, but he is. I’ve said it time and time before, to expect corporations to put ethics ahead of profits is to ignore the DNA of a corporation. Spotify is doing what corporations will always do, strive to be profitable. The decision between Rogan and Young was done with a calculator. And for Danny Michel to expect anything else from Spotify is simply naïve. If we’re going to play this ethical capitalism game, we must realize what the rules of engagement are.

But what about us? Are we any better that the corporations we keep putting our faith in?

We have talked about how we consumers want to trust the brands we deal with, but when a corporation drops the ethics ball, do we really care? We have been gnashing our teeth about Facebook’s many, many indiscretions for years now, but how many of us have quite Facebook? I know I haven’t.

I’ve seen some social media buzz about migrating from Spotify to another service. I personally have started down this road. Part of it is because I agree with Young’s stand. But I’ll be brutally honest here. The bigger reason is that I’m old and I want to be able to continue to listen to the Young, Mitchell and CSNY catalogs. As one of my contemporaries said in a recent post, “Neil Young and Joni Mitchell? Wish it were artists who are _younger_ than me.”

A lot of pressure is put on companies to be ethical, with no real monetary reasons why they should be. If we want ethics from our corporations, we have to make it important enough to us to impact our own buying decisions. And we aren’t doing that — not in any meaningful way.

I’ve used this example before, but it bears repeating. We all know how truly awful and unethical caged egg production is. The birds are kept in what is known as a battery cage holding 5 to 10 birds and each is confined to a space of about 67 square inches. To help you visualize that, it’s just a bit bigger than a standard piece of paper folded in half. This is the hell we inflict on other animals solely for our own gain. No one can be for this. Yet 97% of us buy these eggs, just because they’re cheaper.

If we’re looking for ethics, we have to look in other places than brands. And — much as I wish it were different — we have to look beyond consumers as well. We have proven time and again that our convenience and our own self-interest will always come ahead of ethics. We might wish that were different, but our spending patterns say otherwise.

It’s the Buzz That Will Kill You

If you choose to play in the social arena, you have to accept that the typical peaks and valleys of business success can suddenly become impossibly steep.

In social media networks, your brand message is whatever meme happens to emerge from the collective activity of this connected market. Marketers have little control — and sometimes, they have no control. At best, all they can do is react by throwing another carefully crafted meme into the social-sphere and hope it picks up some juice and is amplified through the network.

That’s exactly what happened to Peloton in the past week and a half.

On Dec. 9, the HBO Max sequel to “Sex and the City” killed off a major character — Chris Noth’s Mr. Big — by giving him a heart attack after his one thousandth Peloton ride. Apparently, HBO Max gave Peloton no advance warning of this branding back hand.

On Dec. 10, according to Axios,  there was a dramatic spike in social interactions talking about Mr. Big’s last ride, peaking near 80 thousand. As you can imagine, the buzz was not good for Peloton’s business.

On Dec. 12, Peloton struck back with its own ad, apparently produced in just 24 hours by Ryan Reynold’s Maximum Effort agency. This turned the tide of the social buzz. Again, according to data from Newswhip and Axios, social media mentions peaked. This time, they were much more positive toward the Peloton brand.

It should be all good — right? Not so fast. On Dec 16, two sexual assault allegations were made against Chris Noth, chronicled in The Hollywood Reporter. Peloton rapidly scrubbed its ad campaign. Again, the social sphere lit up and Peloton was forced back into defensive mode.

Now, you might call all this marketing froth, but that’s  the way it is in our hyper-connected world. You just have to dance the dance — be nimble and respond.

But my point is not about the marketing side of this of this brouhaha – which has been covered to death, at least at MediaPost (sorry, pardon the pun.) I’m more interested  in what happens to the people who have some real skin in this particular game, whose lives depend on the fortunes of the Peloton brand. Because all this froth does have some very IRL consequences.

Take Peloton’s share price, for one.

The day before the HBO show aired, Peloton’s shares were trading at $45.91. The next day, they tumbled 16%. to $38.51.

And that’s just one chapter in the ongoing story of Peloton’s stock performance, which has been a hyper-compressed roller coaster ride, with the pandemic and a huge amount of social media buzz keeping the foot firmly on the accelerator of stock performance through 2020, but then subsequently dropping like a rock for most of 2021. After peaking as high as $162 a share exactly a year ago, the share price is back down to spitting distance of its pre-pandemic levels.

Obviously, Peloton’s share price is not just dependent on the latest social media meme. There are business fundamentals to consider as well.

Still, you have to accept that a more connected meme-market is going to naturally accelerate the speed of business upticks and declines. Peloton signed up for this dance — and  when you do that, you have to accept all that comes with it.

In terms of the real-world consequences of betting on the buzz, there are three “insider” groups (not including customers) that will be affected: the management, the shareholders and the employees. The first of these supposedly went into this with their eyes open. The second of these also made a choice. If they did their due diligence before buying the stock, they should have known what to expect. But it’s the last of these — the employees — that I really feel for.

