How we got to this Election

Originally written in March 2016

Trump is the leading Republican candidate and Sanders has created a showing stronger than most would have imagined. If you asked most a year ago whether this would have occurred they would have responded: Impossible. This means the underlying thinking (mental model) that arrived at the conclusion was potentially flawed. Takeaway: It is important to understand what is really behind these changes. Why? In order to more accurately be able to predict the future. I’ll impart my opinion (which may or may not be accurate) with the hope that it spurs your own thinking. So what has caused this change and how did we get here?

Two main drivers. 1) A shift in media economics and 2) Economic immobility

Media Economics

25 years ago, news media worked in a very different way. Large corporations (i.e. P&G, General Electric, etc.) didn’t have great ways of measuring the efficacy of their advertising. As a result they simply threw $5MM toward New York Times (NYT), $5MM to CBS, and another $5MM to NBC (as an example). NYT would then use this money to fund some of its journalism including investigative reporting such as a middle east desk, etc. In parallel, the supply (the amount of news) that the media was required to provide was limited (CBS/NBC/CBS had to do 1 hour of evening news programming back in the day and NYT had a finite number of physical newspapers to put out a day).

This changed with Google. So the important point I raised before was the advertising dollar allocation. The old method was rudimentary and didn’t provide much feedback to those P&G marketers (was the $5MM ad buy on NBC successful or was it the NYT one that really drove sales?). Google, with its advent of Google Adwords really started to change a lot of this. Google went to these large brands and said to them “hey, right now you don’t have a great sense of your advertising ROI (return on investment). Come advertise with us on paid search and we will give you 1) Good results and 2) A way to actually measure them. At first brands were cautious, however, with time they jumped on this more and more. The net effect? The old news organizations (NYT, NBC nightly, etc.) started losing advertising dollars in mass and instead these advertising budgets went to Google, Facebook, etc. Old news organizations were forced to fire some of their reporters.

Google Advertising Revenue by Year

In parallel, due to technology, news organizations were forced to put out more and more content. Remember, back in the day (~1970s), NBC only had to put out 1 hour of news programming. In the 90’s came Ted Turner/CNN which required ~24 hours of news programming a day. In parallel came internet news which similarly increased the amount of content required.

To summarize so far: 1) News networks were receiving less ad revenue and 2) They were required to produce more content than they had historically. This is basic math. More requirements with less resources -generally- equals lower quality. Thus, we saw the quality of the reporting dropping.

Now the TV news media in particular needed to keep eyeballs on the screen. As they looked around, they saw the original reality shows (trash TV like Geraldo, etc.) were able to do this by feeding the emotional portion of the brain rather than the logical thinking side. They did this by creating artificial drama and were quite successful. News networks adapted this by having polarized commentators. They took a page out of drama novels/movies and created a storyline of good and bad which kept all of us entertained. We could watch the news feeling as if we were being productive but really just watching trash TV.

So to summarize again: 1) Less money in, 2) More content required, 3) Move of “news” toward entertainment over education

So this lands us with a viewership (this is all of us, not just those who watch Fox; CNN & MSNBC are the same from the macro historical standpoint of news) that is dumbed down and polarized over the past 25 years. If you think I’m wrong, take every piece of “breaking news” that CNN, Fox, MSNBC put out and ask yourself a month later (much less a year) how much it really mattered. In parallel, ask yourself how much you learned and how valuable those learnings were toward improving your own life or your family’s life. My own tests show the ratio is close to zero.

There is a saying in artificial intelligence: Garbage in garbage out. The same is true here with thinking. Educate the mind with garbage and the quality of thought becomes close to garbage.

Result (my opinion): Polarized, less educated public across both political parties (rooted in groupthink and inability to differentiate which issues and which drivers of those issues do and do not constitute meaningful historical impact over a decade)

— —

Economic Immobility

In parallel the economy has changed in very large ways (it is scary to me how little the government or average americans seem to understand this) leaving many behind. In the 1700s many of us would have been farmers. With the invention of steam engines we switched in late 1800’s to a manufacturing economy. By the 1950s and the advancements of computers, we started a move toward knowledge economies. Each industry in some way or the other has switched to this kind of economy.

Some regions of the U.S. have diversified into knowledge and have done quite well (San Francisco & NYC offering financial services, biotech, digital advertising, etc.) while others have failed to diversify or have done too late to have any competitive impact (Memphis TN, Upstate NY, etc.).

Further, due to globalization, low skill jobs have moved offshore where the cost of living or labor leverage is lower. I do not like this (besides paying less for goods) but this is the reality. Labor transformation has occurred throughout history, however, with this change knowledge has become a barrier to entry

This has two important implications: 1) Low skill jobs no longer exist in quantity , 2) A well paying job requires a ramp up period (education, whether formal or informal).

Point 2 is the more important one going forward and applies to all lower economic classes. While 40 years ago it was viable to “just get a job” this is no longer really an option. Working at McDonalds or Walmart is going to make it very difficult to pull oneself (much less their family) into the next economic class. This economic immobility (and psychological feeling of lack of control) will lead to increasing levels of 1) illegal activity and 2) despondency

If you think today is bad, just wait. I predict -and others are as well- that there is a tidal wave that will hit over the next decade. Currently the most prevalent occupation not requiring a college education is truck driving. This occupation not only funds the individuals driving but a large quantity of rural American towns. Driverless trucks currently exist and are being tested by Daimler Benz for rollout within the decade. This will very rapidly move much of rural America into economic despair overnight. If you don’t believe me with regard to how fast economics can change I propose you do this (I do it every month): Take several taxi cabs (not Uber) and ask the driver how much their income has decreased over the past two years. Most of them will tell you ~50% (uber, etc.). Can you imagine your boss coming in and telling you you will make half of what you make today? Now imagine that at scale….it creates systemic issues creating tension that will relieve one way or the other. I could speak to this but this article does a much better job than I could given the time.

Most Prevalent Occupations by State

Result (my opinion): Large group of constituency despondent and SIGNIFICANTLY worse off than they were at the start of their lives (loss aversion) with no remedies at their disposal

Conclusion: We have a large number of people without economic hope and a large number of people across both political parties who are being manipulated toward drama issues rather than long term solutions. This created an environment in Germany during the 1920’s ripe for Adolf Hitler. Our mini repeat is in progress.

A few requests if one is serious:

  1. Remove the blame mindset — It is the republicans or democrats or etc. That approach doesn’t work and is like a Chinese Finger Trap. It is flawed and those who apply it aren’t really that serious about change; rather they prefer drama. (I am part of the problem and likely, so are you)
  2. We need to use technology to reduce the cost of education per student but in parallel move the quality up to IVY league standards [in addition, STEM education needs to be foundational]. (free market will fail here, we need public funding in experimentation just as we use the NIH for some early molecule development in drug discovery- also I am less focused on the vehicle of education [formal vs. informal] but on the efficacy of the mental models it imparts)
  3. Mental health — We need increase our rate of understanding in this domain rapidly (I will write on this in a separate piece)