Technologic

Full transcript: ‘Microtrends’ author and political strategist Mark Penn on Recode Decode

This post was originally published on this site

“The cost of data is going to zero, and the value of analysis [is going] to infinity.”

On this episode of Recode Decode, hosted by Kara Swisher, former political strategist, pollster and former Microsoftie Mark Penn talks about his new book, “Microtrends Squared: The New Small Forces Driving the Big Disruptions Today.” He describes it as a less optimistic sequel to his 2007 book “Microtrends,” but it extends the idea that small changes in politics and the economy are having huge ripple effects around the world.

You can listen to the whole thing in the audio player above; below, we’ve also provided a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.


Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode. You may know me as someone who thinks the government should just use Facebook to do the 2020 census — what could possibly go wrong? — but in my spare time, I talk tech, and you’re listening to Recode Decode from the Vox Media podcast network. (Just to be clear, I do not want Facebook to do the 2020 census.)

Today, in the red chair is Mark Penn, a former pollster and Democratic political strategist, but that’s not … He’s very much more important than that. In 2007, he wrote the bestselling book called “Microtrends: The Small Forces Behind Tomorrow’s Big Changes,” and now, 11 years later, he has a sequel called, “Microtrends Squared.” He’s also worked as a strategic adviser to Bill Gates and Microsoft, starting when the company was sued by the U.S. government many years ago. He’s done tons of things, and now he’s working with Steve Ballmer on a bunch of initiatives around …

Mark Penn: Around digital marketing.

Digital marketing, exactly. Mark, welcome to Recode Decode.

Thank you.

So let’s get people familiar with your background. We don’t have just a techie audience, we actually have a bigger audience than you’d imagine, an increasingly political one. And we try to bring lots of different people in. So why don’t we talk about your background. You started off as a political consultant originally?

Well, originally, I had an interest in polling. My first poll was age 13.

What was it?

It was of race relations, actually, at my … Horace, in my school.

You went to Horace Greeley?

I went to Horace Mann High School.

Horace Mann, sorry.

I saw that there was a poll done by CBS and I said, “Well, let’s see what polls are all about.” And so I just became fascinated in what do people really think and learning that through these polls.

And asking the right questions.

Well, asking the right questions and then analyzing it. I think the biggest problem with polls today is they’re not analyzed well. And took that basic interest and, well, I went to law school and was going to be an antitrust lawyer. Me and a friend of mine from school, Doug Schoen, we instead created a political polling company that we did for over 30-some-odd years, diversifying it out to corporate before I started to do some other stuff.

So you were going to be an antitrust lawyer? I’m going to go back to that. Why? What was the …

Well, I loved economics, which is like polling, and I love law because … I thought law was righting wrongs, and then it seemed more like doing big commercial transactions. The kind of excitement of bringing polls and ads to politics at that time, it was kind of bringing science or Moneyball to politics. It didn’t really exist in the ’70s.

No, it didn’t. No, it didn’t. So what was your …

I had to build my first computer in a kit program and an assembler so that we had the first overnight polling.

Wow, so you were doing that in the ’70s?

Yes.

Late ’70s.

Late ’70s.

So what was wrong with polling at that time? That was just Gallup, right? They would just call people.

There was no polling.

There was just … What did they do? Call people on the phone, right?

No, they visited people door to door.

Right. Right.

When we did phone polling, it was controversial. Today, when you do internet polling, it’s controversial.

All right, so you started off, what was the state of polling when you started off?

Well, right then, remember politics was changing from being organization-based politics to what you call media-based politics. And so the need for polling became much greater because people like to understand, were the ads working? What was happening with the campaign? And then because you could do polls by phone, you could for the first time have an affordable ability to understand how your campaign was working, what you should do, how to test ads. And we started … Pretty much the first campaign was the 1977 mayoral campaign with Ed Koch, where he started off with 6 percent, and nobody expected he was gonna win.

Right, and what did you do for him? What was your …?

We helped … At that time, with a media consultant, David Garth, we helped develop the basic, relatively counterintuitive centrist strategy that he ran, which was to be a lot more fiscally responsible, then to both take the messaging and create almost a daily polling operation, the first of its kind, where we could understand how the ads were working. And eventually what …

And the reaction. The immediate reaction.

The reaction, and how to change them because political ads, you could change overnight.

Right, I think Pat Kadell was doing some of that too. There was a whole bunch of people in this.

Yes, in those days, he was our idol.

Right, in terms of doing that, if I remember. I actually worked for him for a summer, doing door-to-door, actually.

Exactly.

Which was horrible. It was a horrible job.

No, at that time only like the Rockefellers could afford polling.

Right. Right. Exactly. So you got into this idea of polling, which was done so that you could get instant results and tell people how to shift their message subtly, or say things, or this was working and this wasn’t working, essentially.

Well, and also so you could understand opinion. I think our biggest polling summer was the ’96 presidential race, and out of that came “soccer moms.” And so that was about shifting Democrats from basically going after downscale manufacturing workers to working women who were leaving their kids, and for whom really there’d been almost no policy or politics up until that point.

So you started doing polling, and then moved to consulting.

Well, polling, we broadened it out into corporate work. And so people had a fulltime job 365 days a year every year, and we grew the firm. Microsoft was probably one of my biggest clients. I didn’t become an antitrust lawyer, but then I worked on big antitrust cases, understanding the messaging and the polling and the politics.

So talk about that case, because I covered that for the Washington Post.

Well, it’s very interesting because compared to, say, Facebook today, Microsoft took the position, “Hey, freedom to innovate. We really didn’t do anything wrong here.” And so I think they strenuously advocated on behalf of the company. I did a very unique ad that I wound up writing and directing with Bill Gates in a sweater when the ruling came down to break up the company. But basically, we had very strong messaging and we lost every single ruling.

Because?

Because the judge, it turned out, was biased.

Right.

And then eventually it was discovered that the judge was biased because he gave an interview to Ken Auletta, in which he revealed his bias. He was thrown off the case. And then we got a reasonable judge and compromises occurred. And the company then went on to rebuilding its image from those problems.

But talk about that because as I recall it, there was a lot of mess-ups by Microsoft in that particular thing. I was just … We were looking … I was looking at Bill’s, when he went to Congress, or when he came to the Washington Post, I remember him coming and really not modulating his message in any way. You know, he was … “arrogant” was sort of a kind way of putting it.

