On April 6th 2015, Renee Edelman was joined by her brother, Richard, CEO of Edelman, the largest privately held PR firm in the world, at the Shabtai Brownstone at Yale University. They reflected on their Jewish ancestry, family values, and moral compass in the world of public relations.
Jews, Mormons & Tobacco
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Richard Edelman: Okay, so I just will tell you a bit about myself and then get into the company and then some of the clients we work on, and then bring up 2 or 3 issues that I think would be good dinner discussion. So I was born in Chicago. My family, my dad was the first to be born in America. My mom was the first to be born in America. So both families came in the 1880s, 1890s. Actually, my maternal grandmother came in 1916 or something, 1917, during World War I, whatever it was, 1908. So she was a, you know, anyway, so my mother was the first born in America. My parents met on a blind date in Chicago. Got married. Um, which is good, because we're here as a result. And we went to Chicago Latin for our grade school and middle school, and then both went to Exeter for high school. And then Renee chose Yale, and I went to Harvard, and that's the story. And then I went to Harvard B school, and Rene went to Columbia Journalism School. And I went straight into the family business in 1978. Rene was a journalist for five years.
Renee Edelman: Yeah, five or six.
Richard Edelman: And then went into Edelman. So I've been in the business now 36 bridging 37 years as of May. And it's the only company I've worked for in my professional life. But I did summer internships at a oil company, at a meat packing company, at a technology company. Anyway, so. And a bank. A boring bank, which was really boring. Um, yep. Lending files. Um, wasn't Goldman Sachs? Uh, no. No. And there were no all nighters in those days. There were banker's hours, which means 5:00 out the door, gone and long liquid lunches with clients in the construction industry, which I was taken to one, and they laughed at me. So it was funny. It was fine. It was okay. So when I joined Edelman, we were about, $6 million in fees. We had offices in Chicago, which was the headquarters, New York, Washington, London, San Francisco. That's it. And today we are about almost, all in $900 million in fees. And we in 66 cities with about 5500 people, 5600 people all in. And so it's a great family business story. My family, mom and dad both passed away in 2013. But the second generation, Renee, me and my brother John all work in the business. And then two of my kids who are the only, you know, third generation. There are three third generations. Two of the three are working in the business, and one of them is a Stanford.
Richard Edelman: I took her here to look. Exactly. You'll have to. So, just to tell you a little bit about the firm and what the business is like. So the PR business actually started in the sort of 20s in the United States and then spread to UK and then to English speaking countries. It's actually a bit of an outgrowth of show business. It started in a certain way, publicizing stars and starlets and, you know, Douglas Fairbanks and Mary Pickford and all that stuff. And it morphed into corporate PR in the sort of late 20s, early 30s. There was a guy named Ivy Lee who was doing work for John D Rockefeller and advised him to give dimes to poor kids. And anyway, there are legends about all these characters. The first big PR firm was Hill and Knowlton, which was started about 80 years ago. So it's not as old as the advertising business. So for example, J. Walter Thompson would be 150 years old in the ad business. So it's just a much older business, the ad business and a more global business. So the biggest firm in the PR business is actually Edelman. We are, you know, 85% family owned, 15% is held by the senior people. We have somehow been able to miraculously do this because it's actually proven that not being part of a holding company, not being part of WPP or Omnicom or Interpublic. Everybody said ten years ago we were going to be Lunchmeat or dog meat or roadkill or whatever.
Richard Edelman: And we've proven, in fact, that if you move quickly, if you predictably move quickly after recessions. Um, we didn't reduce staff in 2001 when there was the dotcom bust, and we didn't reduce staff in 2008 when the world fell apart. And so we just sucked it up and didn't make any money for about a year and just kept our staff. And when the rebound came, we were the best ones positioned to take it. And also people went, God, you didn't fire me. I'm so happy to be at Edelman, you know, for real. And there's an important lesson in that. You should pay attention to this, because if you're a public company, you have to just make whatever margin you have to make. And they don't care. In Wall Street, you have to make your 15% margin, even if you're shrinking by 10 or 15%, and then you're catching a falling knife because you've got to reduce staff by 20 or 25%. So in our business, more or less, if our revenues are 850 million, about 60 to 65% is in compensation. About 10 to 12% is in rent, about 10 to 12% is in so-called general operating expenses, travel and new business and stuff. And the rest, which is, you know, profit is, I don't know, 12, 14% pre-tax. And we pay out somewhere between 30 and 35% of our pre-tax in bonuses. So the family makes about 4 to 5% after tax, which is fine.
