The Brand is in Your Head

Truly, it's a matter of perception. All of it. Current economic climate included [clarification: this in no way attempts to simplify, reduce, or minimize where we are. Perhaps I was bullish in my provocative opening?]. Noah Brier has a thought-provoking post about, among other things, the death of reality. He says:

While there's lots of stuff that makes up the economy, ultimately it's mostly a bunch of people's perceptions about how the economy is doing that drives it. In a state of perceived crisis (such as now), we all react by following the leads of others, even though the vast majority of us don't actually understand what is going on and how it threatens us as individuals.

There is a lot of material out there that references how our brain does not know the difference between something real and something imagined. It reacts the same way to the stimulus provided by the imagination, than it does to real events. That is the philosophy behind the idea of thinking positive, sending good thoughts and prayers. They are all projections of intention.

Brier uses the work of French philosopher Jean Baudrillard to exemplify. We talked about the narrative fallacy with Nassim Nicholas Taleb and The Black Swan. We like stories, we like to summarize, and we like to simplify, that is to reduce the dimension of things. In Taleb's words, "the fallacy is associated with our vulnerability to overinterpretation and our predilection for compact stories over raw truths."

In other words, we seek patterns to wrap our head around unrelated or very complex events. That is a feature of survival - having to make up our minds quickly on what to do next. I was watching a Discovery Channel show recently about leopards, lions and hyenas, and how they follow their instincts even though they often learn from reality.

As marketers we should be focusing on helping people rationalize their purchase, which happens emotionally. Providing the facts, the needed checks on a list of reasons that will satisfy the need to know why the purchase was made - even though many a time it's just "because"... we like it, it sounded good, it felt good, etc.

I really like where Brier is taking this - moral clarity - to the acknowledgment that there are only facts to take to task and deal with at this time.

For all of those who are currently planning a budget for next year - be bullish, be a purple cow, be creative, but please do not go the "same old/same old" route and expect different results. Sometimes less is just less.

On a different and pertinent note, Tim O'Reilly shares his letter to employees about the current financial crisis. When we talk about social media, we keep reminding ourselves that it's about watching, listening, learning. Well, that applies to economics and work as well. O'Reilly's post meets Briers in the here is what is mode - Daniel Lanois spells that as believing in yourself. It's focusing on what matters, liberating the inner leader, conserving. Brand you is also all in your head.

A wonderfully simple resource to understand economics is Tim Harford's The Undercover Economist - it's all about who gets what and why. 

[image of perception and reality]

Comments

[Marc Meyer]

Very timely Valeria. Maybe these times are just the come-uppance that was awaiting all of the takers?

Without out and out telling people to fend for themselves and screw everyone else, the message is simply-do your thing, make good decisions, and be honest to yourself about everything that you do, almost a self assessment of your faculties if you will.

I agree that just because it is said doesn't mean that it is-although if we take the "if it bleeds, it leads mantra"-the sky is falling right now.

[Rick Simmons]

If more people would understand that much of what happens in the economy is perception then they would be able to fix this readily. When we start believing all the news about how bad "it might be" and start to act as if it happened already then we make it happen.
I for one choose to understand that for us we have never been busier so i will continue to act that way. The rest of you - are you with me. We can turn this around in spite of all the gloom in the "news"

[Carolyn Ann]

The economic crisis as a failure of perception? Surely you jest? I hope you do.

Noah Brier is wrong. The economic crisis is not a matter of people reacting to things they don't understand - it's a matter of people reacting to things they *do* understand! To invoke another French philosopher, I've seen Deconstruction used to explain many things. I've never seen it, however, used to argue that what is real is really not! Derrida must be spinning in his grave.

The lack of considered analysis by Brier is astounding; basically, a collection of (selectively chosen) soundbites does not make a coherent argument! Mr Brier fits a few carefully chosen facts and soundbites to his own understanding of the financial crisis.