With ultra-compressed business cycles like Peloton has experienced, it’s tough for employees to keep up. On the way up the peak, the company is running ragged trying to scale for hyper-growth. If you check employee review sites like Glassdoor.com, there are tales of creaky recruitment processes not being able to keep up. But at least the ride up is exciting. The ride down is something quite different.

In psychological terms, there is something called the locus of control. These are the things you feel you have at least some degree of control over. And there is an ever-increasing body of evidence that shows that locus of control and employee job satisfaction are strongly correlated. No one likes to be the one constantly waiting for someone else to drop the other shoe. It just ramps up your job stress. Granted, job stress that comes with big promotions and generous options on a rocket ship stock can perhaps be justified. But stress that’s packaged with panicked downsizing and imminent layoffs is not a fun employment package for anyone.

That’s the current case at Peloton. On Nov. 5 it announced an immediate hiring freeze. And while there’s been no official announcement of layoffs that I could find, there have been rumors of such posted to the site thelayoff.com.  This is not a fun environment for anyone to function in. Here’s what one post said: “I left Peloton a year ago when I realized it was morphing into the type of company I had no intention of working for.”

We have built a business environment that is highly vulnerable to buzz. And as Peloton has learned, what the buzz giveth, the buzz can also taketh away.

When Social Media Becomes the Message

On Nov. 23, U.K. cosmetics firm Lush said it was deactivating its Instagram, Facebook, TikTok and Snapchat accounts until the social media environment “is a little safer.” And by a “safer” environment, the company didn’t mean for advertisers, but for consumers. Jack Constantine, chief digital officer and product inventor at Lush, explains in an interview with the BBC:

“[Social media channels] do need to start listening to the reality of how they’re impacting people’s mental health and the damage that they’re causing through their craving for the algorithm to be able to constantly generate content regardless of whether it’s good for the users or not.”

This was not an easy decision for Lush. It came with the possibility of a substantial cost to its business, “We already know that there is potential damage of £10m in sales and we need to be able to gain that back,” said Constantine. “We’ve got a year to try to get that back, and let’s hope we can do that.”

In effect, Lush is rolling the dice on a bet based on the unpredictable network effects of social media. Would the potential loss to its bottom line be offset by the brand uptick it would receive by being true to its core values? In talking about Lush’s move on the Wharton Business Daily podcast, marketing lecturer Annie Wilson pointed out the issues in play here:

“There could be positive effects on short-term loyalty and brand engagement, but it will be interesting to see the long-term effect on acquiring new consumers in the future.”

I’m not trying to minimize Lush’s decision here by categorizing it as a marketing ploy. The company has been very transparent about how hard it’s been to drop — even temporarily — Facebook and its other properties from the Lush marketing mix. The brand had previously closed several of its UK social media accounts, but eventually found itself “back on the channels, despite the best intentions.”

You can’t overstate how fundamental a decision this is for a profit-driven business. But I’m afraid Lush is probably an outlier. The brand is built on making healthy choices. Lush eventually decided it had to stay true to that mission even if it hurts the bottom line.

Other businesses are far from wearing their hearts on their sleeves to the same extent as Lush. For every Lush that’s out there, there are thousands that continue to feed their budgets to Facebook and its properties, even though they fundamentally disagree with the tactics of the channel.

There has been pushback against these tactics before. In July of 2020, 1000 advertisers joined the #StopHateForProfit Boycott against Facebook. That sounds impressive – until you realize that Facebook has 9 million clients. The boycotters represented just over .01% of all advertisers. Even with the support of other advertisers who didn’t join the boycott but still scaled back their ad spend, it only had a fleeting effect on Facebook’s bottom line. Almost all the advertisers eventually returned after the boycott.

As The New York Times reported at the time, the damage wasn’t so much to Facebook’s pocketbook as to its reputation. Stephen Hahn-Griffiths, the executive vice president of the public opinion analysis company RepTrak, wrote in a follow-up post,

“What could really hurt Facebook is the long-term effect of its perceived reputation and the association with being viewed as a publisher of ‘hate speech’ and other inappropriate content.”

Of course, that was all before the emergence of a certain Facebook data engineer by the name of Frances Haugen. The whistleblower released thousands of internal documents to the Wall Street Journal this past fall. It went public in September of this year in a series called “The Facebook Files.” If we had any doubt about the culpability of Zuckerberg et al, this pretty much laid that to rest.

Predictably, after the story broke, Facebook made some halfhearted attempts to clean up its act by introducing new parental controls on Instagram and Facebook. This follows the typical Facebook handbook for dealing with emerging shit storms: do the least amount possible, while talking about it as much as possible. It’s a tactic known as “purpose-washing.”

The question is, if this is all you do after a mountain of evidence points to you being truly awful, how sincere are you about doing the right thing? This puts Facebook in the same category as Big Tobacco, and that’s pretty crappy company to be in.

