Salesmanship Got Us In. Can It Get Us Out?

JENNIFER STEINHAUER / NY Times 28jul02

OF course in retrospect, it all seems quite clear now. A lot of New Economy snake oil was sold on Wall Street and in boardrooms in the 90's and Americans, as they have always done, took large helpings, and then seconds. Good old American salesmanship — the kind that brought you George F. Babbitt, Weight Loss Without Dieting! and Gov. Jesse Ventura — was in rare form when it came to selling success-proof businesses.

But if Americans love a good pitchman, they also pride themselves on common sense. So now that the New Economy has taken on the distinct taint of, say, the junk bond, the American investing public shows signs of going in the other direction — turning its back on the reasoned sales pitch of even the most fundamentally sound firms.

So from this point on, it will be up to not just the pitchman on Wall Street to restore faith in the country's economic future, but to that equally revered expert in the art of salesmanship, the American politician — who in his role as sculptor of the public mood has already been called on to sell the public a new confidence.

So far, the experts say, it promises to be a tough sell.

It turns out that the end-of-the-century sales pitch was not so different from those of the swindlers among the river-town rubes in "Adventures of Huckleberry Finn." Salesmanship, both by honest brokers and scoundrels, has a special place in American culture, if only because the country was formed without the uniform political, religious and class systems that confined other nations. Choice and the opportunity for self improvement have always created a marketplace.

"All of our political institutions and cultural institutions have been unusually geared toward commercial activity," said Bruce J. Schulman, a professor of history and American studies at Boston University. "And you can see that part of the success of hucksters comes from this idea, whether it is patent medicine or a new religion, that you are selling the possibility of transformation."

And there is a fundamental experience in this encounter, now all too familiar to those who tried to transform their futures with all those dot-com stocks. "Everyone has had the experience, certainly in the commercial world if not in the religious and political realms," says Professor Schulman, "that they are so impressed with the exalted language of the seller that they give up and try it, even if they know better."

It was simply just not a great idea to acquire, invest in or do business with companies that had no earnings, no known potential to ever produce them, or products that the world could have lived without.

So how could they have been bought?

Well, Pets.com had those cool commercials that featured sock puppets. And if people in their 20's who sold designer clothes online could convince seasoned 40-somethings on Wall Street that burning through investors' money on inner-office back rubs was all part of a business model, who was the American investor to question it?

Embracing hucksters is not just an integral part of the American political economy; it has played a role in selling ideas, wars and our national identity to the world at large. "This is not a new development, but rather the end point of a long historical development," said Robert Jackall, professor of sociology at Williams College. He cited the marketing of World War I to its detractors, the similar role taken up in the Second World War by the Advertising Council, and then the selling of the American dream to the rest of the world during the cold war, and after that the myriad commercial chimeras that arose during the boom period in the 1990's.

Among the last on that list was Webvan, the online grocer that sold investors on donating $1.2 billion before it collapsed last year. Shoppers found that using the company required them to plan too much in advance — grocery shopping made harder, every soccer mom's fantasy. On a larger scale were the equally realistic dreams of synergy on which Robert W. Pittman sold Time Warner in merging with AOL.

Part of what made such will-of-the-wisps sell was the idea that any new idea might work, if only it was new enough and pitched well enough. Now that investors have seen through that notion, they seem wary not only of new ideas, but of any pitch at all. So even the best of companies are feeling the unparalleled sting of the jaded American.

Which raises the question: How do Americans get themselves out of this? Traditionally, they have turned to politicians, as they are doing now in the form of demands for new rules and regulations, and for calming words from the optimist-in-chief in the White House. Congress last week gave hope to fans of stricter oversight, but the jury is still out on the public mood.

The presidential historian and biographer Robert Dallek sees a connection between what people will believe and the sensibilities of the politician trying to sell a notion. While Franklin D. Roosevelt's instincts led him right to what Americans wanted to hear during times of troubles, he said, Herbert C. Hoover's and Jimmy Carter's could not.

"It is like Lincoln said: you can't fool all of the people all of the time," Professor Dallek said. "There has to be good sense to all this advertising. Hoover during the Great Depression was a disaster. He kept saying prosperity is right around the corner, and he kept trying to find a song or joke to reverse the mood. And that is relevant to President Bush's response to the economic downturn. It does not work for Bush either. It depends on how sensitive you are to the public mood."

In today's terms, how Americans react to a public figure's sales pitch can depend on who is doing the pitching, and the relationship between their need to believe and their mutual fund statements. If Alan Greenspan says exuberance can be irrational, as he did in 1996, investors pause before continuing to drive the market up. If he declares greed to be infectious as mega-companies go bankrupt, as he did this month, the investors screech to a halt — at least long enough to let the market really dive. In other words, they listen, even if they don't buy everything he's saying.

If President Bush, on the other hand, says the economy is in good shape even as 401(k)'s shrivel, well, maybe Americans note that his own business career was not quite as successful as his political one.

But when New York's mayor, Michael R. Bloomberg, who made a fortune in the private sector, proclaims, "this is one of the unique buying opportunities that people have," is it pure coincidence that the Dow shoots up 570 points? (Actually, it almost certainly is. By then, Congress was awake and moving.)

Salesmanship isn't just a matter of the salesman, of course. It depends on the product and on the potential buyer. That same president who cannot move markets north can sell a war on terrorism. Obviously, that is partly because nearly 3,000 people were killed less than a year ago.

ONE lesson from this is that if optimism doesn't always sell, fear is more dependable. Professor Dallek points to the fears Lyndon B. Johnson raised about Barry M. Goldwater's supposed nuclear recklessness in the 1964 campaign, and the fears President Bush's father raised about Michael S. Dukakis's supposed lack of toughness toward rapists and murderers in 1988.

In the stock market, "Fear is a big variable," said Richard E. Petty, the chairman of psychology at Ohio State University, "If you are a little anxious, that causes people to be very intense information seekers. Anxiety motivates them to find out what the right answer is. But if it gets too high, information gathering shuts down, and people tend to rely on experts as opposed to carefully analyzing it." In other words, even a tough sell can replace logic if it placates deep-seated fears. And in the end, a lot depends on what consumers want to believe.

This may partly explain why some Americans have become so discouraged about stocks that after buying high, they're now selling low, while experienced traders with better nerves tell them to do just the opposite.

And why investors have taken down innocent companies in the name of the many plagued by scandals. "There are a very very small percentage of companies where their accounting is in question," Mayor Bloomberg admonished New Yorkers last week. "Yet most companies are being tarnished by that and having their stock prices decimated. It's not a depression! Most of these companies really have substance. They have great products and great services that will be in demand for a long time." True as that may be, will it sell? It is altogether possible. There is always something new, or old-new to sell. This is, after all, the country where millions of women became convinced in the last two years that low-rise jeans are actually a good thing.