WEBVTT

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Thirteen trillion dollars in wealth

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has evaporated over the course
of the last two years.

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We've questioned the future of capitalism.

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We've questioned the financial industry.

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We've looked at our government oversight.

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We've questioned where we're going.

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And yet, at the same time,

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this very well may be
a seminal moment in American history,

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an opportunity for the consumer
to actually take control and guide us

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to a new trajectory in America.

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I'm calling this The Great Unwind.

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(Laughter)

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And the idea is a simple, simple idea,

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which is the fact that the consumer
has moved from a state of anxiety

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to action.

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Consumers who represent 72 percent
of the GDP of America

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have actually started, just like banks
and just like businesses,

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to de-leverage, to unwind
their leverage in daily life,

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to remove themselves
from the liability and risk

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that presents itself as they move forward.

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So, to understand this --
and I'm going to stress this --

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it's not about the consumer
being in retreat.

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The consumer is empowered.

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To understand this, we'll step back
and look at what's happened

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over the last year and a half.

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So if you've been gone,
this is the CliffsNotes

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on what's happened in the economy.

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(Laughter)

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Unemployment up. Housing values down.
Equity markets down.

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Commodity prices are like this.

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If you're a mom trying to manage a budget,

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and oil was 150 dollars
a barrel last summer,

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and it's somewhere between 50 and 70,

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do you plan vacations?

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How do you buy?

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What's your strategy in your household?
Will the bailout work?

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We have national debt, Detroit,
currency valuations, health care --

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all these issues facing us.

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You put them all together,
mix them up in a bouillabaisse,

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and you have consumer confidence
that's basically a ticking time bomb.

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In fact, let's go back and look
at what caused this crisis,

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because the consumer,
all of us, in our daily lives,

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actually contributed
a large part to the problem.

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This is something I call
the 50-20 paradox.

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It took us 50 years

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to reach annual savings ratings
of almost 10 percent.

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Fifty years.

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Do you know what this was right here?
This was World War II.

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Do you know why savings was so high?

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There was nothing to buy,
unless you wanted to buy some rivets.

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What happened, though,
over the course of the last 20 years,

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we went from a 10 percent savings rate
to a negative savings rate.

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Because we binged.

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We bought extra-large cars,
supersized everything,

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we bought remedies
for restless leg syndrome.

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All these things together
basically created a factor

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where the consumer drove us
headlong into the crisis

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that we face today.

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The personal debt-to-income ratio
basically went from 65 to 135 percent

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in the span of about 15 years.

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So consumers got over-leveraged.

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And of course our banks did as well,
as did our federal government.

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This is an absolutely staggering chart.

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It shows leverage,
trended out from 1919 to 2009.

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And what you end up seeing
is the whole phenomenon

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that we are actually stepping forth
and basically leveraging

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future education, future children
in our households.

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So if you look at this in the context
of visualizing the bailout,

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what you can see is,
if you stack up dollar bills,

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first of all, 360,000 dollars

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is about the size of a five-foot-four guy.

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But if you stack it up, you see
this amazing, staggering amount of dollars

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that have been put into the system
to fund and bail us out.

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So this is the first 315 billion.

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But I read this fact the other day,

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that one trillion seconds
equals 32,000 years.

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So if you think about that,

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the context, the casualness
with which we talk about

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trillion-dollar bailout here
and trillion there,

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we are stacking ourselves up
for long-term leverage.

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However, consumers have moved.

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They are taking responsibility.

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What we're seeing
is an uptake in the savings rate.

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In fact, 11 straight months
of savings have happened

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since the beginning of the crisis.

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We're working our way back up
to that 10 percent.

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Also, remarkably, in the fourth quarter,

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spending dropped
to its lowest level in 62 years --

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almost a 3.7 percent decline.

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Visa now reports that more people
are using debit cards than credit cards.

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So we're starting to pay for things
with money that we have.

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And we're starting to be much more careful
about how we save and invest.

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But that's not really the whole story,

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because this has also been a dramatic
time of transformation.

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And you've got to admit,
over the last year and a half,

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consumers have been doing
some weird things.

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It's pretty staggering,
what we've lived through.

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If you take into account
that 80 percent of all Americans

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were born after World War II,

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this was essentially our Depression.

