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Archive for September, 2008

[Note: This was originally written in April, when we were just beginning to understand what a mess the mortgage market was. The fact that it’s still relevant now is not a little frightening.]

I was waiting for my train with a friend who trades bonds, when I thought, Here is a perfect opportunity for someone to explain to me, a simple advertising guy, just exactly what the heck was going on with the economy.

What he said was that none of the people who usually buy the bonds are buying them. Why? Because they don’t know what risk is bundled into them. And because they’re not buying them, the folks who are selling are holding off on generating more debt. Which means they won’t lend to guys like us. Oh, and sidenote – it’s not just the buyers; the sellers don’t know exactly what the risk is in the bonds they’re selling either. And that further erodes the trust between buyers and sellers, which, my friend felt was the long-term problem.

“Is that all?” I said. “Brother, I deal with that stuff all the time, and if that’s all that’s wrong with this economy, then we’ve got nothing to worry about.”

Because what he had just described is a branding problem. These bonds have no brands.

Look, a brand is what a consumer thinks your product is and not what the seller thinks it is. It’s the shorthand, the mishmash of everything he or she knows about your product – what it tastes like, what it feels like, what other people say about it, the advertising for it today and ten years ago, the features, the benefits, the endorsements, the price – everything he or she knows about it. The consumer’s shorthand. That’s the brand.

If the consumer doesn’t have that shorthand, you’re not in the game. Even a bad, inaccurate shorthand, is better than nothing, because at least you’re on their radar. But no idea? That means you’re not even in the game. So they don’t buy you.

That’s what’s going on here. These bonds need a brand. The sellers need the buyers to have a good idea of what they are – an idea that’s not going to come just from the sellers. How could it? Would you trust a product was good just because the guys selling it to you told you it was? Do you?

These bonds need a brand. That’s all. And the good news is, guys like me are paid to figure this stuff out every day. And we’re happy to help. Cash in advance, of course…

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