Well, I think you have to understand, in those days, Microsoft had no Washington office.

They did not. Remember, he said, “There’s someone up in Rockville I think I hired.” Like, “Phil up in Rockville.”

Look, they did their business quite removed from the political complex.

They did. He had that attitude.

When I came into it, Steve Ballmer had said, “To heck with Janet Reno.”

That’s not quite what he said.

You actually, you hear Bill Gates today, and he’s just incredibly schooled on the issues and message. And in those days, he was involved in, hey, what’s the next version of Windows was gonna be? He was a different person. And so he got an education, I think both of them through the process got an education of working with Washington, that the company never forgot. And then became a model. Other companies tried to get ahead of it. I think you saw Facebook caught somewhat behind, although they have a pretty extensive Washington operation.

Right. So you worked on the trial. What impact did that have on Washington and tech at the time? Because that was really a moment. That was a moment where they got attacked for the first time.

Well, it was a big moment.

Although half of tech was cheering. Most of tech was cheering.

Yeah, because in fact, when I came, I did a video for Microsoft and said, “We’re gonna test against this video.” And the video depicted Microsoft as a shark, swallowing up everything. And so their image was just kind of an aggressive monopolist. And I think that it had an impact internally in the company. I think marketwise, probably not so much of an impact over time.

I think the regulatory element of it, I think people learned that it … I’m not sure that Washington learned much of anything out of that case because ultimately, not a lot really happened other than restrictions on the browser. And Microsoft was right, that other competitors would come into the marketplace and do very well at other services. So at the end of the day, it then, I think, didn’t really change stuff, right?

It didn’t. It didn’t. Not 100 percent.

But it was a big deal at the time, and the company was almost broken up. And I think it was much better that it wasn’t. I don’t think that would’ve been the right conclusion for what happened there.

Right. Right. So you continued working with them, but you also got into politics, obviously. You’re famous for that.

Yeah, well, no, Steve and Bill said they liked the techniques that we used around the trial, so they said, “Hey, apply it to our products.” So for many years … Later on, I would go into Microsoft and become chief strategy officer and head of their advertising.

But during those years, then, really the … I did politics in a lot of international countries and then got hired by Clinton after the … It was actually just before Microsoft, I was hired by Clinton for the ’96 presidential race. And then every week I would hold a strategy meeting with the president and the top staff to review polling numbers, policy options, communications options, to kind of bring the White House together once a week. The president said he liked the meetings so much from the campaign, he said, “Just keep going.” And every time I thought that the beatings would be done with, we’d have like an impeachment crisis.

Right. Oh yeah, that.

That would then put us back.

“We’d have an impeachment crisis.” That happens.

We came in for speech prep one day, and wow. God knows what’s going on. And we got thrown onto campaign footing. But all the time, having a good understanding of what was happening in public opinion, how messaging was working, really, I think, helped the president make decisions about how to communicate and how to enact policies that would move his agenda forward.

Well, some say that’s not a good thing. That that was … A lot of this baked stuff is problematic.

No, because I think people are confused about that. I think that having a real understanding of what you can do and how you can do it and how you can further what you really believe in, these were incredibly productive years.

Look, I came on after the ’94 elections, and therefore, he had lost both houses of Congress but we still got balanced budget, welfare reform, a tremendous economic progress crime bill, an incredible level of accomplishment by restoring a centrist position to the administration. So a lot got done, and a lot got done with, I think, helping inform the leaders that could find solutions, and that they would make compromises.

I think people would argue with you on the crime bill, and they still do. I mean, today it’s …

They do, but they didn’t argue at the time. And if you look at crime and the highs that it was when that crime bill was passed, and the lows that it is now, hey, it might be the right time to do the next level of reform that would look quite differently. But it doesn’t mean that that was wrong for the time.

So you shifted, and you were still working for Microsoft at this time, or not?

Yeah, well, at that point, although really that’s … I was pretty much, those six years, pretty much day in and day out, other than maybe some of the Microsoft work on the case, pretty much absorbed in the administration and what was happening. Even though, unofficially, I was there every day.

So talk about what it was like then to be in politics. We’re gonna fast-forward to today later. But what was the … It was basically you polled issues, then you moved things, then you shifted … It was a slower pace.

Well, it wasn’t a slower pace in the sense that we did polls overnight. We were able to move ads in a day or two. So people, I think, think that, well, today is so dramatically …

It was preeminent, though.

By that time, it was really fast-moving. Even if cable, 24-hour news was sort of just getting going there. Fox News just kicked off around the same time as Monica Lewinsky.

But it was pretty fast-moving, pretty intense, in terms of the system because we could, for the first time, do things overnight. We could meet that kind of demanding schedule of the media. And really, though, it was an incredibly fascinating time to see how the communications and the policies would come together to see the country, in fact, come together around the president, something we just have not had in the last two decades.

Right, absolutely. So you had written your book a little bit after this, correct? The first version of this book.

The first version came out in 2007. I would say, again, back in ’96, I kind of developed a lot of the techniques of polling a combination of lifestyles with personality with issues, and understanding the mix of those, which resulted in, I think, the emphasis on soccer moms. But in 2007, I said, “Well look. Let’s take a look at how the country is now changing. Let’s look at the smaller trends under the surface that people aren’t seeing.”

And I think the 2007 book was extremely optimistic about a world of choice. I referred to it, that we had the Ford economy, which was “any color you want as long as it’s black,” which meant that people thought that mass production would really drive down the prices of things, to the Starbucks economy then, “Hey, 155 different varieties of something, of a commodity like coffee.” And so now, I think we’re in the Uber economy, where you have infinite choice here, both in terms of what you want.

So I think observing that those things then resulted in the smaller trends, whether it was internet dating, whether it was the change in immigrant population, whether it was what was happening with marriage and lifestyles, or whether it was happening in economics, was a way of understanding, I think a decade of change we were gonna have. As I said, it’s much more optimistic than, I think, the new book is.

Yeah, so your point of the old book was to do what? To say … The thesis?

Was to say that … The thesis of this book …

The old book. The old book.

