Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision in global business, the dream drivers that have made the NYSE an indispensable institution for global growth for more than 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at ICE's 12 exchanges and seven clearing houses around the world. Now, here's your host, Josh king, head of communications at Intercontinental Exchange.
Josh king:
Welcome back inside the ICE House, conversations around technology, privacy, and data has dominated the recent news cycle, including Mark Zuckerberg's recently completed two days of testimony before Congress. We could not have asked to have a better guest here in the library to talk about these topics and how data will continue to be the driving force behind the modern world. Our guest today, my old friend, Mark Penn, introduced the term soccer mom in the 1990s and a decade ago wrote the seminal text of how technology was and would continue to fragment society. In 2007, he published Microtrends to identify and describe 75 small groups that were exerting an oversized impact on the direction of society. He's now followed up that with Microtrends Squared, the new small forces driving the big disruptions today to continue his exploration of how 1% of the American public can create massive social change, capable of changing the commercial, political, and social landscapes. My conversation with mark right after this.
Speaker 1:
Inside the ICE House is presented this week by ICE Global Index System or GIS. ICE's index families combine leading reference data, evaluated pricing and analytics, along with the track record in index provisioning and spending 50 years to deliver unique cross-asset and best in class index solutions.
Josh king:
Mark Penn has been exploring the trends of business, politics, and society for decades. In 2015, he formed the Stagwell Group, an investment company that focuses on advertising, research, data analytics, public relations, and digital marketing strategies. Mark previously served as a political advisor and strategist for both President and Hillary Clinton, as well as British Prime Minister, Tony Blair. He and I first became acquainted when we both worked in the Clinton white house, where Penn Schoen, a global market research firm that he founded with his Harvard roommate was brought to introduce the innovative polling techniques he developed working on the political campaigns and for NYSE listed companies, such as AT&T, Ford, Merck, Verizon, McDonald's and others. Welcome Mark, back to the NYSE.
Mark Penn:
Great to be talking to you again.
Josh king:
Let's start with this book. Microtrends really is an investment book if you want to look at it this way. I mean, you might expect Mark Penn to be writing a political track, but this is a book where people can really trade on some of the data inside.
Mark Penn:
Well, the book is really intended to be for people who want to find themselves in how society is changing, people who run businesses, people who want to found businesses. Last time... I always remember the story of a chapter I had called sun haters where parents tell kids now not to go out and get sun, but to go out and not get sun. So the business owner wrote me and said, "I'm going to retool my entire clothing line. And so I'm going to make my clothing line sun protective." And so there are business ideas, but there are also core investment ideas, because after all, the best investments are with the trends. And one of my favorite chapters, and it is actually the pro-proteiners where I discovered the chicken consumption in the US went from 20 pounds per person to 90 pounds per person. I immediately went out and bought some stock in chicken companies and Chinese chicken companies and I did quite well.
Josh king:
I mean, you should spend a minute or so, Mark, describing the organization of the book, six sections, section one, love and relationships, section two, health and diet, section three, technology, section four, lifestyle, section five politics, section six, work and business. And within those six sections, these identifying labels that you described that are so vintage Mark Penn. How did you go about designing the outline in this book and then coming up with these wonderful, and I think in many ways, thrilling for these groups?
Mark Penn:
Well, I really wanted to cover 50 representative microtrends. I think there could be hundreds of microtrends, but you need to be a microtrend hunter to really find the changes that are small, but significant. I liken them to 1% of the population, remember where I say, 1%, if you look at militant dreamers, they're one of the biggest political forces in the country. If you look, the last election was decided by probably the old economy voters, those people who lost their jobs in the old economy who voted together to defeat Silicon Valley. I mean, I see in these trends, the forces and counter forces that are shaping society across culture, and politics, and business, and technology. And I spent some time setting the book and say, "Look, there are some big changes happening, there are some things that are quite different from 10 years ago. I think in this book, I'm much more pessimistic than I was in the first book. I have more caution or Amber lights up. And, and particularly after you see what Facebook is going through, I think actually the public is beginning to see some of the Amber in technology,
Josh king:
But you can also always short pessimism. That's an investment thesis as well.
Mark Penn:
Well, one of the chapters is called happy pessimist because the American public is never been more economically enthusiastic, really in the last two decades than they are now nor more down on their government at the same time, which of course we've never seen before, usually attitudes towards the government correspond to economic attitudes. So technology is still something I believe has an incredibly bright future, I'm very pro-technology. I try to point out in the book, those things, I think, that are maybe not going to do us well. I'm a little down on driverless cars and I'm really puzzled that people do not have businesses that really extend the human senses yet. That's where I would be in technology investing tremendous sums.
Josh king:
This book is like a week long cocktail conversation starter. And I would just duck into a little bit for each section before we get into the rest of our conversation. But I want to pluck out some of the titles of these sections because they are so vintage, Penn. But in section one in love and relationships, number two is the never marrieds. And you begin with a description of Jimmy Stewart's character in It's a Wonderful Life, and whether he would have a terrible life if he never married, but your data suggests that's really an emerging microtrend.
Mark Penn:
Well, that's right. I mean, I suggest that the whole image that Jimmy Stewart was showing in that movie is something that wouldn't be shown in negative light today. Actually, as we find in the book, there's a larger group of people who are going to be in the never married category, which really didn't exist before. And these are people typically more dedicated to their career, and in some cases themselves than people ever were before, especially after I think people spend so many years alone after college, which they never had before.
