Another Ugly Truth: Facebook's Moat

 Another Ugly Truth: Facebook’s Moat

 

“An Ugly Truth” is the name of a recent book about Facebook, authored by Sheera Frenkel and Cecilia Kang, reporters for the New York Times. The book is an eye-opening, stomach-churning account of Facebook’s history from its birth in 2006 through its role in Trump’s election in 2016, up until the recent history of the attack on the Capitol on January 6, 2021. After reading the book, I considered: Why does Facebook have a Teflon coating, and just keeps growing despite all its missteps, misses and company-first decisions with significant global impact?

 

First, to understand the book’s point of view, present tense, stated in the last paragraph, let’s read it here:

 

“One thing is certain. Even if the company undergoes a radical transformation in the coming years, that change is unlikely to come from within. The algorithm that serves as Facebook’s beating heart is too powerful and too lucrative. And the platform is built upon a fundamental, possibly irreconcilable dichotomy: its purposed mission to advance society by connecting people while also profiting off them. It is Facebook’s dilemma and its ugly truth.”[i]

 

What the book chronicles is exactly the above: As Facebook got bigger (by acquisitions and users) and became more relevant in people’s lives, thus more irresistible for advertisers’ money, the more it became a platform not only for people wanting to say hi to Grandma, but people wanting to overthrow governments, influence elections, and spread misinformation easily to the world’s biggest audience. Of course, the known examples are Trump’s use of the platform before and after his election and defeat (he was at one point Facebook’s biggest advertiser), the Cambridge Analytica scandal, and the insurrection of January 6. How to balance hate being spread on its pages with “free speech” (Oliver Wendell Holmes may be doing spins in his grave) and pissing off users when you take a stand for or against something that may influence their lives (Trump’s BS) or even get people killed (Myanmar), which might lead to loss of users and revenue?

 

Facebook’s “Battle for Domination” becomes a battle to walk the tightrope between revenue and principle- in the public and government’s eyes, with revenue the clear and simple goal. Frenkel and Kang leave no doubt that, to Zuckerberg, the algorithm was and is “Company over Country.”[ii]

 

Fast forward to today, July 27, 2021. Two recent news articles about Facebook reveal the road that Facebook has chosen to walk, at least up to now. The first is, as reported by Reuters, that Facebook will restrict targeting of users under 18 according to their behavior on other sites (they still can be targeted, but only based on their activity on Facebook/Instagram/Messenger).[iii]

 

The other is an article in the New York Times by the same Cecilia Kang entitled, “The F.T.C. asks for an extension to refile its Facebook antitrust suit,” which was thrown out by the District Court in D.C.  and given 30 days to refile (good luck with finding something in the next 30 days that they didn’t find before).[iv]

 

For those who are thinking (again) that altruism and social responsibility has become the mantra at Facebook over moneymaking, ask yourself if Facebook is doing this because they want to protect our children, or because they want to protect themselves? The same question must be asked about Apple’s IOS 14.5 (which gives the users the right to opt out of companies selling their info to other companies) and Google’s new Privacy Policy. 

 

And, I believe the answer to this question for three of Scott Galloway’s Four Horsemen[v] is the same: when they have more to lose than gain, only then will they consider compromising any activity that contributes to revenue.

 

Why can they get away with this and why does their business keep growing significantly (Facebook’s share price has increased 61.44% in the last year[vi])? The simple answer is the same as for every other company- Their Moat.

 

For those of you who are not familiar with the term, an economic Moat is, put simply, a barrier to entry for any threats to the enterprise- be it another company, economic issues, governments or Pandemics. The wider the Moat, the safer the company is to continue its mission and prosper. 

 

Morningstar Investments, the famous investment research company, defines four types of Moats:

 

1.    Switching Costs- The financial and/or emotional cost of switching from one brand/product/service to another

2.    Intangible Assets- Brand image, patents, trade secrets, customer perception

3.     Cost Advantage- Based on:

1.    Economies of scale- eg., Amazon Prime-wide

2.    Process advantage- Be cheaper eg., Payless Shoe Stores, Kmart-narrower

4.    Network Effect- Value grows as people use the brand or service more and more-self perpetuating[vii]

 

Let’s look at each as regards Facebook:

 

1.    Switching Costs- Sure, you can switch social media apps, but a. you want to be where everyone is, is the soul of social media, and b. If you did switch from Facebook, your likely choice would be Instagram, which is—Facebook. Yes, you can go TikTok or Reddit or Snapchat but in the 6+ hours the average teenager spends on the internet, which social media app is where the action is? And what would it take, if it were at all possible, for the invaders of the moat to be a real alternative to Facebook? Switching costs are both financial and functional. And advertisers know that.

2.    Intangible Assets- Facebook is a brand that has withstood governmental attacks, hackers, invaders and their own greed and inability to respond in a timely and correct manner-but it is still—Facebook. And advertisers know that.

3.    Economies of Scale- In this case, Scale above all is reach. Half the world outside of China is on Facebook. And advertisers know that.

4.    Network Effect- Why Facebook keeps getting bigger and bigger. The huge trove of data feeds the monster and it perpetuates itself. And advertisers know that.

 

Is there anything that can readjust the balance between social responsibility, actually protecting users from hate and misinformation, and the constant flood of increased revenue without overbearing government control, which would taint the experience? 