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And so, as a result,
some crazy things have happened.

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I'll give you some examples.

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Let's talk about dentists, vasectomies,
guns and shark attacks.

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(Laughter)

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Dentists report molars --
people grinding their teeth,

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coming in and reporting
that they've had stress.

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So there's an increase in people
having to have their fillings replaced.

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Gun sales, according to the FBI,
who does background checks,

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are up almost 25 percent since January.

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Vasectomies are up 48 percent,
according to the Cornell Institute.

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And lastly, but a very good point,

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hopefully not related
to the former point I just made,

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which is that shark attacks
are at their lowest level from 2003.

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Does anybody know why?

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(Laughter)

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No one's at the beach.

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So there's a bright side to everything.

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But seriously, what we see happening,

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and the reason I want to stress
that the consumer is not in retreat,

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is that this is a tremendous opportunity

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for the consumer who drove us
into this recession

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to lead us right back out.

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What I mean by that is we can
move from mindless consumption

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to mindful consumption.

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Right?

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(Applause)

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If you think about the last three decades,

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the consumer has moved
from savvy about marketing in the '90s,

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to gathering all these amazing social
and search tools in this decade.

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But the one thing holding them back
is the ability to discriminate.

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By restricting their demand,

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consumers can actually align
their values with their spending,

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and drive capitalism and business
to not just be about more,

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but to be about better.

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We're going to explain that right now.

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Based on Y&R's BrandAsset Valuator,

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proprietary tool of VML
and Young & Rubicam,

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we set out to understand
what's been happening in the crisis

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with the consumer marketplace.

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We found a couple
of really interesting things.

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We're going to go
through four value shifts

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that we see driving
new consumer behaviors,

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that offer new management principles.

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The first cultural value shift we see

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is this tendency toward something
we call "liquid life."

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This is the movement

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from Americans defining
their success on having things

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to having liquidity,

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because the less excess
that you have around you,

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the more nimble and fleet of foot you are.

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As a result, déclassé consumption is in.

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Déclassé consumption is the whole idea
that spending money frivolously

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makes you look a little bit anti-fashion.

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The management principle
is dollars and cents.

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So let's look at some examples
of this déclassé consumption

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that falls out of this value.

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The first thing is,
something must be happening

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when P. Diddy vows to tone down his bling.

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(Laughter)

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But seriously, we also have
this phenomenon

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on Madison Avenue and in other places,

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where people are actually
walking out of luxury boutiques

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with ordinary, generic paper bags
to hide the brand purchases.

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We see high-end haggling in fashion today,

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high-end haggling
for luxury and real estate.

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We also see just a relaxing of ego,

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and sort of a dismantling of artifice.

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This is a story on the yacht club
that's all basically blue collar.

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Blue-collar yacht club --
where you can join,

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but you've got to work in the boatyard
as condition of membership.

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We also see the trend toward tourism
that's a little bit more low-key:

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agritourism -- going to vineyards
and going to farms.

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And then we also see this movement
forward from dollars and cents.

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What businesses can do to connect
with these new mindsets

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is really interesting.

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A couple things that are kind of cool.

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One is that Frito-Lay figured out
this liquidity thing with their consumer.

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They found their consumer had more
money at the beginning of the month,

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less at the end of the month.

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So they started to change their packaging:

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larger packs at the beginning
of the month,

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smaller packaging at the end of the month.

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Really interestingly, too,
was the San Francisco Giants.

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They've just instituted dynamic pricing.

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It takes into account everything
from the pitcher match-ups,

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to the weather, to the team records,

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in setting prices for the consumer.

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Another quick example of these types
of movements is the rise of Zynga.

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Zynga has risen on the consumer's desire

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to not want to be locked in to fixed cost.

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Again, this theme is about variable
cost, variable living.

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So micro-payments have become huge.

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And lastly, some people are using Hulu

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as a device to get rid
of their cable bill.

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So, really clever ideas there
that are being taken ahold of

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and that marketers
are starting to understand.

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The second of the four values
is this movement toward

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ethics and fair play.

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We see that play itself out
with empathy and respect.

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The consumer is demanding it.

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And, as a result, businesses
must provide not only value,

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but values.