Josh king:
Some of the data that you have in the book, Mark, if you look back at when Microtrends first was published 2005, 16% US adults, 36 to 35, who've never married, today, 22%.
Mark Penn:
Not only are people getting married less, not only do you have to have housing for never married, a tax code that's fair to never married, people who aren't married, do they get pets? Typically, I have another child called SWP, single with pet, because if you don't have children, people say, "Hey, I want to have a pet to take care of." And that's really been a great trend for the pet industry.
Josh king:
In section two, it's focuses on lifestyle. One of the sections is the speed eaters. You have a wonderful anecdote, Mark, and for those who don't know you well, you spent so much time with Bill Gates, the chairman of Microsoft, both in the '90s and later on, when you went to work for Microsoft, and I'm going to quote from the book, "When I worked with Bill Gates, he would eat right through a meeting, never stopping for lunch. At precisely 12:00 PM, a hand would come through the door, holding a white bag for Mr. Gates. In it were two McDonald's quarter pounders and a large fries, his daily choice for years." He sounds like Donald Trump.
Mark Penn:
Well, I was really so astounded that here you have the world's richest guy at that time, he's probably number two now, and what he really wanted for lunch was McDonald's and his staff had to just carry around and he was very efficient. He later on went to some really greasy Chinese food. So I'm sure today he eats very, very healthfully, but I think the chapter points out that the lunch hour is gone. I mean, look, when I originally had my very first summer job at NBC, people came in New York City, the 30 Rockefeller Center, 10:00 to 12:00, they worked, 12:00 to 2:00, they were out, they had a few, shall I say, buy some alcohol during that period. And I'm not sure on a lot of work... Today, people will work straight through, businesses provide food on premises, people minimize eating time, which also can have social impacts, I think. So anything like that. And then foods, obviously, the fastest single food is just a protein bar.
Josh king:
What's the investment thesis there? I mean, I find myself to the extent that I'm a speedier too, walking down the sidewalk, [inaudible 00:10:37], walk in, get a quick baguette with something and almost eat it walking down the sidewalk. Is there a prepared food investment thesis that this works for?
Mark Penn:
People want healthy, nutritious consumption without spending time. It's really quite incredible. I mean, we're losing... So I think there's continued investment opportunities. I do think that when you look at them, the kind of uptick we've seen in delivery, I think from a business point of view too, I think people just get a lot more productivity during the day out of workers than they ever got.
Josh king:
Section three. And you won't mind me sharing with our listeners that I've always regarded you as a technology geek. Is that fair?
Mark Penn:
Well, it would be fair that when Doug and I started Penn Schoen, I built a computer and a kit before there was a PC, program, then an assembler, and had overnight polling. We were the first outside the network, so you could say that I always had a key and interest.
Josh king:
And I share some of that interest with you. And one of the things that jumped off the page for me was chapter 19, droning on. I'm the proud owner of a DJI Phantom 3. I probably should upgrade to the four and the five, but what are you seeing about the development of unmanned aerial vehicles as a microtrend?
Mark Penn:
So, so I picked out a few developing areas in the book for special focus. What I found most interesting about drones is right now, there's a conflict between the security threats of drones and the capabilities that drones offer. So right now, we have what's called the line-of-sight rule in the US, which I don't think most people know, which is that you really can't operate a drone that you can't see. So that means all of the things that you read about, like Amazon's going to deliver things, until the line-of-sight rule is listed, none of that's possible. But right now, we do not have the sufficient security protocols to deal with the problem that they can be used to invade your property, to invade your privacy, and frankly, to be used as a weapon too easily, which is why they're banned through the entire Washington area.
Josh king:
And New York City as well. So in section four, lifestyle, I was so deeply conflicted about what I would spend my precious minutes with Mark Penn talking about, do I quiz you about uptown stoners, which fascinates me, or should I ask you about armchair preppers? I think I'll veer toward the preppers.
Mark Penn:
Interesting, because a lot of people ask me about the uptown stoners, the developing marketplace, which I think people have to focus on the uptown, really where the uptown or high end marketplace, because I think that's where all the money's going to be, the spas or the restaurants. With an industry that's maybe seven billion compared to compared to the liquor industry that's 200 billion. And Josh knows me that like, hey, I don't have a lot of practical experience in that industry so it's funny that people ask me to really expound on that. But knowing Josh, he's preferred the armchair preppers because he's worried about what could happen. And I think what we find is that so many people are worried about what could happen, that having a luxury go bag is now a great industry.
Josh king:
That's exactly what I was going to go to because I watch at the Walking Dead religiously, I've got an upstate place. I will never need it, Mark Penn, but I go on to Amazon and you buy these massive kits of first aid and go bag prep, all pre-made for you. And I don't think I'll ever crack the zipper of it, but just having it gives me a sense of satisfaction.
Mark Penn:
Well, and not only that, but every couple of years, you've got to refresh it, right? It's like a fire extinguisher. People want to be prepared. And when I say armchair peppers, this used to be something that people on the fringes of societies did to the extreme. There are a lot of things you can find now, you can buy real estate plots where you can put in your shelter, and you can be isolated and you can be off the grid for the time when the machines destroy the rest of the world. Or you could just buy a few luxury items so that you feel a lot better in the event catastrophe happens.
