Opinion

Best and worst brand moves of 2018: Nike and Google

The most and least impressive action taken by a brand this year both happened on the same day – says Professor Scott Galloway of Stern Business School

The most and least impressive action taken by a management team to support or erode enterprise equity, so far in 2018, both happened on the same day  –  September 5.

Worst

Google’s decision to wave the middle finger in democracy’s face, and not send a senior exec to the United States Senate hearings, can be explained with one number: 90. Google commands a 90% share of a sector that, by dollar volume, is greater than the entire ad market of any nation except the US.

If the search firm had a 30%, or even 60% share, one of the three senior execs (Larry, Sergey, or Sundar) would have fired up the jet and found their way to DC. Instead, Google cemented the notion that these firms have decided, or know, they are more powerful than elected officials. In sum, Google said to the Senate, “We own you, bitches … Don’t bother us.”

This was not just tone deaf, but plain stupid. The co-chair of the Senate Intelligence Committee, Mark Warner, a former telco VC, has the domain expertise and the will to go after these firms. Google’s absentia was a gift to Facebook and Twitter, deflecting ire to the search engine, as was evident in Senator Warner’s opening remarks.

This level of stupidity raises questions about the board’s judgment and their ability to serve as fiduciaries for shareholders. Someone from the board should have called Larry and asked… “WTF?”

Some 14 senators from 13 states found time for this panel, but Google senior execs couldn’t.

Sorry, America, we’re busy.

Best

That Wednesday also brought an inspired move. Nike announced the spokesperson for their 30th anniversary: Colin Kaepernick. In a word … genius. It’s a bold move and a risk — but a good risk. History judges people not on their inner beliefs, but their outward conviction and sacrifice.

The athlete every brand would endorse if they could turn back the clock? Muhammad Ali. A man who was stripped of his wealth and Olympic medals for refusing to enlist in the draft. Some 30 years later, we asked him to light the flame at the Atlanta Olympics  –  in my view, the most meaningful moment in sport.

Kaepernick, distinct of the merit of his views and actions, has paid a price. He’s not in the same league as Ali, but would likely be a back-up QB had he not taken a knee. Reviewing history, when civil rights comes up against flags, statues, or a traditional view of patriotism, civil rights is Ali to the flag’s Wepner. History/evidence is on Kaepernick’s side, and Nike had the backbone to capture this for shareholders.

Math

The Portland firm also did the math. Nike registers $35 billion in revenues  – $15 billion domestically and $20 billion abroad. Two-thirds of Nike consumers are under the age of 35. A younger consumer who can afford $150 Flyknit racers likely has substantial disposable income and lives in a city.

The term for this cohort? Progressive. Of the $20 billion international customer base, how many believe the US is currently a ‘beacon on a hill’ and is handling race issues well? I’ll speculate, none. Nike has risked $1–-3 billiob in business to strengthen their relationship with consumers who account for $32-34 billion of their franchise. The math? Nike just did it.

Return on invested capital

What’s the capital your firm invests? We naturally think of money as the asset we speculate with in pursuit of growth, margin, or advantage. But there are different forms of capital management. Terry Lundgren, one of the better operators in retail, decided to close Macy’s stores even though they produced cash flow.

The stores were in decline, and Terry felt that, cash flow aside, the slow death of these stores would damage the franchise and distract from growth opportunities. Steve Jobs, when on the board of Nike, suggested they get rid of “all the crap” – merchandise that brought in money, but junked up the brand.

Most managers will face a situation where an employee is bringing in substantial revenue but is an asshole… and bad for the culture. It’s easy to make excuses and keep this person in the franchise. But would your return on invested capital (showing the person the door at the expense of revenue) be worth it over the long term?

What are the different sources of capital  – stock-keeping units, consumers, revenues, partners, political neutrality –  that could be invested or sacrificed for long-term equity? Leadership and market outperformance are a function of the risks you take, not avoid.

Home team

My NYU colleague Jonathan Haidt, an inspiration, argues people are more like lawyers building a case for their gut feelings than judges reasoning toward truth. We form tribes and loyalties, and then build a narrative to support these intuitive decisions.

Our bloody nature, it can now be argued in the context of modern biology, is ingrained because group-versus-group was a principal driving force that made us what we are. In prehistory, group selection lifted hominids to heights of solidarity, to genius, to enterprise. And to fear.

