The Other AI: Why Aesthetic Intelligence Matters, with Pauline Brown
21st Century Renaissance, Ep. 1
Welcome to “21st Century Renaissance”. For the first interview of my new podcast, I speak to Pauline Brown. Pauline is the former Chairman of LVMH Moët Hennessy Louis Vuitton North America, and has held senior executive positions at other leading companies, including Estée Lauder, Bain, and The Carlyle Group. In 2016, she launched her own practice as an advisor, lecturer and author. Her breakthrough book, Aesthetic Intelligence, is based on a course she introduced at Harvard Business School and now teaches at Columbia Business School, filling a void for the topic in business school education.
Pauline is currently a Board Member of America´s leading luxury retailer Neiman Marcus and a Henry Crown Fellow at the Aspen Institute. She hosts the popular lifestyle show, Tastemakers, which airs on the American broadcasting channel Sirius XM.
In this interview, we talk about what aesthetic intelligence is, why it’s important for nearly every company regardless of industry, and why it matters to us as individuals, both for our personal and professional lives. We talk about a new digital divide and its implications on our senses and on business strategy. We also talk a little about her course, and her new e-learning platform, Aesthetic Intelligence Labs, which I plan to join soon.
Pauline brings to the conversation not only her wealth of knowledge and experience, but also a critical and reflective view of luxury, fashion and business in general, as well as life wisdom, and her unique self, which she’s never afraid of being in the often stodgy corporate world. I’m thrilled to have her as my first guest, and I hope you enjoy the episode.
BeiBei
All right. Well, welcome, Pauline, to my new podcast. So I’ve finished your book in about three or four days, which is a record for me.
Pauline
Either that or the book is way too easy a read?
BeiBei
No, no, it’s not. It’s very insightful. I’m not usually a slow reader — I’m usually a slow reader, but the speed means–shows–how engaging the content was. You know, good writers are able to establish or trigger connection from their readers, even though they don’t personally know each other, and I certainly felt that. I felt this connection from afar. I picture that our life paths kind of — if I gesture with my hands — kind of went like this… [hand gesturing]
Pauline
Hmm, crisscrossed.
BeiBei
Yeah, we started on the opposite ends of the globe — you’re a New Yorker, a New York jew with Central European heritage; I’m from China with Manchurian blood on my mom’s side. We skirted each other in New York around the time of our MBAs — I came to the US and spent two years in New York and Washington DC, just at the same time as you went to Wharton. And then I think you went back to New York, and I came to California, where I got my MBA from Stanford. And then I stayed on this coast. So we were on the opposite coasts, with very different industries and very different experiences. But then somehow, as you said, we developed many common interests, ideologies, and curiosities, and now we’re sharing this common time and space to explore them.
Pauline
Thank you. That’s a very heartwarming and most original introduction. Most people get into the bio very quickly, and I always prefer something that talks about the journey. But the other point I’ll make is what I have been pushing for — which way predates the book — this idea of bringing more beauty into business, with in mind that business is a big part of the world — it’s not divorced from the world — to me, this is universal. This is not about people who want to be in the luxury world; who want to work with designers. I think every industry has opportunity to lift the human condition, and very few actually consider that value add. They might think of it as a bit of tokenism. So, my mission here is to take something you’ve expressed: coming from a different part of the world originally, living now in a different part of the country, and with very different industry experience that still resonates with you. You didn’t need to be working for the likes of LVMH or Estée Lauder in order for this to make sense. So that was my goal, and you have given me a bit more confidence that it’s resonating.
BeiBei
Oh, yeah, it’s definitely resonating! So when you’re talking about your family background — again, I’m Chinese with Manchurian background — you talked about your grandmothers and your grandparents, their influence on you. Even though we’re from very different cultural backgrounds, there has been an appreciation of beauty and style in my family too — my grandma was a seamstress, and she worked for a tailor shop–a Japanese tailor shop, when the region was in Japanese occupation. She had this innate sense of beauty; always made beautiful clothes for us. She had three daughters who didn’t inherit her skills, but they also had this great sense of style and beauty. The three sisters were known in my hometown. So my mom, and my sister– my own sister–as well, probably they’re more stylish than I am. So that really personally resonated, like you said, that universality of this human appreciation for beauty.
Pauline
Yes, thank you. The other thing, though, that your story is bringing to light is that the sense of style is shaped by a lot of different factors, but one of them are these maternal lineage: this sort of influences that come from your mother, from your grandmother, from stories of your family in your history, in your migration, and the cultures — not just where you’re living today, but maybe the culture that’s in the backdrop of your family history. I spent a lot of time above and beyond the book thinking about “how does taste get shaped?”. Why is my taste quite different than my sisters’? In our case, we lived in the same house; we have the same parents. But we have other differences. And that has come into bear in terms of how we express ourselves.
BeiBei
Definitely.
So speaking of the book, I loved the anecdote that you started with. So instead of me repeating, it’s probably the best for you to tell that scene, up to when you were proposing your course to Harvard, and the reaction from Francis hearing exactly what you had in mind.
Pauline
You know what? I wasn’t exaggerating; the story went as follows. First of all, I had no aspiration or vision of ever being a professor; that was not on the table. My entire career was in various large global brands. I knew that I wanted to take a time-out from being an operator. I started figuring out at that stage exactly how I would structure my time and still stay relevant and useful, and gainfully employed in some form. Toward the end of my tenure at LVMH, I was asked to give a lecture at HBS. And I went up–it was part of a retail series. I always enjoyed talking to students: That makes me feel young; I think it’s their sort of fresh energy. And I more and more, as I get more senior in my career, felt that I had something to offer that I wish I had had some access to when I was a student. My professors didn’t come from the world in which I had come from at that point.