Josh king:
Section five, Mark, politics. Obviously your sweet spot in the area in which you've helped to elect presidents, prime ministers, brought in all around the world to help manage elections, create advertisements. One of the toughest fights you were ever in, obviously, the 2008 campaign advising secretary, Hillary Clinton in her primary running against Senator Barack Obama. And I need to veer toward the impressionable elites revisited and get you to give your spiel about the idea that people who think they're really smart are actually the ones that can be most easily swayed by what they hear and how they convince themselves that they're right about everything.
Mark Penn:
Yeah, well, this is really my favorite trend in the last book and my favorite trend in this book, because it is such a problematic trend. This started when I observed that when people come up to me when I was working for Hillary Clinton, they would come up to me and they would say, "If Hillary were just a little more likable, I'd vote for her." And increasingly I saw, well, those were the PhDs, really educated, well-off wealthy people would invariably say that. And then if somebody came up to me and say, "If her healthcare plan would really do my more about cost rather than coverage, that would be something that would interest me." Middle class voter. Now, in theory, the way we think about the world and the way American democracy is set up, well-educated elites are supposed to understand the details of issues, the rest of the public is not supposed understand the issues or care about them as much to be easily swayed by non-issues.
Mark Penn:
What's happened is, our elites have gotten so well-off, so removed from the everyday problems, they don't buy healthcare, they don't experience the problems. They actually become quite movable on the basis of what they see in elite publications or talking points on TV. In fact, I ran Burson-Marsteller, which was 2,500 people dedicated really to swaying elites. None of it tried to sway the general public. And so it turns out now that things have gotten upside down and both whether they cared more about likability than issues with candidates, or now believe Russia collusion. If you look to sit down with PhDs and whatnot and say, "Well, do you have any evidence for this Russia collusion?" "Well, it just is. I mean, there's money laundering. I mean, it's quite obvious." So almost this sense that elites follow what they see other elites saying is incredibly dangerous because our whole society of democracy is set up for the elites to be the rational ones, right? And it turns out that the middle class voters today have more education, have the access to the internet, can read more and have more in depth, both experience and understanding of the issues, go figure.
Josh king:
So in the first little part of our conversation, Mark, we've dived very briefly into five or six of the Microtrends that are part of Microtrends Squared. Listeners who are hearing our conversation should pick up Microtrends Squared and get Mark's much more detailed explanation of 50 of these. And it is such a quick and thrilling ride. Do you have fun writing this book compared to the first one?
Mark Penn:
I did. I mean, I did although-
Josh king:
You are more pessimistic, but...
Mark Penn:
Well, because these books are written when you've got something to say. And so, as you know, in the end, I've got a lot of policy prescriptions about how we fix what's gone wrong with technology. And so in the beginning, I kind of lay out the problems, but I enjoyed it. I worked with Meredith Fineman and I had a researcher, Amelia Showalter. And frankly, as you know, Josh, I'm a slightly older fellow and they also brought a fresh millennial perspective and so that we could really bring those perspectives together to be fresh and current
Josh king:
The challenges of technology, Mark, we are living through it really in real time right now. You've been writing extensively over the last few days on Facebook, since the Cambridge Analytica story broke. Yesterday, you published an op-ed in the New York Times. It was titled, How to Make Facebook More Accountable. Before you explain your solution to how to make them more accountable, what did you see as the problem that needs to be solved?
Mark Penn:
Well, I understand that really everyone's focused on the privacy issue. And I think that is a very important issue, but I think even more important at the moment to me is, are these huge platforms, platforms, or are they media companies? And if they're unwilling to choose, we really have to be careful about the power that they have gained. If you take a look at Facebook, for example, two thirds of the population spends an average of a half hour on Facebook a day. That means that they are bigger in broadcasting capability than hundreds of radio and TV stations. Radio and TV stations that for many, many years were regulated so that they wouldn't be too much concentration of ownership, because that means that only one perspective tends to dominate. So now you have Facebook hiring 20,000 people to basically be sensors on all this content and to run news flows, where they decide what people see first. And when you put impressionable elites together with an organization like Facebook, not with real editors now determining journalistic priorities, that is a potentially toxic combination for our democracy.
Josh king:
You mentioned a little while ago that you might be slightly older than the millennials who helped you put this book together. So some of our listeners might not recall the 1990s when you were working with Microsoft chairman and founder, Bill Gates on preparing for his testimony in the antitrust trial against Microsoft. But if you were a political advisor working today brought in to Facebook's Washington office and talking to the team advising Mark Zuckerberg of how to comport himself in front of the House and Senate this week, how would you rate his performance and what would you give him as guidepost for what to say at this point?
