Chapter 5 - Business and the Public

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• THE relationship between business and the public has become closer in the past few decades. Business to-day is taking the public into partnership. A number of causes, some economic, others due to the growing public understanding of business and the public interest in business, have produced this situation. Business realizes that its relationship to the public is not confined to the manufacture and sale of a given product, but includes at the same time the selling of itself and of all those things for which it stands in the public mind.

• Public-Private partnership. A little different, but still cut from the same cloth as the WEF-styled modern partnerships.

• Selling its image and what it stands for. This reminds me of how corporations have become overtly political in the past decade or so. From things like Black Lives Matter and the LGBT movement, particularly pride month rainbow flag logos everywhere, corporations are trying to virtue signal at every chance they have. Obviously this is (mostly) nothing more than pandering for dollars in an ever tightening economy. We see this clearly in game studios that will edit their games depending on what region of the world it is selling in. For example, LGBT flags were removed from Spider-Man 2 in the middle eastern release of the game. Not all studios do this - Final Fantasy 16 was not made for sale in Saudi Arabia because of their noncompliance with removing certain LGBT parts of the game. Other examples include movies self-censoring LGBT content in movies released in China. The corporations (mostly) don’t care about LGBT and are merely using it as a way to virtue signal in the appropriate regions to hopefully increase profits.

• Twenty or twenty-five years ago, business sought to run its own affairs regardless of the public. The reaction was the muck-raking period, in which a multitude of sins were, justly and unjustly, laid to the charge of the interests. In the face of an aroused public conscience the large corporations were obliged to renounce their contention that their affairs were nobody’s business. If to-day big business were to seek to throttle the public, a new reaction similar to that of twenty years ago would take place and the public would rise and try to throttle big business with restrictive laws. Business is conscious of the public’s conscience. This consciousness has led to a healthy cooperation.

• The major example of muck-racking that resulted in - different than intended, but worthy - change would be Upton Sinclair’s “The Jungle.” A book in which the horrors of the meat-packing industry (and the treatment of the new migrant labor) were laid bare for the public to see. The results were legal reforms. We see here and in the modern time, the corporation does not care about treating employees fairly or delivering a quality product. They care only for profit and will only change when compelled. They likely find it easier to proactively virtue signal their pro-the-current-thing attitude to gain public support rather than wait for someone to rake up their current muck.

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• Another cause for the increasing relationship is undoubtedly to be found in the various phenomena growing out of mass production. Mass production is only profitable if its rhythm can be maintained— that is, if it can continue to sell its product in steady or increasing quantity. The result is that while, under the handicraft or small-unit system of production that was typical a century ago, demand created the supply, to-day supply must actively seek to create its corresponding demand. A single factory, potentially capable of supplying a whole continent with its particular product, cannot afford to wait until the public asks for its product; it must maintain constant touch, through advertising and propaganda, with the vast public in order to assure itself the continuous demand which alone will make its costly plant profitable.

• Even Bernays admits it is all, at the end of the day, for profit.

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• The growth of newspapers and magazines having a circulation of millions of copies, and the art of the modern advertising expert in making the printed message attractive and persuasive, have placed the business man in a personal relation with a vast and diversified public.

• This is exactly what we see today with social media, blogs, and influencers instead of newspapers and magazines.

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• An oil corporation which truly understands its many-sided relation to the public, will offer that public not only good oil but a sound labor policy. A bank will seek to show not only that its management is sound and conservative, but also that its officers are honorable both in their public and in their private life. A store specializing in fashionable men’s clothing will express in its architecture the authenticity of the goods it offers. A bakery will seek to impress the public with the hygienic care observed in its manufacturing process, not only by wrapping its loaves in dust-proof paper and throwing its factory open to public inspection, but also by the cleanliness and attractiveness of its delivery wagons. A construction firm will take care that the public knows not only that its buildings are durable and safe, but also that its employees, when injured at work, are compensated. At whatever point a business enterprise impinges on the public consciousness, it must seek to give its public relations the particular character which will conform to the objectives which it is pursuing.

• Things are quite different these days. It is more likely that officers of a corporation are corrupt than honorable and they use public relations to hide that fact. Even that last line reveals that it only want to “give its public relations the particular character” and not actually (though it could possibly) adopt that mode of operation. In modern terms I would say: the optics or narrative matter more than objective reality.