The fact is, there is a financial crisis - and it could send the US economy into a tailspin. That's not a perception issue. It's a very real problem. It's not a perception when you're not sure if you'll continue getting pension payments, or keep your job, or be able to buy that big machine so you can make something to sell. Mr Brier forgets all of this in his rush to put a few cognitive walls around his perception of what the financial meltdown is.

There is no failure in perception in my saying that credit is becoming both expensive and unavailable. The root causes are not a failure of perception, a systemic failure occurred; the analysis and discovery of which will occupy economic analysts and historians for many years.

It could be argued, I suppose, that the entire basis of the credit crunch has its roots in a perception; indeed, that's what Brier tries to do. But it would be the wrong conclusion. It's not a matter of how the economy is perceived, but more a matter of how the value of goods and services are priced. In this case, it's the price of money. The cost of a commodity like money isn't based on perception, but on an evaluation of risk; to argue that this is perception is to misunderstand what the phrase means. An evaluation of risk is based not just on the possibility that a borrower might fail to pay back some amount - these days, there's also the chance that the borrower has already failed - but it is also based on the very real capability of the lender to actually lend the money!

I do agree that we do try to understand the complex by relating it to the simple. Usually that works, but some things are just complex in and of themselves. Mortgage backed securities appear to be simple, but are tied to such arcana as various foreign exchange rates and the political machinations of various national governments. Trying to explain how that market works in simple terms hasn't been done - yet. I surely hope someone manages it!

I'm still wrapping my head around Mr Brier's "moral clarity" point. I'm not convinced there is a point; the bailout had to happen, otherwise the US economy would enter a severe recession at best, and a depression at worst. It wouldn't be drawn out, either - it was a matter of days. The moralists can enter into a political debate about the moral objectivity of the bailout, but they aren't likely to arrive at any conclusion; there isn't one to be had. The only people who would be punished sans bailout are the people who are not directly responsible! "Joe Six-pack" as Sarah Palin so facetiously puts it. That's why the bailout had to happen.

It used to be said "money is cheap"; that is no longer true. And that is not a matter of perception! I've found money to be incredibly expensive, of late. Me, I'm going to be very bearish in my economic planning for next year; not because I want to be, but because I simply can't count on our income staying stable. Heck, I'm not sure I can count on us having an income, next year! That's not a matter of perception, it's a matter of my reality.

Carolyn Ann

PS I'm cross posting some of these points in my blog.

[Carolyn Ann]

Oops. I somehow deleted a phrase. Where I say "It's not a matter of how the economy is perceived, but more a matter of how the value of goods and services are priced. In this case, it's the price of money." I should have had in there "but more a matter of how the value of goods and services are priced, and the availability of capital and/or funds to pay for those.

Sorry.

Carolyn Ann

[Valeria Maltoni]

@Marc - you got where I was going with it. There are plenty of reasons to be concerned, for sure. However, I'd like us to focus more on what we are going to do to work through it than the panic of the moment.

@Rick - some services and companies will be hit very hard. As individuals who are in the market with 401ks and pensions (some, I never had the fortune of having one) we will be hit hard. We will also incur a larger share of health coverage costs, etc. Much of what I can do is, as you say, work on what I can affect.

@Carolyn Ann - the economic crisis was brought on by a series of deregulations, risk transfer deals, investment deals, etc. There is an interesting post about that at RickWebb.com http://rickwebb.net/entries/1928
Perception comes in when we keep talking about how badly it bleeds and do not switch to talking about what and how is being done to fix things. Markets are emotional, because they are driven by people and all the decisions they make. My understanding on the moral clarity point Brier makes is that regardless of who is at fault, there needed to be assistance. Yes, liquidity is going to be a big issue. I am not negating the need to conserve or to focus on what matters - it may be survival. I am recommending that we believe in ourselves. That is the one thing in the absence of which things could get much worse.

[Carolyn Ann]

I read RickWebb; thank you for the reference. He gets it almost right - his laying of the blame in one direction, and on one financial product, is the thing that prevents me from saying "he's nailed it". He also simplified some other complexities a bit too much. (He doesn't even glance in the direction of the staggering levels of consumer debt the British and American consumers hold, for instance.)