Mark Penn:
Well, first, let me say that when in the same couple of days, you see Stormy Daniels be at the top of the news flow with congressional testimony of Mark Zuckerberg. And in the 90s, we had Monica Lewinsky and the congressional testimony of Bill Gates. The irony of history repeating itself in all of these ways is not lost on me. Look, I thought his testimony, I saw a lot of it yesterday, I thought his testimony went pretty well. He was calm. He was collected. Frankly, he didn't get pushed into too many corners. He basically said when he did that, "Hey, I'll get back to you on it." I mean, I think a lot of the questions were prepared by staff and they didn't really understand the questions they were asking because they got so easily pushed off of what they were asking. It was incredible to me. It highlighted the problem we've got with Congress and technology. So that probably everybody there understood that they should label political ads, but I'm not sure they understood much else. I mean, there were really a couple of exceptions I thought Kamala Harris's questioning was pretty sharp. She said, "Well, you agreed to these things in 2009 and then you come here today, basically, pretending like you didn't. Like these were all new problems that hadn't occurred before."
Mark Penn:
So I think he did a good job, very different from what we did with Bill Gates. We were fundamentally more defensive. We basically said, "Look, we're here because of the tremendous innovations. We don't think that it necessarily lasts, other innovators will come along." And so our position was to rebut the various things people were thinking. And the Facebook positioning was, "I'm sorry. I'm sorry. I'm sorry." So it was radically different. I think he came off pretty well. I think it's a dangerous strategy in the sense that if you're a plaintiff's lawyer and you have 20 admissions that, "Hey, we didn't do these things and almost every person on our platform has been scraped without their knowledge, contravening the 2009 requirement of disclosure." Wow, I think there's a potential feast there.
Josh king:
The focus this week has been on Zuckerberg and Facebook, but how has machine learning and algorithmic targeting across the internet... it's being deployed in a much wider way than just in Facebook. You write a lot about it in the book, are these technology is designed to just increase clicks and engagement, and what's the cost of that?
Mark Penn:
Well, in the book, I'm really concerned about the lack of disclosure and how damaging that could be. First, people somehow believe that they're so magical that a year from now, they'll be driving all our cars. And I throw a lot of cold water of that in the book. But the basic trend that happens that I think we have to be worried about is something like this. You have an app and the app says, "Hey, Josh, it's going to rain today, so when you go into work, maybe wear your rate coat." Very helpful, sets up helpful to you, doing a great job. You know what? It's pretty expensive to keep telling Josh it's going to rain. Somebody at the central office comes up and "Maybe, we'll tell Josh where he can buy an umbrella." So then it's, "Josh, it's going to rain. And by the way, around the corner on your way, you can buy an umbrella." "Well, that's not so bad. We're still helping Josh."
Mark Penn:
If you look at it, for example, Google Maps tells you how to get an Uber. It's a very similar tie in. Time goes on and somebody says, "You know what? We're just not making enough money. Wall Street wants higher earnings. How do we get that?" Somebody says, "You know what? Let's just tell Josh, instead of that algorithm being said at 50% that it's going to rain, let's just move it to 40, 35. He's not going to notice. But to be safe, he'll probably buy some more umbrellas, or ponchos, or whatever it is we're selling, anything." And so at that point, the app is no longer working for you, it's working to sell umbrellas, but you don't know that. To you, it looks exactly the same. And I think the lack of disclosure really then encourages this hidden process to go on as people monetize things that you thought were working for you and that were previously free. The answer to that isn't so much to stop, it's to be really clear, I think, in the disclosure. And this moves over to AI, I always say about Alexa, is Alexa a he or a she?
Josh king:
We don't know.
Mark Penn:
Well, you have been a better responder than most, because most people say, "Oh, it's a she." Well, Alexa is an it, okay? And ethically, the minute people think it's not an it, that diverges from the fundamental principle that it's just a bunch of code and it's a code that you don't know what it's programed to do or to sell you. And so you also have to know that. And we've got to get a handle on... I know engineers, look, up close for years as chief strategy officer at Microsoft and they do an amazing job, but they're far removed from the ethical dilemmas that often come from their work. And that's what you saw at Zuckerberg. He was far removed from what could happen 10 years later with something that he designed to do so much good.
Josh king:
You've got a section in the book called kids on meds. You dedicate the book to your three kids. They've been raised during this era, Mark, progressively as more and more digital opportunities are available to them. How do you balance your love and embracive technology with the importance of human connection and the pressure that parents often face to say, "Does my kid have ADHD, and is this at all related to the march of technology?"
Mark Penn:
Well, one of my little children has now grown up and is a psychiatrist, so she argued with me a lot about this chapter. This chapter shows, the tremendous increase in medication going to kids basically for ADHD. And as I recall, something like 3% to now, almost 15% of children are diagnosed with this and 80% or so receive medication. And so we don't know the impact of all this early medication. Now, she argues with me, "Look, it's the information age. People have to sit through more school than they ever have." And the diagnosis of these kids is primarily boys, become very important in letting them get the tools that they need to succeed in school today. So she'll say, "Hey, don't worry about it. This is a good thing."
Mark Penn:
The chapter tries to say neutral and say, "I don't know if it's a good thing or not." Part of this is that we extended healthcare benefits, more and more people on the lower end of the spectrum, used to be just rich kids got meds, more and more went to doctors, got these prescriptions, and the jury then is out, is this helping kids perform in the information age who otherwise would drop out of school? Or is this going to create a lifelong dependency that will lead to the opioid crisis getting even worse? I don't know. My point in this microtrend is just to flag it and say, "We ought to watch it."
