(Mentioned in article: Howard Lindzon, Dan McMurtrie, Morgan Housel, Peter Atwater, Donald Trump, Jim Harberson)
I am bothered by the automatic connotation of success across disciplines. There is an old bromide that government would work better with businesspeople at the helm. This is occasionally true when they happen to get elected- which isnâ€™t often. As a rule of thumb, businesspeople usually do poorly in politics over the long term and politicians are inadequate at business. Why? It comes down to the currency that indicates success. In politics, success is measured in votes. In business, it is measured in dollars. Success in one does not confer nuanced understanding of the other. In light of recent events, I have come to realize is that there is a third, important currency in our attention driven world. It isnâ€™t bitcoin. Itâ€™s ratings.
This harkens to a recent â€œPanic with Friendsâ€ podcast, the sharp and witty Howard Lindzon interviewed the equally sharp and witty Dan McMurtrie (Here is the link to this fun interview: https://open.spotify.com/episode/58tsKdg6FzH1q79M6SgpBB).
They agree that things ARE different right now. Itâ€™s a meta â€œReady Player Oneâ€ world. A game within a game for most participants. If you can fund it, â€œfake it â€˜til you make itâ€ is what will succeed. In a world where attention is the lingua franca of success, the bright, shiny objects are what reach escape velocity and carry the day. Cancellation is a significant risk. Startups need buzz. Ratings matter.
This forced me to wonder what has become of staying power? The investment world hinges on interest rates (essentially zero) and return expectations (VC, Crypto, SPACS, Meme stocks, Real Estate) that are at odds with traditional metrics. Having ratings surpassed dollars as the driving factor in business? What happens when the world is not just a cap table? What happened to good olâ€™ cash flow?
The podcast further congealed my thoughts (concerns?) about the features of the â€œattention economy.â€
With the breadth of data and the velocity of the news cycle accelerating, numbers either seem to not make sense or have much impact on decision-making. There isnâ€™t time for synthesis. There is only ratcheting of valuation. That involves the tricky exercise of finding someone who values the endeavor more than the creators do. This can lead to perverse incentives and bad behavior when militarized like in the cases of Theranos and WeWork.
Because of the changed news cycle, the world via social media has embraced the â€œfollower metricâ€ and all forms of social legitimacy based on statistics that strike me as illusory. Frightening to me is the notion that the follower metric can amplify some of the perverse incentives and bad behavior in the business world.
The other scary notion is that the news acceleration has led to the polarization of power and influence on Americaâ€™s political spectrum. This impact has been seismic but seems to make little logical (or numerical) sense. Have ratings supplanted votes as the operative lever for our electoral process?
The Obvious: Dollars as Currency
Dollars- business success assets liquidity, cash those things that are important for people in order to build wealth and otherwise have the leverage to buy the things that they need not only from a lifestyle perspective but from an influence perspective. It’s usually understood that dollars can buy some modicum of notoriety (the whole PR industry is an example) and influence (the lobbying industry). We will see later this money sometimes money can’t do it by itself.
This isnâ€™t to say that politics and ratings donâ€™t translate into business. One need not look far to see examples like the Jenner/Kardashian business model translate to ratings currency into lucrative returns and income streams.
The political lobbying industry is an example of the use of dollars to influence the policy levers of power for business and ratings effect. Examples include the tobacco industryâ€™s co-option of the government to stretch out is business advantage. The influence of big tech (and others) to maintain monopolies in the face of mounting evidence of social media harm is another good example.
Even industries that deal in the business of dollars see the value of “Ratings Currency.” An exaple would be the world of ESG investing. Weâ€™re seeing the world of asset management play along with the warm embrace of Environmental, Social and Governance concepts (managing investments with goals beyond just making money). While the goals are noble, the cynical see this as a dollar-focused business creating bright shiny objects in a sea of sameness and putting “ratings currency” on their balance sheet.
Is Politics about Power or Buzz?
Votes are the manifestation of political will through a set electoral process. The rules are well defined and the path to electoral success and the spoils it confers isnâ€™t complicated in structure. However, as Morgan Housel might put it, the voting process is complicated by human involvement.
It is a different dynamic than extracting dollars from customers or media attention. The voting â€œsaleâ€ requires less compulsion of the buyer than a business transaction. However, it is more active than a passive claim on an individualâ€™s attention. It is that graduation from attention to commitment. The sale requires an understanding of what the majority of voters â€œwantsâ€ on any given issue AND which issues will trigger the (usually) binary of whom to vote for. Great shifts in group psychology have always been difficult to identify and measure, let alone predict.
