Which companies are likely to be good or bad at public relations?

That is the topic of my latest Bloomberg column, the community banks are likely to be good, here is one excerpt:

I think of community banks as enjoying relatively high levels of trust. Millions of Americans have walked through the doors of their local banks and dealt with the loan officers, tellers and account managers, giving the business a human face. A community bank cannot serve a region without sending out a fair number of foot soldiers. Banks tend to have longstanding roots in their communities, and a large stock of connections and accumulated social capital.

In turn, community banks have converted this personal trust into political clout. There are community banks in virtually every congressional district, and these banks have developed the art of speaking for many different segments of American society, not just a narrow coastal elite. When these banks mobilize on behalf of a political cause, they are powerful, as illustrated by the likelihood that they will get regulatory relief from the Dodd-Frank Act, probably with bipartisan support. They have such influence that one member of the Federal Reserve Board must be a community banker, even though few economists see much rationale for this provision.

Given their usefulness, it would be wrong to describe community bankers as a stagnant sector of our economy. Still, the same features that make them trusted and politically powerful also make them unlikely to be major sector disruptors.

Already you can see a problem shaping up, as perhaps the faster-growing, higher productivity gain companies will have less experience.  And indeed often the very dynamic, big tech companies are not so good at public relations:

Alternatively, let’s say you were designing a business that, whatever its other virtues might be, would not be very good at public relations.

First, you would make sure the business had come of age fairly recently. That would ensure the company didn’t have a long history of managing public relations, learning how the news media work, figuring out what it will or will not be blamed for, and rooting itself in local communities.

The next thing you might do is to concentrate the company’s broader business sector in one particular part of the country. That would ensure that the companies’ culture didn’t reflect the broadest possible swath of public opinion. Better yet, don’t choose a swing state such as Pennsylvania or Ohio, but rather opt for a region that is overwhelmingly of a single political orientation and viewed by many Americans as a bit crazy or out of touch. How about Northern California?

There is much more at the link.  The clincher of course is this:

And we have been building a political system that favors the time-honored company rather than the radical innovator.


Good article. I think doctors enjoy too much trust, and HMOs not enough, for much the same reasons.

Facebook's problems seem solvable from the outside (they have a huge user base and just need to make noisy "improvements"), but maybe for some reason it doesn't look so easy from the inside.

Oddly enough, car dealers have a lot of political clout, even though presumably fewer people trust them. Costco, which tends to have good PR, looked into whether they could extend their popular business model to selling cars and found it would require state-by-state lobbying and litigation trench warfare.

No, politicians know supporting the dealers costs them a lot of votes and donations. Heck, my state's political platform has a plank calling for the end of the dealer model and Costco could easily buy the primaries. Even though Tesla is a fraud they are to be commended for fighting them.

The real problem is the manufacturers won't stand up to them. Costco could get a license easily enough under existing state law and is just being lazy. Do what I do and commit to never buying a new car until they end the dealer model and restore negotiable title. Frankly the old ones are better by all objective criteria anyway.

Dealers as a whole have PR problems, but individual dealers have high levels of trust. Congress gets about the same ranking in these polls, but
90 percent of individual Congressmen get re-elected.

While I didn't read the book at the link, a large number of major companies have willfully violated the law and attempted to defraud me personally, have been convicted criminally of such violations, and have yet faced zero accountability.

Community banks lack the resources to be up to anything.

Facebook and similar companies get everything they want from government - low effective tax rates, a subsidized workforce and infrastructure, and unlimited zero-cost capital from state pension funds and employer-sponsored retirement schemes. While they are pretending to hold hearings, nobody critical of FB can articulate a request that could be drafted into a bill, and even if they did, anyone stupid enough to advertise with them isn't going to cut back just because they don't know the target's sister's fake birthday that they entered into the system.

Good article. One thing I've noticed is that tech bros do not put much faith in "high touch." They view human to human bonds as a bug, not a feature. Facebook, Etherium, Redfin, self driving cars, etc. all try to eliminate the human to human experience. But they can't come out and say that, so they make vague pro-social claims about enhancing the traditional experience. However, within the refuges of their offices they are perfectly comfortable being anti-social. They believe it's the future. They may be right too.

It both delights and appalls me that the Bloomberg piece is probably the best basic-dynamics explainer about political and policy public relations I've ever read. And I've been working in PR for 30 damn years.

Well done, Tyler!