Pauline
So we were sitting down after the series. And I sort of–off the cuff–I said, “I’ve always kind of wanted to teach, but I want to teach something that I think is completely void at business school, really absent”. And she said, “Well, what is it?” And I was like, “Well, I don’t want to teach something about luxury management; I don’t want to teach about brand building; I don’t want to teach marketing, even though those would be the logical subjects from where I came.” I said “something much bigger and more profound than that.” She said, “What is it?” And I said, “Well, it’s kind of like the business of aesthetics.” And she said, “Whoa, I love it! How do you spell it?”
BeiBei
[Laugh]
Pauline
That was the first time I ever had to spell it and I’ve never spelled it wrong ever since. I’m a bit of a wordsmith: I do care about words; I was an English major as an undergraduate. I picked that word — even though it was a bit spontaneous — I really settled on that word very thoughtfully, because aesthetics, as you know from the book, is not about simply beauty, and it’s not about visual elegance. It is something much more humanistic. It’s really– it comes from the Greek word aisthētikós, which is about perception of the senses. So an aesthetic experience is one that lifts you sensorially. And oftentimes, it may be lifting you without having any visual impact: it could be a beautiful concert that you’re listening to; a wonderful meal that has the aromas and the curation, the preparation, and the temperature and all the things that come together to make a meal delectable. That is an aesthetic experience. So what I like about this word aesthetics, which I’ve never given up on, is it allows people who have different ways of arriving, or expressing their tastes, to call on different sensibilities.
BeiBei
Yeah! So her reaction really sums up the state of aesthetics in business or lack thereof.
Pauline
[Laugh] True, true.
BeiBei
I also appreciated the assignment that you gave Harvard students. You asked them to write reviews for restaurants, and they all came back with business consultant–type of reports…
Pauline
Very dispassionate. My directive to them — because I didn’t want to read a 500-page report at 100 students at a time; I didn’t want it to be the great American novel — I said to them: In the constraints that you have, which was a certain number of word count I think, your job is to make me feel what you felt at your most enlivened during that meal, during that restaurant experience. And I wanted them to be connected not just with the emotional experience — because we don’t go to restaurants for nutrition (we can do nutrition much more efficiently) — we go there for other reasons: for social and for sensorial. And what I find is that business people in general, and Harvard MBAs in particularly, are woefully bad at drawing on the language of emotional experience: It’s very clinical, very objective, very analytic. You know, they’ve been trained now for years leading up to their MBA, even, to sort of diagnose things in a depersonalized and almost scientific way. That works, if you’re data analyst, or many kinds of engineers. It doesn’t work if you’re trying to appeal to people on a personal or an emotional level. So it’s almost a different way of communicating that, on top of everything else I’m saying is not being taught at business school, that particular skill set is not being taught.
BeiBei
Yeah, I have a lot to relate on that. Not only HBS graduates, you know, Stanford and the business community at large, are taught to just value above the neck…
Pauline
Yes.
BeiBei
… what is considered to be intellect in the brain and in the mind, ignoring our body and the senses. I have been actually leading workshops and playshops — we had two seasons of playshops during the pandemic — focusing on senses. There’s one session just exclusively focusing on senses; the others were exploring different senses through arts-based learning. But I frame this as for wellbeing, and for emotional intelligence. I use these experiential activities in some of the corporate workshops as well. One of the participants said, “Oh, I never realized how raspberries tasted–raspberries tasted like that!” But even for emotional intelligence, this is kind of experimental, or I guess edgy. My corporate client contacts would squirm when I describe there would be sensory exercises, because they would feel that this is beneath them.
Pauline
The reason that I’m putting my glasses on is: I, today, posted on my Instagram Story, a quote by a woman named Diane Ackeran. She wrote a book called A Natural History of the Senses. And the quote is: “One of the real tests of writers is how well they write about smells. If they can’t describe the scent of sanctity in a church, can you trust them to describe the suburbs of the heart?”
BeiBei
Yeah, yeah, absolutely. Yeah. Yeah.
So you define aesthetics as the arousal of senses, and you spoke about something that is bigger and more profound. So what would you say is the deeper essence of why senses are important?
Pauline
Well, first of all, let me say, aesthetic experiences are about arousal of the senses; aesthetic intelligence is really about shaping other people’s senses. So it’s about taste, right, how you express it. And why do I think that’s important?
I mean, №1, because in business–it’s important in life, we know, because: Who wants to live in Maoist China when you can live with great art and culture and community and faith and all the things that throughout history have enhanced the human condition? So we know it’s important in humanity, which is why we have museums and why we have monuments and so forth. Why is it important in business? Well, Reason #1 is that the vast majority — and I want to say probably 90% of what we spend our money on — is not purely based on this rational assessment of needs, of functionality, of sort of utility, or cost/benefit analysis. If we just were to be rational in how we spend, whether it’s for a T-shirt or for a house or for a vacation, we could do things much cheaper; we could spend much, much less money than we do. What we’re spending on are how things make us feel. On average, about 85% of the ultimate buying decision of one brand over another, of one particular product over another, maybe even one category over another, is how it makes that person feel and whether that feeling connects with an aspiration.
That being the case, why aren’t businesses more empathic toward how their consumers or customers feel? Why are they always designing things with a very rational assessment? Why are marketers spending almost 100% of their energy on the things that might account for 15 or so percent of the decision factor, which is the features and the function.
So that’s one reason. It goes beyond that, though. It isn’t just about gaining or winning the customer. It’s about earning a relationship. We don’t have relationships with products. Products are anonymous, inanimate. We have relationships with an idea, an ideal, an identity; we have relationships with people. And great brands step in and play a bit of a role in that relationship. You feel connected, again, for a variety of different reasons which we can get into; they’re mostly psychological in nature. And in order to do that, you have to be expressing something again, that speaks to people at their core, at their heart.
