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.

The Death of Sears and the Edge of Chaos

So, here’s the question: Could Sears – the retail giant who has become the poster child for the death of mall-based retail shopping – have saved themselves? It’s an important question, because I don’t think Sears was an isolated incident.

In 2006, historian Richard Longstreth explored the rise and fall of Sears. The rise is well chronicled. From their beginnings in 1886, Richard Sears and Alvah Roebuck grew to dominate the catalog mail order landscape. They prospered by creating a new way of shopping that catered specifically to the rural market of America, a rapidly expanding opportunity created by the Homestead Act of 1862. The spreading of railroads across the continent through the 1860’s and 70’s allowed Sears to distribute physical goods across the nation. This, combined with their quality guarantee and free return policy, allowed Sears to rapidly grow to a position of dominance.

In the 1920’s and 30’s, Robert E. Wood, the fourth president of Sears, took the company in a new direction. He reimagined the concept of a physical retail store, convincing the reluctant company to expand from its very lucrative catalog business. This was directly driven by Sear’s foundation as a mail order business. In essence, Woods was hedging his bet. He built his stores far from downtown business centers, where land was cheap. And, if they failed as retail destinations, they could always be repurposed as mail order distribution and fulfillment centers. But Wood got lucky. Just about the time he made this call, America fell in love with the automobile. They didn’t mind driving a little bit to get to a store where they could save some money. This was followed by the suburbanization of America. When America moved to the suburbs, Sears was already there.

So, you could say Sears was amazingly smart with its strategy, presciently predicting two massive disruptions in the history of consumerism in America. Or you could also say that Sears got lucky and the market happened to reward them – twice. In the language of evolution, two fortuitous mutations of Sears led to them being naturally selected by the marketplace. But, as Longstreth showed, their luck ran out on the third disruption, the move to online shopping.

A recent article looking back at Longstreth’s paper is titled “Could Sears Have Avoided Becoming Obsolete?”

I believe the answer is no. The article points to one critical strategic flaw as the reason for Sear’s non-relevance: doubling down on their mall anchor strategy as the world stopped going to malls. In hindsight, this seems correct, but the fact is, it was no longer in Sears DNA to pivot into new retail opportunities. They couldn’t have jumped on the e-com bandwagon, just as a whale can’t learn how to fly. It’s easy for historians to cast a gaze backwards and find reasons for organizational failure, just as it’s easy to ascribe past business success to a brilliant strategy or a visionary CEO. But the fact is, as business academic Phil Rosenzweig shows in his masterful book The Halo Effect, we’re just trying to jam history into a satisfying narrative. And narratives crave cause and effect. We look for mistakes that lead to obsolescence. This gives us the illusion that we could avoid the same fate, if only we are smarter. But it’s not that simple. There are bigger forces at play here. And they can be found at the Edge of Chaos.

Edge of Chaos Theory

In his book, Complexity: Life at the Edge of Chaos, Roger Lewin chronicles the growth of the Santa Fe Institute, an academic think tank that has been dedicated to exploring complexity for the last 33 years now. But the “big idea” in Lewin’s book is the Edge of Chaos Theory, a term coined by mathematician Doyne Farmer to describe a discovery by computer scientist Christopher Langton.

The theory, in its simplest form, is this: On one side you have chaos, where there is just too much dynamic activity and instability for anything sustainable to emerge. On the other side you have order, where rules and processes are locked in and things become frozen solid. These are two very different states that can apply to biology, sociology, chemistry, physics, economics – pretty much any field you can think of.

To go from one state – in either direction – is a phase transition. Everything changes when you move from one to the other. On one side, turmoil crushes survivability. One the other, inertia smothers change. But in between there is a razor thin interface, balanced precipitously on the edge of chaos. Theorists believe that it’s in this delicate interface where life forms, where creativity happens and where new orders are born.

For any single player, it’s almost impossible to maintain this delicate balance. As organizations grow, I think they naturally move from chaos to order, at some point moving through this exceptional interface where the magic happens. Some companies manage to move through this space a few times. Apple is such a company. Sears probably moved through the space twice, once is setting their mail order business up and once with their move to suburban retail. But sooner or later, organizations go through their typical life cycle and inevitably choose order over chaos. At this point, their DNA solidifies to the point where they can no longer rediscover the delicate interface between the two.

