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We Need To Optimize For The Citizen

photo jan 23, 12 19 43 pm

This keynote was shared at the AdExchanger IP Conference on January 23, 2019  in New York City. A video of the talk is available here…. 

Here is a lightly edited transcript of the video since there has been a great demand for it.

The Three Connected Eras

The 800 or so people in this room are part of an ecosystem that over the last 25 years has birthed some of the world’s greatest companies and the world’s greatest technologies.  25 years ago, is about when the Worldwide Web was born and the key connection was a page connecting to a page which I have christened the First Connected Era.  A couple of companies in the United States monetized that era particularly well. You just heard from one, which was Amazon, and the other one was Google.  Google’s insight was the importance of a page where many pages were pointing or connecting to which led to the Page Rank algorithm which led to superior Search and Jeff Bezos understood that these pages were not just about content but Commerce. Today these 2 companies are among the five most valuable companies in the Western world.

About 10 years ago, there was a Second Connected Era where we were connecting to each other with social networks and connecting to everybody and everything with mobile phones. Two companies did particularly well in this era. Facebook, which you heard from earlier today, and Apple.  And those are another two of the five most valuable companies.

By 2015 the impact of the two-connected eras was captured in the fact that the McKinsey Global Institute said the dollar value of data trade was greater than the dollar value of merchandise trade!

And now we’re on the cusp of a Third connected era, where three key things will happen. Data will connect to data, which is my simplified way of describing AI. Things will connect to things, which will be IoT, and they’ll be new ways for us to connect, of which voice, today illustrated by Alexa, Google assistant, Cortina, Bixby, Siri and others.

So, we are at the cusp of probably an amazing era of wealth creation and progress.

The Three Challenges

Everything is rosy, excepting over the last 1000 days, ominous storm clouds have been forming which are likely to slow things down unless we as an industry, change.

And those things are first and foremost the erosion of trust. It began with actually a lot of the companies in this room, which were  questioned by marketers  who were worried about where  their dollars were going. They said something is off and you are siphoning away too many of our dollars ! Then they decided to investigate agencies by hiring criminal detective firms who implied that the entire Agency eco-system was fishy and dishonest. Now there is increasing concern about the aspirations and trustworthiness of many of the major platforms.

And this is part of an overall breakdown in trust across the world. Richard Edelman, every year at Davos, does a trust barometer and he did a trust barometer again this year.

There is a wide spread breakdown in trust with even  Government not trusted. Surprisingly people actually end up trusting business more than they trust anything else. And they expect business to stand up and lead into the future. Most of the people in this room, outside of a few, are businesses. So either we take the world into the future, or there will be not be a bright future. So that’s the real issue big issue.Trust.

The second is a major society issue which is  rise of nationalism and close-mindedness, inflamed in part by social media. I work for a French company, and the Yellow Vest protest, happened all over the country but also resulted in arson and violence in Paris, included defacing the Arc De Triomphe. Many journalists have shown that much of the movement was in part incited by social media.

So to a great extent, the technologies that we have put forth, are neither good or bad, but people make it so. Many of our best technologists and founders are truly brilliant and probably well-meaning but many of them also appear to be naive and Pollyannaish.

They believe they can recode human beings.

You can’t.

People are people. And companies that believe that they are moral and good just because they’re empowering and enabling technologies are misguided. Because people will use technology the way they want to.

The third big societal issue along with the break down in trust and rise of nationalism and close-mindedness is inequality. Oxfam does a study at Davos that basically showed that the 50% of the poorest people lost money over the last 10 years, while the top 1% tripled. At some particular stage, people are going to say, what the shit’s going on. And they’re going to basically vote against the system as they are today or do something more drastic tomorrow.

Another issue is when I hear people saying lets replace human beings with machines. Well who’s going to buy your products and services?  Can one imagine what Inequality will look like then?

The Break Down in Trust, the Rise of Nationalism, The Challenge of Inequality are all interconnected and are very difficult challenges. The solutions to these are likely to be very time consuming and complex.

Citizen and not only Consumer.

But an answer that we have to think about in our industry, is to change our focus. Our focus and everything including current FTC laws, are built on whether something  helps or harms a consumer or creates more sales growth.