I would say another reason is: So many businesses are running on such tight margins, and the minute there’s a recession, or the minute there’s a disruptive technology that intermediate, if they don’t go out of business, they certainly lose their value very quickly. There isn’t inherent value in what they’re doing. When you do what I’m proposing well, it gives you so much pricing power, as we saw with all the LVMH brands, or the Estée Lauder brands on the cosmetic end, that you can actually reinvest in your business. And you don’t just reinvest in coming out with the next, you know, utility-based product; you reinvest in the communication, you reinvest in the service, you reinvest in that human experience. And when you’re operating on a really tight margin, and you don’t have the ability to elevate your prices, you’re never going to be able to offer more than that commodity I just described.
So, I think that if done well–and that’s always– the first step is believing in it; the second step is institutionalizing it starting with the top; the third is keeping it going, keeping the machine. It’s a little bit like–when I think of strong aesthetic propositions, it’s a little bit like a strong athlete. The best athletes in the world, the Olympic athletes, often have form of some advantage, but the real reason that they’re at that level is because they worked really hard. They trained. They had the good fortune of training in the right place with the right people. A good athlete no matter how many medals he or she wins, if they stopped training tomorrow, and then one year later tried to go into the competition, they wouldn’t even rank the top 100, no matter how good they were four years ago or one year ago. So my point is: Aesthetics is like a muscle and you can build it wherever your starting point, and also it can atrophy. You can rebuild it, but generally the strongest athletes are those that are consistent and disciplined and have committed to long periods of time. So I always tell people: If you believe in what I’m saying, and you’re prepared to invest in it, be prepared that this is a lifelong learning exercise too.
BeiBei
In the book, you say, “In the absence of aesthetics most businesses are susceptible to potentially fatal challenges. In other words, when a company’s aesthetics fail, so does the company.” That is a pretty large claim, and I would–I can imagine many eyebrows will be raised by that, in the business world.
Pauline
Caveat: if I were the CEO of Exxon, I don’t know that that line would mean all that much to me, you know? Do I think that there’s a bit of a relationship between a Mobil gas station or a Shell gas station? A little bit, but it’s so marginal relative to proximity, the price per gallon, so on. So I think there are industries that can get away for at least until fossil fuel gets away, which is happening. I think that there are industries for whom this doesn’t speak to; I think they are so few and far between. I think, the vast majority–and do I think that comment raised eyebrows? What…my experience is, when people hear it, they get it in concept. But the reason I called the book Aesthetic Intelligence, and the reason I started my online platform called Aesthetic Intelligence Labs — and I did not call it what I called my business class, which is Business of Aesthetics — the reason is because it’s one thing to understand it and say, okay, “maybe I need to invest more in my ad agency”, or “maybe I need to put a few more seats in my creative department”; it’s another thing to say, to have the commitment to say, “I need to work on this,” whether I’m a CFO, a COO, supply chain: everybody plays a role in this; it’s a value system that has to go all the way to the top. And I think that causes more discomfort than the generic concept that this matters for business.
BeiBei
…because it really goes into your your values, like you said, the raison d’être. Yeah, the meaning and purpose of your business, and a lot of businesses have lost that. So that, you’re saying, is where the discomfort lies.
So can you give some examples — so as to bring it more concrete to people — where this concept either made or broke a company, especially outside of let’s say, luxury, or food, or you know, hospitality, where it’s easier to understand, and maybe outside of creative industries?
Pauline
Well, I can give you countless examples, and I’m always coming up with new ones. So let me give you like three extremely different sectors, and different size, different history. But before I tell you the first one, let me pick up a point I talked about in the book which is: To be aesthetic doesn’t have to be beautiful. It can actually be in some ways unpleasant, that can be exciting too. In French, there’s the term which you may remember: I talked about jolie laide. Jolie is the French word for pretty, laide the French word for ugly, and Jolie Laide is used often to describe a beautiful woman’s face. What makes her beautiful, is that there’s something a little bit off — maybe it’s the proportions, maybe it’s a gap in the tooth — that makes her interesting and it makes her that much more beautiful and memorable.
So I say this because the first example I want to give you is: When I was coming of age, as a young child, I loved ice cream. I have a sweet tooth. I love ice cream. And the most premium ice cream going back to the 70s, early 80s that you could come up with was a Häagen-Dazs. It was sold in this sort of beautifully packaged almost like a jewelry kit pint size. Everything else was in the big box, a quart box. And it was very fine. If you’ve got for example, mint chocolate chip, it was very finely ground and everything was very fine and subtle about it. The vanilla, everything was subtle. And then on the heels of that you have a brand called Ben and Jerry’s. Ben and Jerry’s, well, it was served in the same shape pint. That cylinder pint was the antithesis of Häagen-Dazs in its sort of sensorial experience. Ben Cohen had a form of hypoesthesia where he actually had very dull sense of smell and taste. He was born with it. And because of that, he did two things that reinvented what we think of as acceptable for premium ice cream. The first is that he made them ultra sweet: He over-flavored them; he put together ingredients that normally wouldn’t have been, with this Chunky Monkey and… So there’s a lot of…
BeiBei
Cherry Garcia we recently had.
Pauline
That was a best seller. And then the other thing he did is because he couldn’t fully taste the flavor, he wanted more texture, what they call mouthfeel. So instead of this finely minced chocolate or nuts, everything was very voluminous and chunky. And there was a lot of textural combinations in contrast. My point being: The person who loved Ben and Jerry’s might have been looking for a very different experience than the person who loved a gelato or a Häagen-Dazs. And it was such a subtle change, because as I said, it was still sitting on the same shelves in the same stores. Obviously, the visual representation was quite different, almost amateur-like, which was part of its charm. And the naming was colorful and whimsical. But I think the most important thing is he took something that we had a formula for, and he kind of re-crafted what ? feel like, and in so doing–and there was humor in the line and other personality—we developed a relationship with it that went above and beyond when we were just sitting there eating ice cream. And that is in a crowded market. It is not easy to be an upstart in ice cream. Go down any supermarket in the country in that frozen section, and you’ll see there is no empty space; there are so many brands. And that was a time where the big brands were prevailing. And this was an upstart from Vermont.