 

Well, as Frenkel and Kang have aptly stated above, if there is an answer, nobody has found it yet. Even if government is successful in breaking up the company, it will be broken into pieces so big that they may be able to regenerate to an even bigger tomorrow. But yet, given the absolute fact that our children are digital-native and are influenced more and more by what they see and hear on social media, where they may spend most of their day, it is a problem that must be solved for the good of society. Will today’s teenagers and young people demand more social responsibility of companies they deal with? I have polled every class I teach about this, and they all say yes. 

 

But, the question really is, are they the influencers or the influenced?

 

And Facebook, with the rest of the Four Horsemen, goes on.

 

Author’s Note: An Ugly Truth is a well-written, totally engaging, at times stomach-turning, book that everyone should read, if they live anywhere in this world.

 

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[i] Sheera Frenkel and Cecilia Kang, “An Ugly Truth: Inside Facebook’s Battle for Domination,” (New York: HarperCollins, 2021), p. 300.

[ii] Ibid., p. 117.

[iii] Reuters.com, “Facebook will restrict ad targeting of under-18s,” https://www.reuters.com/article/us-facebook-advertising/facebook-will-restrict-ad-targeting-of-under-18s-idUSKBN2EX1OS

[iv] NewYorkTimes.com, “The F.T.C. asks for an extension to refile its Facebook antitrust suit,” https://www.nytimes.com/2021/07/23/technology/ftc-facebook-antitrust-lawsuit.html

[v] Scott Galloway, “The Four: The hidden DNA of Amazon, Apple, Facebook and Google,” (New York: Portfolio/Penguin, 2017) p. 2. 

[vi] Seekingalpha.com, https://seekingalpha.com/symbol/FB

[vii] Morningstar.com, “Types of economic moats,” http://news.morningstar.com/classroom2/course.asp?docId=144046&page=5

The American Responsibility Act

 The American Responsibility Act

 

Since he took office, President Biden has been promoting Rooseveltian legislation aimed at bringing America up to speed in many ways. Such acts as the WPA-like American Jobs Plan, For the People Act, and American Families Plan are not forward-looking legislation so much as they are playing catch up ball with what we messed up or neglected in the past. Is it too little, too late? Now, it can only be too little, but it could be too late if Congress play games with the needs of the American people. Could happen.

 

Good for President Biden for taking this direction; it is urgently needed to offset years of inaction. Or, in some cases, hundreds of years. Let’s see some examples:

 

·      Infrastructure- We basically built our last interstate highway in 1956[i]. The total of 46,720 miles was surpassed by China in 2011 with 52,800 miles and China main highways stood at 100,040 miles (161,000km) in 2020.[ii]

·      Computer Chips- Only 12% of the world’s computer chips are made in the US,[iii] with China positioned to become the world leader by[iv] 2030.Taiwan Semiconductor and Korea’s Samsung are two of the market leaders. Even Intel, the leader by volume, makes some of its chips in China.[v]

·      Taxes- It has become embarrassingly clear that billionaires like Jeff Bezos probably pay less taxes than you or I do. The income inequality level in 2019 reached its highest level in 50 years. Economist Larry Summers has estimated that if the US had the same income distribution it had in 1979, the bottom 80% would have $1 trillion (or $11,000 per family) more and the top 1% would have $1 trillion, or $750,000, less.

·      Political Gridlock- Our United States Congress is anything but united. Now we have partisan gridlock on just about everything; when something does get done, it becomes like food that tries to please everyone, but ends up pleasing nobody.

 

Let’s move on to social issues. For a country that has a Statue of Liberty still standing in its gateway, and E Pluribus Unum (From many, one) on every bill, we are sadly NOT living up to that image. Some prime examples:

·      Racism- Black Americans- Slavery was abolished in 1865, 10 of the first 12 American Presidents were slaveholders, then Martin Luther King was assassinated in 1968 campaigning for civil rights, yet on May 25, 2020 we had George Floyd’s murder. And many more incidents up until today. 156 years after we passed the Thirteenth Amendment into law, we passed Juneteenth as a national holiday to celebrate it.  Why? Because racism is in our cultural DNA. And in many places little change of attitude has taken place over the centuries. Case in point is that the state of Mississippi did not certify the Thirteenth Amendment, thus actually banning slavery, until 2013.[vi] Don’t believe me? Look it up.

·      Racism-Anti-Asian Hate- This has always existed in the United States and been promoted and protected by law. IN 1882 The Chinese Exclusion Act was passed, which was not officially reversed until 1965.[vii] Of course, in 2020 Anti-Asian Hate was promoted publicly by the President and his staff. So what is the result? In 2021, anti-Asian hate crimes increased by 223% in New York and 140% in San Francisco, two cities with large Chinese populations.[viii]We cannot write this social disease off to “a few people;” it has had official sanction for most of our history. 

 

Think about it, and it gets worse. We have in this country anti-black racism, and anti- Asian hate, not to mention prejudice toward other groups. Along with many other immigrant groups like those from Europe, Chinese, Black, Latino and other countries, immigrant groups have built this country and still stand as some of its most sturdy pillars. If you accept this, and you must if you are not in denial, then please explain why there are no Anti-Italian or Anti-Irish hate spikes? Is it because all of those facing prejudice and racism look different? I am afraid so.

Worse, are we teaching our children to hate or fear anyone who doesn’t look like them? Yes, we are. This is our Xenophobic reality.

 

The most popular excuse, and it is just that, today is to blame China for our ills. Does this make sense? OK, did the Chinese take our jobs in building their economy? Did they build all those roads and metros against our will or were they just doing what they should do?