Josh king:
The New York Stock Exchanges President, Tom Farley, often points to the statistics, the global poverty is down 80% over the course of his lifetime. He's a younger guy. At the same time, there's an increasing economic anxiety, particularly in this country around the loss of manufacturing and manual labor jobs to automation combined with what's seen as a decline in the middle class. This is one of the many dualities that your book looks into. How do you seemly square the disparate world views between the march of technology and the downsides that it brings?
Mark Penn:
Well, that's a great question. I think that, first, which I hadn't realized when I stopped working with President Clinton at the end of his second term, we had kept manufacturing jobs pretty stable. So after that, over the next two presidents, manufacturing jobs basically fell almost in half, because I think the economic policies and the change in the world so favored the coast that we neglected to fully invest in the interior of the country and that was a huge mistake. And those voters got up and voted their economic, more than anxiety, the fact that they had been treated as, I think, second class, I think was behind their votes. Now, on the other end, the usual, hey, automation is going to cost all these jobs. I am actually more optimistic that there're going to be plenty of jobs.
Mark Penn:
We have a record number of people employed now. Manufacturing jobs is jobs, in my view, overrated. When I ask parents, "Do you want your children working in a factory?" 94% of Americans say no. We have a lot of new service industry jobs. Service industry has gone from 40% to 56% of the economy with... I think that the opening up both of personal service jobs, which I have another full chapter on, and just service jobs. Whether you're technically in an Amazon warehouse, you're in a service jobs, it doesn't count as manufacturing but it's the same kind of job. And there are so many more jobs now for the better educated. So I think that, remember, college graduate unemployment is about 2% or below. So we need every college graduate we can get. And I think for non-college graduates, the expansion of the service industries and some of these new economy-like jobs, people talk about Uber jobs. I've been fascinated recently, we have an extreme shortage of truck drivers in this country, right? We are short-
Josh king:
You can't find the people to take those jobs.
Mark Penn:
You cannot find people to take those jobs. And they say, "Well, there are no jobs for people with a high school degree." This is a solid job. It's been the core of the American working class and you can't even find the people to take them now. So I'm much more optimistic that there will be more than enough jobs here.
Josh king:
One of the theses that you introduced in Microtrends Squared is a take on Newton's third law, for every action, there's an equal and opposite reaction.
Mark Penn:
Well, I think that the Newtonian law of trends to me is that, for every trend, there is a counter trend and that's why the cover of the book is actually Newton's cradle, but it's in physically impossible position. But in the law of trends, they don't have to be opposite and equal. So for all the people who love technology, there are more people now, there's been a surge in people buying flip phones, right? So as I always say, on the train, there's the quiet car. It doesn't mean that it's going to be equal, but it means that if you're a marketer and you see the trend as super crowded, think about the counter trend. Because that's what makes it so difficult to figure out what's happening in America, because it looks like chaos. It's not chaos, right? It's people who really love... As you say, people who love steak on the one hand and people who love sushi on the other and it doesn't mean there's something wrong with that. It's that the natural state of the world is that there's trends and counter trends. And people tend to react to the fact when they see people in a trend, they say, "I don't want to be part of that group." And they deliberately move to being in the opposite end of the spectrum.
Mark Penn:
So I think from a business perspective, it's incredibly important and it's why so many old line businesses... If you visit private equity firms who buy old line businesses that people think are out of business and they say, "No, they think..." Whether it's an ADT type business or other, these things are still absolutely going for the very reason that for every trend, there's a counter trend.
Josh king:
Is there any personal counter trend for Mark Penn? Are you still a lover of sushi?
Mark Penn:
I am still a lover of sushi. I try to be as counterintuitive as possible in my trends. I do think the big... I should say that one of the things I point out in the book is like, we're in the age of information and so, of course, the counter trend is we're in the age of misinformation, right? We're in the age of so much power with the millennials, and at the same time, there are more nonagenarian than ever and it's the seniors really. We're in the age of Silicon Valley, and it is the old economy voters who won the election. So the battle between trends and counter trends is critically important. Personally, I find in many ways I'm always very counter trend politically. I was always in the center, I remain in the center. I think Democratic party, a lot of it has moved to the left. I didn't like Independent councils all the way back to 1973. I didn't like them under Clinton, and I don't like them today.
Josh king:
You don't put much stock in the idea that the Russians cost Hillary Clinton the election.
Mark Penn:
I don't, because when you look at it, I think there was a clear set of issues geared towards people from Indiana through Pennsylvania, who are rule the economy voters, the Trump managed to hit and hit successfully. And if you ask almost any kid, "Well, what did Trump stand for?" They could tell you, he was anti-immigration, he was anti-crime, he was pro, let's get a trade balance, he was about the old... They can tell you all these things, and they couldn't quite tell you exactly what Hillary stood for because what Hillary stood for was Donald Trump's unacceptable. And the swing voters here didn't like Trump or Hillary. And so they voted on the basis of... So I think there's a very clear thesis that fits the facts, it the way each campaign was run. The monetary difference here between the campaigns, Hillary had an extra 500 million dollars and so whatever effort there was it really seems to have been to create more divisiveness.