The market isn't emotional, though. These days, the markets are less emotional than they've ever been - automated trading systems are quite capable of driving the Dow in any direction. The only emotional traders I've ever seen are the ones who are having a nervous breakdown, or have just lost their million! (Which is quite a spectacular, if slightly disturbing, sight...) The levels of debt and the emotional state of the consumer are worth examining, though!

Thanks for a provocative post; I forgot to mention that, before. You make me think. (I need an aspirin...) :-)

Carolyn Ann

[michael mckee]

You suggest that "Providing the facts, the needed checks on a list of reasons that will satisfy the need to know why the purchase was made," will help persuade people to buy our brand, even in this economic climate. I would refer you back to your own statement about stories, and suggest that facts and reasons aren't enough but that those need to be embedded within a new compelling story.

For an example, look at how the conservatives have been able to frame political debate in the US for at least the last 10 years. Progressives answer with facts, and facts just don't have the same ability to connect with people as stories.

I don't believe that Obama's current lead in the polls has as much to do with his political philosophy as that McCain's story has been that of the war hero. And Americans' internalized stories cannot reconcile war heroes with strong economic leaders.

It's the story, or as cognitive scientists call it, the frame that compels. Good branding appeals to internalized stories, not reason or facts.

There is no good reason to drink Coke. It's unhealthy and expensive. It's just sugar water with a tiny bit of flavoring added that could be sold at a profit at half its current price. It adds to endemic obesity and other health problems. But drinking Coke (or Pepsi) has been internalized into our stories of what we need to do to enjoy ourselves. Facts only count when they reinforce an internalized story. In and of themselves they persuade very few people.

[Valeria Maltoni]

@Carolyn Ann - I'm glad I got it almost wrong. We are emotional, the market is more automated than we think/or know. Going back to the consumers, their (our) emotional state does drive many of the occurrences that affect the automated system. Do we need brand stories that reassure us now? I saw somewhere that the whole "bailout" conversation was a branding fiasco, thus leading to decreased confidence, etc.

@Michael - of course we buy according to the brand story we believe. However, in hard times like this one, we spend more energy rationalizing that purchase (especially when it requires an investment greater than the price of a can of soda) with facts and figures. This means almost marketing after the fact. Have you ever gone around asking your friends about a major purchase *also* after you had made it? Alas I have not created a category for storytelling, but if you search this blog you will find many posts about story and brands. My point was about reinforcing a decision already made or an event that has already taken place. Your points are well taken. Thank you!

[Carolyn Ann]

No, stories won't help one bit. People distrust stories at this point.

What is needed is someone actually telling the truth about the whole mess. Which will be difficult to do, because no one actually can pinpoint what the truth is! Someone described the meltdown as "the perfect [financial] storm" - it is. Except George Clooney isn't available to pull on heart-strings.

There's a strong sentiment around the world that Capitalism - specifically the type being labeled "Reagan's Capitalism" - is to blame. These past 30 years, deregulation has passed from a mantra, a political slogan, to being an ideology all of its own. Nations rushed to open their markets, and everyone benefited.

Now we're seeing one of the downsides to such unfettered deregulation. This doesn't mean capitalism is wrong, dead, or whatever. It just means that "we" need to rethink what deregulation means. That's not a story, but a process. Capitalism will survive; it's very nature ensures it will. (As bad as capitalism is, it's far better than anything else out there! To paraphrase Winston Churchill...)

On the other hand, Obama is doing well because he is telling a story about the meltdown; McCain isn't so much telling a story as simply shooting scattershot about Obama's acquaintances. (Isn't there some parable about glass houses, those without sin, etc? :-) ) Barack Obama is responding to the crisis with stories, and as such he's building credibility - people believe he understands the problem, and how it might/will affect them. McCain did some flamboyant routine that pretty much backfired, and has had to resort to his vitriolic and tinted exhortations.

Sorry, I didn't mean to "take over" your post. :-)

Carolyn Ann