It’s at the market level where we truly see the Edge of Chaos theory play out. The theory contests that adaptive systems in which there is feedback continually adapt to the Edge of Chaos. But, as in any balancing act, it’s a very dynamic process. In the case of sociological evolution, it’s often a force (or convergence of forces) of technology that catalyzes the phase transition from order back to chaos. This is especially true when we look at markets. But this is an oscillation between order and chaos, with the market switching from phases of consolidation and verticalization to phases of chaos and sweeping horizontal activation. Markets will swing back and forth but will constantly be rewarding winners that live closest to the edge between the two states.

We all love to believe that immortality can be captured in our corporate form, whether it be our company or our own body. But history shows that we all have a natural life cycle. We may be lucky enough to extend our duration in that interface on the edge of chaos, but sooner or later our time there will end. Just as it did with Sears.

 

 

 

Don’t Be Evil – Revisited

I have to confess, I was actually a fan of Google’s “Don’t Be Evil” philosophy. Predictably, once they went public with it, the cynics were quick to tear it apart. Was it naïve? Of course it was. The minute Google did anything that smacked of ethical transgression; there were scads of people willing to point fingers. But the fact was, at least Google was trying. It gave those inside the Googleplex a common code of conduct. More than one planning meeting’s blue sky postulation ran up against the “Don’t be Evil” mantra which caused the conversation to veer in another – hopefully less evil – direction.

Some columns back, I talked about the corporate rush to embrace morality and voiced my own skepticism about this born again fervor. I’m skeptical because I don’t believe that capitalism and morality play very nice together. It’s tough to make a profit and make the world a kinder place at the same time. I think you can certainly set your sights in that direction, but as Google found out, if you wear your morality on your sleeve there are many who look for every opportunity to call “bullshit” on you. That’s likely why they downplayed the whole “Don’t Be Evil” thing in 2015 when Alphabet was formed.

But I still think that Google generally tries to be good. And, perhaps not coincidentally, Google is now most valuable brand in the world, according to Brand Finance When you’re a huge company you have your finger in a lot of pies and some of them, inevitably, will upset someone somewhere. The trick here is that what is evil is in the eye of the beholder. Is AirBNB good because they have enabled a new option for travellers to connect with property owners and find better value accommodation, or are they evil because they’re disrupting an established industry and putting thousands of people out of work?

It’s hard to combine the church of morality and the state of profitability. That’s why most corporations elect to keep the two separate. Microsoft is a good example. Under the reign of Bill Gates, Microsoft was even called the “Evil Empire” because of their predatory and monopolistic business practices. Yet Forbes recently tagged Microsoft as having the second best corporate social responsibility program in the world, right behind –you guessed it – Google. How do you reconcile the two? Thanks to the Bill and Melinda Gates Foundation, Bill Gates is one of the world’s most generous philanthropists. He really, really, really wants to make the planet a better place. But as head of Microsoft, he also made a shit load of money (some of which he is currently giving away) by being an asshole. He, perhaps more than anyone, personifies the dynamic tension we talk about when we refer to corporate ethics.

Let’s go back to the value of corporate brands on the Brand Finance list and the role ethics might play. It’s a timely discussion, especially right now. United Airlines was heading in the right direction, 81 on the list, up a whopping 53 spots from 2016. But then they gave the thumbs up to drag Dr. Dao down the aisle in front of an entire plane full of smart phone equipped passengers. Pepsi was number 33 on the list. But that was before the Pepsi marketing execs gave the green light to the Kylie Jenner abomination masquerading as an ad.

There’s evilness, and then there’s just bone-headed, tone deaf, shake your head in bewilderment stupidity. How the hell do these things happen? Even taking into account the “two sides to every story” factor, how did the multiple United staff members who must have had a part in the Dao debacle think that this could possibly be the way to treat a paying customer flying the “Friendly Skies”? How did the Jenner ad pass through what must have been multiple rounds of approval at Pepsi with no one whispering “WTF”?

Here, it’s an issue of culture. Culture is defined by Merriam-Webster as: the set of shared attitudes, values, goals, and practices that characterizes an institution or organization. And the tone of the culture is generally set from the top down. Corporate ethics depend on the ethics of the founders, CEO and executive management. While having a moral CEO might not be enough to guarantee consistent corporate ethics, it’s a lead pipe cinch that if you have a scum-bag in the CEO role, the company is probably going to be a pretty sleazy operation.