Lush’s decision to quit Facebook also pinpoints an interesting dilemma for advertisers: What happens when an advertising platform that has been effective in attracting new customers becomes so toxic that it damages your brand just by being on it? What happens when, as Marshall McLuhan famously said, the medium becomes the message?

Facebook is not alone with this issue. With the systematic dismantling of objective journalism, almost every news medium now carries its own message. This is certainly true for channels like Fox News. By supporting these platforms with advertising, advertisers are putting a stamp of approval on those respective editorial biases and — in Fox’s case — the deliberate spreading of misinformation that has been shown to have a negative social cost.

All this points to a toxic cycle becoming more commonplace in ad-supported media: The drive to attract and effectively target an audience leads a medium to embrace questionable ethical practices. These practices then taint the platform itself, leading to it potentially becoming brand-toxic. The advertisers then must choose between reaching an available audience that can expand its business, or avoiding the toxicity of the platform. The challenge for the brand then becomes a contest to see how long it can hold its nose while it continues to maximize sales and profits.

For Lush, the scent of Facebook’s bullshit finally grew too much to bear — at least for now.

Whatever Happened to the Google of 2001?

Having lived through it, I can say that the decade from 2000 to 2010 was an exceptional time in corporate history. I was reminded of this as I was reading media critic and journalist Ken Auletta’s book, “Googled, The End of the World as We Know It.” Auletta, along with many others, sensed a seismic disruption in the way media worked. A ton of books came out on this topic in the same time frame, and Google was the company most often singled out as the cause of the disruption.

Auletta’s book was published in 2009, near the end of this decade, and it’s interesting reading it in light of the decade plus that has passed since. There was a sort of breathless urgency in the telling of the story, a sense that this was ground zero of a shift that would be historic in scope. The very choice of Auletta’s title reinforces this: “The End of the World as We Know It.”

So, with 10 years plus of hindsight, was he right? Did the world we knew end?

Well, yes. And Google certainly contributed to this. But it probably didn’t change in quite the way Auletta hinted at. If anything, Facebook ended up having a more dramatic impact on how we think of media, but not in a good way.

At the time, we all watched Google take its first steps as a corporation with a mixture of incredulous awe and not a small amount of schadenfreude. Larry Page and Sergey Brin were determined to do it their own way.

We in the search marketing industry had front row seats to this. We attended social mixers on the Google campus. We rubbed elbows at industry events with Page, Brin, Eric Schmidt, Marissa Mayer, Matt Cutts, Tim Armstrong, Craig Silverstein, Sheryl Sandberg and many others profiled in the book. What they were trying to do seemed a little insane, but we all hoped it would work out.

We wanted a disruptive and successful company to not be evil. We welcomed its determination — even if it seemed naïve — to completely upend the worlds of media and advertising. We even admired Google’s total disregard for marketing as a corporate priority.

But there was no small amount of hubris at the Googleplex — and for this reason, we also hedged our hopeful bets with just enough cynicism to be able to say “we told you so” if it all came crashing down.

In that decade, everything seemed so audacious and brashly hopeful. It seemed like ideological optimism might — just might — rewrite the corporate rulebook. If a revolution did take place, we wanted to be close enough to golf clap the revolutionaries onward without getting directly in the line of fire ourselves.

Of course, we know now that what took place wasn’t nearly that dramatic. Google became a business: a very successful business with shareholders, a grown-up CEO and a board of directors, but still a business not all that dissimilar to other Fortune 100 examples. Yes, Google did change the world, but the world also changed Google. What we got was more evolution than revolution.

The optimism of 2000 to 2010 would be ground down in the next 10 years by the same forces that have been driving corporate America for the past 200 years: the need to expand markets, maximize profits and keep shareholders happy. The brash ideologies of founders would eventually morph to accommodate ad-supported revenue models.

As we now know, the world was changed by the introduction of ways to make advertising even more pervasively influential and potentially harmful. The technological promise of 20 years ago has been subverted to screw with the very fabric of our culture.

I didn’t see that coming back in 2001. I probably should have known better.

The Problem With Woke Capitalism

I’ve been talking a lot over the last month or two about the concept of corporate trust. Last week I mentioned that we as consumers have a role to play in this: It’s our job to demand trustworthy behavior from the companies we do business with.

The more I thought about that idea, I couldn’t help but put it in the current context of cancel culture and woke capitalism. In this world of social media hyperbole, is this how we can flex our consumer muscles?

I think not. When I think of cancel culture and woke capitalism, I think of signal-to-noise ratio. And when I look at how most corporations signal their virtue, I see a lot of noise but very little signal.

Take Nike, for example. There is probably no corporation in the world that practises more virtue signaling than Nike. It is the master of woke capitalism. But if you start typing Nike into Google, the first suggested search you’ll see is “Nike scandal.” And if you launch that search, you’ll get a laundry list of black eyes in Nike’s day-to-day business practices, including sweatshops, doping, and counterfeit Nike product rings.

