The dawning age of thrift

My partner and I are regular restaurant goers. We’ll often quite decadently travel a not insignificant distance to go to a great restaurant, like for instance Eschalot in Berrima (a one and a half hour drive south of Sydney). Recently we’ve started to pull our horns in a bit by spending less per head. I’ve also noticed a distinct reduction in the number of empty tables at restaurants. I take this as a clear sign that the global recession has arrived in Australia.

People who overconsumed during the past decade are rejecting extravagant lifestyles. Following 9/11 when, in particular in the US, it became patriotic to shop and spend, people are now spending less and more wisely. The penny pinching is showing up in the numbers with personal consumption falling, exacerbated by huge consumer debt ($2.6 trillion in the US).

Which brings us to what John Maynard Keynes called the paradox of thrift. What’s good for the individual, argued Keynes, can ignite or deepen a recession. But that won’t deter the newly thrifty. It isn’t hard to hear the millions of those in debt exclaim, “I can’t help the economy, I’ve got to help myself”. Thrift has gone in and out of style over the years often sparked by recessions. Indeed the Great Depression marked many and their siblings for life. In the 1930s, it was typical for son’s to see their fathers out of work for years, perpetually hungry, scraping together a living. Those sons today, many who are now in their 80s and wealthy, shop with coupons, drive a Ford and take the subway rather than throwing away money on a taxi. Their baby boomer children grew up without psychological scars from the Depression. And the boomers’ children have come of age in an era of abundance, easy credit and a taste for luxury. “We want to build a culture that’s more hospitable to thrift, so it’s not seen as odd but fostered and nudged along,” says Barbara Whitehead, co-author of For a New Thrift: Confronting the debt culture, a new report from The Institute for American Values, a think tank.

As joblessness creeps up, many more will receive their own crash course in thriftiness. Some will spend more up front to reap savings over the next few years, like installing expensive but energy sipping light bulbs or solar panels. Some will switch from shaving cream to shaving soap – a relatively small saving per year but a sizable psychological benefit. People are learning the difference between necessities and discretionary spending. Maslow’s hierarchy of needs is as applicable now as it ever was.

People are eating in more, buying more second hand clothes and turning the lights off when they leave the room. In late 2008, Booz & Co conducted a survey of nearly 100 households and found that 43% of respondents said they are eating at home more and 25% said they cutting spending on hobbies and sports activities. In both cases, most said they’d continue doing so even when the economy improves. Much the way the inexorable rise in petrol price have prompted many to forsake SUVs for smaller cars, the likely fall in home values and the size of consumer debt, will make consumers think twice about hitting the mall and lead, I fear to say, to a more lengthy contraction than some commentators would have us believe.

The 'Builders' embrace the power of the web

You know there was a time when my parents didn’t have a clue about computers or the web, let alone Skype or IM. Their generation, those born before 1946 (aka the Builders), were used to stuff in the physical world; purposeful machines you could see working, that could be taken apart, fixed and put back together again. The thought of a mysterious black box sitting in the corner with alien, magical powers that allowed you to get in touch with anyone in the world at any time sent shivers up Builders’ spines. The idea of online shopping was attractive because it removed the hassle of driving or calling around to get the best deal. But there was always the nagging security concern - what if someone intercepted my credit card details? What if I pushed the wrong button while entering my details for payment and ordered the wrong thing or paid too much?

The following is a classic, though admittedly somewhat exaggerated example of my parent’s (actually my Dad’s) first effort to make an online purchase. I have no doubt it’s similar to those efforts of their neighbours and fellow Builders. I guess it’ll strike a chord with my fellow army of Gen Xers who’ve attempted with varying success to educate their ol’ folks of the ways of the web.

- So have you booked your holiday?

- Yes, Dad booked it last night.

- Did you manage to book it online, like we talked about?

- Yes, he booked it all himself online.

- Really, Dad? That’s brave; I thought he was still getting to grips with the computer.

- Well he sorted out the email; he sent you a message.

- Yes, 134 actually. Still it’s good he’s using it, we’ve all got to learn hey. Anyway, where you going on your hols?

- We’re flying to Milan.

- That’s fantastic, it’s a great city. Where are you staying?

- Well, the hotel is a little way outside Milan itself.

- Yes?

- It’s in Miami.