Richard Edelman: It's a nice steady business. We have no debt. We are very humble. We don't make big acquisitions. We do small acquisitions. We make acquisitions in order to expand our geographic footprint. So when I told you we started in 1978, when I started, we had 5 or 6 offices. Now we're in 66. Well, in most of those places, we bought small firms. And what we do is we buy a monoline firm. So a firm that's excellent in consumer or in health care or in tech or in corporate. And then we add the other pieces. And so our business breaks down more or less: the top 20 clients are about a third of the fees. The next 80 clients are a third of the fees. And all the rest, which would be several hundred, would be a third of the fees. And if you look at our business by line of business, our original business, which my dad started when he was the genius who invented the so-called media tour where he took the Toni Twins. Which twin has the Toni home permanents? Which all of you are looking very blankly, I can completely understand. It would be your great grandmothers who would have done this. Home permanents, um, little waves. You couldn't tell which one had the salon done one or the one out of the box. So more or less the consumer products business, which is Starbucks or Unilever or Kraft or Heinz or the Dairy Management Group or Barilla or, you know, Trojan or Consumer Products is more or less 28% of our business, give or take.
Richard Edelman: Health care is somewhere 15 to 18, depending on the year. Tech is 15 to 18%. Our financial services business about 4%. Retailing is about 4 or 5%. Then we have a crisis management business, which is high margin but small, 2%. Corporate business, so our work for Ecomagination for GE, for example, which you would know something about, um, a lot about, so our corporate business is somewhere about 15% of our business and public affairs where we're working for the government of Panama, for example, to go to the third lane for the canal and get approval from their people, and then also get the eco groups to chime in and say, it's okay, and to fight the Nicaragua Canal very importantly, um, quietly. Um, it'll ruin Lake Nicaragua. Remember that, um, is, uh, about just under 10%. So, our business geographically breaks down about somewhere depending on currencies, but right now, since the dollar is so strong, the US is about 57/58%. Europe's just about 20 Asia Pacific, including, the, you know, Africa. We have Africa, middle East and with with Asia, APAC, mia, we call it is about 15 to 16%. And the balance is Latin American Canada, which is you can put in your eye. It's about 5% or four.
Richard Edelman: Our biggest clients would be in order: Unilever, Samsung, J and J, AstraZeneca, Starbucks, Hp, we have a big business with Novartis Adobe Dairy Management, so that gives you a sense of the spread and GE is one of our biggest clients as well. Walmart, eBay, Chevron and shell. So that would be our top dozen clients. And those clients bill anywhere between 7 and $30 million a year. And it's a classic service business. You have, you know, account executives who are pitching media. You have vice presidents who are doing, you know, in theory, messaging, strategy. And the senior relationship is held by the most senior person. So I've given you a very fast run through the business. Our competitors are names you may or may not have heard of Weber Shandwick, which is part of Interpublic. Fleishman-hillard, which is part of Omnicom, Ketchum, part of Omnicom. Golan Harris, part of Interpublic. And then the 3 or 4 agencies that are WPP, Hill and Knowlton, Burson-Marsteller, Ogilvy and GCI, now, Coenwulf. There are also some boutique firms that do only public affairs, Apco. Some boutique firms that do only financial relations: Brunswick, FTI. And so those are boutique businesses in financial and public affairs. We have found that our sweet spot is deep industry knowledge, geographic expanse, a lot of big creative ideas. So I don't know, the dove campaign for Real Beauty, which you may have heard of something about that had its origins in PR.