 

China did not take our jobs, fellow Americans; we handed them to China, gladly. As income inequality grew and our standard of living plummeted, we happily gave up competing in basic industries, and eagerly shopped at Walmart so we could get more for less. I remember back in the 80s when I reached out to American textile and garment owners asking them to compete with overseas industries by using automation and efficiency, they either ignored me or called me traitor for suggesting that we were losing the action to yellow and brown people. At that time, I was just one lonely voice. Maybe I still am, but I haven’t given up telling the Plain Truth.

 

But, why do so many Americans think like Trump? Or like Trump? Because politicians, good ones without a soul, are the most highly skilled at making people think the way they want them to think. Which, in every single case, never serves the influenced but always serves the influencers. Hitler was a master at that. We haven’t had a Hitler yet, maybe we survived a doppelganger, but we need to admit that those in Germany and in this country who are influenced by unscrupulous politicians are usually willing victims.

 

So now we come to the title of this Article- The American Responsibility Act. I am not suggesting that President Biden introduce legislation of this sort; this is because, as I have suggested in all my writing, that legislation cannot solve embedded racism; it can suppress it, but not solve it. To purposely demean the deception that Xenophobics resort to, it is like when a kid gets caught doing something bad; he or she never admits to it, but seeks every creative way possible to deflect the blame, usually on someone less fortunate—the little brother or sister, the dog, etc.

 

The hallmark of emotional maturity is when a person learns to admit their own mistakes and learns from them; they also learn that admitting the truth to yourself is a prerequisite to solving the problem—unless, of course, the continuing existence of the problem is of benefit to you. That isn’t the case for most of us.

 

So, as an individual, what I am proposing you do is the other meaning of the word act. In addition to being a piece of legislation, an act can be something that you do, which goes to the next level and speaks louder than words. 

 

You do something about racism, prejudice and the unfairness of our system; you speak up for spending whatever is needed to bring our economy up to speed. You don’t let the soulless politicians speak for you. How? By taking responsibility as an American for where we are and not blaming China or Chinese, or Asians, or Blacks, or Latinos. Why? Because youhave a soul. An American Soul, that resonates with the intent of our Constitution which we need to turn into the Acts that define our daily lives, and what we will pass on to our children.

 

 

 

 

 

 

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[i] Waycaretech.com, “The US Interstate Highway System,” https://waycaretech.com/us-interstate-highway-system-why-it-took-62-years-to-complete-and-how-the-idea-arose-in-germany/

[ii] Wikipedia.org, “Expressways of China,” https://en.wikipedia.org/wiki/Expressways_of_China

[iii] Businessinsider.com, “Why the US doesn’t make chips,” https://www.businessinsider.com/why-us-doesnt-make-chips-semiconductor-shortage-2021-4

[iv] Ibid.

[v] Wikipedia.org, “Semiconductor Industry,” https://en.wikipedia.org/wiki/Semiconductor_industry

[vi] www.civil-discourse-history-blog.com, “Mississippi Finally ‘Bans” Slavery,” http://www.civildiscourse-historyblog.com/blog/2017/6/7/mississippi-finally-bans-slavery

[vii] Wikipedia.org, “Chinese Exclusion Act,” https://en.wikipedia.org/wiki/Chinese_Exclusion_Act

[viii] CNN.com, “Anti-Asian Hate crimes surged in early 2021, survey says,” https://www.cnn.com/2021/05/05/us/anti-asian-hate-crimes-study/index.html

What Pearl S. Buck Knew About Arab-Israeli Relations

Why a lesson from her 1948 novel “Peony” should be applied to this ongoing, deadly conflict

The conflict between Israel and Palestine is a powder keg for the world with a short fuse. Now the fuse is (temporarily) blown out, and we are led to believe that a new government in Israel (maybe) will solve the problem. History tells us that it won’t. 

In researching for my book about US-Chinese relations, I came across a passage in Pearl S. Buck’s 1948 novel that I believe applies to the current situation in the Middle East and reveals the plain truth about the nature of the situation in Israel/Palestine; recognizing the plain truth is the only route to a solution--in all cases and always. 

Pearl S. Buck (1892-1973) was the daughter of Christian missionaries in China, where she was born and lived until 1934. She is best known for her Pulitzer Prize-winning book “The Good Earth” in 1932. Her work earned her the first Nobel prize ever given to a woman in 1938. After coming to the US, she wrote, taught and advocated for Chinese and minority causes.

The book for which she is most acclaimed is the story of the travails of a Chinese peasant family. 

So what should she know about this current, seemingly unending conflict that inflames the rest of the world with its flash fires, simmering forever under the surface and never being put out. What is the solution to the problem? Many Presidents and diplomats have tried, for decades, and still, it defies resolution. Worse, in today’s connected world, the information is available to everyone on video and, like a California forest fire, throws its embers everywhere, becoming an instant global conflagration.

So why should Pearl S. Buck know anything about Jews and Arabs? I believe that her later novel, Peony, about a Jewish family in Kaifeng, China, points directly at the cause of the conflict, which is necessary for a resolution-if there can be one.

She was born and grew up in China, so what did she know about Jews? Were there Jews in China at the time? The answer is yes. The Kaifeng (Henan) enclave is notably famous, but there have been Jews resident in China since the 8th Century AD, who were known to trade in China up to 6 centuries prior. China is part of the Jewish Diaspora; it started to figure during the Han Dynasty after the Silk Road was created to facilitate trade between China and the Middle East. Waves of Jews later followed this route between 618-807 AD, having been blessed to interact by the Tang Dynasty Emperor. Later, during the Song Dynasty, the Kaifeng community began to be formed. 

Let’s note: In contrast to many other parts of the world, Jews were accepted in China, despite their physical, racial and religious differences.

