Tuesday, April 2, 2019

A C.E.O. Who's Scared for America. And the Ad Industry.

It doesn’t take a John Kenneth Galbraith to observe that in most economic systems, wealth begets wealth. Because capital, to be all deep-dish about, tends to consolidate.

If you’re a five-year-old and have inherited a soft ice-cream machine and 100 cones, before long you’ll have amassed a dominant position in your local market. You’ll be able to leverage your capital, that is, your ice-cream machine, and the kids in the neighborhood will likely trade you their yo-yos, bicycles, baseball cards and mobile devices in return for ice-cream.

Soon, you’ll have a dominant position in all sorts of categories. You’ll be able to rent, at a profit, all the crap that kids traded for a cone. You’ll have other kids working for you. Before long, the neighborhood will be yours.

This is how drug dealers operate and the mob. They gain market-share, then they branch out. If they’re successful (and deadly) they gain a monopoly or become part of an oligopoly. Then they can set prices for their goods and establish wages that allow them to do what the “malefactors of great wealth” have always done.

Accumulate more wealth. And exert more control over the market.

Along the way, typically, certain things happen. As competition decreases or collusion takes hold, prices for goods and services go up. Wages decrease. And the quality of what’s being sold gets worse. After all, why would you invest in your product if you have engineered the marketplace so that no competition can steal your customers?

This sort of pathology has ruled economies since there were economies. It ruled the world during Roman times, during the feudal period, and certainly during the Gilded Age
(the late 19th century through the first-third of the 20th century.)

There are those who understand history and economics and the world today who have taken to calling our life and times “The Gilded Age, 2.0.” I am one of them.

We need only to look at the lack of progressive taxation, the loopholes of the aforementioned malefactors, the Gini coefficient (a measure of inequality in income distribution) and the vast (usually government-subsidized) fortunes accumulated by the very few.

We could also look at, if we had the data, the number of people employed by any given agency. The average tenure of those employees and the increase or decrease in wages over time. We could also, though this would be a soft-metric, look at the decline in advertising effectiveness as a result of industry consolidation. 

Businesses beholden to shareholders (more-so than clients) will always play it safe. They'll give the clients what they want. They won't offend their principle audiences, that is, clients and shareholders. They'll only offend people watching ads. You know, the people who have no power.

In Sunday’s "Times," there was an op-ed by Dave Leonhardt called “A C.E.O. Who’s Scared for America.”  It tells the story of Peter Georgescu who in his native Romania survived the Nazis and escaped the Communists. After college and business school, Georgescu joined Young & Rubicam (today’s agency is called: HDEFOSJDHJEJLJJJBY&R.) He spent 37 years there. The last seven as CEO.

Georgescu says, “Capitalism is a brilliant factory for prosperity. Brilliant, and yet the version of capitalism we have created here works for only a minority of people. Leonhardt says, “Profits have soared at the expense of worker pay. The wealth of the median family today is lower than two decades ago. Life expectancy has actually fallen in the last few years. Not since 2004 has a majority of Americans said they were satisfied with the country’s direction.

My guess is that Georgescu’s indictments of capitalism could easily be applied to our industry. That assertion can be backed up by this data from PWC, a professional services network headquartered in London. 

Surveying businesses in 94 different industries, you'll find advertising and marketing near the top in inequality. And among the top in industries where inequality is growing.


To be clear, all this high-falutin' cogitation leaves my head spinning. Though I took my share of economics courses in college, and have something of a head for numbers, I'm better at Dickens than derivatives.

In short, all of the above could be a crock. I'm sure Sean Hannity would see it that way.

Nevertheless, I'm scared.

I think with good reason.

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