Richard Edelman: We worked with Ogilvy on that. I'm happy to share the credit, but that's been a great campaign for us, ten years in length. Our digital business, which we really started in 1996 by doing crisis websites for people and all this has exploded because of Facebook and Twitter and Instagram. We're hosting 900 communities on Pinterest, Facebook, Instagram, Twitter for brands. So when you look at the dove social site in the UK where someone is asking a question about the product or the formulation or this sourcing, that's us. We private label that for brands. And why? Because we're cheap. We're fast, and we know what we're doing in that. We don't do apps. We're not. It's a quasi PR business. It's just people communicating with other people in social as opposed to communicating with reporters. The business has changed fundamentally because of the evaporation of mainstream media. If you think about it, the average local newspaper has half as many reporters as 5 or 6 years ago, since 2008. And if they exist at all. Correct. And so what you're starting to observe is though the growth. So I think of the media as a four leaf clover. You have mainstream, you have born digital, social and owned. I'll go through each one of those. So the mainstream, you know, the New York Times, The Wall Street Journal, the Ft, The economist, you know, brands that you know, at plus local newspapers, plus local television.
Richard Edelman: Born digital, well, these are brands that you are quite familiar with. Huffington post, quartz, Politico, Business Insider. Business Insider is actually owned by a Yale guy named Kevin Ryan and Henry Blodget, who's another yalie. And they have, if you can believe this, 75 million unique viewers a month. 75 million. That is 50% more than the Wall Street Journal. That is three x. That is three x The New York Times. According to them about business news. Now, The New York Times probably has a broader reach because of news news, but that's impressive as hell. So invite Kevin Ryan, whatever you do. And so, then the next category is obviously social. I mean, I just would imagine that the first thing you guys light up in the morning is not what I do, which is to go to Newyorktimes.com or the Ft.com. You go to Facebook or Twitter, right? What do you go to Facebook first and you generally link to stories through Facebook. That would be your behavior as opposed to going to media source. You may go to media sources directly, but you'd be you're a yalie and you're an exception to the general rule of- if I was at Ohio State, we would have we wouldn't even have a discussion. Just it's Facebook forever. So social for us is we now think of our brands having to go to platform and then to publisher and then to consumer.
Richard Edelman: And so therefore social for us is the locus on which we are putting tons of attention and putting, if we have 900 communities, we are putting content into that example. We went to Twitter and said, hey, for the Oscars, we want to do a program with dove on female self-image, because four out of five tweets that women do during the Oscars are bad about their self-image. I'm fat, I can't do this right. And we interrupt them and say, not so quick, You may be as hot as Jennifer Aniston. We don't know. But if even if you aren't, it's just okay, you know? And then we do PR. We do earned media stories about what we see on Twitter. So we keep compilations of how many are negative and how many people we change. And then we pitch stories to reporters. So it's kind of like this. Now, the owned part is fascinating. So I believe that every one of our clients over the next five years will be its own media company. Now, this is quite revolutionary, but your alma mater at GE has 4 million unique visitors to the Thomas Edison blog and to GE reports. And so Beth Comstock and gang have done a magnificent job of pushing people to GE content. It's amazing. And these are films on I don't know or photos on Instagram of attractive GE turbines. What what this is not like you know good looking girls. This is good looking turbines okay. But they but they allow people to play with the turbines and design them and make them look pretty.
Richard Edelman: And then they have a contest for who's got the prettiest looking turbine. Okay, I don't get it, but you guys do, and I'm glad. But we we actually have set up, for various clients, what we call creative newsrooms. So clients outsource to us this so-called owned property. So for a low interest category, America's dairy farmers, this is a low interest category. Sorry milk doesn't sell, so milk sells. But anyway. But we actually take tours of dairy farms. We show people who are farmers using compost as a way of, you know, powering their trucks or their machines and, you know, funny stories that then we point bloggers to, farming bloggers, and then if it gets enough traction, then we can go to Business Insider's say hi, we have a really great farming story here that you should link to. So we're creating a lot of content in these creative newsrooms. So we're hoping, like with social, that our clients will outsource their business to us of these creative newsrooms. And we've got them in probably 6 or 7 markets. And so, for example, for Flextronics, which is one of Renee's hot clients, they build, um, how many of you where the digital devices on your Fitbits or any of these things? Any of you? None. You don't have a cellphone. It's okay. Well, clearly. Clearly you're a big user, right? No, no, no. But you know, like the Samsung thing anyway, Flextronics builds all those.