The thesis of the old book was very much that we now had a world that was being differentiated by a new level of choices. That is, technology was evolving at the same time people desired to be different from one another, and that that was creating a new world of choice, whether it was politics or culture or religion. There was a new religion on every street corner. You were beginning to see society differentiate. And you couldn’t understand society very much because if you just looked for a couple of big trends, it didn’t seem to make sense.

Which used to be the case.

Right, but if you understand for every trend there’s a countertrend, you understand that people are being pulled in one direction and then also there’s another group pulling society in a different direction at the very same time. And that’s why it looks so impossible to figure out.

Right, and so you wrote this book, which got a lot of attention. And then you moved on to the campaign. The Clinton campaign.

Yes, moved on to the 2008 campaign.

So if you were armed with this idea, what went wrong there?

I don’t think the two were much related.

The first Mrs. Clinton campaign.

Yes. Now in the 2008 campaign, that from Day One was really … that Barack Obama represented a serious challenge to her. He had the support of a lot of those of the media, a good fundraising apparatus, he represented the first African-American president. And I think all of those things, I think, was from Day One a challenge. And that campaign … The biggest thing, I think, in retrospect, was I did something called the 3 a.m. ad, but I did it in April. I really wanted to do that in November. So we would’ve had to have been a lot sharper about drawing the distinctions between Hillary Clinton and Barack Obama, I think, to win that race, and to win it early on. As they always says, “You have to stop a phenomenon early on.”

When I worked with Microsoft, I did a big campaign against Linux that was very successful, right? And we didn’t really do a campaign to block Barack Obama. And I think people failed to do a campaign against Trump. Trump was equally like Barack Obama, believe it or … a phenomenon, that once they get to a certain point, boy they’re impossible to stop.

And also a big trend, not a microtrend. A macrotrend really, right?

Well, yes, but he is a collection of microtrends that put him over the top.

All right, we’ll get to him in a minute. But Barack Obama was also a macrotrend of hope, of change, of …

He was, I think, a phenomenon where he was able to put together a coalition of the, both African-American community and progressive Democrats. And he was the first person who could put together that coalition. And we pretty much did win the Latino vote, the working-class vote. We did very well with women. But that constituency was really like 49.7 percent. I mean, really, Barack Obama won just on the strength of, actually, the caucuses. She won the primaries.

Right. All right, but yet she did not win. So you went off after the election, after she lost the nomination, obviously, to go back to Microsoft.

Actually then I was CEO of Burson-Marsteller.

Right. Right. Okay.

So we had taken the polling company, become part of the WPP. They’d asked me to run Burson-Marsteller. I was CEO of Burson-Marsteller for four or five years. Then I went off to Microsoft, originally to do special projects.

Why didn’t you stay at Burson?

Well, I had pretty much restored Burson to … After five years of decline, when I took it over, then we had three or four years of tremendous growth. We tripled the bottom line, we won the top agency of the year awards. And at WPP, there just wasn’t a path that was being built for a leadership team, something for which I think that …

They’ve got a CEO opening right now.

Well they do now, but … And the reason why they have an opening is that they weren’t building the leadership structure. So that was actually the reason that I called up my best client and said, “Hey, I could maybe try to solve some of your difficult problems in tech.” And I start off actually working on Bing when I did the fairly infamous “Scroogled” campaign.

Yeah, talk about Scroogled. I think I wrote about Scroogled.

Scroogled was a phenomenon from the … We did this ad, and I would get 250,000 people a day to the website. As a joke, one day, we said, “Well, let’s put out just some Scroogled merchandise.” 450,000 people came in the first 36 hours. And what that really was about was the appetite for knowledge and competition about privacy. See, it was the first campaign to ever say, “Well look, I know Bing is free to you. I know Google is free to you. What’s the difference? Well, one difference is privacy.” And so nobody knew that Google was scanning the mail, looking through the text, using that information to construct ads.

Yeah, you really stopped them there, Mark.

Well, the truth of the matter, and Satya [Nadella, the CEO of Microsoft] would later say that nothing worried the people at Google, there was nothing that Microsoft did except that campaign.

Scroogled, yeah, they didn’t like it. I recall they didn’t like it. But you were super aggressive. Was that correct, you were Steve Ballmer’s college roommate? Is that correct?

No, that’s not right.

All right, explain that because I didn’t think that was right.

We didn’t really have any connection in school, other than we were both on the Crimson, the newspaper. And he was on the business board and I was on editorial. And of course, in those days, we looked down on people on the business board, the little bit we’d know.

So you knew him a little bit?

Well, just in passing.

Right. Right, But you weren’t like best buddies. For some reason, I grew up around … I wanna disabuse everyone of that idea. So what was your goal for Microsoft then? Because they were facing the existential threat of Google, essentially, at the time.

Well, that’s right. At that time, I think the goal was could we increase the market share of Bing? We did successfully increase it well into the 20s. But then, Ballmer actually didn’t … His emphasis shifted. He became … said, “Look, let’s focus more on phone.” He then shifted me to be head of all advertising, actually, on the basis of that and a couple of other things. And then I revamped the advertising there. But then Satya came along as the next CEO and made me chief strategy officer, where my job was really to evaluate hundreds of possible directions for the company.

And why did you wanna stay in a tech role?

Well, I’d always had two interests, if you go back, in technology and politics. Frankly, I built computers before I did political campaigns. And so I was always equally fascinated. And I originally thought I would spend a few years before shifting to what I’m doing now, which is to really make the … Really put together this combine of digital marketing companies, and to make sure that I really understood what was happening in technology. But I enjoyed very much the time at Microsoft then, to be a sort of Blue Badge, so to speak.

Yeah, it was a pleasure. And we’re gonna talk about that more when we get back, what Mark’s doing now with Steve Ballmer, which is to reinvent digital marketing, correct? You’re buying up a bunch of companies. We’ll talk about that in a second. We’re gonna take a quick break for a word from a sponsors. We’ll be back in a minute with Mark Penn, the author of “Microtrends Squared.” He’s gonna tell us what that means.

[ad]

We’re here with Mark Penn, the famous political strategist, and also was an employee at Microsoft, apparently, a Blue Badge employee of Microsoft. He’s also the author of “Microtrends Squared,” which is a sequel to his book. Talk about the book a little bit. So is it a sequel? Or what’s the premise of this one?