The corporate watchdog site ethicalconsumer.org has an extensive entry on Nike’s corporate faux pas. Perhaps Nike needs to spend a little less time preaching and a little more time practicing.

Then there’s 3M. There is absolutely nothing flashy about the 3M brand. 3M is about as sexy as Mr. Wood, my high school Social Studies teacher. Mr. Wood wore polyester suits (granted, it was the ‘70s) and had a look that was more Elvis Costello than Elvis Presley. But he was by far my favorite teacher. And you could trust him with anything.

I think 3M might be the Mr. Wood of the corporate world.

I had the pleasure of working with 3M as a consultant for the last three or four years of my professional life. I still have friends who were and are 3Mers. I have never, in one professional setting, met a more pleasant group of people.

When I started writing this and thought about an example of a trustworthy corporation, 3M was the first that came to mind. The corporate ethos at 3M is, as was told me to me by one vice president, “Minnesota nice.”

Go ahead. Try Googling “3M corporate scandal.” Do you know what comes up? 3M investigating other companies that are selling knockoff N95 facemasks. The company is the one investigating the scandal, not causing it. (Just in case you’re wondering, I tried searching on ethicalconsumer.org for 3M. Nothing came up.)

That’s probably why 3M has been chosen as one of the most ethical companies in the world by the Ethisphere Institute for the last eight consecutive years.

Real trust comes from many places, but a social media campaign is never one of them. It comes from the people you hire and how you treat those people. It comes from how you handle HR complaints, especially when they’re about someone near the top of the corporate ladder. It comes from how you set your product research goals, where you make those products, who you sell those products to, and how you price those products. It comes from how you conduct business meetings, and the language that’s tolerated in the lunchroom.

Real trust is baked in. It’s never painted on.

Social media has armed consumers with a voice, as this lengthy essay in The Atlantic magazine shows. But if we go back to our signal versus noise comparison, everything on social media tends to be a lot of “noise,” and very little signal. Protesting through online channels tends to create hyper-virtuous bubbles that are far removed from the context of day-to-day reality. And — unfortunately — companies are getting very good at responding in kind. Corrupt internal power structures and business practices are preserved, while scapegoats are publicly sacrificed and marketing departments spin endlessly.

As Helen Lewis, the author of The Atlantic piece, said,

“That leads to what I call the “iron law of woke capitalism”: Brands will gravitate toward low-cost, high-noise signals as a substitute for genuine reform, to ensure their survival.”

Empty “mea culpas” and making hyperbolic noise just for the sake of looking good is not how you build trust. Trust is built on consistency and reliability. It is built on a culture that is committed to doing the right thing, even when that may not be the most profitable thing. Trust is built on being “Minnesota nice.”

Thank you, 3M, for that lesson. And thank you, Mr. Wood.

The Profitability Of Trust

Some weeks ago, I wrote about the crisis of trust identified by the Edelman Trust Barometer study and its impact on brands. In that post, I said that the trust in all institutions had been blown apart, hoisted on the petard of our political divides.

We don’t trust our government. We definitely don’t trust the media – especially the media that sits on the other side of the divide. Weirdly, our trust in NGOs has also slipped, perhaps because we suspect them to be politically motivated.

So whom — or what — do we trust? Well, apparently, we still trust corporations. We trust the brands we know. They, alone, seem to have been able to stand astride the chasm that is splitting our culture.

As I said before, I’m worried about that.

Now, I don’t doubt there are well-intentioned companies out there. I know there are several of them. But there is something inherent in the DNA of a for-profit company that I feel makes it difficult to trust them. And that something was summed up years ago by economist Milton Friedman, in what is now known as the Friedman Doctrine. 

In his eponymously named doctrine, Friedman says that a corporation should only have one purpose: “An entity’s greatest responsibility lies in the satisfaction of the shareholders.” The corporation should, therefore, always endeavor to maximize its revenues to increase returns for the shareholders.

So, a business will be trustworthy as long as fits its financial interest to be trustworthy. But what happens when those two things come into conflict, as they inevitably will?

Why is it inevitable, you ask? Why can’t a company be profitable and worthy of our trust? Ah, that’s where, sooner or later, the inevitable conflict will come.

Let’s strip this down to the basics with a thought experiment.

In a 2017 article in the Harvard Business Review, neuroscientist Paul J. Zak talks about the neuroscience of trust. He explains how he discovered that oxytocin is the neurochemical basis of trust — what he has since called The Trust Molecule.

To do this, he set up a classic trust task borrowed from Nobel laureate economist Vernon Smith:

“In our experiment, a participant chooses an amount of money to send to a stranger via computer, knowing that the money will triple in amount and understanding that the recipient may or may not share the spoils. Therein lies the conflict: The recipient can either keep all the cash or be trustworthy and share it with the sender.”