- Dad booked the hotel in Miami but the flights are for Milan?

- Yes, he’s a bit reckless with his mouse. We’re hiring a car so we’ll be able to drive there.

- From Milan?

- Oh no, not from Milan, we’ve got to pick the car up in Manchester.

- Mouse problems again?

- No, no, Dad dropped his bifocals on the keyboard. Still, it’ll be a nice long break. Dad spilt his cocoa on the keyboard and some of the number keys started to stick so he’s managed to book the hotel for 33 weeks…

- Oh no…

- For 222 people…


I am pleased to say that nowadays my Mum - and Dad – use the web successfully, to search for information, to buy various goods and services, to download files and software. They are also fully Skype literate. As I beam into their UK study all the way from Sydney, it is, amongst other things, a pleasure to see their faces filled wonder; the wonder of this technology and the magic it can perform.

Us marketers need to take note. Builders make up a not insignificant 17% of the Australian population (ABS) and therefore present a great business opportunity. Though still weary of the computer ‘thing’ in the study, Builders have embraced the web and are demanding more from us, the young upstarts that have upset their apple carts and brought them this pragmatic magic.

(Note: McCrindle Research have excellent papers on generational differences including internet usage trend variances.)

The Secret of Spin

Just finished reading Barack Obama’s ‘life story’ Dreams from my Father. As he does on the Telly, in his writing he comes across well. I was left with the distinct impression that he is a thoughtful, diligent and considerate person. Above all, he seems like a decent human being who plays with a straight bat.

But the sceptic in me kept asking, Am I being played, in a good way or bad? For goodness’ sake, he’s a lawyer and a politician (and we all know politicians don’t lie straight in bed). Was the entire book a brilliant piece of spin doctoring? Like a good spin doctor, had he worked out the questions to come, and the kind of replies he needed to make in his build up to be President of the United States.

Some years ago I was told a story by someone who was brilliant at working an angle:

A customs officer stopped a youg boy who was cycling from Mexico into California. Across the handlebars of his bicycle he had two great big sacks. And of course the customs officer threw up his arm – drugs being blatantly taken across the border! “What’s in the bags?” “Sand.” “Oh yeah?” “Yeah.” “All right, let’s empthy the bags out here.” So he emptied the bags out and it was sand.

The customs officer couldn’t see anything wrong, so he let the boy put the sand back in, searched him, and watched him pedal into California.

This happened every week. Every Monday, along came this boy on his bicycle, and the customs officer examined the bags and found nothing wrong.

Finally, the customs officer became so frustrated he said, “ Look, I know your putting something across me here. We examine these bags and search you every time you cross, now what are you taking across the border?”And the boy thought for a moment and said: “New bicycles”.

Now that was a great bit of spin. All the attention was directed onto something else. How do you put an angle on something?

Some of the best examples come in speeches. When Martin Luther King said: “I have a dream, my friends,” it was a great piece of spin doctoring. It was putting the right words in the right place to the right audience. Obama’s more recent “Yes we can” mantra is pure spin.

Spin has been around a long time. I think it was Goebbels who said: “Tell a lie often enough and everyone will believe it”. That’s not true anymore. Sooner or later people are going to start asking: “Is that right? Has the emperor got clothes on?” With greater access to information, people are more sophisticated today and it doesn’t work.

An example of spin doctoring gone wrong was when Richard Nixon was advised to go on the Telly and say: “I am not a crook”. It was like, if you could fake sincerity then you’ve got it made. But Tricky Dicky looked like a sweaty crook and everybody could see it. It was bad advice.

So what are the characteristics of successful spin doctoring? To my mind, there are few points:

The first is, be genuine. Simple communication and absolute straight up integrity and honesty is key.

Two, it has to be a presentation, not a show. You can’t put on the falsity of a show. Abraham Lincoln said: “I couldn’t be two-faced, because if I had two faces I sure wouldn’t wear this one”. Straight up works best.

Third, you have to understand what your message is. Obama’s message was “Vote for Change”, a clear, simple message that made him different. People instantly knew what he stood for.

Fourth, you have to be able to see yourself as other people see you and be prepared to laugh at yourself. I remember reading a piece by the acerbic Alan Clark, the craggy old Tory MP, who described an official dinner in Peru. The host thought it would be nice to give Alan a British toast, so everyone took up their glasses and said: “Up your bottom.” Sir Alan took up his glass and replied: “Up yours”.

