The Obama Bubble

By Randy Fardal

President Obama, entirely lacking in business experience, could learn something about branding from the high tech sector. At the dawn of the tech bubble, startups began to realize the importance of branding -- creating market awareness or "buzz" about a company and its products. As is common with trends, branding became a fad. Small companies soon were shifting large portions of their product development budgets to Super Bowl ads and stadium naming rights. When many products inevitably fell short of their buzz, companies producing them were weakened and the tech bubble burst.

It's a good allegory for the 21^st century US presidency. Like many pre-bubble tech nerds, President Bush apparently believed that self-promotion would cheapen the Office of the President, so he did little of it. For instance, when competitors attacked his Social Security privatization plan, he didn't defend it, even though he was right and his demagogic opponents were wrong. In terms of political branding, the Bush administration was pre-bubble.

Now we have a president that, as they say in Bush's Texas, is all hat and no cattle. With a quarter-page résumé, he is little more than a brand name. And like the tech bubble, the Obama bubble is in danger of bursting, despite his plan to spend another billion campaign dollars inflating it over the next 14 months.

During the high tech bubble, many sell-side analysts, such as those at investment banks, overestimated the market value of certain firms. In fairness to the analysts, most were quite professional and even partitioned from the banking business. But their superiors often edited the reports to make them more optimistic because they hoped to underwrite an IPO or secondary offering for the firms they covered.

At the same time, many buy-side analysts, such as those managing mutual funds, switched from being value investors like Warren Buffet, to become trend investors like George Soros. They knew that the lofty valuations were unjustifiable, but they also realized it was dangerous to "fight the tape" so they too issued overly optimistic buy recommendations -- perhaps with tighter stop-loss orders though.

Similarly, Big Media "sell-side" journalists hoped to profit from a far-left presidency, so they hyped Obama, Inc. Leftist Big Media companies may have expected an Obama administration would hobble their talk radio competitors with the Orwellian "Fairness Doctrine." In addition, PBS and NPR have strong incentives to support candidates such as Mr. Obama, that are likely to help them tap deeper into the public treasury via taxpayer subsidies, tax-exempt business designations, and tax benefits for their donors.

General Electric, which in 2008 owned NBC and MSNBC, might have hoped to get favorable treatment for the wind turbine business it had purchased from Enron. NBC's "Green Week" promotions certainly had the appearance of journalistic feathering of the corporate nest. Even some non-conflicted "buy-side" journalists shrugged and played along because they feared fighting the populist trend. Or being called racist.

However, Obama's valuation, as measured by his poll numbers, has fallen enough to hit the implicit stop-loss triggers set earlier by wary buy-side journalists. They no longer fear accusations of racism and they don't care whether the polling trend recovers slightly, because now it's clear that Obama, Inc. never will achieve its original hype.

During its 2008 "IPO", Obama, Inc. was hawking virtual bottles of magical potion with a "Hope and Change!" smiley face label. But since then, none of its products has met the minimum tests for safety and efficacy. The products proved instead to sicken, not heal the economy, and Mr. Obama's foreign policy appears to be nurturing terrorist regimes. Peeling off the smiley face label reveals old images of Jimmy Carter and Hugo Chavez.

A recent New York Post column details the hype problem:

What's most perplexing about all of this: Barack Obama had undeniably the greatest, most successful product launch of the 21st century. Weeks before winning the presidency, he won Ad Age's "Marketer of the Year" Award, beating such brands as Apple, Nike and Coors. It was a hard-won honor: No presidential campaign in history had been run with such airtight, top-down control, with veteran political consultant David Axelrod stressing an aesthetic and thematic unity that resulted in the consistent use of a lovely font, two pithy slogans and high-tech advances. One of the first applications designed for the iPhone was the official Obama for America app.

...it all felt very organic and authentic, inviting and human. But when then-White House social secretary Desirée Rogers sat for a glossy profile with the WSJ magazine in April 2009, she let slip a cynical truth: "We have the best brand on Earth -- the Obama brand," she bragged. "Our possibilities are endless."

Then the smiley face label gradually peeled off:

Three years on, Barack Obama -- overexposed, way too talkative and kind of cranky -- now exists in what the Harvard Business Review calls "product limbo." It's a byproduct of the content not aligning with the sales pitch.

At this rate of decline, Obama, Inc.'s valuation soon will hit the Big Media sell-side journalists' stop-loss triggers, and they too will begin dumping. They watched the housing bubble take down hundreds of banks, so they might fear that a bursting Obama bubble could take down hundreds of Big Media journalists. To use another Wall Street metaphor, even Big Media partisans aren't dumb enough to try catching a plummeting refrigerator, so they'll just step aside and cut their losses, as they ultimately did with Carter.

How can Obama, Inc. re-brand its failed product line? Perhaps it will use its billion-dollar branding fund to place "New! Improved!" stickers over those old misleading "Hope and Change!" labels. Unfortunately for Mr. Obama, everyone already knows that the potion in those allegorical bottles still is toxic.