Buck’s novel, Peony, written in 1948, is the story of a Jewish family, the House of Ezra, in the Kaifeng community. Peony is a bondmaid whose only job is to take care of the only child and son of the family, David. David’s father, while observant of Judaism, is half Chinese, which makes David one-quarter. Ezra is a respected merchant in the community, with a Chinese partner named Kung Chen. Throughout the book the internal struggle between the traditions of Judaism and the open-minded and accepting Chinese community is a main element. David sees and falls in love with Kaolien, daughter of Kung Chen, and wishes to marry her. This is not acceptable to Naomi, David’s mother, who wishes David to marry Leah, the daughter of the local rabbi, so that he can personify the perpetuation of the faith. She moves the rabbi’s family into her house to promote the relationship between David and Leah. 

Significantly and notably, the rabbi is blind. 

The exchange that relates to the current Arab-Israeli situation takes place in the synagogue between the rabbi and Kung Chen (note that, when this incident takes place, Kung Chen has already accepted that his daughter marry David).

Kung Chen meets David on the street, and David informs him that he has come from the synagogue but will go back there. Kung Chen asks to accompany him, which David happily accepts. In his previous visit, David has observed inscriptions written by congregants which emphasize the inclusion between Judaism and Chinese culture. One inscription said, 

“Worship is to honor Heaven, and righteousness is to follow the ancestors. But the human mind has always existed before worship and righteousness.” 

Another, which both Kung Chen and David read, says,

“From the time of Abram, when our faith was established, and ever after, we the Jews of China have spread the knowledge of God and in return we have received the knowledge of Confucius and Buddha and Tao,” 

This is a message of inclusivity, not exclusion. Both David and Kung Chen are happy with this message. But, when the Rabbi becomes aware of their presence in the synagogue, including the Chinese non-Jewish man, he sings a different tune. The exchange that follows is the significant allegory for the current Arab- Israeli conflict.

The rabbi becomes angry when he discovers that Kung Chen is in the temple. He berates David and tells him he should not have brought a Son of Adam into the holy place. Kung Chen responds with the statement, “I am no Son of Adam. There is no such name among my ancestors.” The rabbi retorts that all heathens are sons of Adam, and only Jews (David) are sons of God. Kung Chen says that he does not want to be called the son of a man of whom he has never heard. 

The exchange heats up between them as Kung Chen becomes insulted and angry. The interaction goes as follows (soon you will get my point, be patient and read on):

Kung Chen: “Moreover, I do not like to hear any man call only himself and his people the sons of God. Let it be that you are the sons of your god if you please, but there are many gods.”

Rabbi, trembling: “There is only one true God, and Jehovah is His name.”

Kung Chen: “So the followers of Mohammed in our city declare, but they call his name Allah. Is he the same as your Jehovah?”

Rabbi, yelling: “There is no god beside our God. He is the One True God.”

Rabbi, loudly, responding to Kung Chen’s statement that beyond this earth we cannot know: “Beyond this earth we can know! It is for this that God has chosen my people, that we may eternally remind mankind of Him, Who alone rules. We are gadfly to man’s soul. We may not rest until all mankind believes in the one true God.”

Kung Chen, in a kind voice: “God--if there is a God—would not choose one man above another or one people above another. Under Heaven we are all one family.” 

This is an allegory for the past and current situation between Palestine and Israel. Both, in their purest state, are religions of exclusion, claiming that theirs is the one true faith and that all others can be heaped into a group. Some Jews call them Goyim or Gentiles, while some Muslims call them Kafir or Infidels. Notably these are not all or maybe even most Jews or Muslims; but they are the primary actors in this conflict (who may be using the religious differences to their own political end).

So here we are: two strong, passionate, exclusionary cultures, living next door to each other through a legislated nationhood, facing off in a battle that has been going on for ages. Either/Or, not Both. Only now it gets more dangerous with each flareup, creating enmity, hate and misunderstanding worldwide.

Imagine if, in Peony, the rabbi were having this argument with a Muslim, maybe an Imam, rather than Kung Chen. Would it have come to blows? Probably. 

David, who is physically and spiritually part of both cultures, doesn’t know how to feel at first, but then remembers the inscriptions about the human mind, and the free exchange of cultures, and decides to marry Kaolien rather than Leah. Kung Chen actually remarks earlier in the work that the hybridization of the two cultures, whether by marriage or interaction, makes both stronger.

In Peony, cultural understanding and compromise is juxtaposed with a clear and fanatical exclusionary mindset, and is what wins out in the end when David marries Kaolien and gives birth to (mixed) children, happily prospering in Kaifeng as part of the community of Jews and Chinese living and working together. Had he married Leah and become a proselytizer of the religion as superior, special and exclusive, the outcome in his life and in Kaifeng would have been very different. Not better, just different.

The current story of Israel and Palestine can be imagined to be an ongoing argument with no compromise or end between the Rabbi and his Muslim counterpart, both insisting on their religious culture as superior, to the exclusion of the other, and all others.

Israel and Palestine can never conclude this battle if each insists on cultural, religious supremacy and doesn’t recognize the the other culture as different but equal. Given that their lingering hate spreads like a virus around the world, there is an imperative for a real, lasting solution that is much bigger than both of them. Cultural compromise, fueled with genuine caring about children’s lives and welfare, is a small price to pay for what would be considered a monumental victory for peace and understanding.

Changing the government won’t do it.

[1] Wikipedia.com, “History of the Jews in China,” https://en.wikipedia.org/wiki/History_of_the_Jews_in_China

[1] Buck, Pearl S., “Peony: A Novel of China,” (New York: Moyer Bell, 1948) p. 147.