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Increasingly, consumers are looking
at the culture of the company,

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at their conduct in the marketplace.

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So we see with empathy and respect

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lots of really hopeful things
come out of this recession.

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I'll give you a few examples.

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One is the rise toward communities
and neighborhoods,

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and increased emphasis on your neighbors
as your support system.

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Also, a wonderful by-product
of a really lousy thing,

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which has been unemployment,

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is a rise in volunteerism
that's been noted in our country.

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We also see the phenomenon --
some of you may have "boomerang kids" --

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these are "boomerang alumni,"

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where universities are actually
reconnecting with alumni

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and helping them with jobs,
sharing skills and retraining.

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We also talked about character
and professionalism.

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We had this miracle on the Hudson
in New York City in January,

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and suddenly Sully has become
a key name on BabyCenter.

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(Laughter)

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So, from a value and values standpoint,

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what companies can do is connect
in lots of different ways.

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Microsoft is doing something wonderful.

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They are actually vowing to retrain
two million Americans with IT training,

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using their existing infrastructure
to do something good.

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Also, a really interesting
company is GORE-TEX.

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GORE-TEX is all about
personal accountability

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of their management and their employees,

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to the point where they really
kind of shun the idea of bosses.

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But they also talk about the fact
that their executives --

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all of their expense reports
are put onto their company intranet

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for everyone to see.

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Complete transparency.

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Think twice before you have
that bottle of wine.

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(Laughter)

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The third of the four laws
of post-crisis consumerism

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is about durable living.

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We're seeing in our data
that consumers are realizing

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this is a marathon, not a sprint.

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They're digging in and looking
for ways to extract value

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out of every purchase they make.

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Witness the fact that Americans
are holding on to their cars

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longer than ever before:
9.4 years on average, in March.

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A record.

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We also see the fact that libraries
have become a huge resource for America.

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Did you know that 68 percent
of Americans now carry a library card?

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The highest percentage ever
in our nation's history.

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So what you see in this trend
is also the accumulation of knowledge.

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Continuing education is up.

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Everything is focused
on betterment, training,

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development and moving forward.

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We also see a big DIY movement.

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I was fascinated to learn that 30 percent
of all homes in America

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are actually built by owners.

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That includes cottages and the like,

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but 30 percent.

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People are getting their hands dirty,
rolling up their sleeves.

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They want these skills.

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We see it with the phenomenon of raising
backyard hens, chickens and ducks.

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And when you work out the math,
they say it doesn't work,

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but the principle is there;

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it's about being sustainable
and taking care of yourself.

00:11:15.814 --> 00:11:18.425
Then we look at the High Line
in New York City,

00:11:18.449 --> 00:11:21.217
an excellent use of reimagining
existing infrastructure

00:11:21.241 --> 00:11:22.400
for something good,

00:11:22.424 --> 00:11:24.459
which is a brand-new park
in New York City.

NOTE Paragraph

00:11:24.483 --> 00:11:28.574
So what brands can do, and companies,
is pay dividends to consumers,

00:11:28.598 --> 00:11:30.126
be a brand that lasts,

00:11:30.150 --> 00:11:31.539
offer transparency,

00:11:31.563 --> 00:11:34.057
promise you're going to be there
beyond today's sale.

00:11:34.081 --> 00:11:36.126
Perfect example of that is Patagonia.

00:11:36.150 --> 00:11:37.864
Patagonia's "Footprint Chronicles"

00:11:37.888 --> 00:11:41.686
basically goes through and tracks
every product they make,

00:11:41.710 --> 00:11:43.500
and gives you social responsibility,

00:11:43.524 --> 00:11:47.063
and helps you understand the ethics
behind the product they make.

NOTE Paragraph

00:11:47.087 --> 00:11:48.869
Another great example is Fidelity.

00:11:48.893 --> 00:11:52.579
Rather than instant cash-back rewards
on your credit or debit purchases,

00:11:52.603 --> 00:11:57.499
this is about 529 rewards
for your student education.

00:11:57.523 --> 00:11:59.610
Or the interesting company Sunrun.

00:11:59.634 --> 00:12:00.789
I love this company.