Another example: Disney. This is a much bigger company. It’s been around a lot longer than Ben and Jerry’s. Disney– I’m just going to talk for a minute about the parks, the theme parks, which are very expensive. I don’t know if you read it, which recently came out of the paper, that at the current price, because of inflation and soaring travel costs, average family of four will spend five to 10 thousands for a few days there.
BeiBei
Oh my god!
Pauline
Very expensive, in the US. And that’s a middle class family. This is not geared toward the uber-luxury, right? And that could be more than 10% of their annual income. So why did they go? And why do they keep going back? When you leave a Disney park, you leave with nothing. It’s not like you leave a Vuitton store and you’ve got your bag, right? Or Chanel cosmetic counter and you’ve got your lipstick. You leave with nothing, except you leave with a memory. And what Disney does so well is it creates a series of experiences and little moments (as well as a few big moments, but mostly accumulation of little moments) that are so colorful, and so delightful, and so evolving, because there are families that go back every year or every other year for years until their kids are in college. And you say I get you go once, but why would you keep going back? Because they keep evolving it. They keep delighting people in new and refreshing ways. And there are so many moments of delight. And what you leave when you leave a Disney park is with memories. And memories and anticipation (meaning the appetite to go back) is about 50% of the perceived value of a Disney vacation. So when somebody says “I spent $5,000 for five days of the park with my family, and that was a lot,” you know what they actually spent 2500 at the parks, spent the other 2500 in some combination of the six weeks before they got on the plane, and six months after they were still talking about that trip. So that’s another experience, it is– to the point where I couldn’t even compare a Disney vacation with a day going to Adventure Land Park. It is not even a theme park. It’s an immersive experience. So it’s kind of created almost its own sector within the entertainment world.
Another example. Again, I want to stay out of luxury. Um, oh there are so many examples. People ask me, well, “Can you actually do this online? Can you actually create digital aesthetics?” And I talk a lot about that, especially in my class (I now teach at Columbia), and everyone is of course consumed with the D2C and with digital representation. And I say “with limitations”. It’s never going to be as good if it’s a standalone online proposition. But I can give you an example of a company that’s done it as well as I could imagine anyone doing it within the constraints, and that is Airbnb. Airbnb, like Disney, it sells nothing. I mean it’s a matchmaker. It has no inventory, right? It’s just brokering. Airbnb did not invent this concept of home or room rentals. In fact, 12 years or so before Airbnb was even launched, you had Craigslist. Craigslist was doing exactly that. Nobody unless they were incredibly price sensitive or desperate, would go on Craigslist. And then certainly if you did get a room on Craigslist, you didn’t expect it to be a joyful experience. There were a number of other companies that launched around the same time or even earlier than Airbnb: HomeAway, VRBO… Why did Airbnb become, you know, the giant in the space? Why is Airbnb’s market cap to the tune of about 20x where Craigslist is, when it was launched so much later? And why is– it’s probably 4x what Expe– what Barry Diller’s group, which they own now– ah,VRBO as part of that group. The reason that– the founders, the two founders of Airbnb came out of Rhode Island School of Design; they were not technologists.
BeiBei
Yeah, I was going to say that, yeah.
Pauline
And they understood from the get-go, that to solve this problem, they had to use the elements of design — in their case, mostly visual design, but even around the placement of photography, the word choices, the style, and form and voice of communication with both the renters and the customers — they had to use all of those tools to foster trust, and to create excitement. And they did it brilliantly. So that would be another example where, again, their competency- they don’t sell anything that I couldn’t buy any other number of ways; I could also still stay at a hotel- but they were able to create magic in their communication and their messaging and in their visual expression.
BeiBei
So you give two, I guess, physical world examples historically (not really far out historically, but at least in modern history), and then one contemporary, a new– I guess, less than 20 year old–story, Airbnb, which is a digital company. That brings up two questions that I’d like to discuss with you. So one is: Among the things that really resonated that you mentioned as upcoming trends is this digital expansion. Where I am in Silicon Valley, it’s– what we teach at Stanford, it’s a lot about digital transformation. Airbnb is certainly a stalwart example, more so from “How do you transform digitally”, rather than the aesthetic angle. But, you know, CX — consumer experience — is certainly one of that. But what I wanted to discuss with you is that you point out this two emerging worlds, which really resonated, out of this whole digital expansion, transformation, whatever you want to call it. One is the automation, the artificial intelligence, robotics, et cetera, and that seems to be unrelenting. The other is this craving for more meaning, relationships, human connections, that are really the core part of our humanity, which senses are rooted in. So I thought– you know, I haven’t thought of this that way, but it really spoke to me. So what as consumers can we expect looking forward, that may be — products or services that may be going a little away from the everything–going–digital? You know, how that may be evolving or even changing?
Pauline
I just want to actually slightly tweak the way you characterized it. I don’t see these as two parallel worlds, although in some ways they are. I see the more emphasis there is on the URL, on the all things digital, the more unmet need and yearning there is for what has made us human for 1000s of years, which is IRL. So they are not independent variables in the sense that we have spent so much energy in the last — particularly the last, oh, over the last 20 years, but I’d say particularly in the last 10, you know, with THIS [holding up the iPhone to the screen] being an extension of our brain — that there’s a part of our human condition that is really thirsting for reactivation, and it is opening the way for experiences that are multi-sensorial, that are immersive. Not in the metaverse sense of the word because that’s still not — you know that [metaverse] form of immersive to me is at best like seeing a great movie. If you said to me — I mean, the first time I went to some of my favorite films like Gone With the Wind, of course, I was utterly rapt for two or three hours. If I had the choice to take my best…my favorite film of all time and watch it, and if it were extended to 24 hours, I’d say “no way”. I cannot sit in a theater, in a dark theater, watching a screen listening to sort of that form of fabricated or digitized sound, for 24 hours. I can do it very happily for two to three hours.