Does Tyler need to get consistent on the significance of small business? In Complacency he seemed to argue that the decline in creation of small businesses was a crisis but now he seems to be endorsing the Big is Beautiful line that small businesses are irrelevant and nobody needs them no how.

Also seems a bit self-serving to advocate that winning PR approval from the public opinion shaping industry (ie firms like Bloomberg) is the best way to shape public policy.

No, I'm thinking maybe community banks are getting relief from Dodd-Frank is that Dodd-Frank is abominable public policy and killed off tons of the little banks it was supposed to be helping: https://www.forbes.com/sites/carriesheffield/2015/02/09/dodd-frank-is-killing-community-banks/#14697f1b73a7

And really, "even though few economists see much rationale for this provision?" What economists are not able to see could fill volumes. Occupational hubris doesnt strike me as persuasive.

What this article demonstrates most aptly is that we should be looking to lawyers, tea leaf readers, or random winos, anybody but economists, for public policy advice.

I am fascinated by the way Trump is destroying people who come arrayed against him. Seemingly without trying.

So the connection is that this week it seems to be Silicon Valley's turn. Did Facebook do anything wrong? Not really. But the hysteria over Trump's election means that the latest iteration of the Russian collusion freak out requires Facebook to be blamed for allowing data to be passed on.

Up to this point Facebook had been doing brilliantly at PR. They survived Zuckerberg's creepiness as a student and his screwing of the Vinklevoss twins (or whoever they were). But now the Zuk has to go on a Global Crawling on His Belly Apology Tour. Not because they did anything bad, as such, but because the narrative they bought into requires a victim at this point and so they have to confess in the best Show Trial fashion.

I expect Twitter will not be far behind. Both have managed to turn their reputation for free-wheeling Hippy-like openess into a record of repressive authoritarianism.

Compare with Microsoft that has never tried not to be evil. But they don't care.

Will Apple be the next to go? They have nonsensical tax problems. The problem is the only people who would defend them vote Republican. When the mob turns on them, what will they do?

Who exactly is getting 'destroyed' here? What does '(next) to go' mean here? Check FB's stock price and then you can answer. Once Trump is gone in less than 3 years, every company you listed will still be crushing it, and all their founders will still have higher net worths than Trump.

All of the locally-owned, community, banks in my low country home, under the weight of bad loans, disappeared during the great recession, taken over by larger national or regional banks, in many cases not voluntarily. "Community banks" are like "small businesses": they exist in the minds of politicians and lobbyists, serving the interests of national and regional banks and large businesses. I suppose one could say they are good at "public relations" , but only in the sense that the public is so gullible. Don't cry for the "community banks" and "small businesses", cry for the "dynamic, big tech companies", who Cowen informs us are "not so great at public relations" even though, or because, each is a "radical innovator". I think I get Cowen's point: the "community bank" may not be a "radical innovator" but isn't disruptive either, while the "big tech companies" are both dynamic and disruptive, and as Cowen and his friend Jonathan Haidt inform us, Americans are complacent, don't like "radical innovation", and above all else wish to avoid disruption and the pain and discomfort that may result. I would point out that the "big tech companies" employ the same time-honored public relations as the "community banks", in the former case by promising such nonsense as flying cars and spaceships to Mars to distract from their actual business of selling advertising and invading the privacy of their users.

The entire thesis of this post is refuted by your example.

1) "When these banks mobilize on behalf of a political cause, they are powerful, as illustrated by the likelihood that they will get regulatory relief from the Dodd-Frank Act" [SNIP]

The parties driving this are the lobbyists of the Big Banks, who are practicing a 'thin edge of the wedge' strategy. After the small banks are 'relieved' of these 'onerous' regulatory burdens, the Big Five will step in to 'claim their share'.

2) If you knew anything about community banking, you'd understand that the so-called 'clout' you invoke [we call them deposits] exists within their markets/catchment areas, and not a mile beyond.

3) The idea that thousands of local community banks could throw their weight around DC to do their bidding betrays a naivety that astonishes even a cynic like myself.

Have you ever had a real job?

It seems odd to me to be praising big business for being more standardized as though that is something customers want. This seems highly likely to result in all customers being treated at some point on the spectrum that is favorable to no one.

For instance, in some regions of the country customers like small talk while interacting with cashiers and the like, in others they would prefer to talk with no one. A standardized policy would split the difference and, say, have the cashier mumble some platitude.