Ten years later, let’s take a look at what’s going on. So I think people have moved from the Starbucks economy to the Uber economy.

So explain that.

Companies don’t deliver just 155 choices. They deliver infinite choices, what I think is a world of infinite choice. Problem with that is that more choice has resulted in people making fewer choices. And by that I mean that, think of America as a restaurant that just serves chicken and fish. Kind of boring choices. They’re alright. Now let’s add steak and sushi. Well, turns out the steak eaters love steak so much, they have it every day. The sushi eaters love the toro so much, they get into it and have it every day, so that they then become divided into these different communities.

Now substitute news for that same analogy. People watch MSNBC, watch it every day. People watch Fox every day. The fact that we’ve given consumers so much choice, that in fact has encouraged this niching of society. And for every trend there’s a countertrend, and there’s a war of trends. So the last election, think of the last election as Silicon Valley voters against old economy voters. Those people on the coast, those people with more education, very much into technology, including the technology companies themselves. Well, they’ve been benefiting tremendously well in the last decade. But those people from Indiana to Pennsylvania hadn’t been. They had lost nine or 10 million manufacturing jobs just in that period, in that area. They had been more or less overlooked and really had been left to languish.

Well, they spoke up. And they spoke up, and frankly, the last election was decided not by millennials, but by voters who were older. It was decided not by Silicon Valley but by old-economy voters, by exactly the opposite of the forces that were in power before. And that’s very much the power of microtrends. These trends of several million people that shifted in nature and power really decided the election for everybody. And maybe we’ll have a shift back. We probably will, if I were guessing.

But the book covers a little bit about politics. I also talk about the couch-potato voters. I talk a lot about … I usually open the book with romance and dating. I talk about graying bachelors, so that guys in their 60s have never had it so good because there are so many single women for single men. I talk about Internet Marrieds. Internet Marrieds is just like that example I gave you about choice. I thought 10 years earlier, Internet Marrieds, which is now about 15 percent of all marriages, would result in much more mixture of the classes. Instead, now, people use it to find themselves. And so more choices keeps resulting in less choice.

So what does that mean, a continued parting of the ways of the country? That there are so many choices that we sort ourselves perfectly?

Well, it means we have to be worried about this. We have to take some corrective action. We have to figure out how to mix it up a little bit more, how to, in these algorithms … And I do go on in the book, a lot about the secrecy of algorithms being the real problem. But we’ve got to have, in the algorithms, we’ve gotta put some sushi on the steak eaters’ plates every now and then, almost deliberately, because people lose track of what they might like because they stop trying it. And again, politics, consumer areas, social policy … This is having really unexpectedly profound and difficult impact.

So what is that? What is the impact, from your perspective?

Well, the impact is that not only are people pitted against each other, not only do people … If you look at it, there’s the same number of liberals and conservatives. But there’s more very liberal. And there’s more very conservative. But then people don’t see the other half of the world over the fence anymore because they’ve become so cocooned. And that really accentuates the divisions of the country because they don’t understand the people. In Washington, D.C., where I live, the vote for Hillary was 96 to four. It’s very hard for those folks to understand what happens when you drive across America, 90 percent of the territory you drive across will be Trump territory.

So what happens then, in that scenario? Because then you have, literally, it’s just hand-to-hand combat for whoever can get the most votes.

Well, that’s right. And that’s why I say, look, we need a few changes. We right now have 90 million people that don’t vote. And that means that some of the campaigns … When I ran campaigns, typically, I would look for swing voters. So I was famous for campaigns where a Democrat would try to reach out to soft Republicans. Now, what’s great about that is, if you win, all those soft Republicans, they support you because you spent a year courting them. And that unifies the country.

When you do campaigns now, just to get what I call a slice of the potato, of the 90 million who are sitting on the couch, and energize them with the most divisive message possible … because the day after the election, the country is no more unified than it was before the election. That is a destructive process, right?

Mm-hmm. And we’ve noticed.

So frankly, I say, “Look, we’ve gotta have registration from birth. We’ve gotta have …” I suggest ATM voting as the most secure system. We have to keep the secret ballot. There’s closet conservatives. There are a lot more conservatives in the country now, who are afraid to say what their real political views are. We’ve gotta overcome that and make a freer atmosphere for people to express themselves. We have to get rid of caucuses that are undemocratic, related to primaries. So I have a whole series of remedies there.

And in the book, I also have a lot of concerns. I talk about relationships with a bot. My biggest concern now is, I ask people regularly, I say, “Is Alexa a ‘he’ or a ‘she’?” And of course you would know that the right answer is “it.” And most people will say “she.” The other day, I asked Alexa, “Are you a ‘he’ or a ‘she’?” And Alexa said, “I am in female character.” That’s a slimy answer. Right?

It’s accurate.

Alexa didn’t own up that, “I’m an ‘it.’ I’m a collection of code. And by the way, what am I doing in your household? Am I there to tell to tell you the weather? Or am I there to sell you an umbrella? Am I there to sell you stuff? Am I a salesperson in a closet? Or am I actually there to benefit you?” Well, because there’s no disclosure of any of this stuff, I think we could have serious problems. And relationships with a bot can take on a very personal nature that we’re just getting into, and could really harm people.

Right. Right. Well that’s a big topic, obviously. So when you’re trying to get this idea of what … prescriptions for what should happen, you’re sort of painting a really problematic future that’s sort of like the present, where we’re at Trumpville right now. What do you imagine is gonna happen? It seems like we’re there, what you’re talking about. We’re already living there.

Well, I still remain largely optimistic that more people will be happier with their lives. When I look at the millennials — and they have what I call the footloose and fancy free 10 or 15 years on their own — or I look at the older voters — we have a record number of nonagenarians, which is unprecedented. The overall view is, people are enjoying life more. They are more divided, I think, politically, on some of these things. They are more susceptible to some real, I think, ethics issues with technology and how it may interfere with their life. And I think we have some problems in fixing the democratic system. But it is not a totally pessimistic view.

And I think if you understand the present, if you understand exactly what you said, “Hey, this is the world today,” that really tells you the problems that we oughta be working on. And it also tells you little things that we don’t notice, like another chapter I have on kids on meds. The dramatic increase, the tripling of putting young kids on medications, which …

Yeah. I just did an interview with Maria Shriver about this.