So what’s happening is for the — what maybe used to be a few minutes a day and then turned into a few hours a day, and now might be 12 hours a day especially with COVID; we’re working and we’re doing this interview remotely — for every hour we’re spending doing this, it is like stepping into that movie and stopping the part of our life that gives us a sense of balance, the physical gratification, the human connection that is much more profound if we were having this conversation face-to-face, which would be quite different. We’re making do with it, because we’re practical, and we’re efficient. But it is — we can’t fool ourselves — a little bit like if you were going to go on a diet and you said “okay, well, this is my nutritional needs, and I broke it down as a scientific experiment. And I said, I need certain amount of vitamin A, certain amount of vitamin C, I need a certain amount of volume so that I don’t feel hungry and…” and you just do — you could survive. Many people who are in the hospital for months on end survive on such artificial diets or supplemented diets, but you would not enjoy it. You would not enjoy life and you would not enjoy your meals. And the only thing that makes life worth living and makes us look forward to the next day and makes us creative, and romantic, and imaginative: all of that is emanated in the things that give us joy. So I go back to — so your question is how is this going to play out…
BeiBei
Well, actually, I’ll add something to what I said. So you give a different meaning to “digital divide”: rather than the “haves” and “have-nots”, you’re saying that divide is now the “wants” and “do not wants”. So it’s defined not by access, but by desirability.
Pauline
Yes.
BeiBei
So how would that play out affecting not only what’s coming — as a consumer, what we can expect in terms of new shifts in products and services, and on the flip side, what would you tell companies? Do they need to target one or the other? Or is there a different/optimal way of serving both?
Pauline
Well, so I’ll give you a real world example. I serve on the Board of Neiman Marcus Group. Neiman Marcus is the largest retailer in North America of luxury goods. Neiman Marcus has an online business and e-commerce business that does over a billion dollars in sales. And unlike Farfetch and Net-a-Porter and a lot of the others, it actually makes money. Doesn’t make as much money online as it makes in stores, but it also isn’t operating like a pure play, where its customer acquisition is nearly as high.
Pauline
When I think of that business model, you know, it’s gotten to a size where I always say, “you’re not going to win by playing the Amazon game”. The market may reward us as we have outsized growth in our Online, but our Online will never be what we’re essentially selling. We’re selling two things that Amazon will never be able to do. So Point #1 is you do what others can’t do. If you’re offering just a smarter algorithm, there’ll be an even smarter algorithm that will get — and product is not going to be your limitation here.
So what — why we’re winning? №1, we’re winning because we’re creating an integrated experience where we can no longer look at “are you online, or are you offline”? If you’re customer-centric, we’re everything, we’re both. And my relationship as a shopper with Neiman Marcus has to have a certain seamlessness between the two, which very few companies have done well. I think we’re probably in like the first or second inning of how this could play out over time. But where we really win is in creating an in-store experience that people want to go to, and they want to go there not because the chances of finding something my size are better than if I try it online and I’m disappointed when it comes and it’s not my fit. It’s because I can discover things in the store that I would never discover if I was doing a Google search. It’s because I can have the support of a person in the store, who can give me advice, so that when I — maybe even found that skirt I was looking for, I could have some ideas or some inspiration of how I can finish it and pair it. I can be in a store that — more and more in our Neiman Marcus stores, we’re putting bars and lounges and coffee areas, because the experience shouldn’t just be about buying clothes; it should be a form of retailtainment! I’ve come — maybe there’s a pop-up that is short-lived, and it’s a theme and it’s seasonal; maybe there’s a friend I can meet for lunch or something I can do just to take a break.
So the experience of it has to be more than the transactional, which I think was one of the many areas that most retailers…bricks and mortar retailers have gotten wrong. They were so consumed — for about 50 years — with productivity per square foot. And we as a country are so over-stored; I’d say as a world we are over-stored, we’re over-malled, and we’re selling things that people don’t need. But what they do need is to go back… they need to be delighted: women and men, increasingly men — want to feel and look stylish. This quest for discovery, the enjoyment that comes from discovering, even if you won’t buy it: I like going in stores sometimes because it’s a bit anthropological; I can touch things and see things and I… . I have a daughter who’s going to college; it’s interesting for me to see what her generation is flocking to and staying away from. So that human piece of it will never be done online. Never!
Does that mean that Neiman Marcus should steer clear of all things digital? Of course not. First of all, it already has a big business online. Second of all, it could be very complementary. Thirdly, there are times where I just want a replenishment of my Crème de la Mer; I don’t want to go all the way to a Neiman Marcus store for that one item. And I should have an easy option. But we’re not going to win on that convenience factor.
So that’s my view: the best of the — in all of these categories that are essential, Amazon can continue to win. In addition to just being, you know, fast and plentiful and transparent, and cost effective, is they can supply all my necessities. I have no reason to buy cleaning fluid anywhere else; it gives me no joy, even in the best store environment. So I, I might say my hats off to Amazon. But when I see — and I’ve seen this about a dozen times in the last 10 years — that “Amazon is focusing on beauty and Amazon is focusing on fashion and Amazon wants to go into luxury”, I say “you know what? Good money after bad; they’re not going to do it”. It’s a different mindset that is required having spent my whole career on that other side of the fence.