Richard Edelman: They build the PCs for Hewlett Packard anyway. That's what they do. So they want to trade up to having more like brand identification. So Intel inside. So we created a magazine for them called innovation. It's a digital magazine. And so that's from our creative newsroom. It just gives you an example of what we're doing. So, structurally the business is run really in. So it started with geographies. So in terms of reporting relationships, it was all just local businesses Chicago, New York, whatever. And they would report in that case to my dad. So all the geographic guys went to my dad. And then we eventually grew so big that you had to have regional managers, a regional manager, US regional manager Europe, regional manager Asia. That was the whole business. So when I became CEO, I said, okay, that's fine, but we actually have knowledge that we should be passing between the offices there, not a bunch of frigging castles run by barons. And so, um, and my father ran the business like a wagon wheel. So he was Rome, and everything came through Rome, through the Emperor. And that was good. And at that size business, it was perfect and it worked. But when you get to another size business, it can't work like that. So, um, you have to share knowledge across. And also it was leading to fights between New York and Chicago in particular, because I was, quite early on, made head of the New York office when I was 26, and we had like 12 people, and four years later we had about 80 or 90 people.
Richard Edelman: And it was getting as big as Chicago. And Chicago was starting to get pissed. And this is just what happened when between geographies and because it was Richard and he was dans son, the Chicago people were like, I can't criticize him. So, you know, how are we going to undermine how are we going to dig the thing around him so that he falls into the dirt, but quietly, though, and disappears? But I started to understand how that's correct. And I grew up there, remember? So I knew all the tricks. So, in fact, we started to do is try to bind the company together and you bind a company together in part through practices. So people who knew tech or people who knew health, or people who knew consumer products would be oriented horizontally and deal on client matters. So we would have a director of health and the health person would be assigned: go get a health client in LA, work with the LA team or whatever it was. So it started to bind the company this way. Then some of our clients started to get really big, and the local geography guy in Hong Kong would say, I don't want to work on GE. It's only $5,000 a month, and our guy in New York would have a heart attack because he's getting 100,000 a month on GE and he can't get the Hong Kong guy to move.
Richard Edelman: So we created we call a triangle offense where you have geography, you have practice, health, tech, etc. and then the top of the pyramid, the client leader. So the GE person can say to the Hong Kong person, hi, I'm in charge, you're going to take this $5,000 a month and you're going to like it. And by the way, and if you don't like it, you can complain to Richard. But and then and then we sometimes do subsidies. So if the Hong Kong guy is really getting screwed, the Chicago or New York, wherever the hub is, can do some transfer pricing and give them some money, because there's nothing wrong with what the Hong Kong guy is saying because he's getting too little money. And the Hong Kong GE office only wants to pay five a month, but you got to play the game, so you got to move money around. So that's the leader of the client now. Now we're I'm running out of fingers but now we have to go to a box and let me try to explain the box theory. So what's happened in the last five years is that we've seen the business morph so that- Edelman has about a 20% market share of the PR spend of the top ten firms. So the math on this is, let's say, more or less that just for math's sake, um, business school people would get this quickly.
Richard Edelman: So if the addressable market is PR and it's $4 billion for the top ten firms and we have a 20 share, we have $800 million. All right. So to go from a 20 share to a 25 share is hard work. Trust me, trust me. And so what you have to do is you have to grow the addressable market. Ha. So how do you do that? Well. You have to reinvent what PR means, and you have to say, all right, so what are the adjacent businesses that you can start addressing and start pushing yourself into? So what we've found is digital and advertising are soft underbellies for the holding companies. Why? Well, because what WPP has done is they have created 45 horizontals for Ford and Unilever and, you know, the hugest clients. Ha! But what have they not done? They haven't created that for Barilla or for the 4 or $5 billion company. So that's point of attack at the advertising guys. The other point of attack is, in digital, they want to do big design and build. So if you're digitas or if you're akqa or whoever it is that are holding companies, you want the 25% plus margin business, that is okay. Shmully wants to buy a Ford and he goes to the ford.com and he says, I want a blue you know, whatever. Taurus. And the engine just, you know, and that's design and build and it makes him, you know, the CRM program, customer relationship management.