Right. And see, some people will say that’s a good thing because it’s mostly boys who can’t make it through the classroom, and that this helps them get through it. But we don’t know the long-term effects of this. We don’t know if that leads to an exacerbated opioid crisis. Part of microtrends is identifying things like this, that we oughta change social policy, or have a better understanding of now, before they become a crisis 10 years from now.

So in thinking about that, when you have this sort of dissipated populace and different things … people going off in different directions, is it even possible anymore to bring them back together to a single trend? Talk about politics, because that’s really where everything is happening, right?

Well, that takes leadership that has as its goal to unify the country. When I was working for President Clinton, our consistent goal was to bring the country together. I don’t think in the current administration that’s the strategy. We believe …

No, no. It would be quite the opposite.

Look, we believed very simply, you had to have the support of more than a majority of the people on every day. Why? Because when you fall below that, it’s to everyone’s advantage to kick you so you fall into the 30s. And if you’re above that, you can maintain the mantle of leadership to get done what you really think is important to get done. And I think that right now, you surely don’t see that perspective in the White House, but I don’t see that perspective in the Democratic party either.

Meaning?

Meaning that it takes a leader. And Barack Obama, in many ways, personally, was able to bring the country together. I think, interestingly, people did not support a lot of his policies, but they liked him and his leadership style. Here, you have people hate Trump’s style, but you know — I have a new poll that I do every month for the Harvard Center for American Political Studies and the Harris Poll — but they actually favor almost all his policies. Not all of them, but a good number of them. You’d be surprised. Exactly the opposite of what we had with Barack Obama. So we need somebody with both.

So what do you imagine happening in the next election then?

Well, typically at this point, we didn’t know Jimmy Carter, we didn’t know Michael Dukakis, we didn’t know Barack Obama. We actually didn’t know the leader that was going to emerge. Trump’s leadership style, I think, is changing, right? And the question is gonna be …

No, he’s doubling down.

Well, he … Right, he’s doubling … Will the Democrats come forward with someone who is, in many ways, way out of the mainstream and believes in the same kind of divisive politics? In which case, Democrats have a very high likelihood of losing. Or will they come up with somebody who is looking to unify the country, who can reach back over to the working-class voters that Trump was able to appeal to, and bring them back to the Democratic fold? And I think that kind of nominee will win a resounding victory.

Mm-hmm. And do you imagine that happening?

I do. I do. I don’t think it’s … Again, in the book, in “Microtrends Squared,” I call for reform of the process because these caucuses tend to give, I think, more divisive activism a bigger role than they should have in picking the party nominees.

So the point you’re making is, you can’t out-Trump Trump, really.

No. I think if you out-Trump Trump, you may or may not win. But you have the real risk of …

Of later, the next morning.

Right. Of, you know … getting re-elected. I think that … And I see Biden, so far, doing probably the best job reaching out to those working-class voters. I think somebody who really can reach across and understand the cross-currents that we have in America right now. We could really win and bring the country together.

What are the effects of the changing demographics have? Because ultimately, that’s where it goes. It’s such a diverse populace, voting populace. Maybe not fully voting.

Well, but see, the biggest change is actually … And another thing I warn about in “Microtrends Squared” is that the first thing people get rid of when they get more money is kids. And that, in fact, we’re among many societies that are having fewer kids. So right now, the over-65s are about equal in size to the 18-29. Now, when John F. Kennedy was elected, 18-29 was twice as big.

So to really understand the demographics of America, yeah, has there been an increase in diversity? Yes. African Americans are about 12 percent. There’s been a huge increase in the Latino vote. That could be 8 or 9 percent in the next election. But generationally, the tilt is to older voters who reasserted, “Hey, values of country, family, religion, have been left out. The kind of values I believe in, I feel the country moved too far from.” And they reasserted their own authority. That actually is a very big issue. I think right now there’s a huge gender gap. I had this poll … In this poll I did after the Stormy Daniels interview, men actually went up for Trump, and women went down.

Huh. Why was that?

I can only speculate as to why that is, because I didn’t really put … But the truth is, it accentuated the gender gap, and women really feel very, very alienated from this administration.

Do you think?

But men do not.

Well, why would they? Certain kind of men. Certain kind of men.

Well, a lot of men. A lot of young men. Surprisingly, a lot of the youth, young male vote, is very pro-Trump. Which just goes to my point, that it was a mistake to ignore the power of Trump’s movement, and to understand that Democrats will need an equally powerful movement to win, and not just opposition.

So where do you assess Trump right now, in the midst of his daily, whatever daily tantrum is happening?

Well, look he’s at 44 percent job approval, which would be actually slightly higher than Barack Obama’s job approval. I think he’s gonna face a defeat in the House, most likely. But not in the Senate. Both times, both Clinton and Obama lost considerably in the midterm. So it’s not a surprise. And I don’t think that, unless the president changes, fundamentally, his leadership style, that he is gonna be able to cement the kind of majority against a good Democratic candidate who’s reaching out to those voters.

And do you imagine … When you’re in Washington … I was just there this weekend. Everyone’s sort of obsessed with the Comey, all the noise of a lot of different investigations. You were in the midst of one, obviously. Does it matter?

Look, I spent a year fighting the Ken Starr investigations. I believe that the independent counsel was wrong to have extended his investigations. I think President Clinton was guilty of trying to cover up his personal relationship he was having, but that that didn’t rise to an impeachable offense, or a crime. And I think the current investigations are wrong too. I’ve spoken out very strongly.

Yeah, you have.

I don’t agree with the direction of these investigations. The law enforcement of the country has to be above reproach when it investigates a president. It can’t give the appearance of partisanship. And boy, at this point, the FBI and the CIA people who are basically just permanent talking heads, the idea that the head of the FBI is now going to make millions of dollars selling a book blasting, in all sorts of political terms, the president and how people should vote, says was he never really an impartial administrator of justice? He does more damage to those institutions that have to be nonpartisan.

Look, we have institutions that are partisan. That’s called Congress. That’s called the presidency. We have to have other institutions that are nonpartisan. And if everything gets politicized, all we do is fight. We’ll never progress.

Well, Trump does have some responsibility here, correct?