 I’d like to put forth a hypothesis that we should switch this to look at things from a perspective of whether what we do helps or hurts the citizens.

Because I believe  our consumption is just a component of being a citizen. Because if the only thing you were doing is consuming, then at some particular stage, you are worthless to most people.

Companies all say they want to have relationships with us but evaluate us from a perspective of life time monetary value. Can you imagine if you had a relationship with your cousins, friends, children, because of lifetime value? The reality of it is, I’m only worth something, and you want a relationship with me because I have money. And when I don’t have money, you don’t want to have a relationship with me. As a consumer, you think I’m a cow. You send messages and you milk my udder, and when I’m dry you throw me away. The reality of it is, people are getting smart, and because they’re getting smart, focusing on the consumer alone does not make sense.

I had the opportunity to speak to people at Amazon, and someone asked me, what do you think of Amazon? I let them know that I have used Amazon for 20 years long before most of them were even in high school and I love Amazon as a consumer to the point of addiction. I however increasingly have deep questions about Amazon as a citizen. And I worried that a backlash was building. This was about eight weeks ago, and the backlash has begun, including, why did they have to talk to hundreds of cities to get data when they end up in the obvious two cities that everybody thought they’d end up in?  At some particular stage, you can be so smart and so cute trying to collect data, play people off against one another and press every advantage that you are stupid. I’m not calling any of these companies stupid. but just because they deliver faster, better, cheaper, to us as consumers does not mean we should just leave them alone to enjoy the benefits of the moats created by data and network effects.

So why should we think about human beings as overall human beings and citizens, and not just consumers?

The first is, we all talk about authenticity. Being a human is authentic, being a machine is not. So if you want to basically think broadly, think human, which is number one. Number two is increasingly the leading companies talk about things like ESG. Environment. Social. Governance. They talk about values. They talk about purpose. These can only be justified and measured in ways that have to be wider than a consumer lens. Companies cannot explain or justify lot of these things, just on maximizing short-term quarterly results. So, if you want to do ESG, and you want to do values and purpose, and but also want to maximize quarterly earnings, it can’t be done. You can maximize lifetime value of your corporation with these but not the short term.  However, as companies invest in these less short term numeric areas they will differentiate themselves and build emotional moats.

Interestingly many modern companies that are doing increasingly well, whether it’s the Warby Parkers of the world, or others, have actually not just a direct to consumer edge, because eventually everybody will have a direct to consumer edge, they happen to have one of these other edges. A purpose-driven edge, the ESG edge or something else.

And so, in effect, as an industry, we have to recognize that if we just focus on the plumbing, we’re to lose the poetry. And it’s the poetry that actually differentiates. It’s actually poetry that differentiates brands, and the truth of it is outside of a few, like maybe a Google Amazon or Facebook, no one is going to be able to create of a moat or differentiation just because they are data focused, network scaled and technology driven. Impossible.  All of that stuff is going to be available as a service. So something else is going to have to separate. And so the latter part of my talk is what I found those things and how do we do it.

Three Ways Forward

The first area is how you get that trust. Because if you don’t solve on trust, you don’t get anything. And speaking again of the Edelman they identify four components of Trust which I thought was really good. One is capability, which is I’m going to trust someone who actually is capable. The second is integrity. I’m going to trust people and companies who have integrity. The third is dependability, which is are you going to be there in the hard times, or are you going to run away? Can I depend on you in the long run, or is this just a transaction? And then finally purpose. Do you live for something besides extracting money from my pocket? Those four factors broadly, are things that we should consider overall as a group of people and ecosystem. Because we can use that for everything.

Then there’s another one, which is Four New Filters for decision making, which is the four factors that we should actually think about when we consider partnering and investing and buying stuff.

Today too many decisions because we are focused on the consumer, and therefore on the short term highly measurable result are focused only on the near-term ROI.  Under a near term ROI we often see great results from our digital investments

But if the results were so good, how come most of American companies are struggling to grow? Most of my clients are struggling to grow. Much of the growth is coming from some of the newer companies, and in fact if you look at all in food and packaged goods, almost all of the growth is not coming from the Fortune 500 but the long tail, direct to consumer businesses.