What goes into go into getting votes? Many things it turns out.
Sometimes it’s money â€“ Michael Bloomberg is a good example is his mayoral campaigns where the brute force of his money helped him win the election. He is also an example where money is not dispositive. His national ambitions could not be advantaged with his limitless resources. Hillary Clintonâ€™s financial advantage was of little help vs Trump and Jeb Bush was cast aside quickly despite early dollar advantages over Trump.
Sometimes it’s ratings- I just alluded to the idea that mass psychology is difficult to identify and measure. â€œRatingsâ€ provides a convenient proxy for the allocation of resources even if the underpinning behind them is unclear. AOC might serve as an example of candidate straight out of central casting. Her backstory, appearance and media friendly (yet polarizing) persona generate the kind of attention that can move mountains in this country. Her grasp of the value of ratings as a currency is obvious. Her ability to convert that into long term political (and business) success has not been established yet.
Most often, there is a competence that people see in a candidate that drives the voting decision. A vote, though a low energy commitment, is a specific choice to name a person to represent their interests within the political process. The connection between voter and candidate is one of trust that rises above the concept or â€œratings.â€ It is also difficult to buy.
Whither the Media (and Ratings Currency)?
â€œRatingsâ€ are this weird thing where people can be popular the most superficial reasons or they can be popular for very good reasons or they can be popular for horrible reasons. This popularity can lead to a formidable currency.
I talked to my friend, Jim Harberson, on the subject of â€œratingsâ€ as currency. (I think heâ€™s well-qualified to talk on the subject as we wrote a horror graphic novel, â€œStay Aliveâ€, based on the murder victim being chosen on the basis of negative social media popularity). He brings up a couple of really good points:
-Ratings can come in many forms and demand a formal definition. I think of them as “measurable popularity.” If we stitch the concept of ratings as currency, I would expand the thought to say “measuraable popularity that can be used for value or leverage.”
-Ratings can be positive or negative (Sully Sullenberger/Charles Manson), and positive and negative fame can translate very differently to votes and dollars (I wonâ€™t vote for a serial killer for president, but I will pay to read his biography). Moreover, ratings may be popular or curated (Twitter trending/MSM reporting). Twitter ratings may be fleeting, but curated ratings may be artificially sustained because the curators are more interested in someone than is the general public (and both types of ratings may influence each other).
-Ratings are also keyed to different audiences and subject to scaling, which itself is subject to scaling depending upon the influence of the audiences (most people know who Brad Pitt is; most people donâ€™t know who Mohammed El-Erian is, but the right people do). Moreover, fame is convertible into money and/or votes more directly and less directly, depending upon the type of fame and whether the conversion is to dollars or votes.
Is “Ratings” its own currency?
What makes ratings so interesting is that, while measuraable, it’s very difficult to define what makes something watchable which makes something that many thousands or millions of people want to follow or want to keep track of or want to emulate. Impressions, clicks, likes, downloads are low commitment expressions of interest. However, they carry significant weight even if they donâ€™t rise to the level of political votes, purchases or views/listens.
Niching and discovery (getting those first 50K followers) is vital. Building the following and elevating the users commitment requires a massive investment in â€œattention discoveryâ€ where one stand out in the crowd. Then you have to make significant resource investment in maintaining consistent and compelling content to hold that attention and make even more investment in graduating that attention into usable commitment. This is the difference between knowing about a book, buying a book and then reading a book. Each step represents a step up in the ratings currency game.
That is the reason ratings in the attention economy have value even though the link between ratings and votes can be tenuous. It is an economy based on promise.
This promise is something that is a value and currency unto itself. Sometimes that can translate to dollars. Sometimes that can translate to votes. However there’s something about ratings that can be hard to handicap. It’s a charisma . . . it’s a watchability . . . it’s being camera ready . . . it’s having a wonderful voice . . . it’s having a message It’s something that promises better, invites trust and establishes connection. Like pornography, we know it when we see it, but it isn’t easy to predict what will connect with the zeitgeist and capture its imagination.
Of a different note, Social Media has further disrupted the attention economy. Twitter disintermediation, individual publishing capabilities, worldwide access to distribution and permeation (amongst dozens of other developments) have displaced many of the traditional gatekeepers and the emergence of cancel culture.