Mark Penn:
But the truth of the matter is, none of the messages run by these Russian bots are messages you couldn't find on any cable channel at any minute. There was nothing unique about them. And, no. I think that we've managed to be divisive on our own. And I think that the election was decided because of forces that you can clearly see, and the impressionable elites we're so bought into the New York Times 937, that they don't see what the rest of America looks like. A map of America will show you that something like 90% of the territory voted Trump, and that to people who live in New York, and LA, it just seems inexplicable. What I always say about a lifetime in polling is you don't need polls to see that the things you know, you need polls to see the things you don't know. And I don't think enough people really acknowledge that there's so much that they don't know about how Americans live, how they speak, how they act, and how they interact.
Josh king:
How do the impressionable elites need to adjust their mindset for 2020 to see things that they don't see now?
Mark Penn:
Well, look, I start with getting a dose of the reality in front of them. When this early political season started and Donald Trump was running for president, I said, "That guy is a crook, he's not going to get 30%. He's not going to get 40%." Then I was in the, "He'll never, ever get over 50%." Now, I was proven wrong. At that point, "Wow. Okay. There must be something here. What have I missed? Who are the voters, right" The reality is in, and he is right, he won, right? And he won against 17 candidates. He must have had something to say. He didn't have any magic pixie dust that I know of. There's no Cambridge Analytica voodoo that can turn people's minds that way, the way people imagine. At that point, I take seriously what he stood for, what are his issues? I mean, the impressionable elites have to understand that when there's a disconnect between what they think and what clear reality is, that clear reality is right. And you have to reset your thinking based on that. And I don't think you see that happening at all
Josh king:
After the break, we talk with Mark Penn more about resetting our thinking, after this.
Speaker 1:
GIS provides access to top level and constituent data for the complete universes of ICE BofAML bond index and convertible index families. GIS has extensive functionality that allows you to view and download current and historical performance data and statistics. With the customization tools on the site, you can analyze relative value of individual bonds, sectors, and indices. Visit the ice.com/indices for more information.
Josh king:
Back now with Mark Penn, founder and president of Stagwell Group and author of Microtrends Squared. You described, Mark, that data is the biggest commodity of the modern world, something that ICE's founder Jeff Sprecher also said on one of our podcasts recently. Is the commoditization of information and ideas a renewable and inexhaustible resource? And if so, what are the pitfalls that our listeners need to be aware of?
Mark Penn:
Well, I say in the book, look, data's the new oil. If you think about it, what do I have of my great-grandmother? Maybe one little picture, so I don't have much data. But today people have a data set that begins at birth, begins, frankly, before birth when they're monitored in the womb, starts with what kind of pampers do they do like? And moves its way through their entire life. In fact, a typical person now is a data machine. They are creating data about their habits, their likes, their wants, and they're being captured primary through their smartphone, but through a lot of other things. And so this data stream, why is it the new oil? Okay, because if I run a company today and I want to sell something to Josh King, the more I know about Josh King's likes, the more efficient I can be in marketing to him. Josh is no longer found on one of three channels at any given time. So marketing then was pretty easy. Well, I just market on a sports show or a different show.
Mark Penn:
Now, Josh's time is broken up in all these different habits. He doesn't have all that much time, I've got to catch him. And I want to catch him with something that is maximally relevant to him. So the person who can more often do that because they know their customers is then going to have a lower cost curve than the company that doesn't know their customers very well, and so, therefore, doesn't maximize their revenue against those customers because they don't have the most intelligent data-based marketing. They will go out of business. It is a matter of time. So every company has to think this way, and if they haven't done it, they've had a successful business model until now, they have to get ready for the data-oriented business model or they will be defeated and beaten by someone else in their industry who has it.
Josh king:
But with the proliferation of data, Mark, what steps need to be taken to protect an individual's information? And does that action need to come from government corporations or is it your own personal responsibility?
Mark Penn:
Well, I am less worried about data privacy than I am that people should get a fair share and understanding of how and to what extent they're being monetized. So for example, people have no idea, and I don't think anybody asks Facebook like, "So what's a typical customer worth? What do you get out of me? I mean, I get a free service and, wow, you sell 100, 200 bucks? Maybe I'm a good more upscale customer. So maybe you get $300 or $400 of advertising out of me, right? But you never tell me that. Doesn't look to me that you're collecting 400 bucks for my data, right?" So I think people should know that, right? And then they should have more control over that. Well, do I want to sell it to all these brands? Do I want to have kind of a more of fence around it? Do I want to just pay for my Facebook 10 bucks a month than give them $400 worth of ads? Now, Facebook and others wouldn't like it if the choice was in my hands.
Mark Penn:
Right now, I think the problem with the data model, to me, isn't that it's wrong, it's that it's hidden and disclose. There are no free apps, there are no free services, there's no free anything in the technology world, at least not for long. And I think that what happens is, for example, people don't know that even they're text messages, if they're on one of the typical mail services, are read and analyzed and then become part of how they're advertised. So I want more disclosure, I want more control for consumers, and I want more understanding of how much I'm being monetized so that whether or not I care about that becomes based on an informed decision. And right now, consumers don't have even the slightest bit of information to make informed decision about their data.
Josh king:
Putting on your hat as president of Stagwell Group, would you advise your clients as they're thinking about their strategies to connect with customers in an efficient way to use services and platforms like Facebook?