Culture depends on clearly understood values and practices that adhere to those values. If this is in place, it gives the rank and file the confidence to hold up their hand when “off-culture” things occur. It would give the United flight attendant the moral obligation to say, “What a minute. Maybe we shouldn’t drag a paying customer who had already been seated forcefully off the plane like a common criminal. That just doesn’t seem right to me.”

Things like Google’s “Don’t Be Evil” dictate may seem naïve in the corporate world, but it was a value that helped define the culture. Perhaps we shouldn’t be so quick to criticize it. Maybe we need more of that particular type of naiveté.

How Vision and Strategy Can Kill a Marketer’s Job Security

“Apparently, marketers today are losing confidence in their ability to meet key goals, like reaching the right customers with their marketing efforts, or being able to understand or evaluate the ROI of their marketing plans.”

Dave Morgan – Why Are Marketing Losing Confidence in Their Ability to Do Their Jobs?

“I think marketing is going to be getting much, much easier over the next couple of years.”

Cory Treffiletti – CMOs’ Vision Crucial to their Success

A couple of weeks ago, my fellow Spinners offered these two seemingly contradictory prognoses of the future of marketing. The contradiction, I believe, is in the conflation of the ideas of media buying and marketing. Yes, media buying is going to get easier (or, at least, more automated). And I agree with Cory’s prediction of consolidation in the industry. But that doesn’t do much to ease the crisis of confidence mentioned by Dave Morgan. That’s still very real.

The problem here is one of complexity. Markets are now complex. Actually, they’ve always been complex, but now they’re even more complex and we marketers can no longer pretend that they’re otherwise. When things get complex, our ability to predict outcomes takes a nosedive.

At the same time, an avalanche of available data makes marketers more accountable than ever. This data, along with faster, smarter machines, offers the promise of predictability, but it’s a dangerous illusion. If anything, the data and AI is just revealing more of the complexity that lurks within those markets.

And here is the crux of the dilemma that lives between the two quotes above. Yes, marketing is becoming more powerful, but the markets themselves are becoming more unpredictable. And marketers are squarely caught on the horns of that dilemma. We sign on to deliver results and when those results are no longer predictable, we feel our job security rapidly slipping away.

Cory Treffiletti talks about vision – which also goes by the name of strategy. It sounds good, but here’s the potential problem with that. In massively complex environments, strategy in the wrong hands can become a liability. It leads to an illusion of control, which is part of a largely disproven and outdated corporate mindset. You can blindly follow a strategy right into a dead end because strategies depend on beliefs and beliefs can dramatically alter your perception of what’s real. No one can control a complex environment. The best you can do is monitor and react to that environment. Of course, those two things can – and should – become a strategy in and of themselves.

Strategy is not dead. It can still make a difference. But it needs to be balanced with two other “S’s” – Sense making and Synthesis. These are the things that make a difference in a world of complexity.

You have to make sense of the market. And this is more difficult than it sounds. This is where the “Strategy” paradox can creep up and kill you. If your “Vision” – to use Cory Treffiletti’s term – becomes more important to you than reality, you’ll simply look for things that confirm that vision and plunge ahead, unaware of the true situation. You’ll ignore the cues that are telling you a change of direction may be required. The Sense Making cycle starts with a “frame” of the world (a.k.a. “Vision”) and then looks for external data to either confirm and elaborate or refute that frame/vision. But the data we collect and the way we analyze that data depends on the frame we begin with. Belief tends to make this process a self-reinforcing loop that often leads to disaster. The stronger the “vision,” the greater the tendency for us to delude ourselves.

sensemaking2

Sensemaking: Klein, Moon and Hoffman

If you can remain objective as possible during the sense making cycle you then end up with a reasonably accurate “frame” of your market. This is when the Synthesis part of the equation takes over. Here, you look at your strategy and see how it lines up with the market. You look for new opportunities and threats. Knowing the market is unpredictable, you take the advice of Antifragile author Nassim Nicholas Taleb, minimizing your downside and maximizing your upside. You pull this together into a new iteration of strategy and execute like hell against it. Then you start all over again.

By going through this cycle, you’ll find that you create a wave-like approach to strategy, oscillating through phases of sense making, synthesis and strategic execution. The behavior and mindsets required in each of these phases are significantly – and often diametrically – different. It’s a tough act to pull off.

No wonder marketers are having a tough time right now.