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• The public has its own standards and demands and habits. You may modify them, but you dare not run counter to them. You cannot persuade a whole generation of women to wear long skirts, but you may, by working through leaders of fashion, persuade them to wear evening dresses which are long in back. The public is not an amorphous mass which can be molded at will, or dictated to.

• There have been a few of these lines where it feels like Bernays it trying to cover his ass. He waxes on and on about how the thoughts we have are not our own. How even in private we are still herd animals and while we assume we are making our own decisions, we are actually at the beck and call of the propagandists’ whims. Then he sprinkles a few crumbs like this expressing how the public isn’t completely helpless to propaganda. If he took this middle ground, that the public is somewhat pliable for the whole book, I wouldn’t even be making these recordings. But, that isn’t what he is saying. He is very clear in his position. I state again, from chapter 1, paragraph 1:

  • The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.

  • We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of.

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• The relationship between business and the public can be healthy only if it is the relationship of give and take.

• That ship has sailed a decade before this book was even written. Corporations take. They are, in the USA, legally obliged to maximize shareholder profits. From wikipedia: Dodge v. Ford Motor Co., 204 Mich 459; 170 NW 668 (1919), is a case in which the Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than in a manner for the benefit of his employees or customers. It is often taught as affirming the principle of “shareholder primacy” in corporate America, although that teaching has received some criticism. At the same time, the case affirmed the business judgment rule, leaving Ford an extremely wide latitude about how to run the company.

• A jewelry store may complain that its patronage is shrinking upwards because of its reputation for carrying high-priced goods; in this case the public relations counsel might suggest the featuring of medium-priced goods, even at a loss, not because the firm desires a large medium-price trade as such, but because out of a hundred medium-price customers acquired to-day a certain percentage will be well-to-do ten years from now.

• I can’t argue with these tactics, but I reiterate that they are only doing what they think will maximize their long-term profits. They are, in this example, willing to take a loss today for better profits ten years from now. Today we see this in a shorter terms where stores will use “loss leaders”, items they sell at a loss, to get customers into the store in the hopes that they might make other, more profitable, purchases. This is generally as far as it goes in terms of short- versus long-term planning. Many corporations are helmed by CEOs who’s compensation is dictated by quarterly profits. They will often run a company into the ground in the long-term in exchange for higher short-term profits and golden parachutes.

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• The public relations activities of a business cannot be a protective coloring to hide its real aims. It is bad business as well as bad morals to feature exclusively a few high-class articles, when the main stock is of medium grade or cheap, for the general impression given is a false one. A sound public relations policy will not attempt to stampede the public with exaggerated claims and false pretenses, but to interpret the individual business vividly and truly through every avenue that leads to public opinion.

• I argue that the entire point of PR is to hide the real aims (profit) behind virtue signalling. This, as unappealing as it may be, is only a minor issue though. The real concern I have is that propaganda applied by bad actors (with no morals) to politics, and what might un-hyperbolicly be referred to as “world domination”, has been and is currently leading the globe into a dystopian future.

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• While the concrete recommendations of the public relations counsel may vary infinitely according to individual circumstances, his general plan of work may be reduced to two types, which I might term continuous interpretation and dramatization by highspotting. The two may be alternative or may be pursued concurrently.

• Continuous interpretation is achieved by trying to control every approach to the public mind in such a manner that the public receives the desired impression, often without being conscious of it. High-spotting, on the other hand, vividly seizes the attention of the public and fixes it upon some detail or aspect which is typical of the entire enterprise.

• “Continuous interpretation” is straightforward - control the message completely. “High-spotting” would be, as the example given but not quoted here, focusing on making your new building 10 feet taller than the tallest building to make it seem better overall.

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• The tendency of big business is to get bigger. Through mergers and monopolies it is constantly increasing the number of persons with whom it is in direct contact. All this has intensified and multiplied the public relationships of business.

• We can see the natural conclusion to a hundred years of mergers and monopolies today. Our media is controlled by a handful of parent companies. Our retirement and investment (if you even have one) accounts are controlled by less than a handful of ultra powerful firms. Pick almost any industry and look at the companies in it. You will often find numerous subsidiaries that are reside under a handful of umbrella parent corporations. AT&T was broken up in anti-trust suits that pale in comparison to what companies like Microsoft and Google have today.