E. O. Wilson, Harvard biologist

From a young age, I found reasons to judge others based on their tribe. I lived on the West Side of Los Angeles, which meant obviously I was better than somebody who lived over the Sepulveda Pass (a “Valley”). Each cohort congregated at different lifeguard stations at Santa Monica Beach. It was just as obvious that young people at USC were less worthy than me and my friends at UCLA. It’s gotten worse with politics — I’m critical of both tribes. I believe Republicans lack empathy or are just plain dumb, and Democrats are whiny and ineffectual. Maybe it’s just anger coagulating. But that’s another post.

Cooperation

One of our advantages as a species is cooperation, and shorthand for identifying peers to cooperate with is shared affinity/membership. We both went to the same school or root for the same team. We lived in London for part of the summer, and my boys, eight and 11, set about finding a team we could all coalesce around for the World Cup.

Parents give a lot to their kids. But my kids have given more to me (yeah, nauseating). My oldest has given us soccer. He is so passionate about it, that our family has begun praying at the church of the beautiful game, as we feel closer to him and each other. So, our pilgrimage to Mecca: the 2018 World Cup. But we needed a tribe.

— We take an interest in team USA and their star Christian Pulisic. Christian and team US fail to make the tournament.

— No problem, my wife is from Poland, and Lewandowski is the sixth-best player in the world. We have our team. Their time has come. So confident, I predict, in front of 600 people at DLD, that Poland will make their first appearance in the final. Except it wasn’t Poland’s time. Eliminated in the first round.

— Then our prayers are answered. Football is coming home, as England goes on a tear and makes it to the semifinals. We’re living in London; Harry Kane is our man, and we’re wearing team England garb every day. Then lightning strikes, and a large beer company invites a professor and his son to Russia for the last games of the tournament. #magic. The setting is perfect, and we attend the semifinal, where team England loses to Croatia.

— No problem, third would be great, and Dad spends several dozen hours online figuring out a way to get us to the third-place game in St Petersburg (a beautiful city), where team England loses to Belgium.

— No problem, we’ll root for Croatia, as their homeland has sent 50% of their population to the Cup, and their fans make the games electric. In the final, they’re beaten by France. We conclude that any jersey we wear is a forward-looking indicator of one thing: impending loss. The camaraderie, affection, shared success, trust, and victory are not ours on this trip.

But they are.

As we’re leaving the Luzhniki stadium, 80,000 people are corralled down a narrow street for 1-3 miles to public transportation and taxis. It’s an unusually warm night, and the scene quickly becomes intense/disturbing. A woman faints in front of us, and a bottleneck forms. Several dozen Russian security forces, dressed as if they had stepped out of an Orwell novel, surround the woman and begin yelling commands at the crowd.

The river of people becomes a sedentary lake. My son looks understandably tense and nervous. He’s at the age where he rolls his eyes at 10–30% of anything I say. However, at this moment he’s grasped my hand with both hands and, unable to speak, looks at me and says with his eyes, “I’m scared, what do we do?” Like any dad, I firm my grip on his hand and reassure him.

After a fair share of luck and hard work, our family has the basics covered  – education, housing, economic security. My life is now about relevance. Wanting to feel as if I’m making a difference, that my actions matter and echo for some distance and time after I exit this rock circling the near-perfect sphere of hot plasma.

There is no place I feel more relevant than with my sons. But the moments are fleeting. Most of the time, I’m the guy who can’t fix things and is there to watch TV with or kick/throw a ball around. I also serve as stand-in driver on occasion.

My boys come to me for guidance only when the real authority, Mom, isn’t around. But here, outside a venue in Moscow, I’m relevant. I have the most important thing in the world, who looks and smells like me, trusting me… counting on me. I feel important, a sense of camaraderie, meaning, relevance, and trust. He can count on me. There are so few people, not proud of this, who likely felt they could really count on me. He can. He knows I love him completely. We’re a team. And I am home.

Life is so rich.

P.S. Below is a picture of my oldest and me, at Luzhniki Stadium before the England-Croatia game — my screensaver. And this video captures a wonderful moment, a son whose love for his father is so raw and immense, it can’t be contained.

Scott Galloway is clinical professor of marketing at New York University’s Leonard N. Stern School of Business – and this article was first published here

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