I still have to think about this, but my initial read is that â€œCancel cultureâ€ is the publicâ€™s attempt to convert ratings currency into a proxy for voting currency. This occasionally clumsy attempt to graduate ratings into â€œvotesâ€ is both a catalyst and symptom of the news cycle acceleration. However, it has had the effect of increasing the stakes and the risks of dealing with this currency. Itâ€™s no wonder that traditional industries and political structures are averse to this currency- even when it Is the multiplier that can be a competitive in advantage.
Testing the Mental Model on an Outlier: Donald Trump
I was curious to see if this framework held any water. In a haze of a few fitful nights. I thought about the framework of dollars, votes and ratings and its application to an example that continues to perplex me: Donald Trump. His â€œglowâ€ encompasses all three currencies. I have watched his career over the past 40 years. This comes with growing in in Westchester County, NY I guess.
What major Trump stages come to mind?
-The ascendancy under his fatherâ€™s wing. His command of the New York levers of power in furtherance.
-The ego, his meteoric â€œriseâ€, the colossal failures, the daft initiatives, the publicity, the rebirths and the pivots. Only New York City could create him.
All of this led to the insane notion of a Trump presidency. Ask any New Yorker if they thought he realistically had a chance right up until the late afternoon of Election Day in 2016.
And what did DJTâ€™s Early History lead to?
Trump inexplicably swept aside 13 Republican primary candidates- committing one fatal faux pas after another (remember McCain?) along the way that would have killed any other candidacy yet somehow raising more money and drawing bigger crowds.
Then he defeated what, on paper, seemed to be the most qualified Democratic candidate in a long time in a societal moment begging for the coronation of a woman as president.
To wash it down, Trump then bludgeoned, bullied and bore his way through the presidency. Every day was a ratings bonanza for both sets of news networks that designed their programming to document the culture of conflict for each of their respective bases.
Trump then presided over the biggest societal earthquake that this country has faced since World War II. He then proceeded to LOSE a national election with a wounded economy recovering under his watch with the biggest turnout by far against a low energy candidate who committed one gaffe after another during the election.
Does this point to any conclusions? Does the Trump example help us to understand the ratings as a driver of economic or political success? Or is it a success metric on its own terms?
Was Donald Trump successful in dollar terms? Yes and no.
One area that Donald Trump gets a lot of credit but is actually a source of shame for him in many cases is his grasp of the second currency . . . dollars. Trump inherited a real estate empire from his father Fred. However, he’s gone through several bankruptcies involving many different types of endeavors. Itâ€™s not something he can say he built from the ground up. It’s something that he’s tried to maintain over time and it’s been very difficult for him.
He knows how to get deals done and has innate sense of the limits of leverage (so much so that he takes a running leap and jumps over those limits and lets his partners and lenders deal with the wreckage).
However, his wealth is of a certain size (even if exaggerated/distorted) that it has to be taken seriously by those who analyze him.
Was Donald Trump successful in voting terms? Yes . . . and then no.
An interesting phenomenon for Mr. Trump has been in the area of votes he obviously was able to parlay some financial strength and a little bit of a advantage in the political fund raising system.
Back in 2016 he was also able to take the ratings that he had in his brand awareness and completely sweep aside a whole host of republican challengers that didn’t take place in 2020 which is strange because he actually won the ratings game.
If you look at his at the turnout records of Trump vs Biden outstripped any Obama election by many percentage points. It is this feature that surprises me the most. Trump won the ratings battle but ultimately lost the votes war and may ultimately lose the dollars war if his empire faces carpet-bomb-style litigation. Irony of ironies, his lack of anticipation of what was important to people in the voting scheme and the inability to build a trust relationship beyond his core following was what led to his political undoing.
In the Trump example, the ratings advantage helped win him the Republican nomination and the presidency. In a stunning turnabout, his ratings advantage proved to be a NEGATIVE in winning him re-election- even when winning the second most votes of any US candidate ever and was a part of the largest turnout in American political history.
In 2020, his polarization fired up BOTH bases and for many in the middle who entrusted him with the job, they felt his performance represented the withdrawal of that trust. It will be interesting to see where â€œname recognitionâ€ and â€œratingsâ€ candidates like Andrew Yang (in the NYC mayorâ€™s race) come out in a world where the ratings currency seems to have exploded in the financial world and deflated in the political world.
Where is Trumpsâ€™ true success? The Currency of Ratings
One area where Donald Trump truly shines is in the ratings game and this has been the case for many years. If you go back to the early 80s Donald Trump was the consummate self-promoter.Â
As a real estate developer in New York as a fledgling NFL wannabe owner, as a branding machine with a variety of different products (including steaks and water) and finally as a reality show host and media personality.