And finally, good spin doctoring is nearly always 90% positive. I remember reading a piece about “that woman” as I call her, Margaret Thatcher. Working on a speech, an advisor said: “I don’t like that bit”. “Don’t you, what would you put in its place?” “Well…” “Don’t waste my time. I’ve got a country to run. If you’ve got something better to suggest, fine, let’s have it. Otherwise, shut up.” Knocking all the time doesn’t attract people to you, doesn’t attract the attention that you’re looking for, doesn’t give the image you want.

Obama’s book meets my criteria. So it was an excellent piece of spin doctoring. Whatever, it felt good reading it. Perhaps, this is the most important thing for a spin doctor to do - make people feel good. Obama has certainly done that.

The Importance of Being Nice

In these tough economic times, I’ve been thinking about corporate reputations and I've come, I think, to a rather compelling theory: nasty companies will become extinct and nice companies will survive and thrive. The reason why nice companies will do well is that they establish attractive reputations. Companies that have reputations for being good employers find it easier to recruit and keep good people. Companies that have reputations for being good citizens are looked upon favourably by consumers. These days, companies that give to charity and are genuinely concerned about the environment tend to attract more customers. Companies that care about their customers as well as their suppliers give to their products and services an additional, and rather special kind of value. Business leaders are getting very interested in this ‘reputation’ value. They’re beginning to see it as an asset on their ‘invisible balance sheets’. Those are the balance sheets accountants can’t see, but which contain the really crucial things like brand values, intellectual property and know-how of employees.

If we agree that a company’s reputation is its most valuable asset, and if we recognise that reputation consists not of reality but of perceptions, then it is essential for a company to market a strategy. Reputation building and maintenance are going to be key management tasks going forward. It will become routine to acquire reputational assets at every opportunity. Until now, the big question for companies has been: ‘What shall we do?’ Henceforth the big question will be: ‘What am I?’

The theoretical part of the argument for how a nice company behaves is based on the theory of games. The game I think models nice businesses very well is ‘The Prisoners Dilemma’. Games theorist Robert Axelrod tried to discover the best strategy – the one that accumulated the highest score by inviting games theorists to enter their strategies in a computer tournament. To cut to the chase, the nice strategy did surprisingly well. (Axelrod defined the nice type of strategy as one that was never the first to make an aggressive move). It was a surprise because the conventional wisdom was to be first to defect (i.e. make an aggressive move). The reason why the conventional solution does badly in our game is that we are playing the repeated version. Players meet each other frequently, as they do in business, and soon establish reputations. A nasty player does well at first, but then gets a reputation for being nasty and finds that no-one wants to play with him any more.

The strategy that actually won Axlerod’s tournament he called ‘Tit for Tat’. It always cooperates on the first move and then always repeats what the other player does. Its simplicity is its strength. Other players recognise it; they know that if they’re aggressive it will be aggressive back. They also know that if they’re nice, it will be nice back, and that a long and mutually profitable relationship will begin.

It is this kind of niceness I mean when I talk about the nice strategy. It’s a clear, deliberate and disciplined kind of niceness. It’s not woolly, soft, weak niceness. Axelrod attributes Tit for Tat’s success on four qualities: it’s nice, it’s retaliatory, it’s forgiving, and it’s clear. I think all these qualities are desirable in a business strategy.

I'm convinced that the dominant business strategy of the future will be nothing other than to behave as a nice company.

The Rise of the Machines

Just had my latest fix of sci-fi. Last night I finished the first season of Terminator: The Sarah Connor Chronicles, and despite the meaningful glances, clichéd dialogue, cheesy acting and the decidedly annoying voiceover, I enjoyed it. Following the themes set out by the Arnie movies, we see 15 year old John and his mother, Sarah, on the run from cyborg Terminators…

Pouty John’s sulky teenager moods and boyish rebellions grate at times - especially when you consider that we’re talking about the future leader of mankind. But we have to bear in mind that he’s been raised by a paranoid (doesn't mean they're not out to get you) control freak mother. He also lives with a kick-arse Terminator protector, Cameron, who's hotter than most real girls - no doubt the producers realised early on the need to appeal to the teenage boy demographic.