BeiBei
Neiman Marcus is a large, famous brand, established company. You did also gave, in the book, examples of small emerging companies that are specifically meeting the unmet need of this human craving for whatever that sense might be, whether it’s touch, or…
Pauline
Most companies in this country and in the world are small. They have less than 10 employees. They are…might be described a little bit pejoratively as mom-and-pop. I think you can do very well — very well as a high-performing small business that isn’t chasing sales, that’s deep in the community. People don’t live in countries; they live in neighborhoods, right? And people don’t have relationships with 1000s of people — the average person has probably 150 meaningful relationships. So what I would say to a small business is: go deep, but do it well. Offer something in the form of service or product or ideally some combination of both that feels special and unique and authentically you.
This idea of aesthetic intelligence is not about — the worst thing you can do is copy anyone else, no matter how good. When I see that Microsoft is opening stores and they took the best of of Apple Store designs and made it their version of Microsoft Store, I say that was the worst thing they could have done. Why? №1 because the designs they’re copying were already old Apple. That was Apple circa 2012; that’s not even Apple today. Second of all, it’s so disingenuous; it’s not interesting. You know, if I want that sensibility, I go to the original. So I really encourage them — the smaller businesses — to double down, however imperfect it is, on what is authentically your expression, and bring it into the store, because that’s what people will emotionally connect with, just like that’s what people connect with, in human form.
BeiBei
What’s an example of a company that has been doing well on that front?
Pauline
Oh, I’ll give big companies because the names are also recognizable, but like a Trader Joe’s. Trade Joe’s didn’t study Wegmans or Whole Foods and say, “this is the departments that they’re winning, and this is the marketing campaign that put them on the map and made them commanding of a much bigger marketplace or newer territory than we have”. They just said, “this is what we are.” Trader Joe’s is a big business but didn’t start as a big business. It started…there was a Joe! He died in the last year, and I read his obituary, and I was quite touched by it. And I thought, you know, you still feel — and I never met him; I never went to the original Trader Joe’s store — but the point…
BeiBei
He’s a Stanford grad, by the way. A Stanford MBA.
Pauline
Or he is? I gotta believe, I gotta believe that his aesthetic is very in tune; that the original store didn’t feel all that different than all the other stores that we now see under that banner.
BeiBei
It’s quite quirky. Great customer experience. It’s very different. We shop there every week, almost.
Pauline
What’s important there is that it’s a great employee experience, too; employees are happy. I don’t know another supermarket where employees genuinely enjoy their job. And I don’t know that they enjoy their job because they tell me; I know it because I see their smile on their face. And I’ve been to many different Trader Joe’s. One thing companies do wrong, is they think… they treat their business as a bit of a theater, where there’s a stage, and the stage is what the customer sees, and then everything behind the stage is another story altogether. It’s sort of this: when the curtain goes down, who cares what you express or how you express it and how this all looks? I think a good company is one where the way you treat your people — whether they are employees, whether they are your cleaning staff, your CEO, your customer, your vendors, your marketing agency — there has to be a consistency. That value, the value system which is what you’re expressing through aesthetics, is a value system that has to be true to how you run everything. It can’t just be used for design.
BeiBei
Right. Yeah, it’s like a person: you have to be congruent as a whole being other than just this part vs. that part. So what do you think would make businesses more aware of and value aesthetics? By the way, the Trader Joe’s story makes me think that…they may not have thought of their strategy as an aesthetic strategy. Many companies probably do not think of it through the aesthetic lens, but they have exemplified…
Pauline
The best strategies are not developed as aesthetic strategies; they’re developed as honest ones. It’s just an expression of what you believe and how you believe it. It’s a voice. And that to me — I think you’re absolutely right, you know, I have a whole section of the book where I talked about brand codes. Brand codes are these markers of the brand, like, McDonald’s’ Double M, you know, it could be a tune; it could be anything that we kind of connect with: Chanel Double C and so forth. None of them were developed because they were supposed to be codes; they were part of the…kind of the archive of the company’s history. And they — you know, some clever people, whether they were the founders or designers or marketing — found ways to repurpose them and make them iconic over time.
Pauline
Financial Times when it was first produced…first published…was in London, and it was competing with a local paper. And it had two issues: No 1, it was financially strapped; and №2, that it wanted to differentiate itself from the other business newspaper that came out of London. So they decided to keep that sort of salmon pink tone. It was actually…the first reason was because it was quite expensive to bleach the paper, and so it was a way for them to save money to not have to bleach it. And then secondly, they said, “Plus, it will make us feel different than our arch competitor.” Flash forward over 100…more than 100 years now, it is more expensive today for the Financial Times to produce that color on this paper; it would be cheaper for them to go with just neutral white. But it has become such a powerful code…
BeiBei
You know exactly, immediately that’s FT.
Pauline
I can be 100 feet away from someone, if they’re reading it, I don’t need to see anything — I don’t need to see the font — I know it’s a Financial Times. And, I’d go even further: I have certain assumptions about that person 100 feet away who’s reading a Financial Times: he or she is sophisticated, is worldly, obviously cares about the world of business. I mean, there’re certain associations that are powerful. But my point being: it didn’t start as a code. Codes become that over time. And once they are codes, they’re very valuable. That’s goodwill.
BeiBei
So going back to that question: what do you think will make companies be more conscious of it, and cultivate it more, and value it more?
Pauline
First of all, if I had been around and proselytizing all of this 40 years ago, nothing I would have said would have changed the course of business history. We’re in a different moment in time. And I think most companies, while they may or may not, or let’s just say their CEOs may or may not believe that I have the answer — and I may or may not, but I think for many I do — one thing they do know for sure, is that the way they’ve operated for decades doesn’t work anymore. Just having a reputation is not a pass to market leadership, sort of scale and equity no longer go together. We see that in many industries. Just having more resources — well sometimes that becomes diseconomies of scale, because there’s too much complexity, which is why Tesla is worth so much more than Ford, right? Why is Tesla, which sells a fraction of the cars of Ford or GM, worth so much? Well, because it didn’t have any of the legacy issues. It’s actually a good example of diseconomies of scale, so it could be focused.