Mark Penn:
Of course. I mean, I think that Facebook gets a tremendous amount of people's times. As I always say, first there was TV, then there was TV advertising. First, there was Facebook, then there was Facebook advertising. And so Facebook... Look, search advertising, Facebook advertising, they're both very effective. People who are actually also creating apps and things have to advertise, but brands cannot count on capturing as much time of people's time on television anymore. Because people have moved from the TV screen to the small screen, they have to be there with their advertising and their marketing. And they have to be there efficiently because you don't buy 20 million people at once. You buy a selection of people who are more likely to buy your products, and so you have to understand in how to do that.
Mark Penn:
That's why really the Stagwell Group came into existence as a digital first fund, where we would collect a group of digital markers and bring it to scale because it's a whole new industry when you think about it. The major digital platforms are 10, 12 years old. Digital marketing really wasn't very important to companies until four or five years ago. And it's importance right now and internet advertising is overtaking television and mobile advertising is on the verge of overtaking desktop. So that's where people are, that's where they spend their time, that's where you need to figure out how to market to of them.
Josh king:
Your resume goes back to working on campaigns for Bella Abzu and Ed Kotch up to the Clintons in the 90s, Tony Blair, after that, and then back to Penn, Schoen & Berland, taking over Burson-Marsteller part of the WPP Group. And then the period that you spent at Microsoft, I want to, as we move into the second part of our conversation, talk about your decision to leave the commercial research and public relations side of the business and going to work for Microsoft and why you made that decision and what you learned when you were out at Redmond.
Mark Penn:
Well, I think, again, it's a great subject to reflect upon. I always had kind of twin interests of technology and politics and issues. And I approach politics from an egghead point of view, which is you could find issues, you could find words. I wasn't a street organizer. I was more of a word and policy organizer because those were the tools that I could really influence through polling. And so I got the incredibly rare opportunity to work, not officially in the white house, but I was, frankly, the almost every day and had a meeting with the president and the top staff once a week at which to bring the white house together and talk about not just where they're in the polls, but what they could do policy wise, what they could do communication wise. And I got to do that for six years. And that was an incredible experience helping the president, both make the best decisions he could, and then get through some unexpected crises like impeachment which seems like a dim memory to people now.
Mark Penn:
And so having started in polling, having worked in politics to get to be kind of pollster and advisor to the president, we then took our company and became part of WPP. I wanted to manage something bigger. And then I managed Burson-Marsteller and put into effect the strategies that would turn it around for five years. And I said to myself, "Well, okay, I'm actually came up with the idea that I probably was going to create Stagwell, probably create an investment-based group of digital companies. Probably now, work a lot more with capital." Very interesting. People ask me, well, what do I know now that I didn't know in my 20s? I would say in my 20s and 30s, I drove personal services to the very best I could to get to work for people like Gates and Clinton and so forth. And now in these later years, I'm working more with capital and understanding how we can build and invest through that, how we can create jobs with capital on a much bigger scale, much faster than I could, and build on the experience that I had as a pollster. Then I was head of Burson-Marsteller, big PR company. And then at Microsoft, I said to myself, "Well, look, they were since '98 my largest client, before I embarked on something like this, I'd really like to know, do I understand technology as it is today?"
Mark Penn:
And I wrote Steve Ballmer and said, "I'd be interested in coming over if you'd let me try to whack away at some of your most difficult problems." And he basically said, "Sure," although I had a seven hour job interview with him once. And I made the switch to really make sure I was current, and at the same time, I felt that I could help them bring the larger world. And after a short period of time of working on some of the problems, he said, "You know what? I like your stuff." And he made me head of advertising. So I had a two billion dollar budget and we went to the Super Bowl and we revamped all our advertising. I had done Scroogled campaign, which was the first campaign ever on digital privacy, really, questioning whether people knew about how their privacy was being used. Because, if consumers don't know, you can't compete on privacy. If you don't know how your data's used, you can't be the other company that treats it differently.
Mark Penn:
So it got unbelievable consumer response. I was second, only to Xbox in terms of fans. Every day, 250,000 people would come to the privacy website that we had erected and one day as a luck, I created Scroogled-Merchandise. I had only like 10 mugs, 450,000 people came in the first two days. It was astounding. So we really into something. And so I really enjoyed... Because I wanted to get some insight. So it's one thing to be a consultant to all these companies, it's another thing to really be inside. So Steve made me part of the management team. We had 12 executives and we'd meet every Friday for either half day or a full day to really see, I think, both... Obviously, my role then was advertising, and then when Satya took over, he made me chief strategy officer. So I really helped direct the overall strategy and review the various areas where I thought the company should invest for the future.
Mark Penn:
So this gave me kind of fascinating insight. And that's where I came to understand how engineers work, how... I used to have a running joke at Microsoft if somebody would come in and they would come in and base their technological ideas on something they saw their kids or their spouse doing. And I'd say, "You can't do that when you have a billion customers. You have to understand what they're doing in Pakistan and you have to be much more data-oriented." And so I tried to bring that kind of data-oriented approach to a world that you think is all data-oriented. But in many ways, technology... And engineers are brilliant and conceiving of new things and making them happen, basically. And they believe then people will come.
Josh king:
And then Steve Ballmer has remained a close friend of yours and really was a consultant, and a helper, and an investor in your next venture, which was Stagwell Group. You leave Microsoft, and basically, you see a blank sheet of paper in front of you and saying, "What am I going to do now? I've been in traditional polling, research, advertising both in the firm, in the agency, the big global conglomerate like WPP. I've been inside managing a two billion dollar budget for Microsoft, now I'm going to create a new digital first agency from scratch, Stagwell Group." Looking at that blank sheet of paper, what was the first thing you put down on that sheet?