 

 

 

 

 

 

 

Too Many Fish in the Sea: The Search for Brand Love

I still see – in a number of MediaPost articles and in other places – a lot of talk about “brand-love.” So let’s talk about that.

My grandfather Jack, who farmed on the Canadian Prairies for most of his life, loved John Deere tractors.

And I mean L-O-V-E-D. Deep love. A love that lasted 50 some years and never – not once – did he ever consider a rival for his affection. You could have given him a brand new shiny red Massey Ferguson and it would have sat untouched behind the barn. The man bled green and yellow. He wore a John Deere ball cap everywhere. He had his grime encrusted one for every day wear and a clean one for formal occasions – things like the christening of new grandchildren and 50th wedding anniversaries. He wasn’t buried with one, but if he had his way, he would have been.

My grandpa Jack loved John Deere tractors because he loved one tractor – his tractor. And there was absolutely no logic to this love.

I’ve heard stories of Jack’s rocky road to farm equipment romance. His tractor was a mythically cantankerous beast. It often had to be patiently cajoled into turning over. It was literally held together with twine and bailing wire. At the end of its life, there was little of it that originally issued from the John Deere factory floor in Welland, Ontario. Most of it was vintage Jury-rigged Jack.

But Jack didn’t love this tractor in spite of all that. He loved it because of it. Were there better tractors than the ones John Deere made? Perhaps. Were there better tractors than this particular John Deere? Guaranteed. But that wasn’t the point. Over the years there was a lot of Jack in that tractor. It got to the point where he was the only one who was sufficiently patient to get it to run. But there was also a lot of that tractor in Jack. It made him a more patient man, more resourceful and – much to my grandmother’s never ending frustration – much more stubborn.

This is the stuff that love is made of. The tough stuff. The maddening stuff. The stuff that ain’t so pretty. A lot of times, love happens because you don’t have an alternative. I suspect love – true love – may be inversely correlated to choice. Jack couldn’t afford a new tractor. And by the time he could, he was too deeply in love to consider it.

This may be the dilemma for brands looking for love in today’s world. We may be attracted to a brand, we may even become infatuated with it, but will we fall in true love? What I call “Jack-love?”

Let me lay out some more evidence of this Love/Choice paradox.

If you believe the claims of online dating sites like Match.com and eHarmony, your odds of ending up in a happy relationship have never been better than when you put yourselves in the hands of their matching algorithm. This just makes sense. If you increase the prospects going in the front end and are much smarter about filtering your options, you should come out the winner in the end. But according to an article from the Association for Psychological Science, this claim doesn’t really stand up when subjected to academic rigor. “Regarding matching, no compelling evidence supports matching sites’ claims that mathematical algorithms work— that they foster romantic outcomes that are superior to those fostered by other means of pairing partners.”

A study, by Dr. Aditi Paul, found that couples that meet through online dating sites are less likely to enter marriage than those that meet through offline channels and; if they do wed, are more likely to split up down the road. Another study (D’Angelo and Toma) showed that the greater the number of options at the beginning, the more likely it was that online daters would question and probably reverse their choice.

What dating sites have done have turned looking for love into an exercise in foraging. And the rule of thumb in foraging is: The more we believe there are options that may be better, the less time we will be willing to invest in the current choice. It may seem sacrilegious to apply something so mundane as foraging theory to romance, but the evidence is starting to mount up. And if the search for a soul mate has become an exercise in efficient foraging, it’s not a great leap to conclude that everything else that can be determined by a search and matching algorithm has suffered the same fate. This may not be a bad thing, but I’m placing a fairly large bet that we’re looking at a very different cognitive processing path here. The brain simply wouldn’t use the same mechanisms or strategies to juggle a large number of promising alternatives as it would do fall deeply in love, like Jack and his John Deere (or my grandmother, for that matter).

The point is this. Infatuation happens quickly and can fade just as quickly. Love develops over time and it requires shared experiences. That’s something that’s pretty tough for an algorithm to predict. As the authors of the APS article said, “these sites are in a poor position to know how the two partners will grow and mature over time, what life circumstances they will confront and coping responses they will exhibit in the future, and how the dynamics of their interaction will ultimately promote or undermine romantic attraction and long-term relationship well-being.”

I’ve always felt uncomfortable with the phrase “brand-love” but I think it did provide a convenient and mostly accurate label for some brand relationships. I’m not so sure this is still true today. As I said in a previous column, branding is still aiming to engender love by latching on to our emotions but I suspect they may just be sparking infatuation.