Pauline
Innovation: There is not an industry that I can think of other than some, maybe very few commodities that isn’t affected by the technological advances. But you can’t really win on technology up to — it’s a bit like biotech or pharmaceutical: You can get a patent and it can give you a big lead. But eventually, eventually — it might be 10 years, or — but eventually that narrows. In fact, as you get closer every year, it’ll narrow. So how do you win? Well, you don’t win on any of the toolkits that we’ve been taught in, you know, in your case in Stanford, in mine Wharton. Now, you can’t avoid them, because to be a big business, you still have to have a strong supply chain, you still have to use big data, you still have to have financial controls: All of that is to me the price of entry. But you win on, I think on connecting with people in a way that is much harder to replicate; you win on delighting people in a way that takes empathy, and takes creativity and imagination. You win on differentiation…
BeiBei
… and originality…
Pauline
All of that. There may be other paths to originality — certainly there’s a burgeoning field around innovation. But this one is so gettable, right? To me, it’s really hard — like I know people working on artificial intelligence or on… There’ll be some winners, kind of like the California Gold Rush, but you’ll have a lot of people who go there because that’s the next frontier, and they’ll come away empty-handed, a lot of people, because it’s really hard to get that stuff right, and it takes a long time. And even when you get it right — I mean, think of Internet 1.0, right? — it takes time for the world to adapt. I’m not saying that that doesn’t need to keep going on. What I’m talking about is almost catching up with where the world is. The world is looking for these experiences already, and so few companies do it well. And that is why when companies do it well, they are over-rewarded, in my mind. Why is Apple one of the most valuable companies in the world? Its computers don’t have more microprocessing power than its direct competitors. There are competitors, when it comes to technology, have a number of other benefits and advantages. But what they do well puts them in a league of their own in their category. So, I go back to — why do we think people will change now? Because they don’t have a choice not to.
№2: How does it get socialized and executed? Well, my biggest frustration: I was working, and still am to some extent, with one of the biggest old automotive companies. I started…I was brought in by a senior-most person in the company. For a variety of reasons they wanted to rethink of the car, not least of which because of this competitive issue that they don’t know how to get their arms around with the EVs. But, after a few iterations, my initiative sort of started to fall further into some functional trap, where “well, let’s work within product vehicle”; but then “there’s a market research consumer insights team” and… What I realized is if the CEO and the CMO and anyone else who has a seat at that top table isn’t owning these kind of initiatives, it’s lip service. It’s lip service. If I were having an investor meeting, if I were the CEO of a Fortune 500 company, and I had a supply chain issue, I wouldn’t call in my Chief Operating Officer and say, “Can you talk to the analysts about that?” I would feel as the CEO, if that were a critical issue — parts or manufacturing — that I have to speak to it, because it’s just that’s fundamental to my business, even though I have a whole team of people who have civil engineering backgrounds and so forth. So why is it if I were at an analyst meeting, and there was a question about the emotional resonance of your customer experience, would I not feel I need the same grasp, the same ownership, the same insight on that topic? If you believe what I’m saying that this is the differentiator, it cannot be outsourced.
I would like to see — you know, they talk a lot about diversity on the boardroom, diversity in executive management. Great. But the challenge I give is: It’s always diversity in terms of color of skin, of gender, of sexual preference. But why don’t we have any…why don’t we have any artists or cultural leaders sitting on corporate boards?
BeiBei
Thank you! I have been wanting to ask that question forever!
Pauline
I mean, I understand if I had a board of 12, even at Neiman Marcus, I can’t afford to have eight people coming from museums, clearly. But Neiman Marcus is a cultural experience. It is connecting its customer to the zeitgeist — in this case around fashion and style — that is more connected, you could argue, to culture than it is to Silicon Valley. But why do we prioritize having a technologist on the board? So my point being: That to me would be diversity, and that would be a winning formula.
BeiBei
Right! And it’s not even necessarily a technologist or artist, but a different way of thinking, to bring to the table.
Pauline
That’s right. That’s right. And a sensitivity, a sensitivity to the way people operate, and some of these other components. Whether we like it or not, business has moved in; business is so much more than commerce in this day and age.
BeiBei
So we’ve talked much about businesses. Bringing it back to the personal level: So you make this great observation — which I share as well — of this unnatural separation between the personal and the professional, in the world of business and probably in many other trades and professional worlds as well. I haven’t felt as much because as an entrepreneur, you know, the professional and personal lives tend to blend…bleed into each other. But I have — you certainly have inspired me to be more intentional in terms of how I dress. I do dress up for occasions, and I put on some makeup for you today, but in my day-to-day life, I have not been paying much attention to how I dress and how I appear. It doesn’t help to live in California where people tend to be more casual, and certainly the pandemic has made it even worse. But what would you say to people who either don’t think about it or are skeptical, and even averse to the concept of aesthetics? You know, they would think “I am for work ethics, not for aesthetics.” What would you say to them [about] why aesthetics matter for our lives both personally and professionally?
Pauline
Well, the first thing is, as you might remember, there’s a small section of the book on Aesthetics and Ethics. I do not believe aesthetics works in the absence of ethics. There are companies like…Juul is the example I use, the e-cigarette company, that used aesthetics very effectively, but, in my opinion, unethical way, and it caught up with them. At their peak, they were valued at 40 billion, and Altria took a big position. Today, they’re valued at probably 1/20th of that. So my point being, eventually, if your aesthetic representation isn’t married with an authentic and appealing point of view, it won’t work. Point #1.
