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  • Thirteen trillion dollars in wealth

  • has evaporated over the course of the last two years.

  • We've questioned the future of capitalism.

  • We've questioned the financial industry.

  • We've looked at our government oversight.

  • We've questioned where we're going.

  • And yet, at the same time,

  • this very well may be a seminal moment in American history,

  • an opportunity for the consumer to actually take control and guide us

  • to a new trajectory in America.

  • I'm calling this The Great Unwind.

  • (Laughter)

  • And the idea is a simple, simple idea,

  • which is the fact that the consumer has moved from a state of anxiety

  • to action.

  • Consumers who represent 72 percent of the GDP of America

  • have actually started, just like banks and just like businesses,

  • to de-leverage, to unwind their leverage in daily life,

  • to remove themselves from the liability and risk

  • that presents itself as they move forward.

  • So, to understand this -- and I'm going to stress this --

  • it's not about the consumer being in retreat.

  • The consumer is empowered.

  • To understand this, we'll step back and look at what's happened

  • over the last year and a half.

  • So if you've been gone, this is the CliffsNotes

  • on what's happened in the economy.

  • (Laughter)

  • Unemployment up. Housing values down. Equity markets down.

  • Commodity prices are like this.

  • If you're a mom trying to manage a budget,

  • and oil was 150 dollars a barrel last summer,

  • and it's somewhere between 50 and 70,

  • do you plan vacations?

  • How do you buy?

  • What's your strategy in your household? Will the bailout work?

  • We have national debt, Detroit, currency valuations, health care --

  • all these issues facing us.

  • You put them all together, mix them up in a bouillabaisse,

  • and you have consumer confidence that's basically a ticking time bomb.

  • In fact, let's go back and look at what caused this crisis,

  • because the consumer, all of us, in our daily lives,

  • actually contributed a large part to the problem.

  • This is something I call the 50-20 paradox.

  • It took us 50 years

  • to reach annual savings ratings of almost 10 percent.

  • Fifty years.

  • Do you know what this was right here? This was World War II.

  • Do you know why savings was so high?

  • There was nothing to buy, unless you wanted to buy some rivets.

  • What happened, though, over the course of the last 20 years,

  • we went from a 10 percent savings rate to a negative savings rate.

  • Because we binged.

  • We bought extra-large cars, supersized everything,

  • we bought remedies for restless leg syndrome.

  • All these things together basically created a factor

  • where the consumer drove us headlong into the crisis

  • that we face today.

  • The personal debt-to-income ratio basically went from 65 to 135 percent

  • in the span of about 15 years.

  • So consumers got over-leveraged.

  • And of course our banks did as well, as did our federal government.

  • This is an absolutely staggering chart.

  • It shows leverage, trended out from 1919 to 2009.

  • And what you end up seeing is the whole phenomenon

  • that we are actually stepping forth and basically leveraging

  • future education, future children in our households.

  • So if you look at this in the context of visualizing the bailout,

  • what you can see is, if you stack up dollar bills,

  • first of all, 360,000 dollars

  • is about the size of a five-foot-four guy.

  • But if you stack it up, you see this amazing, staggering amount of dollars

  • that have been put into the system to fund and bail us out.

  • So this is the first 315 billion.

  • But I read this fact the other day,

  • that one trillion seconds equals 32,000 years.

  • So if you think about that,

  • the context, the casualness with which we talk about

  • trillion-dollar bailout here and trillion there,

  • we are stacking ourselves up for long-term leverage.

  • However, consumers have moved.

  • They are taking responsibility.

  • What we're seeing is an uptake in the savings rate.

  • In fact, 11 straight months of savings have happened

  • since the beginning of the crisis.

  • We're working our way back up to that 10 percent.

  • Also, remarkably, in the fourth quarter,

  • spending dropped to its lowest level in 62 years --

  • almost a 3.7 percent decline.

  • Visa now reports that more people are using debit cards than credit cards.

  • So we're starting to pay for things with money that we have.

  • And we're starting to be much more careful about how we save and invest.

  • But that's not really the whole story,

  • because this has also been a dramatic time of transformation.

  • And you've got to admit, over the last year and a half,

  • consumers have been doing some weird things.

  • It's pretty staggering, what we've lived through.

  • If you take into account that 80 percent of all Americans

  • were born after World War II,

  • this was essentially our Depression.

  • And so, as a result, some crazy things have happened.

  • I'll give you some examples.

  • Let's talk about dentists, vasectomies, guns and shark attacks.

  • (Laughter)

  • Dentists report molars -- people grinding their teeth,

  • coming in and reporting that they've had stress.

  • So there's an increase in people having to have their fillings replaced.

  • Gun sales, according to the FBI, who does background checks,

  • are up almost 25 percent since January.

  • Vasectomies are up 48 percent, according to the Cornell Institute.

  • And lastly, but a very good point,

  • hopefully not related to the former point I just made,

  • which is that shark attacks are at their lowest level from 2003.

  • Does anybody know why?

  • (Laughter)

  • No one's at the beach.

  • So there's a bright side to everything.

  • But seriously, what we see happening,

  • and the reason I want to stress that the consumer is not in retreat,

  • is that this is a tremendous opportunity

  • for the consumer who drove us into this recession

  • to lead us right back out.

  • What I mean by that is we can move from mindless consumption

  • to mindful consumption.

  • Right?