Mark Penn:
Well, I viewed the process as climbing a mountain, right? Look, Steve said to me... When Steve was outside Microsoft, he said, "Look, I liked working with you. That idea you told me, one day I'll be your a core investor." Because I had been thinking for a while about doing this. And then he said, "Yes." So the first thing was get capital. So between me and Steve, we were the two investors. I always joke and say, "Larger part of my net worth." But we announced that we had 250 million to invest. Well, okay, great. But now, who the heck am I? We needed deal. So I started with politics with people I knew and we were in a competition and within three or four months closed the first deal. And I told them how a couple years from now, we're going to have plenty, I used to call it brothers and sisters, as we build this network around the marketing wheel and as we fill in the digital services. And they looked at me like, "Yeah, yeah, just, okay."
Mark Penn:
And I think that we then met... We've actually had done 15 deals in the two years. So I had a concept, right? So I had a concept of the kind of company, the kind of size, the marketplace, and the distribution of the companies. And against those targets, then we built a team of 14 or 15 internally who could manage this trying to stay... The first deal was done with just me and an assistant. And then by the end, two years later, we had 15 people who help work on the deals, understand and analyze, because we get incoming almost every day now. Then as the companies came in, it had to be really different from the holding company to really value the talent, really encourage them to continue to grow. We had to encourage them to understand how to grow their companies, and at the same time, it gets more complex every day. And I'm going to London now, because our first acquisition in London in performance marketing, I think, is just Forward3D is a terrific company that has a global footprint.
Josh king:
As we wrap up, Mark, without spoiling the book too much, you've identified many of the opposing microtrends that are pushing and pulling on culture, society, and the world, explain the forces behind them and highlighted some of the concerns that we should have about the technology and powers that are arriving them. Do we need to learn more about how to function in this brave, new, chaotic world or does something big need to change that we don't see yet?
Mark Penn:
Well, look, I think that it's just a matter of understanding where things need to be tempered. I don't think that we need a fundamental change, of course. I think people are living today with the advantage of modern technology, access to information, the growth of online shopping, is obviously a mega trend. And these are incredible changes. And I think as it moves into some of the areas where AI is properly employed, it will get even more incredible. So I'm fundamentally optimistic about the core direction. But what happened was, whether it was privacy, whether it was ethics, whether it was the security, and whether it was fairness and keeping ourselves democracy... And one of the things I point out, oddly enough, the more money people get, the first thing they seem to get rid of is kids. So rather than being overpopulated, were in the danger of being underpopulated because people would rather spend money on themselves than on kids.
Josh king:
People love data about themselves. And you've got a chapter on it.
Mark Penn:
They love data about themselves. So we really need to take care of the other branch, we need to wake up and say, "You know what? We got to just make some midcourse corrections here. We shouldn't be over optimist and rush to driverless cars before they're truly ready. We should understand how our data's being monetized. We should make sure that the primary and election processes are fair and open." I say you got to get rid of caucuses instead of their primaries. We've got to have more codes of ethics in technology in general rule, because I don't think people understand the forces that they're unleashing. And we have to figure out some of those security issues. So if we do those things and not think that, "Oh, don't worry about it. We're now far enough along that we have to worry about these things." If we do those things, I think we will be able to take advantage of the incredible opportunities that lay ahead.
Josh king:
There are ways that we've talked about in this conversation, Mark, about how to focus on what you're thinking about writing about obviously, first, Microtrends Squared, your new book, The New Small Forces Driving Today's Big Disruptions that you've written with Meredith Fineman. If you look in what you've published week, New York Times op-ed, How to Make Facebook More Accountable and market watch what Facebook and other tech leaders must do to win back our trust. If people want to continue to follow Mark Penn, Stagwell, and the thoughts you're having, what's the best way to keep in touch with Penn?
Mark Penn:
Well, just check out our website. I tend to continue to be active in write about the current topic, so throw me in your Google Alert, is probably your best and check out the Stagwell Group., I'm pretty accessible. It's funny my group says, "Well, everybody's into privacy these days." Frankly, if you can't figure out my email and so forth, you're not technologically up to snuff.
Josh king:
Mark, safe travels over to London. Thanks so much for joining us inside the ICE House.
Mark Penn:
Thank you.
Josh king:
That's our conversation for this week. Our guest was Mark Penn, author of Microtrends Squared: The New Small Forces Driving Today's Big Disruptions. You can find it at your little independent bookstore or as we discussed with Mark, myriad technology platforms and online shopping sites.
Josh king:
If you like what you heard, you've heard me ask you this before, I'll say it again, please rate us on iTunes so that other folks know where they can find us. And if you've got a comment on this episode or a question you'd like one of our experts to tackle on a future show, email us at ICE House, at theice.com or tweet at us at NYSE. Our show is produced by Pete Ash and Ian Wolf with production assistance from Ken Abel and Steven Portner. I'm Josh king, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties express or implied as to the accuracy or completeness of this information and do not sponsor, approve, or endorse any of the content hearing, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, or a solicitation of an offer to buy any security, or recommendation of any security or trading practice.