Donald Trump knew and, I guess, continues to know how to do one thing: get ratings
To look at his impact you really only have to look at CNN and Fox News to see what has happened after he’s departed the political stage at least temporarily- their ratings are down by almost 50% in some cases.
He learned from the â€œbestâ€ in Roy Cohn and Lee Atwater and lesser lights like Roger Stone. They were the ones that said that no publicity was bad publicity, if you were attacked, hit back twice as hard twice as quickly and finally don’t let any good deed go unpunished these are all concepts that have warned him well in a real estate sense the man loved conflict and conflict leads to ratings.
Ratings are something that drives much of what happens in the media and Donald Trump at root understands the media even better than media companies themselves.
I think the thing that’s particularly interesting about Mr Trump is the fact that his relevance lay in the intersection of his marketing and his sense of public relations and he has a long tradition of name recognition (his is already discovered so his notoriety costs are minimal) and he has developed a low-cost engine for delivering consistent content even after being de-platformed from most social media.
The man truly understands that conflict is really what interests people. People are more interested in the car crash than the race â€“ especially in a high velocity news cycle. This is Trumpâ€™s fundamental understanding and core to his â€œbusiness model.â€
The fight itself is the light that he gives off that many just don’t understand. He enjoys conflict, bullying and leverage. He is not blessed with the â€œgift of shameâ€ (to steal a great line from the Simpsons). His lack of shame in dealing with people whether it’s creditors, voters, governmental agencies, constituents or anyone makes him something that’s unique in American Society. Ultimately that’s something that Americans want to watch and a competitive advantage for Trump in the American three currency system.
How should we think about Trump going forward?
Ratings are oxygen to Trump. It is the currency he values most. It drives any dollar or voting success for him.
It is foolish to underestimate him. He has a following. He has dollar and vote resources. He understands the currency of ratings better than anyone in the world. He, unlike anyone else, is willing to â€œgo thereâ€ and double, triple and quadruple down on a seemingly illogical position. These are superpowers in a ratings currency society.
I think his support is fragile. To my mind, his popularity is rooted not in competence, achievement or intellectual grounding, but as a sparkly counterpoint to conventional wisdom and demographic and social change. While his stature has proven durable over the years, the crush of aging is undefeated and his acolytes will probably scatter if the financial or political pillars of his support buckle.
Is Our World Falling Apart because of the Ratings Currency? (No.)
Itâ€™s not often that will someone come out of a thought exercise about Donald Trump and feel better about the logic of societyâ€™s usual workings. I did and Iâ€™m becoming more comfortable with my three-currency mental model.
Let’s remind ourselves: in politics, success is measured in votes. In business, it is measured in dollars. Ratings (as currency) measures popularity and translates to value or leverage.
In the Donald Trump example, ratings couldnâ€™t completely replace the logic of business or the political system. Numbers, math, process- they finally bore themselves out. The distortive effects of the â€œattention frameworkâ€ regressed back to the mean in the case of Trump (so far).
In business and investing, the ratings game continues to be in vogue. Investors continue to place more and more faith in it. Venture capital, SPACS, meme stocks, cryptocurrencies, sky-rocketing residential real estate, cheap borrowing are the rage. These all seem to be informed by an â€œanalysisâ€ of social mood and broad investor confidence rather than an analysis of traditional concepts like cash flow and customer acquisition and margins.
In politics, the value of the ratings currency reached a point of diminishing returns in 2020 for Trump. The Republican party felt the brunt of that. Against that backdrop, the political process is in a relative ratings vacuum with the usual hangover from a national election and with the deflationary ratings impact of Trumpâ€˜s desperate non-presence . With Trump still the focus of the Republican platform for the near future, it is tough to tell what the value of the ratings will be in generating votes (and electoral wins) when his absence has deflated the ratings in the political sphere.
The problem with the ratings currency in an attention economy is that even if it maintains its value, its impact on dollars and votes is fragile, never certain, often inconsistent and occasionally at odds with conventional wisdom and social mood/preference. Donald Trump delivers masterclasses in dealing with and manipulating the ratings currency. As we have seen, his superpower hasnâ€™t always translated into the business and political worlds, but it has acted as a useful, if inelegant, hedge when he runs into trouble on those fronts.
(PS- as I hit send, Iâ€™m already thinking about a fourth currency tentatively labeled as â€œbulletsâ€, â€œconflictâ€ or â€œviolence.â€ My thinking is that the ability to wade in these pools has a distinct value in my currency framework. Those who are expert in it have a source of leverage (and also risk) that others donâ€™t.)