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• There is no detail too trivial to influence the public in a favorable or unfavorable sense.

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• Public opinion is no longer inclined to be unfavorable to the large business merger. It resents the censorship of business by the Federal Trade Commission. It has broken down the anti-trust laws where it thinks they hinder economic development. It backs great trusts and mergers which it excoriated a decade ago. The government now permits large aggregations of producing and distributing units, as evidenced by mergers among railroads and other public utilities, because representative government reflects public opinion. Public opinion itself fosters the growth of mammoth industrial enterprises. In the opinion of millions of small investors, mergers and trusts are friendly giants and not ogres, because of the economies, mainly due to quantity production, which they have effected, and can pass on to the consumer.

• This result has been, to a great extent, obtained by a deliberate use of propaganda in its broadest sense. It was obtained not only by modifying the opinion of the public, as the governments modified and marshaled the opinion of their publics during the war, but often by modifying the business concern itself.

• The public opinion that large trusts, mergers, and mammoth industrial enterprises are good things is a result of propaganda. It would seem to follow that before said propaganda was employed, the public opinion of mega corps was negative. Then, via propaganda, it was changed to positive. This is another attempt at painting a picture where the corporations (or governments) are following the will of the people. The reality is that propagandists cultivated this public opinion for the benefit of the mega corp.

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• But it would be rash and unreasonable to take it for granted that because public opinion has come over to the side of big business, it will always remain there. Only recently, Prof. W. Z. Ripley of Harvard University, one of the foremost national authorities on business organization and practice, exposed certain aspects of big business which tended to undermine public confidence in large corporations. He pointed out that the stockholders’ supposed voting power is often illusory; that annual financial statements are sometimes so brief and summary that to the man in the street they are downright misleading; that the extension of the system of non-voting shares often places the effective control of corporations and their finances in the hands of a small clique of stockholders; and that some corporations refuse to give out sufficient information to permit the public to know the true condition of the concern.

• “Come over” isn’t as accurate as “brought over” (via propaganda. “Illusory” voting power. “Downright misleading” financial statements. “Effective control … in the hands of a small clique.” Is it any wonder that propaganda must be employed to paint big business as favorable when the engage in such tactics as these? Again I wonder, where is the “truth” that Bernays and Scientific America were lauding a few chapters ago.

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• The trends he speaks of in the following paragraph are anti-business trends.

• The public relations counsel should anticipate such trends of public opinion and advise on how to avert them, either by convincing the public that its fears or prejudices are unjustified, or in certain cases by modifying the action of the client to the extent necessary to remove the cause of complaint.

• “Convince” the public, don’t “prove” to the public.

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• A merger may bring into existence huge new resources, and these resources, perhaps amounting to millions of dollars in a single operation, can often fairly be said to have been created by the expert manipulation of public opinion. It must be repeated that I am not speaking of artificial value given to a stock by dishonest propaganda or stock manipulation, but of the real economic values which are created when genuine public acceptance is gained for an industrial enterprise and becomes a real partner in it.

• He can keep saying he only supports honest propaganda, and we might even grant him this position, but this is no longer the case. I would even argue that “honest propaganda” would be called “information.” You don’t, or shouldn’t, need to manipulate people if you are speaking truthful information.

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• The growth of big business is so rapid that in some lines ownership is more international than national.

• This is beyond what I want to cover here, but Smith and Ricardo both made points that the internationalization of businesses would lead to societal decline. When a businessman outsources his factory for increased profits, he does so at the expense of his own nations people and ultimately the very society he resides in. Today we have reached a crescendo where these businessmen have outsourced (or imported cheaper labor) to the point where many nations are crumbling. They themselves can now-a-days escape to wealthy enclaves to avoid the effects of their lust for profit while the citizens languish. This is seen acutely in the “99% vs 1%” slogans.

• The new technique of public relations counsel is serving a very useful purpose in business by acting as a complement to legitimate advertisers and advertising in helping to break down unfair competitive exaggerated and overemphatic advertising by reaching the public with the truth through other channels than advertising. Where two competitors in a field are fighting each other with this type of advertising, they are undermining that particular industry to a point where the public may lose confidence in the whole industry. The only way to combat such unethical methods, is for ethical members of the industry to use the weapon of propaganda in order to bring out the basic truths of the situation.

