Tech

This Is Your Public Relations Nightmare

What community banks understand, and some tech companies don't, about building political clout.

Welcome to Capitol Hill.

Photographer: Alex Wong/Getty Images

If you are looking for examples of companies that do well at public relations, start with what determines personal trust. We often trust people we have met, interacted with and maybe done business with.

Facebook's Zuckerberg to Tell Congress 'I'm Sorry'

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.

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?

Then, make sure that most users, or for that matter vendors, never have a face-to-face interaction with the company. Let everyone deal with software, whether they are bidding for ads on Google or opening a Facebook account. 1  Make it so easy for them that they never have to drive to a local branch to ask a human being a question or initiate a personal relationship.

If you wanted to go further yet, you might imagine that a disproportionate share of the staff and the executives would be immigrants, and on top of that make the corporate leaders relatively young.

Your design for this public relations disaster might also include a lot of companies being run by their founders. Founders are often brilliant and substance-obsessed, and they focus on rapidly scaling up the provision of quality products to their consumers. They are not always well-equipped at dealing with the most frustrating angles of their jobs. This is especially true for younger companies, where no process of evolution has weeded out those founders poor at public relations or who cannot master the imperatives of long-term survival. The innovative drive of founders may or may not have much correlation with the patience and social savvy required to handle public opinion, Congress and the media.

For the final piece of the disastrous PR design, the most successful companies are not used to failing. Their basic systems and culture are set up to handle and reward rapid success, not to play defense. They are not built to understand why people might, rightly or not, object to a product given away at zero price.

You might think all of the talent and money of these companies, and their considerable public relations departments, will overcome those disadvantages. Yet for better or worse it is hard to override Americans’ natural inclinations. Polls consistently show that Americans trust small business much more than big business, even though large companies are more likely to treat you in a uniform, straightforward and nonfraudulent manner. The large companies have the skilled public relations talent, yet that doesn’t swing opinion in their favor.

One of the big news stories, and PR challenges, of this week will be Facebook founder Mark Zuckerberg’s testifying before Congress. Soon, Washington may be taking a crack at regulating the major tech companies. Yet the defenses of those companies aren’t nearly as strong as they might seem. And we have been building a political system that favors the time-honored company rather than the radical innovator.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
  1. As a disclaimer, Google and Facebook have been donors to the university research center I am affiliated with, Mercatus.

To contact the author of this story:
Tyler Cowen at tcowen2@bloomberg.net

To contact the editor responsible for this story:
Stacey Shick at sshick@bloomberg.net

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