There is life after ‘shareholder value’ for businesses that step up to society’s challenges. Post pandemic, trust in business is at a high. Just don’t blow it.
Trust has always played an important role in successful brands. In low involvement categories, a brand is often simply a name that’s recognised and trusted. But trust has come to mean more than just assurance of quality or service. In society, trust is at a premium as it wanes for media, politicians and charities. Trust is often the cause of our discomfort with advertising and its exaggerated claims or cultural bombast. But as trust declines all around, we seem to have simultaneously entered a new stage in the acceptance of the role businesses play in society. The best now want to prove their motives beyond profit and, call it desperation if you like, we seem willing to hear them out.
To understand the role of consumer trust in this environment is to understand the changing nature of brands and advertising. It sheds light on the logic of a new kind of brand, like Tesla, that can conquer a category without massive ad spend. But it also shows why stunts like buying cars with Bitcoin are doomed to fail. More on that later.
The established texts will tell you that your brand should be like a person, one that people ‘respect and trust’. This is true but can’t be solved in a workshop on brand personality. In life, we trust actions that evidence good intent and people who take care with their words. For too long brands have been focussed on the external expression of their proposition through the caricatures of advertising.
The cultural moment is changing and an opportunity opening up for businesses that get it. This may run counter to the quantitatively evidenced playbook of The Ehrenberg-Bass Institute — that we think little of brands and choose those most repetitively stamped into our memory. But arguments built on consumer data only ever tell us a story about who we used to be. If we want to see culture-shifting on the horizon we need to put some faith in the capacity for change.
Earlier this year, Edelman ran its annual Trust Barometer survey in which they assess trust across global industry sectors. The findings were genuinely surprising. After trust in government hitting a high the previous year, at a time when populations looked to the state at the outset of the pandemic, this year trust in governments cratered. Trust in business rose in its place.
In 2021, trust in business increased in 17 of 27 countries, buoyed by successful vaccine development and workplace schemes and against a backdrop of political polarisation and what Edelman calls an ‘infodemic’ across the media. Trust in all forms of media declined. This is part of an ongoing crisis for social media but the huge drops for both web search and traditional media are surely a consequence of news outlets drawing ever more extreme positions in the Trump years.
Now, Edelman finds themselves in the unlikely position of announcing their respondents find a corporate newsletter to be more ‘believable’ than government communications or traditional media. Business is reaping the benefit of increased transparency around issues like sustainability (see the below chart) and, if the survey is correct, people are looking to CEOs to lead on societal issues — sustainability, systemic racism, job automation, and upskilling. Post-pandemic, business is perceived as both competent and ethical.
There also appears a link between the increased trust ratings of sectors where technology has driven a customer-centric disruption of the old status quo. Financial Services and Energy have evolved from very low scores in the previous decade to make big gains. As more value comes back to us from green energy companies with missions we care about or fin-techs that help us manage our money rather than quietly reaping the rents of distressed finances, so trust in these sectors grows.
What’s this got to do with Tesla and bitcoin? Let’s start with one of the most persistent barriers that has prevented businesses from making long-term change towards better environmental and social performance, the idea of shareholder value. This is the Chicago School philosophy behind the CEO’s fixation on quarterly earnings. The anxiety of a sinking share price leads to the postponement of investment in future gains for the protection of short-term margins.
Harvard Business School Professor Rebecca Henderson argues that markets’ fixation with quarterly earnings is due more to the line they draw between this metric and the quality of a businesses’ management. She observes that since the ride investors went on in the early days of Amazon — in its first five years on the NASDAQ Amazon lost nearly $3b, when it eventually went positive it was valued at $318b despite only $600m in profits — Wall St has become more comfortable with the long view. The parabolic ascent of the likes of Tesla, Square, Shopify and Zoom show investors can look a long way past earnings for the spoils of disruptive business models. Many of those disruptors are now focused on solving environmental and social problems.
Henderson describes how Walmart sank 10% in 2015 on the CEO’s announcement that investments in e-commerce and improved pay for hourly employees would take time to yield their return. But she sees change in new approaches to accounting that seek to put a cost line against the negatives of harmful CO2 emissions or poor labour rights, citing the Sustainable Accounting Standards Board (SASB). Its aim is for all investors to be able to summon ESG data on a business as easily as they do financial data.
Take a look at the comments of central bankers to see attitudes shifting here as well. Fed Chair Jerome Powell has signalled his intention to risk inflation in pursuit of better employment and labour rights, in order to fight the earning disadvantage that skews to American minority populations. The ECB’s Christine Lagarde has been vocal about monetary strategies to tackle climate change, ranging from limiting the ability of ‘brown’ companies to raise debt to improved financial modelling and disclosure. Wherever these things land, the signalling is clear. Monetary policy has become politicised and a rapacious notion of shareholder value no longer serves the interests of investors.
Tesla, bitcoin and bad behaviour
Which brings us to Tesla. Elon Musk frequently looks like a masterclass in managing a brand outside of the old channels. Whether that’s rallying a retail investor army to put faith in his stock when institutions refuse or spraying saga from his Twitter feed to create a tailwind of news print and social buzz. Musk can be erratic but the brand message is usually consistent. That’s why it was confounding when he announced that Tesla had bought $1.5b bitcoin and was accepting payment for its products in the cryptocurrency.
Not because the instability of bitcoin makes it a strange substitute for dollar purchases (particularly while it is appreciating at a wild rate) but because of the energy cost that’s a well-documented consequence of bitcoin mining. Its annual carbon footprint is more than that of the Netherlands or Egypt. When he made the announcement there were some grumbles but the speculative fever driving bitcoin and cult of Musk are such that it went unremarked by the majority. Now though, he himself is walking it back.
That the carbon footprint of buying a Tesla with bitcoin is such that it sinks the environmental benefit of the vehicle is indefensible. Now he says, “We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” In simple terms, Tesla’s actions were out of step with the promise that elevates and motivates its brand. In a culture shifting to punitive policies to address decarbonisation, this couldn’t remain unaddressed. No doubt it’s not the end of the story for his involvement in cryptos but unless bitcoin can solve this problem, Musk’s retreat may signal the beginning of an existential crisis for the token.
The modern brand is outside-in
Tesla’s great achievement has been to bring down a boundary that’s often existed between the ‘inside and outside’ of brands. Musk has aligned himself to the democratizing forces of disruption and benefited. The rise of retail trading platforms that allowed the masses into markets buoyed Tesla when Wall St might have failed it. And it’s understandable that crypto is in Musk’s sights as a similar force, capable of redistributing power.
This is how Tesla draws people closer to the businesses from which they may one day buy products and services. By giving them a share in the value the business creates, something beyond the one-way transaction.
Patrick Newbury and Kevin Farnham’s 2013 book ‘Experience Design’ makes the case for building brands as living embodiments of their value proposition, seeing that customers experience and share that value in every interaction. They see the flow of value from a business to its customers as running two ways, with an upstream flow of brand meaning and belief returning from customers if a business successfully bestows its value on them.
This can’t be achieved if the mindset of the business is to beam a singular expression of value strategy to consumers through advertising communications. A two-way flow means letting people into the brand to experience value in tangible ways and to iterate that value together.
Internal strategy expressed through external communications assumes that what the business thinks about itself will therefore make sense to its customers. In the age of decarbonisation, liberated from the short-sightedness of shareholder value — in the age of Tesla — that looks like a blinkered approach.
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