[1] Ibid., p. 149.

[1] Ibid., p. 150.

[1] Ibid., p. 152.

Economist: “Sweatpants Are A Designer’s Worst Nightmare”—Is dressing up another casualty of the Pandemic?

 Economist: “Sweatpants Are A Designer’s Worst Nightmare”—Is dressing up another casualty of the Pandemic?

Are we doomed to be sloppy?

 

An article in The Economist 1843 Magazine written in March 2021 thinks so—maybe.

 

What do you think?

 

There is no doubt that the year of the Pandemic took a grave toll on apparel, maybe more than any other industry.  Let’s look at some numbers:

 

First, of all retail sectors, apparel and accessories have suffered the most, almost diving 100% last year and still seriously in deficit.

 

Next, let’s take a look at the total sales picture. From a peak of about $34 billion in November 2019 pre-Christmas, sales sunk to about $7 billion in May 2020 and only could recover to about $30billion at Christmas 2020, after operating in serious deficit for almost a year:

 

 

The kids didn’t get new clothes, either. Family clothing stores followed the same trend, but even worse; the nadir in May 2020 was about $700 million from a peak of almost $15 billion.

 

Some major companies did well during this period, and some did not. Take a look at the following graph and tell me what the common denominator is for those who saw increases:

 

Crocs. Eh? You don’t wear those to the office or on a date. Wolverine- Moccasins, Hush Puppies? See the point now?

 

So, dressing up is dead and we all fall down in sweats? Hoodies for dinner? To a meeting, though? The author of the Economist article entitled, “Fashion Victim: Sweatpants are a Designer’s Worst Nightmare: The Shape of Things to Come,” [i]says, “The rise of sweatpants represents the demise of fashion as we knew it.”[ii]

 

So, is this true? Are we going to see hoodies in restaurants? In offices? My answer to that is no and no. And it has been for more than a year, which I have expressed in my isourcerer.com article in February of this year, my informal poll of nearly 100 students from the US and other countries begs to differ:

 

My students will happily shed their hoodies and sweatshirts to dress up when person-to-person and person-to-group interactions are permitted and safe. They were nearly unanimous about that. One student went so far as to say she felt like she would throw out her entire wardrobe. Bright colors, happy clothes that actually fit and don’t make you feel like taking a nap will come roaring back. 

 

Those of us who have experience in the world of retail (pre-Pandemic and pre-Ecommerce) and have a good merchant’s sense of trends incoming all agree that the lack of buying clothes for a year (except online which seems to have been Crocs and Mocs) will have a snapback some are calling “the roaring 20’s (100 year anniversary which we hope will not end the way the last 20’s did), insofar as it will constitute not only wardrobe additions, but wardrobe replacement).

 

In fact, here is my contribution to the chorus, my solo as it were: I believe we are going to see a new attitude toward dressing that has been in remission since the jeans craze of the 1980’s and subsequent approval for casual dress in offices (because the boss wanted to wear jeans too). No, we won’t have dress codes to wear a tie and suit to work as we did in the 1970’s; if there is any code to come, it may be that offices set limits on how sloppy you can look. 

 

The real trend will be a reaction to the Year of the Pandemic where people began to recognize that a sloppy you is not your ideal presentation to the world; in fact, it is pretty damn embarrassing. And that you are what you wear; look good, feel good (Ricardo Montalban vintage: “I feel mahvelous, dahling”). Wait-will “dress for success” come back into people’s psyches? It could be…

 

This revolution will also be a quality revolution. Renewed pride in your appearance will require your clothes don’t look cheap; this will spell trouble for those purveyors of disposable clothes like Inditex and H&M (I have complete faith that they will respond but it may take some time and rocky roads).

 

One more blow to the fast-fashion brands will be that people not only won’t want to look cheap, they will NOT want to look just like the person next to them (and also on the other side); so we will see a drive for Individualism in apparel, a definite departure from the cookie-cutter fashion that ruled the world pre-Pandemic.

 

We merchants had solemn responsibility to not only spot the fashion trends—fit, silhouette, fabric, the Black Swan (actually, significant fashion changes can come from the Unknown Unknown), but when we bought merchandise to populate our t-stands and round racks, we had better figure out the right color. There could be few worst disasters than having thousands of the right style in the wrong color. So here I go with another risky prediction, one which I have said before: Bright Colors can do the best job of externalizing our psyche and will have the most robust response both physical and online.

 

None of this is written in stone or on tablets (stone ones). And world events could easily get in the way of my predictions (such as European countries like France bungling the vaccine response and prolonging the pain of Pandemic). But I think, all things considered and not considering Black Swans (which you never get to consider until they show up at your door), my predictions are accurate.

 

The one thing that I can virtually guarantee is that the Economist column writer is wrong about the enduring influence of sweatpants on fashion. If anything, their influence will be a reverse effect. 

 

The author backtracks and covers his butt at the end of the article. After a headline that pronounces sweatpants the Wicked Witch of fashion, he backtracks and says, “One day we will go out again and we won’t be wearing sweatpants.”[iii] So which is it, then? I guess it depends on when “one day” is. I can speculate on that: One day is 2021 Fall season to 2022 Spring season, the start will be fast and the momentum will leave many retailers in the dust.

 

And, therein lies the biggest danger to the revival of the fashion business: That retailers get lazy, or lack vision and merchant abilities, thus failing to prepare the inventory when the customer wants it, or blindly following the Pandemic Trend as if it were going to last forever. Google sweatpants and you will see that everyone from designer to mass market is rushing to compete in the Red Ocean of sweats. From the online merchandising, it would see that the Economist writer is correct.