The choice of this task speaks volumes. It also lays bare the inherent conflict that sooner or later will face all corporations: money or trust? This is especially true of companies that have shareholders. Our entire capitalist ethos is built on the foundation of the Friedman Doctrine. Imagine what those shareholders will say when given the choice outlined in Zak’s experiment: “Keep the money, screw the trust.” Sometimes, you can’t have both. Especially when you have a quarterly earnings target to hit.

For humans, trust is our default position. It has been shown through game theory research using the Prisoner’s Dilemma that the best strategy for evolutionary success is one called “Tit for Tat.” In Tit for Tat, our opening position is typically one of trust and cooperation. But if we’re taken advantage of, then we raise our defences and respond in kind.

So, when we look at the neurological basis of trust, consistency is another requirement. We will be willing to trust a brand until it gives a reason not to. The more reliable the brand is in earning that trust, the more embedded that trust will become. As I said in the previous post, consistency builds beliefs and once beliefs are formed, it’s difficult to shake them loose.

Trying to thread this needle between trust and profitability can become an exercise in marketing “spin”: telling your customers you’re trustworthy, while you’re are doing everything possible to maximize your profits. A case in point — which we’ve seen repeatedly — is Facebook and its increasingly transparent efforts to maximize advertising revenue while gently whispering in our ear that we should trust it with our most private information.

Given the potential conflict between trust and profit, is trusting a corporation a lost cause? No, but it does put a huge amount of responsibility on the customer. The Edelman study has made abundantly clear that if there is such a thing as a “market” for trust, then trust is in dangerously short supply. This is why we’re turning to brands and for-profit corporations as a place to put our trust. We have built a society where we believe that’s the only thing we can trust.

Mark Carney, the governor of the Bank of England and the former governor of the Bank of Canada, puts this idea forward in his new book, “Value(s).” In it, he shows how “market economies” have evolved into “market societies” where price determines the value of everything. And corporations will follow profit, wherever it leads.

If we understand that fundamental characteristic of corporations, it does bring an odd kind of power that rests in the hands of consumers.

Markets are not unilateral beasts. They rely on the balance between supply and demand. We form half that equation. It is our willingness to buy that determine how prices are determined in Carney’s “market societies.” So, if we are willing to place our trust in a brand, we can also demand that the brand proves that our trust has not been misplaced, through the rewards and penalties built into the market. 

Essentially, we have to make trust profitable.

The Split-Second Timing of Brand Trust

Two weeks ago, I talked about how brand trust can erode so quickly and cause so many issues. I intimated that advertising and branding have become decoupled — and advertising might even erode brand trust, leading to a lasting deficit.

Now I think that may be a little too simplistic. Brand trust is a holistic thing — the sum total of many moving parts. Taking advertising in isolation is misleading. Will one social media ad for a brand lead to broken trust? Probably not. But there may be a cumulative effect that we need to be aware of.

In looking at the Edelman Trust Barometer study closer, a very interesting picture emerges. Essentially, the study shows there is a trust crisis. Edelman calls it information bankruptcy.

The slide in trust is probably not surprising. It’s hard to be trusting when you’re afraid, and if there’s one thing the Edelman Barometer shows, it’s that we are globally fearful. Our collective hearts are in our mouths. And when this happens, we are hardwired to respond by lowering our trust and raising our defenses.

But our traditional sources for trusted information — government and media — have also abdicated their responsibilities to provide it. They have instead stoked our fears and leveraged our divides for their own gains. NGOs have suffered the same fate. So, if you can’t trust the news, your leaders or even your local charity, who can you trust?

Apparently, you can trust a corporation. Edelman shows that businesses are now the most trusted organizations in North America. Media, especially social media, is the least trusted institution. I find this profoundly troubling, but I’ll put that aside for a future post. For now, let’s just accept it at face value.

As I said in that previous column, we want to trust brands more than ever. But we don’t trust advertising. This creates a dilemma for the marketer.

This all brings to mind a study I was involved with a little over 10 years ago. Working with Simon Fraser University, we wanted to know how the brain responded to trusted brands. The initial results were fascinating — but unfortunately, we never got the chance to do the follow-up study we intended.

This was an ERP study (event-related potential), where we looked at how the brain responded when we showed brand images as a stimulus. ERP studies are useful to better understand the immediate response of the brain to something — the fast loop I talk so much about — before the slow loop has a chance to kick in and rationalize things.

We know now that what happens in this fast loop really sets the stage for what comes after. It essentially makes up the mind, and then the slow loop adds rational justification for what has already been decided.

What we found was interesting: The way we respond to our favorite brands is very similar to the way we respond to pictures of our favorite people. The first hint of this occurred in just 150 milliseconds, about one-sixth of a second. The next reinforcement was found at 400 milliseconds. In that time, less than half a second in total, our minds were made up. In fact, the mind was basically made up in about the same time it takes to blink an eye.  Everything that followed was just window dressing.