Again, and again, I see these charts with amazing numbers on growth, but I don’t see my client growing. The analogy I use is I’m a patient at a hospital. The monitor says I’m healthy. The only person who seems to be getting fatter is the doctor. I wonder why. Maybe we’re not measuring the right thing.

So therefore, we should measure more than near term campaign ROI to capture the true impact of our decisions and investment allocations.

The first is what is the data usage and other risks? Because that is the big thing now. And you have seen and I don’t think you’ve even begun to see, since I happen to be working for a European-based company, what’s coming out of Europe on data fines and GDPR? The 50 million for Google was pittance compared to what’s coming.

And in the US, because our national government has lost the plot, our the local governments are putting forth a patch work of rules. And this is going to be like a hell hole if as business in concert with lawmakers we do not take care of it. Can you imagine having hundreds of people, thousands of people just basically working on rules and regulations? So, data and privacy is going to be a huge issue and should be a key filter to allocation decisions.

The other issue that’s going to be very, very, dramatic, is going to basically be brand risk. So I’ve worked with brands for a long times, and brands are so powerful that even horrible brand managers can’t kill them. I’ve worked for great brands with terrible brand management. Brand management fortunately got fired, the brand survived. Brands are very powerful. Many of the new platforms can build or break brands faster than ever before. Despite what people say brand risk will always remain, because everything is now being whack-a-mole put together in these technology platforms as new problems arise every time another problem is solved.

The third is reputation risk. People including a lot of young millennials are asking a very simple question. Who is funding all of this? If this is supposed to be toxic, who’s funding it? The advertisers. The marketers. And people are saying okay, you talk about values and purpose and this and that, and what you’re doing is funding this. How does that jigger up? And if you only think about the consumer, how does that measure up? If you think about the citizen it doesn’t make sense at all. So how you plan that? That’s a third area.

And the fourth is strategic optionality. Whenever you have no optionality, you have already lost. The only time you don’t want to have optionality is with a husband or wife or lifetime partner. Otherwise you want to have optionality. What I learned from the best clients in the world, is they always kept us honest, because it was always someone in the wings.

Everybody had triple bidding. Entire companies were built on that. Often on these new platforms I hear people saying I have no choice. It’s your money. It’s your partnering. If you don’t have any choice, you’ve already lost. It’s a very simple strategic question. It’s a boardroom conversation that’s about to happen, which is why have we found ourselves without true choice  and  ability to make a decision. So those are some very interesting ways of looking at partnering and where you put your money, besides what the ROI monitor tells you.

Re-Inventing Yourself

And finally, something that I’ve learned over the years, is firms, companies and institutions do not change just because you change code. Currently everybody believes that all problems are basically going to be fixed with machine learning and AI.

Complete and utter bullshit.

I have an advanced degree in mathematics. It doesn’t work that way. People out-hustle machines. They play machines. What basically happened is we figured out how to play machines, even I know how to play the machine. And I haven’t done any math for a long time. So this whole idea of we got this under control just give us time is not believable. it’s going to be hard, it’s going to be messy. What’s going to eventually happen is companies will change and people will change because of only one thing. The people in the company. So when someone basically says, I’m going to change the company through and M&A acquisition, I’m going to change the company through a synergy. I’m going to change the company through something like a press release. My stuff is nothing’s changing. The only way a company changes is when people change. The only way an institution changes is when people change.

So, we should take the leadership as an Industry and think about ourselves as citizens and not just marketers or consumers in the following ways.

The first is, spend at least an hour a day paying attention to something you hate. So, if you love Fox, pay attention to MSNBC and don’t think the people there are stupid, which is number one.

Number two, is build a case for opposite of what you believe. And then attack that, because I truly believe what’s gone wrong is in a connected world, we are no longer connecting. Each of us are in our filter bubbles, yelling screaming and thinking the other person sucks. And the truth of the matter is we all suck or we all don’t suck, but it can’t be everybody else sucks.

And finally, most importantly, follow the late Shimon Peres who said:

“Think Higher. Feel Deeper”

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