 

Again, I don’t agree and think that stores are lobotomously missing a key post-Pandemic trend. That enduring incompetence can scotch this recovery; however, for those of us who have the right merchandise at the right time, it IS the Roaring Twenties. At the other end of the spectrum, the Grim Reaper will be invited to the party, as he was so many times in 2020.

 

Send me your opinions! You are part of the customer base. Then, when we get enough opinions, it will be more than opinion—it will be proof.

 

Copyright 2021 Michael Serwetz

 

(Origin of all graphs are documented on the graph itself and text quoted is duly footnoted below)

 

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[i] www.economist.com/1843, “Fashion Victim: Sweatpants are a Designer’s Worst Nightmare: The Shape of Things to Come,” https://www.economist.com/1843/2021/03/17/sweatpants-are-fashion-designers-worst-nightmare?utm_campaign=the-economist-today&utm_medium=newsletter&utm_source=salesforce-marketing-cloud&utm_term=2021-03-19&utm_content=article-link-7&etear=nl_today_7

[ii] Ibid.

[iii] Ibid.

Exclusive: Not a Crystal Ball: A Look into the Fashion Industry’s Post-Pandemic Future

 

 

In my last article for Fashion Mannuscript, “E-commerce’s Great Leap Forward” I wondered about the Post-Pandemic future of the Fashion Industry. Which, as we all know, suffered greatly during the Pandemic when everyone was sequestered, stores and offices closed.

In addition to 50 years in the industry, I teach university students who are from all over the US, as well as from China and France, among other nations. Since the Pandemic is a mission-critical subject for marketing, we discussed the effect on e-business and p-business at length, particularly their prediction of and plans for the fashion industry and their own wardrobes. They responded to my questions passionately. Their answers since last Spring when we were forced into isolation relate to “what’s next after the Pandemic has abated?” Last Spring, a very few months after the Pandemic lockdowns started, my students and I sensed that the significant (sometimes catastrophic) emotional toll that the Pandemic exacted on isolated people was unprecedentedly traumatic. Shocks produce affective compensation. Soldiers exposed to battle trauma may develop PTSD which causes extreme reactions from the emotional stress of battle to their lives afterward; likewise, average humans (who had never considered any of what might happen to them, unlike a soldier who is well informed of the risks of battle) develop extreme or severe reactions to their unprecedented deprivation.

So it is with the folks and their fashion. We know that the fashion industry suffered unprecedented losses, some as much as 80%. Why? Locked down, don’t go to office, can’t meet friends, every day the same so why do I need to wear anything but what I wore yesterday? If I do shop for clothes online, it is not for wardrobe-building but to keep my sanity.

WFH, which was the only way to continue business activities during the Pandemic, furthered this casual attitude toward clothing. When you are working alone, and there is nobody to watch you, see you, and whom you want to impress, the same old PJs, hoodie or t-shirt will do. 

Even if you had the impulse to make a purchase of any sort during the Pandemic, you did it online. The Economist reported in January on a study by Mckinsey from May 2020 which claimed online business in the US had “ten years’ growth in 3 months.” Everybody who could, did switch over to e-business, even doctors. 

Online shopping, which hovered at about 15% of retail sales in 2019 and early 2020, went from “important” to “default.” Will this kneejerk of shopping online first last long after the Pandemic has subsided? Economist reported in the same piece that 75-83% of US customers intended to continue the same behavior, joined by 72-81% in China, and the same range in other industrialized countries like Italy and Japan. 

Does that mean that, even after all clear is sounded, customers will continue their self-isolation and complete their shopping alone? Answer: No. 

The Economist report wonders what the “snap-back” effect will be. 

First let me get one thing out of the way: Customers, whether for the fashion industry or other shopping, will never go back 100% to what they did before. This disease made its mark, among many other things, on the shopping habits of humanity.

Before we predict what will happen in the Fashion Industry, we should predict human behavior Post-Pandemic and what will and won’t change; what will change, how will it change and how extensively? As this is a critical issue for marketing, I have spent a lot of time since last Spring discussing this topic with my students; my opinion formed around what I thought was going to happen, their input and what they said they personally would do. That was the most enlightening part of the discussion: We may not be able to predict what the market will do with any degree of certainty, but we can be damn sure, after a year of isolation, what we will do as customers. 

Oh, one more thing: all predictions are made on the premise that we don’t NEED clothes. There is enough in most people’s closets to be sure they are not fig-leaf naked. 

The affective driving force behind people’s fashion decisions Post-Pandemic is: everyone I have talked to, students in the US, Europe and Asia, as well as peers here, is passionately longing for interaction; with friends, family, and anyone who passes the screen test. More, being in a controlled public environment and feeling the energy of people together is rejuvenating to the spirit. One article in Economist February points to the fact that humans need touch for emotional satisfaction. So, as with PTSD, the shock of deprivation of interaction, and even touch, produces a desire and hunger that are unprecedentedly intense. Hold me…

Some of the questions I asked, specifically regarding fashion purchases:

1. Will you shop online or physical after “all clear” is given? Answer: due to the scar of the Pandemic, wandering in a store is not as attractive as it used to be, but, for the fashion business, which is high-touch, benefitting by touching, feeling, trying on and appreciating yourself in a three-way mirror, physical is preferred, and this experience will be refreshed with new vigor and satisfaction. What is better than seeing yourself in a mirror with a new outfit and someone, your family, friend, salesperson says, “You look Marvelous, Darling?”