Pauline
Point #2: When I think of personal aesthetics, I don’t think of style in the sense of, you know, “I gotta read Vogue magazine…or…the Robb Report and figure out how to project myself as a serious person”. I think it’s as much as anything about getting into the fullest expression of who you are underneath. So let’s take Warren Buffett. Warren Buffett, whether he would ever talk about it or not — and of course, I think he would not — has a very strong aesthetic, and his aesthetic works for him supremely well. His aesthetic is not just the disheveled hair and the glasses that haven’t probably changed in 40 years, been oversized, falling down the nose, and the shabby suit, the fact that he drives…I don’t know what he drives…Subaru?…I don’t know what he drives, a practical car. He lives his beliefs, and it gives him a credibility and an appeal, and a sort of folksy accessibility that is so unusual in high finance, even before he had the stellar performance we know he has today…’cause in this case, success breeds success; the more money you have to invest with, the more you can actually turn those results and so forth, so it’s really been a virtuous cycle for him. But he’s been so consistent and so clear, and so coherent, and original, and original.
I used to always say that…I worked at the Carlyle Group — I was a partner for a period of years — and I wrote a little bit about this as well. One of the three founders of Carlyle is a guy named David Rubenstein. If you see him, his image…this is one of the wealthiest men in the country…but his archetype is the exact opposite of a Henry Kravis. Both of them have the same business model. They raise money from many of the same pension funds and other high networths. They pursue the same deals. And they both are very successful. So not one is more effective than the other. They’re both effective, because their demeanor and their expression is true to what they believe. When you go into to Henry Kravis’ office, it is dripping with art. It’s very imposing: he’s got dark wood walls; it feels like, you would imagine, like a robber baron of the early 20th Century. And he himself wears very tailored suits, finest material, Loro Piana, and…; everything about him is studied and refined and expensive. David: he’s the son of a postal worker, and he’s proud of it. He fell into this business — he worked in the Carter administration in the 70s. He’s very creative, but he’s hokey, and he’s sort of socially awkward. It’s part of his appeal! He’s got a good sense of humor. He too, like Warren, has the glasses down the nose, not at all aware of how shabby the suits are. There are investors who would rather go with David because they say “my money is going into the deals and not into his fancy offices”, which are very unfancy. And there are others who say “I’d rather invest with Kravis because that is what success looks and feels like to me, and that’s my aspiration”.
My point is: There is no such thing as good taste, while there is such a thing as YOUR taste. Where I think people struggle is when they either follow formula, which — for example, when I came into the corporate world, there was a formula and it was not considered professional for a woman to, for example, wear as low cut a neckline as I have right now or as dangly an earring as I have right now. I don’t work in a corporate environment anymore, but I wear the dangly earrings today. I don’t live by other people’s rules. And if I’m in a company that is uncomfortable by my expression, I’m in the wrong company.
BeiBei
That’s partly why I got fed up with corporate world very quickly.
Pauline
But you had the fortitude, and I guess the self-honesty, to say, “This is why I can’t stay.” Most people end up complying and it’s a form of oppression. It’s a form of oppression. And they do it out of fear; they do it because they can’t really envision how to be otherwise. From a very young age in our schools, we’re taught that to succeed is to follow the rules. And schools are very rule-bound. Learning is very rule-bound. There is a purpose: I mean, if I was going to be, you know, a train conductor, I better follow the rules; a pilot has to follow the rules; doesn’t have to be creative. But, how many jobs are out there where you’d be better off if you could be yourself? And how much more fun would you have too?
BeiBei
Yeah, I certainly would like to have more fun. I’ve been paying more attention to cultivating inner beauty, but there’s this other side that I…I appreciate, but have not paid enough attention to. So I will follow through.
Pauline
Never too late. And start in small ways. One of the reasons I started the platform I mentioned earlier, Aesthetic Intelligence Labs, is I wanted to give a community of people who are interested, who are not getting their MBA at Columbia or at Harvard, but who do work in the real world, and who do need to express themselves and do have ideas that they want a canvas to showcase, to give them tools for doing really simple things, really simple things, because as I said, you’re not going to be taught this kind of methodology in a traditional school. In fact, I don’t think anyone else in the world is teaching this. So I’ve made it my mission to not just proselytize but actually to provide a platform where people can learn.
BeiBei
A point you make in the book is that aesthetics can be cultivated. An encouraging point.
Pauline
100% of the population has more capacity than they use.
BeiBei
Well, it’s been delightful to talk to you, Pauline, and best of luck with your — so the class coming up on the first of June: is this your debut, or have you run it before?
Pauline
No, I’ve been doing it…this will be my fourth cohort. We launched it in…actually June of 2021. Every quarter we have a new cohort. It’s self-paced, so people don’t have to work alongside others, but it’s a three-month period so that we can sort of give people the various exercises and learnings in sort of chunk…bite size. We recognize that most people are working; they’re busy. They have to do this on their own time. We also have participants from around the world. I have 10 people coming into the next cohort that are refugees from the Ukraine.
BeiBei
Oh wow!
Pauline
I put together scholarship for them because they had expressed interest but couldn’t afford to join. What shocked me, by the way, was one woman who reached out. She said “I’m living in Indonesia; my family is still in Ukraine; it’s terrible time. I would love to take that course; I can’t afford it.” I said to her, “We’ll put aside 10 seats. Help us spread the word.” In matter of days, we had 100 applications. We had to pick 10. We did a few things for the 90 who didn’t make it in. So my point being we have participants from around the world: from Asia, from South America, from Central Europe. One of my surprises — it was a pleasant surprise — is how powerful the community piece is. There’s a community platform. People learn not in a vacuum or in isolation. They learn through the interaction and seeing each other and supporting each other. That’s become a big piece of this platform.
BeiBei
How uplifting! I can have another conversation just on that with you.
Pauline
Well, I hope you’ll join us.
Pauline
Yeah, I will let you go to get started on your Memorial Day. Once again, thank you so much!
Pauline
Thank you. It’s really lovely, lovely speaking with you.
BeiBei
Thanks for spending this time with me. Yeah, I would love to stay in touch and to see how your work develops.
Pauline
And good luck with the podcast.
BeiBei
Thank you so much.
Pauline
OKay.