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• Take the case of tooth paste, for instance. Here is a highly competitive field in which the preponderance of public acceptance of one product over another can very legitimately rest in inherent values. However, what has happened in this field?

• One or two of the large manufacturers have asserted advantages for their tooth pastes which no single tooth paste discovered up to the present time can possibly have. The competing manufacturer is put in the position either of overemphasizing an already exaggerated emphasis or of letting the overemphasis of his competitor take away his markets. He turns to the weapon of propaganda which can effectively, through various channels of approach to the public—the dental clinics, the schools, the women’s clubs, the medical colleges, the dental press and even the daily press—bring to the public the truth of what a tooth paste can do. This will, of course, have its effect in making the honestly advertised tooth paste get to its real public.

• Propaganda is potent in meeting unethical or unfair advertising.

• Shouldn’t the false claims that the initial manufacturer made be seen as such in time? If they said the toothpaste whitened your teeth, but after using several tubes your teeth were no whiter, would that not be enough for the free market to determine the claims were false? Bernays seems to be stuck on the idea that the masses are so stupid they can’t figure anything out for themselves. If you make a false claim, the masses will never figure out it was false unless some other propagandist sets their story straight. Again, I belabor the point, wouldn’t the actual truth of what the product does trump any advertising, unethical or not?

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• Years ago, when the country was smaller and there was no tremendous advertising machinery, it was comparatively easy to get country-wide recognition for a product. A corps of traveling salesmen might persuade the retailers, with a few cigars and a repertory of funny stories, to display and recommend their article on a nationwide scale.

• This is exactly how pharmaceutical (and likely other) salespeople still do it. Offer some free tickets to the ball game and a kickback for every prescription written. Before you know if you’ve got an opioid epidemic on your hands.

• Over the next several pages a speech given by Mr. O. H. Cheney, Vice-President of the American Exchange and Irving Trust Company of New York is recounted. It goes into details about inter- and intra-industry competition. Where it is obvious that toothpaste manufacturers are competing, but less obvious that textile and heating industries are in competition. Warmer clothes equal less need to run your furnace as much. More keenly you can see this inter-industry competition in foods. We are literally limited in how much we can eat, but have access to a plethora of competing foods. If I eat more meat, the fish industries may go bankrupt. If I eat more vegetables the meat industries may suffer. And vice-versa. Today this kind of competition is still seen and has even expanded to vie for your attention. Are you a Facebook or Instagram user?

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• If low price is the only basis of competition with rival products, similarly produced, there ensues a cut-throat competition which can end only by taking all the profit and incentive out of the industry.

• The logical way out of this dilemma is for the manufacturer to develop some sales appeal other than mere cheapness, to give the product, in the public mind, some other attraction, some idea that will modify the product slightly, some element of originality that will distinguish it from products in the same line.

• This is still done today. I’ve recently read Alex Hormozi’s first two books and he focuses on this differentiation vs. cheapness extensively. There can only be one cheapest and being the second cheapest is worth nothing. On the other hand, you can differentiate upwards and be MUCH more expensive if you offer something none of the competitors offer.

• Over the next few pages Bernays explains how the hat industry was manipulated. This is basically the same as the other examples so I won’t quote it. Get prominent people to display and talk about your hats in the media. Rinse and repeat. Profit.

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• Amusement, too, is a business—one of the largest in America. It was the amusement business—first the circus and the medicine show, then the theater— which taught the rudiments of advertising to industry and commerce. The latter adopted the ballyhoo of the show business. But under the stress of practical experience it adapted and refined these crude advertising methods to the precise ends it sought to obtain.

• Entertainment and advertising clearly go hand-in-hand still today. Celebrity and athlete endorsements are worth many millions of dollars because certain faces alone will get fans to buy this or that. It goes the other way as well. When you see rudimentary product placement, a Ford car in a movie for example, you can be almost assured that Ford paid (and donated the cars themselves) to have their product slipped subconsciously into the movie-goers mind. There is a third, more insidious, technique that is very popular today called native advertising. This is more commonly know and sponsored content and is when an influencer (for example) does a “review” of a product and makes it seem like they aren’t getting paid to give the review. Even if the segment is explicitly noted as being paid for, it appears the same as the other content on that channel and thus disarms the viewer into forgetting they are watching a paid advertisement.