Watching Cameron adapt to the challenges of the mission is fascinating and bloody funny too. In Cameron’s time period (the future) everything is focused on defeating SKYNET, an artificially intelligent system that has developed a consciousness and is bent on exterminating its creator humankind. Protecting John at all costs means there are few social interactions that don’t involve a battle for survival. This puts her in awkward positions in the present day, not understanding how to relate in a human manner. She grows to understand by watching television and reading, and there is a defining scene where John tells her not to act like a nerd, and she quickly replies with a definition of nerd. John asks her how she knows that, and she tells him she has been reading the dictionary at night. She doesn’t sleep.

Ray Kurzweil has written a number of books on non-biological intelligence and biotechnology. His latest work, The Singularity is Near, When Humans Transcend Biology, is an awesome/terrifying text on life in the near future, when nanobots become self-designing and self-replicating members of our society and help us out with everything from hair loss to taking out the rubbish. ‘Within a quarter century, non-biological intelligence will match the range and subtly of human intelligence,’ says Kurzweil. ‘It will then soar past it because of the continuing acceleration of information-based technologies, as well as the ability of machines to instantly share their knowledge. Intelligent nanorobots will be deeply integrated in our bodies, our brains, our environment, overcoming pollution and poverty, providing vastly extended longevity, full-immersion virtual reality incorporating all of the senses (like The Matrix), “experience beaming” (like Being John Malkovich) and enhancing human intelligence. The result will be an intimate merger between the technology-creating species and the technological evolutionary process it spawned.’

If Kurzweil’s timeline is accurate, by the mid-2020s, we will be on the verge of a nanotechnology revolution. The soldiers of this revolution are the nanobots, blood cell sized robots that can travel through our bloodstream destroying pathogens, removing debris, correcting DNA errors and reversing the aging processes.

Plans are currently underway to create medical nanobots that will use our own metabolic energy as a source of power. That means these devices could remain operational as long as we are alive – or longer if they manage to get into human egg or sperm. Any nanobot that develops the ability to propagate in this or any other manner across even one human generation has fulfilled the definition of a non-biological lifeform. A true alien.

There is, of course, opposition from the Church and environmentalists. The virtual worlds of Second Life and World of Warcraft have been attacked multiple times by self-replicating worms called Grey Goo, which clutter the environments and in some cases destroy players’ avatars. The name Grey Goo is itself a reference to the threat of nanotechnology: hypothetically, a self-replicating nanobot could consume the Earth’s resources, transforming our planet into a giant blob of grey goo.

So will the future look like Terminator? The Matrix? Blade Runner? It’s inevitable that machines will become ever more powerful. Our interneural connections compute at about 200 transactions per second, at least a million times slower than electronics. With their ability to share their knowledge at lightening speed and ‘think’ in groups, machines will be able to leverage their collective intelligence at a far greater rate than humankind. Then the genie really will be out of the bottle - see http://www.theregister.co.uk/2007/05/11/skynet_takes_control/

Advertising is no longer about the things it sells

There was a time when advertisements were about selling us things. There were the women that got over-excited about washing detergent and the chocolate that helped you “work, rest and play”. But it's not like that anymore, is it? Now we get bionic women dressed head to toe in white leather, set against an all-white futuristic landscape, spraying out white paint at a red car that races through the city. At the end of the ad, underneath the car manufacturer's logo, the strapline says 'Fight conformity'.

As advertisers we argue that these campaigns are needed to cut-through our media saturated landscape. But we must be careful.

Many a time the consumer is at a loss as to what the product is, never mind the brand name. Lately, I’ve seen ads where instead of thinking, ‘I’d like to try/buy that’, I’ve been left wondering what I’ve just seen has to do with the product being flogged.

This is propagated by the current tendency to be caught in a self-referential loop where advertising is mostly about advertising. Never mind the stupid soft drink, feel the art direction. ‘Look at me, I’m a really interesting ad’, screams the graffiti-proofed poster which could be for IKEA, a kitchen appliance or a charity. You can never tell…

However, there is another, more exciting and appealing trend, where advertising again, it seems, is no longer about the things it sells. Indeed, it’s not even about the things at all.