This is the power of trust. It takes a split second for our brains to recognize a situation where it can let its guard down. This sets in motion a chain of neurological events that primes the brain for cooperation and relationship-building. It primes the oxytocin pump and gets it flowing. And this all happens just that quickly.

On the other side, if a brand isn’t trusted, a very different chain of events occurs just as quickly. The brain starts arming itself for protection. Our amygdala starts gearing up. We become suspicious and anxious.

This platform of brand trust — or lack of it — is built up over time. It is part of our sense-making machinery. Our accumulating experience with the brand either adds to our trust or takes it away.

But we must also realize that if we have strong feelings about a brand, one way or the other, it then becomes a belief. And once this happens, the brain works hard to keep that belief in place. It becomes virtually impossible at that point to change minds. This is largely because of the split-second reactions our study uncovered.

This sets very high stakes for marketers today. More than ever, we want to trust brands. But we also search for evidence that this trust is warranted in a very different way. Brand building is the accumulation of experience over all touch points. Each of those touch points has its own trust profile. Personal experience and word of mouth from those we know is the highest. Advertising on social media is one of the lowest.

The marketer’s goal should be to leverage trust-building for the brand in the most effective way possible. Do it correctly, through the right channels, and you have built trust that’s triggered in an eye blink. Screw it up, and you may never get a second chance.

The Deconstruction of Trust

Just over a week ago, fellow Insider Steven Rosenbaum wrote a post entitled “Trust Is In Decline Worldwide.” He quotes from the Edelman Trust Barometer Report for 2021. There, graph after graph shows this decline. And that feels exactly right. The Barometer “reveals an epidemic of misinformation and widespread mistrust of societal institutions and leaders around the world.”

Here in the ad biz, the decline of trust is nothing new. We’ve been seeing it slip for at least the last decade.

But that is not a universal truth. Yes, trust in advertising is in decline. But trust in brands — at least, some brands — has never been higher. And that is indicative of the decoupling we’re seeing between the concept of brand and the practice of advertising. One used to support the other. Now, even when an ad works, it may be stripping the trust from a brand.

This decline in advertising trust also varies from generation to generation. An Ofcom study in the UK of young adults 16 to 34 found that 91.6% of all respondents had little or no trust in ads. The same study found that if you were looking for trustworthy sources, 73.5% would go to online reviews or recommendations of friends.

One reason for this erosion in trust is that advertising has been slumming. Social media advertising is the least trustworthy channel that exists. The vast majority of us don’t trust what we see on it. Yet the advertising dollars continue to pour into social media.

Yet more than ever, we want to trust a brand. The Edelman Report shows that business is the most trusted institution, ahead of NGOs, government and media. And the brands that are rising to the challenge are taking a more holistic approach to brand management.

More than ever, brands are not built on advertising. They are built on consumer experience, on ideals and on meeting promises.  In short, they are built on instilling trust. Consumers, in turn are making trust a bigger deal. Those aged 18 to 34, that very same demo that has no trust in advertising, is the first to say brand trust matters more than ever. They’re just looking for proof of that trust in different places.

But why is trust important? That seems like a dumb question, but it’s not. There are deeper levels of understanding that are required here. And we might just find the answer in southern Italy.

Trust to the north and south of Naples

Italy has an economic problem. It’s always been there, but it definitely got worse after World War Two. It’s called the Mezzogiorno Problem.

Mezzogiorno means “noon” in Italian. But it’s also a label for the south of Italy. Like many things in Italian culture, it can make even problems sound charming and romantic. It has something to do with being sunny.

Italy has two economies. The North’s economy has always been more robust than the South’s. Per capita income in the Mezzogiorno is 60% of the national average. Unemployment is twice as high. Despite repeated attempts by the government to kickstart the economy of the South, the money and talent in Italy typically flow north of Naples.

The roots of the Mezzogiorno problem go to a not totally surprising place: a lack of trust. Trust is also called social capital. And southern Italy has less social capital than the North. Part of this has to do with geography. Villages in southern Italy are more isolated and there is less interaction between them. Part of it has to do with systemic corruption and crime. Part of it has to do with something called Campanilismo — where Italian loyalties belong first to their family, second to their village or city, third to their immediate region and, lastly, to any notion of belonging to a nation. People from the South have trouble trusting anyone not from their inner circle.

For all these reasons, the co-ops that transformed the agricultural industry in the north of Italy never gained a foothold in the South. If you were to look for an example of how low trust can lead to negative outcomes for all, it would be hard to find a better one than southern Italy.

But what does this have to do with advertising? That begins to become clear when we look at the impact trust has on our brains.

Our Brains On Trust

Neuroeconomist Paul J. Zak has found that trust plays a key role in the functioning of our brains. When trust is present, our brain produces oxytocin, which Zak calls the trust molecule. It literally rewards our brain when we work together with others. It pushes us to cooperate rather than be focused exclusively on our own self-interest. This is exactly what was missing in southern Italy.