Why Can’t Markets be Moral?

Last week, I said there was an emerging market for morality. I painted that particular picture in a somewhat negative light. Andrew Goodman, a fellow Canadian who I have always admired for both his intellect and morality, called me on it (via my Facebook feed): Nice post, but I was hoping for a little more from this.” I paraphrase Andrew’s eloquent and lengthy reply by boiling it down to essentially this: extreme circumstances call for extreme measures and if that has to come from corporations and their advertising, then so be it.

It’s fair to say the last week has done nothing to dispel Goodman’s assessment of the extremity of the situation. Insanity seems to be accelerating at an alarming rate.

But on further reflection, I feel some further clarification needed here. I ascribed morality to markets, not necessarily corporations. There’s an important difference here. Corporations are agents within markets and will follow where markets lead. And increasingly, it looks like there is a market movement towards morality. Morality is becoming more profitable. So let’s look specifically at the morality of the market.

On one hand you could take the position of British economic historian Robert Skidelsky, who said in 2008 that there is an inherent dilemma when one looks for morality in economic markets. This was essentially the point I raised last week:

It has often been claimed that capitalism rewards the qualities of self-restraint, hard work, inventiveness, thrift, and prudence. On the other hand, it crowds out virtues that have no economic utility, like heroism, honour, generosity, and pity.

But let’s say for the moment that Adam Smith’s “Invisible Hand” is solely moved by greed. Does that mean that no good can come from it? New York Times columnist Nicholas Kristof ran a column earlier this year stating that 2017 could be the best year ever. If you can set your cognitive dissonance aside for a moment, here were his reasons:

  • “Since 1990, more than 100 million children’s lives have been saved through vaccinations, breast-feeding promotion, diarrhea treatment and more.”
  • “Every day, an average of about a quarter-million people worldwide graduate from extreme poverty, according to World Bank figures. in the early 1980s, more than 40 percent of all humans were living in extreme poverty. Now fewer than 10 percent are. By 2030 it looks as if just 3 or 4 percent will be.”
  • “While income inequality has increased within the U.S., it has declined on a global level because China and India have lifted hundreds of millions from poverty.”
  • “Some 40 countries are now on track to eliminate elephantiasis. When you’ve seen the anguish caused by elephantiasis — or leprosy, or Guinea worm, or polio, or river blindness, or blinding trachoma — it’s impossible not to feel giddy at the gains registered against all of them.”
  • “85 percent of adults are literate. And almost nothing makes more difference in a society than being able to read and write.”

All these benefits come from the “trickling down” benefits of capitalism. Globalization and the opening of new markets have unleashed a tide that has raised all boats. Kristoff shows what happens when you look at a bigger picture and rely on facts rather than personally held beliefs that come from your own limited perspective. What we forget is that the very first mention Adam Smith made of his “invisible hand” was actually in a text called “The Theory of Moral Sentiments” in 1759. Here was the exact passage:

“The proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest … [Yet] the capacity of his stomach bears no proportion to the immensity of his desires … the rest he will be obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of. The rich…are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society.”

In direct contrast to the protectionist policies of the current U.S. administration, the western world (especially the U.S.) is the landlord in this scenario. As much as we may want to rely on our beliefs rather than facts, the average American is better off now they were 50 years ago as measured by almost any empirical baseline you may want to use: lifespan, economic well being, degree of civil freedom, measure of social equality or quality of our environment. And this American free-market drive to get ahead has dragged the whole world in its wake. Again, Robert Skidelsky concedes this point:

“From the ethical point of view, consumption is a means to goodness, and the market system is the most efficient engine for lifting people out of poverty: it is doing so at a prodigious rate in China and India.”

The other potential moral windfall of markets is that there is a second kind of “trickle down” effect that also happens – the driving forward of technology. Technology is a tool that is designed to advance the interests of humans. While there is much in technology that is misapplied to the human condition, we cannot deny that technology continually and consistently makes us better than we were yesterday. As Kristof notes in his column, today 300,000 more people around the world will get electricity for the first time. This will enable access to communication networks, clean water, higher levels of hygiene and many other spin-off benefits. All this happens because corporations see potential profitability in new markets.