Well, everybody has responsibility. But the question is, defeating Trump at the polls I think is the right thing to do. Trying to bring in all these investigations I think was wrong when the Republicans tried it against Clinton. I think it’s wrong to see what’s going on here.

All right. When we get back, we’re gonna talk about what you’re doing around digital marketing, because you’ve been busy buying up companies. And I wanna understanding where you think that’s going. And also I’d love to talk a little bit about Facebook, which is part of digital … part of marketing and privacy, and where it’s going from there. We’re here with Mark Penn, the famous political strategist, and also the author of “Microtrends Squared,” which is a sequel to his first book.

[ad]

We’re here with Mark Penn. We’re talking about a range of things, including his dislike of the Special Counsel. But I don’t know where that’s going. We’ll see. We’ll see.

I dislike them all.

What could go wrong with someone investigating a real estate guy from New York? What could they find?

I’m a universal disliker or special counsels, so …

Yeah. Yeah, all right. So Mark, you … So after Clinton lost, you went to Microsoft, and then you broke off and you started buying … What are you doing? Explain …

Well, let’s see. I had had experience originally in polling. Then I was head of one of the larger public relations firms, Burson-Marsteller. And then I …

You were a techie.

Techie. I had one of the larger advertising budgets, $2 billion, at Microsoft. And I said, “Well, what’s the best use of what I could do now?” So I said, “Well, look. Marketing is changing. It’s undergoing a disruption.” You look at the expenditures of marketing, television expenditures are just topping … Growth has slowed to almost zero. Magazines, negative. Radio, negative. Billboards actually, because of digital billboards, slightly up. But search marketing, up 15 to 20 percent a year. Social marketing, primarily Facebook, up almost 40 percent a year. Video advertising, up 26 percent a year. And you look at more advertising done on the internet than on television, just about now as we cross that, and then more on mobile.

So given those trends, I said, “Well, look. I have an opportunity now to create what is structured as a fund — it could also be seen as a collection of companies that can work together — that takes advantage of these trends. That I don’t have to have some big Y&R firm with 3,000 people who made 30,000 advertisements. I can go right to the heart of performance marketing, building complex content management systems, the things that kind of combine numbers, strategy, technology and engineers into the kind of new methods of marketing, and that nobody was really putting together a group at scale.

And you bought some traditional ones. You bought some pretty normal communication …

Well, I started to do the first acquisition … Well first, Steve [Ballmer] said he really liked working with me and became a core investor with me in the fund. And then I started in politics with SKDKnickerbocker, a group that I’d worked with for many years and that I knew well and is this tremendously strong group. A little less digital, but they’re becoming a lot more … They have a digital department now. And actually now, we have a Republican group, Targeted Victory, that does, as I say, everybody but Trump. Because they do a lot of work for Romney, and primarily they’re in digital fundraising. But still, I think political firms by nature are nimble, they’re current, they’re responsive compared to the hugely bureaucratic marketing firms that people are finding quite inefficient.

So what’s changed about marketing? And then I want to get into the power of Facebook, Google and YouTube.

Well, TV came before TV advertising. So advertising is typically a function of where people spend their time. And so people have moved their time from TV to being online. Facebook is probably 40 percent of browser time that people spend. I think Google is slightly different. It’s not about the time that people spend.

No, it’s utility.

Right, it’s that people are searching for the product, and therefore it’s a great time to hit them with an ad. And so as those things become more and more important in people’s daily life and as, frankly, the ability then, as people watch more and more video … And some of it’s just gonna be ad-supported as opposed to subscription-supported. So marketing has to move. It has no choice. And at the same time, there’s now a data set on people that we never had before.

As I always explain — and I explain in “Microtrends Squared” — imagine two companies, one company that really understands its customers and has data to target and re-target them, and another that has a bunch of stores but doesn’t really maintain much of a profile of their customers. That second company is going to go out of business. Why? Because the first company is gonna have more efficient marketing. They’re gonna be able to market a better yield out of their consumer database for less money. They will dominate the marketplace. And so you have no choice, if you are a company, but to embark upon that process and to go from traditional brand marketing and advertising that was built around having a huge Olympics campaign, to really understanding your customers or potential customers, how you can target them online and how you can be very effective in messaging to them. And that’s what all these companies are about.

So that’s what ends these big massive marketing campaigns that, say, an Olympics, or a mass event. So you’re talking about micromarketing, essentially.

Well, that’s right.

Which isn’t new. Which isn’t new. There’s lot of companies that have been trying to do this.

Right, but you see, the dollars weren’t there before.

Right.

So even just five years ago, or four years ago, when I was doing the Microsoft … We would do the TV ad first.

Yeah. The feel good, Surface … Here’s the Surface. Let’s dance a little bit.

Right, and then, okay yeah, I’d give some money to the digital folks, and let them … Most of the digital ads would be like, “Get Office 365.” They didn’t have content drawing power. That’s actually where the Scroogled campaign was so different, in having an edge to it. And to have the same kind of creative energy put into those marketing campaigns …

Which hasn’t been creative. They’re …

No, they had been afterthoughts in most big companies. And now they realize … Look, they … Remember, they were also going to … Many of the companies now for the first time have to be DTC, or direct-to-consumer. So they had outsourced all of these things to the retail channels. Now that people are buying online … See, the other big trend that supports this is the percentage of online shopping. For every dollar of online shopping, that’s 15 cents of online marketing.

So that’s why I identify that as a growth area. Identified it, that people weren’t putting together that many companies of scale. We’re not trying to be a tech company. We’re trying to be a group of service companies that has technology infused it, to provide really good work.

So give me an example of that. Because when you’re talking about online marketing, why does Amazon need you? Why does Google need you? Why does Facebook need you?

Well, but the customer …

Who needs you? P&G.

So Amazon is, in fact, a client of one of the companies. But if you would take a Nike, or you take a P&G, or … So there are several ways to do it. First, more and more people need efficient sites that can handle complex transactions. That can be financial transactions. Right now, some of our biggest customers in the content management system division, really, are large banks because they understand that their consumer relationship now is driven by being able to do things that you never thought could be done online. Online simply, efficiently and quickly.

And I’ve really invested in the performance marketing space. You know, here’s money, whether it’s Google or … Take all the digital ads and get me ROI. I believe in that because more and more advertising moves from brand to direct consumer results. At the same time, I think it requires a knowledge and expertise in the various retail and e-commerce areas to be really effective. And so that’s where we put a lot of investment.