  • (Applause)

  • If you think about the last three decades,

  • the consumer has moved from savvy about marketing in the '90s,

  • to gathering all these amazing social and search tools in this decade.

  • But the one thing holding them back is the ability to discriminate.

  • By restricting their demand,

  • consumers can actually align their values with their spending,

  • and drive capitalism and business to not just be about more,

  • but to be about better.

  • We're going to explain that right now.

  • Based on Y&R's BrandAsset Valuator,

  • proprietary tool of VML and Young & Rubicam,

  • we set out to understand what's been happening in the crisis

  • with the consumer marketplace.

  • We found a couple of really interesting things.

  • We're going to go through four value shifts

  • that we see driving new consumer behaviors,

  • that offer new management principles.

  • The first cultural value shift we see

  • is this tendency toward something we call "liquid life."

  • This is the movement

  • from Americans defining their success on having things

  • to having liquidity,

  • because the less excess that you have around you,

  • the more nimble and fleet of foot you are.

  • As a result, déclassé consumption is in.

  • classé consumption is the whole idea that spending money frivolously

  • makes you look a little bit anti-fashion.

  • The management principle is dollars and cents.

  • So let's look at some examples of thisclassé consumption

  • that falls out of this value.

  • The first thing is, something must be happening

  • when P. Diddy vows to tone down his bling.

  • (Laughter)

  • But seriously, we also have this phenomenon

  • on Madison Avenue and in other places,

  • where people are actually walking out of luxury boutiques

  • with ordinary, generic paper bags to hide the brand purchases.

  • We see high-end haggling in fashion today,

  • high-end haggling for luxury and real estate.

  • We also see just a relaxing of ego,

  • and sort of a dismantling of artifice.

  • This is a story on the yacht club that's all basically blue collar.

  • Blue-collar yacht club -- where you can join,

  • but you've got to work in the boatyard as condition of membership.

  • We also see the trend toward tourism that's a little bit more low-key:

  • agritourism -- going to vineyards and going to farms.

  • And then we also see this movement forward from dollars and cents.

  • What businesses can do to connect with these new mindsets

  • is really interesting.

  • A couple things that are kind of cool.

  • One is that Frito-Lay figured out this liquidity thing with their consumer.

  • They found their consumer had more money at the beginning of the month,

  • less at the end of the month.

  • So they started to change their packaging:

  • larger packs at the beginning of the month,

  • smaller packaging at the end of the month.

  • Really interestingly, too, was the San Francisco Giants.

  • They've just instituted dynamic pricing.

  • It takes into account everything from the pitcher match-ups,

  • to the weather, to the team records,

  • in setting prices for the consumer.

  • Another quick example of these types of movements is the rise of Zynga.

  • Zynga has risen on the consumer's desire

  • to not want to be locked in to fixed cost.

  • Again, this theme is about variable cost, variable living.

  • So micro-payments have become huge.

  • And lastly, some people are using Hulu

  • as a device to get rid of their cable bill.

  • So, really clever ideas there that are being taken ahold of

  • and that marketers are starting to understand.

  • The second of the four values is this movement toward

  • ethics and fair play.

  • We see that play itself out with empathy and respect.

  • The consumer is demanding it.

  • And, as a result, businesses must provide not only value,

  • but values.

  • Increasingly, consumers are looking at the culture of the company,

  • at their conduct in the marketplace.

  • So we see with empathy and respect

  • lots of really hopeful things come out of this recession.

  • I'll give you a few examples.

  • One is the rise toward communities and neighborhoods,

  • and increased emphasis on your neighbors as your support system.

  • Also, a wonderful by-product of a really lousy thing,

  • which has been unemployment,

  • is a rise in volunteerism that's been noted in our country.

  • We also see the phenomenon -- some of you may have "boomerang kids" --

  • these are "boomerang alumni,"

  • where universities are actually reconnecting with alumni

  • and helping them with jobs, sharing skills and retraining.

  • We also talked about character and professionalism.

  • We had this miracle on the Hudson in New York City in January,

  • and suddenly Sully has become a key name on BabyCenter.

  • (Laughter)

  • So, from a value and values standpoint,

  • what companies can do is connect in lots of different ways.

  • Microsoft is doing something wonderful.

  • They are actually vowing to retrain two million Americans with IT training,

  • using their existing infrastructure to do something good.

  • Also, a really interesting company is GORE-TEX.

  • GORE-TEX is all about personal accountability

  • of their management and their employees,

  • to the point where they really kind of shun the idea of bosses.

  • But they also talk about the fact that their executives --

  • all of their expense reports are put onto their company intranet

  • for everyone to see.

  • Complete transparency.

  • Think twice before you have that bottle of wine.

  • (Laughter)

  • The third of the four laws of post-crisis consumerism

  • is about durable living.

  • We're seeing in our data that consumers are realizing

  • this is a marathon, not a sprint.

  • They're digging in and looking for ways to extract value

  • out of every purchase they make.

  • Witness the fact that Americans are holding on to their cars

  • longer than ever before: 9.4 years on average, in March.

  • A record.

  • We also see the fact that libraries have become a huge resource for America.

  • Did you know that 68 percent of Americans now carry a library card?

  • The highest percentage ever in our nation's history.

  • So what you see in this trend is also the accumulation of knowledge.

  • Continuing education is up.

  • Everything is focused on betterment, training,

  • development and moving forward.

  • We also see a big DIY movement.

  • I was fascinated to learn that 30 percent of all homes in America