00:12:00.813 --> 00:12:02.880
They've created a consumer collective

00:12:02.904 --> 00:12:05.250
where they put solar panels on households

00:12:05.274 --> 00:12:07.369
and create a consumer-based utility,

00:12:07.393 --> 00:12:09.091
where the electricity they generate

00:12:09.115 --> 00:12:11.739
is basically pumped back out
into the marketplace.

00:12:11.763 --> 00:12:13.499
So it's a consumer-driven co-op.

NOTE Paragraph

00:12:13.523 --> 00:12:17.197
The fourth post-crisis
consumerism that we see

00:12:17.221 --> 00:12:19.538
is this movement
about "return to the fold."

00:12:19.562 --> 00:12:21.361
It's incredibly important right now.

00:12:21.385 --> 00:12:23.969
Trust is not parceled out, as we all know.

00:12:23.993 --> 00:12:26.185
It's now about connecting
to your communities,

00:12:26.209 --> 00:12:27.971
connecting to your social networks.

00:12:27.995 --> 00:12:29.709
In my book, I talked about the fact

00:12:29.733 --> 00:12:32.408
that 72 percent of people trust
what other people say

00:12:32.432 --> 00:12:33.883
about a brand or a company,

00:12:33.907 --> 00:12:35.949
versus 15 percent on advertising.

00:12:35.973 --> 00:12:39.693
So in that respect, cooperative
consumerism has really taken off.

00:12:39.717 --> 00:12:42.700
This is about consumers working
together to get what they want

00:12:42.724 --> 00:12:43.900
out of the marketplace.

00:12:43.924 --> 00:12:45.901
Let's look at a couple of quick examples.

NOTE Paragraph

00:12:45.925 --> 00:12:47.498
The artisanal movement is huge:

00:12:47.522 --> 00:12:50.579
everything about locally
derived products and services,

00:12:50.603 --> 00:12:52.387
supporting your local neighborhoods,

00:12:52.411 --> 00:12:55.387
whether it's cheeses,
wines and other products.

00:12:55.411 --> 00:12:58.069
Also this rise of local currencies.

00:12:58.093 --> 00:13:01.068
Realizing that it's difficult
to get loans in this environment,

00:13:01.092 --> 00:13:03.151
you're doing business
with people you trust

00:13:03.175 --> 00:13:04.354
in your local markets.

00:13:04.378 --> 00:13:08.246
So this rise of local currency
is another really interesting phenomenon.

00:13:08.270 --> 00:13:11.892
And then they did a recent report
I thought was fascinating.

00:13:11.916 --> 00:13:15.089
They actually started, in certain
communities in the United States,

00:13:15.113 --> 00:13:17.140
to publish people's electricity usage.

00:13:17.164 --> 00:13:20.475
And what they found out is when
that was available for public record,

00:13:20.499 --> 00:13:23.569
the people's electricity usage
in those communities dropped.

NOTE Paragraph

00:13:24.511 --> 00:13:27.126
Then we also look
at the idea of cow-pooling,

00:13:27.150 --> 00:13:31.345
which is the whole phenomenon
of consumers organizing together

00:13:31.369 --> 00:13:35.262
to buy meat from organic farms,
that they know is safe and controlled

00:13:35.286 --> 00:13:37.472
in the way that they want it
to be controlled.

00:13:37.496 --> 00:13:41.063
And then there's this other really
interesting movement in California,

00:13:41.087 --> 00:13:42.570
which is about carrot mobs.

00:13:42.594 --> 00:13:45.640
The traditional thing would be
to boycott, right? Have a stick.

00:13:45.664 --> 00:13:47.010
Well, why not have a carrot?

00:13:47.034 --> 00:13:50.338
So these are consumers organizing,
pooling their resources

00:13:50.362 --> 00:13:53.126
to incentify companies to do good.

NOTE Paragraph

00:13:53.150 --> 00:13:55.947
And then we look at what companies can do.

00:13:55.971 --> 00:13:59.424
This is all the opportunity
about being a community organizer.

00:13:59.448 --> 00:14:02.415
You have to realize
that you can't fight and control this.

00:14:02.439 --> 00:14:04.049
You actually need to organize it.

00:14:04.073 --> 00:14:06.598
You need to harness it.
You need to give it meaning.

00:14:06.622 --> 00:14:09.834
And there's lots of really
interesting examples here.