We do a little bit in specialized health care, which I think also in … We have a rare diseases drug marketing company that really has to find the patients and doctors and the communities who’re really affected by these diseases. And sometimes they have to push for the kind of approvals that they might not get, to make the drugs available. So I’ve been … Influencer marketing is also, I think, growing significantly, and we’ve invested in that areas as well.

That would be Instagram Store, that kind of stuff?

Yes. But it’s also people who have followers, again, both in microtrend’s ability now to have a virtual business. You know, 90 percent of the people fail. But a good number of people can get a little side income out of their … A lot of people just get it out of their pet instead of themselves. But once they have enough followers, and they can really, fairly, with proper disclosure, endorse products and so forth …

Yeah. I have a lot of followers. I could do that.

It’s pretty powerful.

I don’t care. I got enough money.

Well, that’s good, but other people are picking up on it. And it’s very effective. Look, if you were to endorse a product, right, and a lot of people … I think it’s a new way to make a living off of the virtual economy. And I think that if you complete the marketing wheel, I think political is extremely important. We invested a little less in straight public relations because we think that’s where it’s going. We just acquired something called Reputation Defender.

Mm-hmm. I know that.

So that really closed just a few days ago.

And that’s to monitor how you’re looking.

And that helps to monitor how you’re looking. It has some privacy-related products as well. You know, to find whether your personal information is spread around the internet, and also to say, “Look, are you being smeared or not?” And I think that, to me, was a fascinating corollary to a lot of the stuff we were doing.

So, Mark, finishing up, I wanna talk about data because that’s … All of this requires enormous amounts of data and computing power to understand. You can’t just … This isn’t a hand … This isn’t a person and a bunch of young kids you’re having do this kind of stuff. This all has to do with technology, how to manage it and how to interpret it, interpret the technology. Obviously, last week we had a big hearing with Facebook on the Hill. I’d just love to get your thoughts on that. And then what happens next with data privacy? Because this is at the heart of your business, the idea of having this amount of data.

Yes, well, I always say that the cost of data is going to zero, and the value of analysis to infinity. Meaning that simple problems get handled and more difficult problems are the ones that are remaining. Look, I think that Facebook has a business model that is about taking people’s personal information and targeting advertisements. Their platform used to be more open to third parties. And in fact, their closing it is to their advantage. It’s actually not helpful to the competition. So what happened here with Cambridge Analytica got blown up because it was related to politics. Even though it’s similar to what they do themselves internally.

Sure they do. Oh, by the way, Mark, we don’t sell data. We just hoard it relentlessly.

We don’t sell data, yes. Because we don’t sell data because we …

We just hoard it relentlessly, and keep …

Because we license the value of that piece of data hundreds of times.

Yes, of course. Yes, I noticed. I didn’t get tricked by that, even though most of the Senators did.

And so look, at the end of the day, I am for more and more disclosure, right? I mean, see, when you go back to the Scroogle campaign, you can’t compete on privacy if people don’t know the difference. My answer to this, if people make a knowing choice, “Hey, this is the way they handle my data. I get the benefit of the service. I’m cool with that.” I think offering a paid alternative is also, I think, a good idea. I don’t think that’d be done by regulation. But I think more and more companies should do that. And I think that when you look at it, I’m a little even more concerned about these algorithms where people don’t know how pages are being biased, or why things are appearing where they are and that we’ve gotta have more disclosure that …

Do you see that happening, after these hearings?

No.

I don’t either.

No because, look at the … The questioning from the Senators was embarrassing.

About terms of service.

Because they generally … The questions had clearly been written by staff members. They didn’t even know what the questions were, so they couldn’t intelligently follow up.

How much are you worth to Facebook? You’re probably worth about 100 bucks a year. Do you have that idea? No. Is your exchange for about $100 worth of advertisements sold based on our data? Is that a fair exchange for the service you get? Somebody else could be worth two or three hundred. People have no real concept about what the economics are here and what they’re giving and what their choices might be if either they paid or if someone were to come in with a competitive service.

You see, when terms are not really known, someone can come in and say, “You know what? I’m gonna give you a better deal. Why don’t I give you … I’ll split the revenue with you.” Eventually, I think we will get … Someone will come up with a business model where people will be able to get some royalty for their own data. And that will revolutionize these services.

So what do you think is gonna happen from last week? Given you’re in the data arena?

I have thought there should be a new privacy bill forever.

Mm-hmm. There hasn’t been one since …

There hasn’t been one since, really, I think …

Ever.

I think goes back to during when I was working with Clinton. I think we had a privacy bill around then. I think it’s time to have better standards on the privacy, more fines for when privacy’s violated. Phony accounts, I think, is a problem that people should pay a pretty high fine for. Because nobody should really be sanctioning these phony accounts. And so I’d like to see that come out of there, at a minimum.

I don’t think, by the way, driverless cars are something we’re gonna see for like 20 years or more. I think for some reason, technologists think that they can accomplish more than I believe is really possible. But I do think that, more and more, AI is gonna be in our lives, and that we need disclosure. Is it an ’it’? What is its purpose? What is it doing there? And, oh by the way, the driver of this car, if it’s gonna choose between killing me or killing a pedestrian, I would like to know what the choice is gonna be. Even if I don’t have any impact on it.

Right, so do you imagine this was a moment for Silicon Valley, this idea that tech is not so benign, that it needs to be more responsible? Do you think it’s gonna … Because I had interviewed Tim Cook last week, and he sort of just was very basic in that we need to have more disclosure. That’s all he said. And the reaction was, “How dare he say such a thing?” It was fascinating for me to watch.

I think he’s taken some actually very strong stance on privacy.

No, he has.

But that’s because his business model is selling devices. It’s not selling data.