But there’s another side to this: the dark side of oxytocin. It can also cause us emotional pain in stressful social situations. And these episodes tend to get embedded in us as bad memories, leading to a triggering of fear or anxiety in the future.

We have to think more carefully about this question of trust. The whole goal of advertising is simply to get an impression to the right person. I suspect most marketers might define an unsuccessful ad as one that gets ignored. But the reality might be far worse. An ad that is shown in an untrusted channel might cause an emotional deficit, leading to the creation of future anxiety about or animosity towards a brand.

Once this happens, the game is over. You now have a Mezzogiorno of marketing.

Why Free News is (usually) Bad News

Pretty much everything about the next week will be unpredictable. But whatever happens on Nov. 3, I’m sure there will be much teeth-gnashing and navel-gazing about the state of journalism in the election aftermath.

And there should be. I have written much about the deplorable state of that particular industry. Many, many things need to be fixed. 

For example, let’s talk about the extreme polarization of both the U.S. population and their favored news sources. Last year about this time, the PEW Research Center released a study showing that over 30% of Americans distrust their news sources. 

But what’s more alarming is, when we break this down by Republicans versus Democrats, only 27% of Democrats didn’t trust the news for information about politics or elections. With Republicans, that climbed to a whopping 67%. 

The one news source Republicans do trust? Fox News. Sixty-five percent of them say Fox is reliable. 

And that’s a problem.

Earlier this year, Ad Fontes Media came out with its Media Bias Chart. It charts major news and media channels on two axes: source reliability and political bias. The correlation between bias and reliability is almost perfect. The further a news source is out to the right or left, the less reliable it is.

How does Fox fare? Not well. Ad Fontes separates Fox TV from Fox Online. Fox Online lies on the border between being “reliable for news, but high in analysis/opinion content” and “some reliability issues and/or extremism.” Fox TV falls squarely in the second category.

I’ve written before that media bias is not just a right-wing problem. Outlets like CNN and MSNBC show a significant left-leaning bias. But CNN Online, despite its bias, still falls within the “Most Reliable for News” category. According to Ad Fontes, MSNBC has the same reliability issues as Fox.

The question that has to be asked is “How did we get here?”  And that’s the question tackled head-on in a new book, “Free is Bad,” by John Marshall.

I’ve known Marshall for ages. He has covered a lot of the things I’ve been writing about in this column. 

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” 

Upton Sinclair

The problem here is one of incentive. Our respective media heads didn’t wake up one morning and say, “You know what we need to be? A lot more biased!” They have walked down that path step by step, driven by the need to find a revenue model that meets their need for profitability. 

When we talk about our news channels, the obvious choice to be profitable is to be supported by ads. And to be supported by ads, you have to be able to target those ads. One of the most effective targeting strategies is to target by political belief, because it comes reliably bundled with a bunch of other beliefs that makes it very easy to predict behaviors. And that makes these ads highly effective in converting prospects.

This is how we got to where we are. But there are all types of ways to prop up your profit through selling ads. Some are pretty open and transparent. Some are less so. And that brings us to a particularly interesting section of Marshall’s book. 

John Marshall is a quant geek at heart. He has been a serial tech entrepreneur — and, in one of those ventures, built a very popular web analytics platform. He also has intimate knowledge of how the sausages are made in the ad-tech business. He knows sketchy advertising practices when he sees them. 

Given all of this, Marshall was able to undertake a fascinating analysis of the ads we see on various news platforms that dovetails nicely with the Ad Fontes chart. 

Marshall created the Ad Shenanigans chart. Basically, he did a forensic analysis of the advertising approaches of various online news platforms. He was looking for those that gathered data about their users, sold traffic to multiple networks, featured clickbait chumboxes and other unsavory practices. Then he ranked them accordingly.

Not surprisingly, there’s a pretty strong correlation between reputable reporting and business ethics. Highly biased and less reputable sites on the Ad Fontes Bias Chart (Breitbart, NewsMax, and Fox News) all can also be found near the top of Marshall’s Ad Shenanigans Chart. Those that do seem to have some ethics when it comes to the types of ads they run also seem to take objective journalism seriously. Case in point, The Guardian in the UK and ProPublica in the U.S.

The one anomaly in the group seems to be CNN. While it does fare relatively well on reputable reporting according to Ad Fontes, CNN appears to be willing to do just about anything to turn a buck. It ranks just a few slots below Fox in terms of “ad shenanigans.”

Marshall also breaks out those platforms that have a mix of paid firewalls and advertising. While there are some culprits in the mix such as the Daily Caller, Slate and the National Review, most sites that have some sort of subscription model seem to be far less likely to fling the gates of their walled gardens open to the ethically challenged advertising hordes. 