00:14:09.858 --> 00:14:14.651
First is just the rise of the fact
that Zagat's has actually moved out of

00:14:14.675 --> 00:14:16.903
and diversified from rating restaurants,

00:14:16.927 --> 00:14:19.126
into actually rating health care.

00:14:19.150 --> 00:14:21.279
So what credentials does Zagat's have?

00:14:21.303 --> 00:14:22.473
Well, they have a lot,

00:14:22.497 --> 00:14:24.341
because it's their network of people.

00:14:24.365 --> 00:14:26.908
So that becomes
a very powerful force for them

00:14:26.932 --> 00:14:29.126
to make their brand more elastic.

NOTE Paragraph

00:14:29.150 --> 00:14:31.407
Then you look at the phenomenon of Kogi.

00:14:31.936 --> 00:14:34.913
This Kogi doesn't exist.
It's a moving truck.

00:14:34.937 --> 00:14:36.536
It's a moving truck through L.A.,

00:14:36.560 --> 00:14:39.056
and the only way you can find it
is through Twitter.

NOTE Paragraph

00:14:39.080 --> 00:14:40.137
(Laughter)

NOTE Paragraph

00:14:40.161 --> 00:14:41.314
Or you look at

00:14:41.338 --> 00:14:46.400
Johnson & Johnson's "Momversations,"
a phenomenal blog that's been built up,

00:14:46.424 --> 00:14:50.554
where J&J basically is tapping
into the power of mommy bloggers,

00:14:50.578 --> 00:14:55.026
allowing them to create a forum
where they can communicate and connect.

00:14:55.050 --> 00:14:59.889
And it's also become a very valuable
advertising revenue for J&J as well.

00:14:59.913 --> 00:15:04.127
This, plus the fact that you've got
phenomenal work from CEOs,

00:15:04.151 --> 00:15:06.691
from Ford to Zappos,
connecting on Twitter,

00:15:06.715 --> 00:15:08.126
creating an open environment,

00:15:08.150 --> 00:15:11.188
allowing their employees
to be part of the process,

00:15:11.212 --> 00:15:12.920
rather than hidden behind walls.

NOTE Paragraph

00:15:12.944 --> 00:15:17.149
You see this rising force
in total transparency and openness

00:15:17.173 --> 00:15:18.961
that companies are starting to adopt,

00:15:18.985 --> 00:15:21.292
all because the consumer is demanding it.

00:15:21.316 --> 00:15:23.262
So when we look at this and step back,

00:15:23.286 --> 00:15:27.478
what I believe is that the crisis
that exists today is definitely real.

00:15:27.502 --> 00:15:30.126
It's been tremendously
powerful for consumers.

00:15:30.150 --> 00:15:33.713
But at the same time,
this is also a tremendous opportunity.

00:15:33.737 --> 00:15:37.204
The Chinese character for crisis
is actually the same side

00:15:37.228 --> 00:15:38.395
of the same coin.

00:15:38.419 --> 00:15:40.126
Crisis equals opportunity.

00:15:40.150 --> 00:15:43.644
What we're seeing with consumers
right now is the ability for them

00:15:43.668 --> 00:15:46.304
to actually lead us forward
out of this recession.

NOTE Paragraph

00:15:46.328 --> 00:15:51.126
So we believe that values-driven spending
will force capitalism to be better:

00:15:51.150 --> 00:15:53.030
it will drive innovation;

00:15:53.054 --> 00:15:55.155
it will make longer-lasting products;

00:15:55.179 --> 00:15:57.775
it will create better,
more intuitive customer service;

00:15:57.799 --> 00:16:00.676
and it will give us the opportunity
to connect with companies

00:16:00.700 --> 00:16:02.771
that share the values that we share.

00:16:02.795 --> 00:16:04.814
So when we look back and step out at this

00:16:04.838 --> 00:16:08.126
and see the beginning of these trends
that we're seeing in our data,

00:16:08.150 --> 00:16:10.999
we see a very hopeful picture
for the future of America.

NOTE Paragraph

00:16:11.023 --> 00:16:12.191
Thank you very much.

NOTE Paragraph

00:16:12.215 --> 00:16:14.031
(Applause)