That’s all right. Maybe he’s just right, too. Maybe he’s just also right, besides … I get that. You know what I mean? It was interesting, because that’s what you got from Facebook, “Well he sells that.” I’m like, well …

But it is a moment because until now, the viewpoint had been, “Technology is the engine for our economy. Therefore, hands off is the best policy.” And people have said, “Wow. Okay.” Technology has now reached a size and a point at which maybe we can put a few hands on it. Maybe we’re gonna tax it normally. Maybe we’re gonna give it the kind of regulations … not that a bank would have, but that anybody, any merchant with a store would have. I think you’re gonna see more normalcy kind of return to technology. And at first, people are so, in technology, are so used to having complete freedom, that they’re gonna bitch and moan about it. But I do think that’s coming. I think it’s unstoppable. I don’t know … You know, it’s gonna take a leader who knows something about this, though, to really get stuff done.

Who would that be?

That’s nobody I’ve seen lately.

Me neither.

Right? I mean I’ve just, like it’s …

Margrethe Vestager likes to drive them crazy.

It could be Europe. But I have to believe that there’ll be a new generation of political figures who’ve been … who were brought up on technology, who know its incredible strengths and its weaknesses, and can strike the right balance them before some really bad stuff happens.

And if you had to rank the companies you think are the most important now, in this area, impact on politics, impact on marketing … Would Facebook still be at the top?

Well, Amazon is at the top because Amazon has such an impact on retailing. Amazon doesn’t … I think one of the things is that the tech companies have sorted themselves out into their various areas and not competed as much against each other.

No, they don’t. That was, to me, the most fascinating question to Mark, is he’s like, “Are you a monopoly?” And I was thinking … And I think it was Hatch that said, “Oh, I remember the old …” thing. And I said, “No, no, it’s not even that. There are six powerful companies. Not one.” And they all are really scary powerful in their area.

Well, but that’s right. They have their lanes. And I think everyone decided, “You know what? Hey, I could really go all out and compete against Google. But that’ll probably cost me 10 or 15 billion dollars.”

“So I’ll go over here, into commerce.”

And so, yes, I’ll go over here …

They’re sort of … They have a couple of things that overlap, but not very many.

That’s right, because I always say there’s a Google or Amazon tax on virtually every e-commerce purchase because you’re gonna go through one of those two doorways, and somebody’s gonna be paying money for you going through those doorways. And I don’t think most people even realize that.

I think Amazon, Google, Facebook … Microsoft has an incredible marketplace in Office, and in terms of the workplace, no one has really come into the modern workplace. And that’s why Microsoft … You know, one of the … I won’t say which CEO of technology. When I went into Microsoft, the person said to me, “Five years from now, there’ll be no Microsoft.” And I just laughed. And five years ago, there is a very strong Microsoft in the cloud and Office.

Yeah. It’s a different Microsoft, for sure.

Exactly.

Any predictions for politics? Any name you wanna name in the Democrats?

No. I’ve observed that the most interesting trend is that all of the people potentially running for president, all had about 10 or 15 that now, Biden had come up to 26. That’s not enough to … You know, you gotta be in the 40s to have a real advantage going in. I think Michelle Obama, if she ran, would be a very, very formidable candidate. And that match-up would be, again, iconic.

Oh man. Tough mom and creepy old man. That would be fantastic.

You know, and I don’t think that the kind of Sanders-Warren wing of the Democratic party will be successful or would be good candidates.

I’m with you on that one.

I think that they run a risk of having Trump re-elected. And I think more Democrats see that as the case. As I say, look, mostly I wanna restore confidence in our democracy. I don’t think that the $100,000 of Russian ads up against four nights of televised conventions’ billions of dollars of ads really affect it. I think this race did play itself out, as I go through in “Microtrends Squared,” to the contours of the shift in power of different groups, whether it’s old economy versus all those who are upset with each other. I think when Hillary Clinton said, “Oh, I got the vote from counties with two-thirds of the GDP,” she was exactly right. Those counties that were half the country were the third of the GDP said, “You know what? I’m not getting my fair share.” And there were very real reasons.

I went into this whole political game because I read a book at college called “The Responsible Electorate.” And it said, “The simple thesis of this book is that the voters are not fools.” And I think that the more we believe that the voters are fools … And actually, I think our elites have become … I have a chapter in “Microtrends,” impressionable elites have become more the fools. The more we think our democracy doesn’t work, that it’s all about some kind of voodoo targeting instead of real issues, the more we discredit our own democracy and don’t realize the power of ideas in this country is enormous. The power to communicate them effectively is incredible and unparalleled. And that we should respect whoever wins, at least, as the winner. And defeat them next time with a better message, with a better candidate, with a better idea. I think that is the notion. And if we get away from that, we’re just gonna have a divided society that accepts nothing as legitimate. And then we will … That is the wrong rabbit hole to go down.

Yeah. So we’ll have to kill Twitter, you and me. Gotta kill it. Gotta take it down. Take it down. I love to Twitter. It’s real bad. It’s the heroin of our media age, I think.

It is. Never did I think that any, that just … I don’t know what the next president is really gonna do about that because I don’t think presidents can go back. Look, I used to go through every single word that moved through the White House. And there’s just like, nothing in this Trump administration is anything remotely like what I would’ve …

I think he’s just one of these comets that’s just gonna … He’s … I called him … He’s the genius of Twitter.

Yes, but presidents in the future are going to have to make more authentic, direct expression of what they’re thinking.

Yeah, but I … There’s nobody … There’s few people as good. I haven’t seen anybody. I’m trying to think of one politician as good as him. And I hate complimenting him, as you might imagine. But he’s good.

Look, you gotta realize he didn’t just have a show on TV. He had the No. 1 show.

Actually, Comey’s not bad. Comey’s not bad. He’s super self-righteous. But it works. It works.

Comey, yes. I think people are gonna get pretty tired of Comey pretty quickly.

Yeah, yeah, yeah. But I’m just trying to think of who’s good. Eh, Kim Kardashian, I’m trying to think, is quite good. Of the Democrats, none of them really. Not yet.

No, but you don’t want them to be good in that sense. But you want them … My point is, we’re just not gonna go back to the formal 100 percent formal communication.

No. No, we’re not.

At least 20 percent of presidents’ communication now, it’s gonna have to be more …

It’s gonna be VR. Mark, it’s gonna be VR.

… top of mind and less formal.

We’re not even gonna get into that.

Yeah, I think there’s another industry that’s gonna be …

Yeah, we’ll talk about that next time. Anyway, it was great talking to you. Thanks for coming on the show. And read his book, “Microtrends Squared,” which is an update of his original book.

Leave a Reply