All of this drives home Marshall’s message: When it comes to the quality of your news sources, free is bad. As soon as something costs you nothing, you are no longer the customer. You’re the product. Invisible hand market forces are no longer working for you. They are working for the advertiser. And that means they’re working against you if you’re looking for an unbiased, quality news source.

Amazon Prime: Buy Today, Pay Tomorrow?

This column goes live on the most eagerly anticipated day of the year. My neighbor, who has a never-ending parade of delivery vans stopping in front of her door, has it circled on her calendar. At least one of my daughters has been planning for it for several months. Even I, who tends to take a curmudgeonly view of many celebrations, has a soft spot in my heart for this particular one.

No, it’s not the day after Canadian Thanksgiving. This, my friends, is Amazon Prime Day!

Today, in our COVID-clouded reality, the day will likely hit a new peak of “Prime-ness.” Housebound and tired of being bludgeoned to death by WTF news headlines, we will undoubtedly treat ourselves with an unprecedented orgy of one-click shopping. And who can blame us? We can’t go to Disneyland, so leave me alone and let me order that smart home toilet plunger and the matching set of Fawlty Towers tea towels that I’ve been eyeing. 

Of course, me being me, I do think about the consequences of Amazon’s rise to retail dominance. 

I think we’re at a watershed moment in our retail behaviors, and this moment has been driven forward precipitously by the current pandemic. Being locked down has forced many of us to make Amazon our default destination for buying. Speaking solely as a sample of one, I know check Amazon first and then use that as my baseline for comparison shopping. But I do so for purely selfish reasons – buying stuff on Amazon is as convenient as hell!

I don’t think I’m alone. We do seem to love us some Amazon. In a 2018 survey conducted by Recode, respondents said that Amazon had the most positive impact on society out of any major tech company. And that was pre-Pandemic. I suspect this halo effect has only increased since Amazon has become the consumer lifeline for a world forced to stay at home.

As I give into to the siren call of Bezos and Co., I wonder what forces I might be unleashing. What unintended consequences might come home to roost in years hence? Here are a few possibilities. 

The Corporate Conundrum

First of all, let’s not kid ourselves. Amazon is a for-profit corporation. It has shareholders that demand results. The biggest of those shareholders is Jeff Bezos, who is the world’s richest man. 

But amazingly, not all of Amazon’s shareholders are focused on the quarterly financials. Many of them – with an eye to the long game – are demanding that Amazon adopt a more ethical balance sheet.  At the 2019 Annual Shareholder Meeting, a list of 12 resolutions were brought forward to be voted on. The recommendations included zero tolerance for sexual harassment and hate speech, curbing Amazon’s facial recognition technology, addressing climate change and Amazon’s own environmental impact. These last two were supported by a letter signed by 7600 of Amazon’s own employees. 

The result? Amazon strenuously fought every one of them and none were adopted. So, before we get all warm and gooey about how wonderful Amazon is, let’s remember that the people running the joint have made it very clear that they will absolutely put profit before ethics. 

A Dagger in the Heart of Our Communities

For hundreds of years, we have been building a supply chain that was bound by the realities of geography. That supply chain required some type of physical presence within a stone’s throw of where we live. Amazon has broken that chain and we are beginning to feel the impact of that. 

Community shopping districts around the world were being gutted by the “Amazon Effect” even before COVID. In the last 6 months, that dangerous trend has accelerated exponentially. In a commentary from CNBC in 2018, venture capitalist Alan Patricof worried about the social impact of losing our community gathering spots, “This decline has brought a deterioration in places where people congregated, socialized, made friends and were greeted by a friendly face offering an intangible element of belonging to a community.”

The social glue that held us together has been dissolving over the past two decades. Whether you’re a fan of shopping malls or not (I fall into the “not” category) they were at least a common space where you might run into your neighbor. In his book Bowling Alone, from 2000, Harvard political scientist Robert Putnam documented the erosion of social capital in America. We are now 20 years hence and Putnam’s worst case scenario seems quaintly optimistic now. With the loss of our common ground – in the most literal sense – we increasingly retreat to the echo chambers of social media. 

Frictionless Consumerism

This last point is perhaps the most worrying. Amazon has made it stupid simple to buy stuff. They have relentlessly squeezed every last bit of friction out of the path to purchase. That worries me greatly.

If we could rely on a rational marketplace filled with buyers acting in the best homo economicus tradition, then I perhaps rest easier, knowing that there was some type of intelligence driving Adam Smith’s Invisible Hand. But experience has shown that is not the case. Rampant consumerism appears to be one of the three horsemen of the modern apocalypse. And, if this is true, then Amazon has put us squarely in their path. 

This is not to even mention things like Amazon’s emerging monopoly-like dominance in a formerly competitive marketplace, the relentless downward pressure it exerts on wages within its supply chain, the evaporation of jobs outside its supply chain or the privacy considerations of Alexa. 

Still, enjoy your Amazon Prime Day. I’m sure everything will be fine.