2. Will you buy new clothes or just touch up your old wardrobe? (Remembering the economic uncertainty) Answer: It is unanimous, in my questioning, that people will buy new clothes. 

3. Will your clothes be of the same, casual nature that you got used to at home? Answer. NO. One student said that she hated her clothes which she had to wear for the last year and intended to throw them out, and with them the memories. Everyone I polled said something like the following:

a. I will dress up more, because I want to feel good and look good like never before.

b. my clothing worn to work will reflect my desire for self-respect and recognition, which is hard to come by with WFH.

c. I may build a multi-layered wardrobe—home, casual, out to dinner, work in office.

d. I will NOT look for fast, disposable, cookie-cutter fashion, but quality, individual clothes I can be proud of and wear for a longer time (practicality comes in here), even if I have to pay more.

4. How much will you spend and what will you add to your wardrobe? Answer: New clothes that make me feel good; as many as it takes. And no matter bought online, physical or omnichannel. Let me out to shop! Nobody that I questioned brought up any financial constraints. Even if they exist, which I am sure they do, they are not the driving force. They never ever said that they would only buy a few pieces to supplement what they have. Almost all envisioned a “new look.”

5. The most impressive comments-about COLOR. Everyone, men and women, pointed out without any prompting that they would seek out clothing with bright colors to reflect the light (as brights do) in their mood and the receptivity for new contact.

I have read comments from industry folks about a new “Roaring 20’s” for the Fashion Industry. That may be an exaggeration, but I do see some opportunities that have not existed in the industry for a while:

1. The Fashion Industry could be a source of personal stimulation and fulfillment as clothing becomes more central to people’s lives and self-assessment. When bell bottom jeans were the rage in the 1970’s, you felt great about yourself if you could prance around in the latest pair, and pretty ragged if you didn’t or couldn’t. This has not been the case in a very long time, even before the Pandemic.

2. The fashion industry, which has been in the Denim Era since Reagan was president, may begin to successfully create some new trends. This, of course, will drive business of those who recognize the trends and those who create the trends. And, they could revive businesses that have been dormant- such as dress shirts. Trends are the healthiest probiotic for the fashion industry. In 1947, when Dior introduced his New Look after a fashion hiatus for WWII, it led the trends for fashion well into the 1960’s. Wouldn’t it be exciting if history repeated itself? Will we all be wearing shirts, ties, hats and cinch-waist A-line dresses? 

3. The most exciting news is that, in the past, when fashion in the US was at its heyday, it was spread by local and national media (such as TV) and had limited reach due to technological limitations. Today, global platforms can spread the word and the product literally everywhere, 365, 24/7. Global reach, global trends.

I am not sure of the magnitude of the outcome. What I am 100% sure of, from my own experience and research, is that people’s desire for company, interaction and hugs is intense and passionate. Humans are social animals, who have been kept in a cage for about a year. Like birds, they will value their plumage as a component of their self-esteem. 

Once released, people all over the world are going to be ultra-attentive to what they are wearing and spend what they need to be fulfilled. Release them and see what happens.

My biggest worry is that companies in the fashion industry will miss the opportunities for whatever reason and not properly prepare what customers want. The biggest crime in the fashion industry Post-Pandemic will be: boredom.

Ecommerce “Great Leap Forward:” What Will Be the Impact on The Fashion Industry in 2021 and Beyond?

 

Well, we all know what happened in 2020; we went to ground and tried to live our lives at the same time. What did we have to do to survive? And what could we not do anymore?

No more restaurants and bars; sporting events; shopping at the store (we even may have had groceries delivered); events, concerts, just being with friends; in-person classes. Oh, and going to the office; WFH became as much a part of our vocabulary as WTF.

And it was (the latter).

But, in 2020 as compared to prior crises, ecommerce was developed to a point where it could take up at least some of the retail slack, if not most of it. Maybe it wasn’t as fun or romantic to make a daily Amazon run as it was before to run to the store or the mall, but it saved us. Zoom and other meeting platforms became our default method of communication for business, personal and teaching; sometime during 2020 Zoom became a verb-let’s Zoom tomorrow.

The effect was astounding. Could we say it was the “white swan in a black sea?” Ecommerce, remote learning, an online meeting were increasing anyway, but what happened took everyone’s breath away. The Economist magazine, in their “The World in 2021” issue, called it “The Tech-Celeration.” The article quotes McKinsey as saying “Recent data show that we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks.” In the US, ten years’ growth in three months. In Italy, it reports, it was a “ten-year revolutionary leap.”  Yes, ecommerce was steadily growing before, but now, badabing, it gets a new name—Default.

Further, the same article points out the changes in banking and education, citing cashless transactions and remote learning. I can report, as an instructor, that in March 2020 we had to transition to remote learning literally overnight. We got through it, but it was clumsy at best. After myriad articles and meetings (on Zoom and other platforms), we all got some idea of what it took to improve the learning when your students are little squares who may or may not choose to reveal themselves visually. Whereas there is no doubt that both students and instructors would prefer the face-to-face mode (unanimous sentiment when students are polled at the end of semester), we learned somethings that will be valuable in the future, such as: 1. Lectures are boring, I don’t care who you are-much less “sage on the stage;” 2. Students can be engaged most effectively by letting them express themselves through assignments that are knowledge plus opinion-based; 3. The time saved by not commuting can be put to good use.