But there is another piece to this. If we look only at the “trickle down” effects of capital markets, we have to keep a careful eye on what’s happening at the top of the pyramid. As Skidelsky said in 2008, “But this does not tell us at what point consumption tips us into a bad life.”

 

 

 

 

A Market for Morality

Things are going to get interesting in the world of marketing. And the first indication of that was seen this past Sunday during the Super Bowl. As Bob Garfield noted, there were a lot of subtle and not so subtle undercurrents of messaging in the ads that ran in between the distracting sub-story that played out on the field. Things got downright political with a number of 167 thousand-dollar-a-second ad swipes at the current president and his policies.

I and many others here at Mediapost have been criticized over the past several months for getting political when we should have been talking about media and marketing. But as this weekend showed, we’re naïve to think those two worlds don’t overlap almost completely. And that’s about to become even more true in the future.

Advertising has to talk about what people are talking about. It has always been tied to the zeitgeist of society. And in a politically polarized nation, that means advertising’s “going to go there”. That’s normal. What’s not so normal is this weird topsy-turvy trend of for-profit companies suddenly becoming the moral gatekeepers of America. That’s supposed to be the domain of government and – if you believe in such things – religion. That’s in a normal world. But in the world of 2017 and the minds of 53.9% of America (the percentage of the electorate who didn’t vote for Trump) there is a vast, sucking moral vacuum on at least one of those fronts. It seems that Corporate America is ready to step up and fill the gap.

Suddenly, there is a market for morality. Of course, we have always had “feel-good” advertising and codes of corporate responsibility but this is different – both in volume and tone. It is more overtly political and it plays on perceived juxtaposition of the mores of the nation and the official stance of the government. Markets are built to be nimble and adaptive. Governments are seldom either of these things. Corporate America is sensing a market opportunity by taking the high road and the Super Bowl marked the beginning of what may become a stampede to higher moral ground.

This isn’t the first time this has happened. Around the turn of the last century, we saw the rise of welfare capitalism. In a rapidly expanding industrial market where there was a scarcity of human resources and little legislative regulation of working conditions, corporations became paternalistic. The reasoning was that no one could better provide stability for workers than the corporation that employed them. What is different about the current situation, however, is that this moral evangelism is primarily aimed at the market, not internal operations. We’ll come back to this in a bit.

This creates an interesting dynamic. In a free market economy citizens have the right to vote with their wallets. After a deeply divisive election the debate can continue in a market suddenly divided along political lines. This is compounded by the interconnected and interactive nature of marketing today. We have realized that our market is a complex system and plays by it’s own rules, none of which are predictable. Social network effects, outriding anomalies and viral black swans are now the norm. As I said in an earlier column, branding is becoming a game of hatching “belief worms” – messages designed to bypass rationality and burrow deep into our subconscious values. Our current political climate is a rich breeding ground for said “worms.”

You might say, “What’s wrong with Corporate America taking a moral stand? “

Well..two things.

There is no corporation I’m aware of that has as its first priority the safeguarding of morality. As economist Milt Friedman said, corporations are there to make a profit. Period. And they will always follow the path most likely to lead to that profit. For example, Silicon Valley has been very vocal in its condemnation of the Muslim travel ban not because it’s not right but because it jeopardizes the ability to travel for its employees from Muslim countries. And a century ago, welfare capitalism spread because it helped employers hang on to their employees and gave them a way to keep out unions. Even if morality and profitability happen to share the same bandwagon for a time the minute profitability veers in a new direction, corporations will follow. This is not the motivational environment you want to stake the future on.

Secondly, there is no democratic mandate behind the stated morality of a corporation. There are a lot of CEO’s that have robust ideological beliefs, but it is fair to say the moral proclivities of a corporation are necessarily tied to a very select special interest group: the employees, the customers and the shareholders of that corporation. Companies, by their very nature, should not be expected to speak for “we, the people.” Much as we would like morality to be universally defined, it is still very much a personal matter.

Take just one of these moral stakeholders – the customers. According to Blend, a millennial messaging app, their users loved the Coke, Budweiser and Airbnb ads that all had overt or thinly veiled moral messages. But there was a backlash from Trump supporters asking for boycotts of all these advertisers along with others that got political. The social storms stirred up on both sides were telling. Reaction was quick and emotionally charged. In a world where branding and beliefs are locked together at the hip, we can probably expect that morality and marketing will be similarly conjoined. That means that morality, just like marketing, will be segmented and targeted to very specific groups.