No, it’s about ideas that build positive impressions of your brand, that in turn build brand loyalty, that in turn build an army of consumers that will not only buy your products but keep 'em coming back for more. So the argument goes, if you give people a reason to love your brand, people will (repeatedly) buy your products. In particular, ideas that get people taking about you are held in high esteem, like Cadbury's Gorilla that brilliantly captured the essence of Chocolate - happiness - and generated 3 million views on YouTube (http://www.youtube.com/watch?v=TnzFRV1LwIo)

The old paradigm was to identify ideas about brands. The emerging notion is to think of brands as being about ideas. For example, Jeep talked about all the stuff they had done over the past 50 years and summed it up with ‘There is only one Jeep’. In essence, Jeep’s communications focussed on the things it was trying to sell - Jeeps. Jeep decided to re-evaluate this strategy. They took a few steps back, looked at their vehicles and realised a plain truth - their cars were simply about fun. They switched tack with the end line ‘Have fun out there’. There were a bunch of people out there that wanted a fun experience with their SUV. And Jeep wanted to say to them, ‘Yeah, we’re into that too’.
The latest brand buzz word is content, as in if you don’t have a cool product then creates cool content that will give your brand the desired positive impressions – it’s not about the things your selling. We talk about giving is the new taking. We talk about legions of marketing aware punters not wanting to be stalked like targets (segments). We talk about them wanting to be surprised and delighted where brands help them in unexpected ways, like, for example, a bank that sets up branded lockers at a beach for them to leave their clothes and stuff while they have a swim.

This is all good stuff and successful brands will adopt (if they haven’t already) these approaches…but we mustn’t forget, as well as building positive impressions of the brand, we’re - ultimately - here to flog stuff.

To highlight what I'm talking about take the latest campaign from Carlton - 'Made from beer'. It's an ironic, self-referential pastiche that keeps things strikingly concise and simple. It appeals to the sensibilities of the no-nonsense beer drinking audience and will help Carlton stand-out from the bewildering clutter of beer competitor communications. It combines a neat idea with flogging beer. It has sublime balance.

KIPPERS - prepare to be smoked

And so because of a few greedy financial fat cats who lent money to people who had, at best, a slim hope of making their payments, we’re heading for a global recession where thousands of people will be put out of work and lose their homes. Thousands more around the world will die of poverty and hunger as the developed world pulls in its horns to look after No. 1.

In a way I feel reluctant to blame the Gordon Gecko types who triggered this mess. They were playing in a game with certain rules. They played hard, following the rules, in an effort to maximise returns for investors (and themselves). And look where we are - the bursting of an outsized bubble of interlocking debt. Clearly, the rules were not right and with the latest round of billions of dollars being injected into the system, governments around the world have given a clear indication that they have lost faith in the market (and the system). We have witnessed the end of unbridled capitalism. If you don’t believe me, look at the heart of capitalism - the US - where Fannie and Freddie and AIG, both massive, massive financial institutions are now owned by the taxpayer, making them effectively nationalised companies like in a good ol’ communist state such as Cuba.

But my feeling is that there is something more fundamental going on here. The world is now run on credit and debt (the lack of credit - as banks stop lending to each other for fear the debter will go bust - is the main contributing factor to the global recession). It has become natural for people to be in significant debt. There has been a huge growth in consumer credit, which has amplified the economic cycle and prolonged the recent upswing. In the US, consumer indebtedness is a massive 139% of disposable income, while in the UK it is even higher at 173%. The biggest debt we have is a mortgage and I guess, in a way, paying off a mortgage gives the individual a purpose in life. It is the cornerstone of liberal, capitalist, democratic system.

And yet the next generation, currently 13-28 year old Generation Y-ers aka KIPPERS (Kids in Parents Pockets Eroding Retirement Savings), have no interest whatsoever in saving, let alone make a pact with the devil and take on a mortgage. The current average credit card debt amongst Gen Y is $5,000 and rising. If they’re short, Mum and Dad fix them up and bail them out. But what happens when Mum and Dad don’t have a job any more, and see their Super halve overnight. I foresee great pain for Gen Y-ers, as they are forced to face reality and see that endless prosperity is not guaranteed.

As a result, Gen Y-ers, and consumers in general, will become far more financially aware and will demand simplification of financial products and services. Those banks that respond to this emerging need will be well placed to return to growth after the economy rebounds and enters the next upward cycle.