The same Economist article states that executives they polled were definitely willing to allow more of their employees to WFH permanently. Particularly in the growing technology sector, it reports that 34% of executives, up from 22% the prior year, were willing to allow at least a tenth of their employees to work from home two or more days per week.  We have yet to see what, other than lowered commuting and building costs, comes as a positive when that becomes reality. Does a Zoom meeting have the same impact as a face-to-face meeting? Well, let’s see… You can’t mute the speaker when you are in the same room; and you must at least pretend to be paying attention. As with remote classes, engagement is the biggest challenge. For the workplace,  reduction in takeaways, reaction time, enthusiasm and morale can be business-changing. 

While consumers were able to find almost all of what they needed or wanted to buy online, what they didn’t need or want was apparel and accessories. Early on in the pandemic, I tried to convince myself and others that your attitude toward work or meetings would be affected by your dress. If you dressed smartly, you would work smartly; if you dressed sloppily or casually, it would reflect in your productivity and results. As an instructor, I cannot tell students what to wear or where to sit; as a supervisor, I sure could—if I weren’t guilty of the same lackadaisical habits myself. That said, I believed and still believe my presumption was correct. 

What happened to apparel in 2020? The above Statista graph demonstrates the precipitous drop even better than the numbers:

Per the graph above, clothing store sales hid their nadir in April 2020 of $2194 million, against $21,416 million in April 2019. It doesn’t get much worse than that. Headline-making bankruptcies abounded as a result of this trend and the inability to physically shop (clothing is a high-touch attribute item, and I don’t care how good online shopping is, buying a new shirt or dress online just is not as good, and MUCH easier to walk away from).

What, then, happens to the fashion industry, in particular Womenswear, which has traditionally been the volume leader (also remember women may buy clothes for men as well)? Do people just buy more t-shirts and sweatpants? More structured and function-oriented clothing like suits, dresses, sportscoats, ties etc. go the way of the dinosaurs? When today’s parents become grandparents and show their grandchildren old pictures, do they get asked, “did people really dress like that?”

As with the acceleration of ecommerce due to the Pandemic, other trends will continue to accelerate-even if the trends themselves are decelerating. One clear example relevant to the fashion industry that was well under way before the Pandemic hit was-dressing up. When you watch TV series that were shot in the 50’s or 60’s of last century, you can see everyone dressed up prim and proper-suits, shirts, ties, dresses, hats. That trend had been casualized long ago- for better or worse- and now? Will anyone ever agree to wear a shirt and tie to the office? Or anywhere? Again, I will ask you to consider how that casualization affected people’s attitude toward work, for better or worse, even before the pandemic (I can’t accept “no effect” as an answer because you know it isn’t the case)?

Wait, it gets worse for the fashion industry. Fashion business was always best when there was a trend or mood in the country which got people excited to buy more clothes; it is rare that people buy clothes because they really need them. Now, how to popularize a fashion trend? I don’t care how good your image is, clothing needs to be seen in person, touched, felt, tried on. Yes, you can do it after receiving it and return it if you don’t like it; but, by then, the thrill is gone. And, where you could try on 20 items in a few minutes, can you do that now? No. Not even if you get a cute little subscription box that some AI made up for you. Not even Alexa can do that yet—if ever.

So, what’s the hope for the fashion industry? Whatever it is, it is going to be a long road back. Clothing purchased in the future will have to distinguish itself clearly from others- fabric, color, sustainability- to be added to a wardrobe when it isn’t needed. Children who eventually attend school in person will need clothing. As will people who have to go back to the office, for at least part of the week. That said, something bought because you have to carries less weight and volume than, “I love it.” Pockets of consumers, especially Gen Z, will still shop for distinctive items that fit their requirement; but the general public will need a lot more stimulation to get even close to resuming OR restructuring their former habits.

The best hope for the fashion industry is-human nature. What provides the best chance for rebirth of the industry is the fact that, once allowed, human beings will crave personal contact and appreciate it more than before. People who have been sequestered with Zoom meetings will want to have a laugh with someone less than social distance from them. Human beings have been gathering since time immemorial and no Pandemic is going to change that. Will that result in a resurgence of the fashion industry to former volume levels? It could, after a while, but that, I am sure, will be largely populated by people buying fewer, and better apparel and accessories; as well,  purchases will be affected more than ever by brand image and social criteria. Does this mean nobody will buy no-name, disposable clothing anymore? Of course not, but the proportion of total fashion purchases will change drastically- hopefully for the better. 

Sorry, Zara. 

Happy 2021! Here’s to a better world with everyone holding hands, appreciating each other, no matter who or where they are, what their nationality or anything else about them is, and all participating to be a better they. 

12/29/2020

 Footnotes: 

Statista.com, “US Retail: Monthly Clothing Store Statistics, 2017-2020, https://www.statista.com/topics/965/apparel-market-in-the-us/

  The Economist Magazine December 2020, “The World in 2021 Issue;” Tom Standage, “After the Tech-Celeration”

  Ibid.

The Package That Cried

 The following is dedicated to the US Postal Service, who really made people nervous but ended up delivering:

I am a delicate package

Of a delicate painting

Of a delicate little girl.

I hoped to fly swiftly

To the little girl’s home

In time for Christmas.

No! I was crushed for days

Among heavy and bulky

And rude packages of

Food processors

Pots and Pans

Microwaves.

Can’t anybody read?

The sticker on my outside says

“Fragile”

And I am.

Sitting, crushed

In a bag

In a warehouse

On a truck

In another warehouse

On another truck

I began to think

Is this the end?

Will I end my existence

Here among these rude boys

Not with the child?

So I cried

And cried

And sobbed

What else could I do?