Likewise, if you are going to have advertising in your business that depicts potential customers you may improve your image in coastal metropolis by having same-sex couples, religious minorities, etc. depicted while that might make customers in rural areas less inclined to do business there.

Uniformity, on anything that touches the ever increasing polarization divide, is going to be bad. Particularly as people tend to think their own positions are normative and have a hard time establishing where the "middle" actually lies.

Take Facebook. The liberal side of the partisan divide is appalled at "Fake News" and will be hard on Facebook if they let "hatemongers" have a platform ... but their definition of "hatemongers" includes people like Charles Murray, Nigel Farage, and Thomas Sowell. Conservatives, on the other hand, look around and see where things like abortion policy are terribly misunderstood (e.g. we had to have a full "Fact Check" to establish that US abortion laws are more liberal than all but a dozen odd countries in the world), firearms mechanics and trends are routinely misstated (e.g. semi vs. full automatic), and where religious opposition to same-sex marriage is not faithful adherence to millennia old religious teachings but just "bigotry".

There is not a "uniform" approach that will make both sides happy. And this is part of the brilliance of the franchise model. The core skills are uniform and where there is broad agreement you get uniform treatment, but where there are localisms they are respected.

Also, of course, there is the power differential. A major chain can afford to write off your entire town, and indeed often has more regional clout than your whole town. Facebook, Walmart, Amazon, and can basically take any individual's entire life and ignore it. Your local shop, which survives on reputation cannot do so. Losing a single customer may be a few percentage of total revenue, particularly if you lose their family and some of their friend networks. People prefer to be on more even footing, not relying on lawsuits which will be decided by people other than them on terms not dictated by them.

In short, Facebook and all other major companies are not going to be able to keep the median user happy in a bimodal world. Their sheer power will make them feel like a bully every time they upset anyone. This will result in the public seeking redress through a stronger entity and preferring when possible to use smaller organizations (or at least signalling such).

I find it both amazing and disturbing that Tyler (and virtually all comments thus far) implicitly buy the idea that disruption is inherently good. Those large disruptive tech companies are to be admired? The customer relations of Microsoft, Google, etc etc are very poor and those of community banks are enviable models. Yes, the giants are nondiscriminatory - they treat all their customers equally poorly. Is that the goal we are setting?

The reasons are simple: good customer relations do not scale well. Scale economies offer real benefits, but there are costs as well. These are poor customer service and increasing concentration. Shouldn't economists be concerned with both the benefits and costs?

While I was writing I see that a number of other comments came in - by others that also find the original argument shallow or misguided.

If community banks are so valued why is their number decreasing pretty rapidly. Using search giant Google (are there any other search engines these days) one gets an immediate hit from none other than the Mercatus Center!!!! https://www.mercatus.org/publication/small-banks-numbers-2000-2014 shows the a 28% decrease in the number of small banks and percent of deposits dropped by half. The weekly list of at risk banks is pretty much community institutions. Other than Sandy Spring Bank in my area, I am hard pressed to name another one (Montgomery County Maryland).

What's a community bank?

Their were 2 banks in the community where I grew up. The loan officers and managers had gone to high school with the loan applicants and depositors, their kids played on the same little league teams, etc. They made loans to local businesses, auto loans, etc. Ownership was local, the boards were local business people.

The banks sponsored the little league teams, scout troops, bought tickets to community fundraisers, ads in the local paper and high school yearbook.

One bank is still community in that sense, one was bought out 20 years ago by a regional chain, and is now only semi-community. The survivor has been and is financially conservative, the bought out guys got too aggressive.

Where I live today (suburbs) there are probably 12-15 banks within 3 miles of my house, some national like Chase, some I've never heard of beyond the sign. I would not consider any to be community banks.

As to why the number of community banks is decreasing, they face major, probably insurmountable, obstacles in both technology and regulation, with regard to both cost and implementation.

What's a "community bank"?

Mr. Potter from It's A Wonderful Life was a community banker. I didn't get the sense that people loved him. Indeed, bankers are always the villain in American popular culture (think Bonnie and Clyde, Hell Or High Water, John Mellencamp's farm songs). The community sees the guy holding their mortgage as a necessary evil at best. It's a little odd to me that (community or otherwise) they would be seen as having good PR.

Aside from a nice mortgage rate my community bank has been useless or worse -- aggressively gumming things up when a major disaster hit our house despite an excellent response from our insurance company.

I've extensively mystery shopped banks big and small for years, and you really need to shop around for someone who is dedicated and knowledgeable, then hope they don't leave.

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