Richard Edelman: And it's a sophisticated thing. We are doing the dumbed down social media, you know, chatting with people on the web about blah, blah customer service and oh, you're mad at the line in Disney, here's a Coca Cola for you. But that's what we do. But people are happy with that. So we're happy with that. And it's a 12 to 15% margin business not a 25% plus. So the holding companies digital can't do it because they have all been acquired by these holding companies. And they're supposed to make 25% margins because Martin Sorrell and Morris Levy, in their wisdom, paid three times revenue for these businesses. So therefore they have to make 25 to 30% margins. Therefore, we are safe in our little world of social digital, which I love. We're going to get eaten a little bit by the new incomers. You know, the small guys like we are social and vayner who are coming up on us, who are cheaper and sillier than we are. But that's okay, because we uniquely can do global and we uniquely know industries. So they'll get some and that's fine. So they'll okay, eh, competitors. So it's just it's called market capitalism. So, then, I would just say if you think of the marketing communications business as a box, it's been advertising is about 13.5 billion. Media buying is about ten, digital is about ten and PR is four.
Richard Edelman: So if you can reclassify this competitive set and say, okay, instead of marketing communications, we have a new idea called communications marketing. And communications marketing- this came out on an airplane for me. It was great. Sounds good. Yeah. It's good. It was simple to just change the words. But communications marketing means that communications and marketing are equal, that we appeal both to the chief communications officer and to the chief marketing officer, which, you know, within GE, as an example, there was marketing and there was communications. Separate. And we want to bring them together and it's maybe a GE. It won't happen for us. But in smaller companies, in the midsize companies, Intuit, Barilla, you know, clients that don't have such a sophisticated, huge apparatus, we can do this and we have a new idea, which is instead of just promoting brands, we have two other things: evolve the brand and protect the brand. So what can't advertising do? It can't really protect because it can't do crisis management. It's a one page thing. We're sorry, but it can't really do crisis and the evolve part. Most brands have a hard time taking on a bigger aspiration. So like the real beauty campaign for dove, that's an aspirational kind of campaign. And so we're pushing our clients like Gap, for example, to raise wages in stores, CVS to ban tobacco in their retail outlets. That was $2 billion in revenue that they walked away from. They did it.
Richard Edelman: Bye and guess what? Their preference went from 9% to 14% and they became the market leader in preference. I'd rather go to a CVS. I walk across the street to go to CVS because they're good people and they change their name to CVS health. Sorry, CVS health from CVS. And uniquely, they can say that because Walgreens sells tobacco and they don't. Think about it. What a contrast. So it's smart huh. So we're trying to get clients to change their reality so that they are actually evolved. And so that's why I love what I do, because actually what we do is we advise on what to do, not just how to communicate it. So in fact, I'm going to give a speech to DePaul students for commencement. I'm going to bounce this off, you guys. Good target market. I actually think that the speech I should give is about powerful ideas. Not any longer being about selling, but powerful ideas about being, about starting movements and starting change in corporations. And that people who will come from our sector should not be simply put into the corner of, oh, you know, help me go sell this thing. It's already positioned. We should be in conceptualization. We should be in imagining. We should be in hey, this is what this could be. And and by the way, let us go test this in a community and whatever. And before I stop blabbing, um, I really want to have a discussion. I just want to tell the story of our relationship with the Church of Latter day Saints. So we were one of five firms called into Salt Lake. And my dad led the pitch. He was about 81 when he led the pitch. And he was he was doing well.
Speaker6: 81 is a good.
Richard Edelman: I got it. I understand.
Speaker6: Listening were about.
Richard Edelman: And there were the 12 who were the most senior people in the church. And this is probably late 90s, mid to late 90s. When was the Olympics oh '02?
2001, 2002.
Richard Edelman: 2002. So I think it was 95, give or take. And so my dad started his pitch as follows. He said, you know, I'm the grandson of a rabbi. My father was a devout Jew who retired at 65 and studied Torah until he died at 90. And I've read the Book of Mormon. And, I wanted to say to you guys, a more elegant way than that, that Jews and Mormons have a lot in common. You know, we've been discriminated against. We believe deeply in family. We believe in community. We've been given back. And I just want you to know that I feel really good about working with the church, and I wasn't sure when I started this process that I would, but I really want to do this. These guys looked around. You're the one I want and we want you to come to Salt Lake every month. And so he came with Michael Deaver, who was Reagan's, you know, genius marketer. And these two guys, you know, 165 and 180 were advising the church. And this is a true story. So how does Richard Edelman get into this story? Wait, um, so, um, you're.
Hal Boyd: Much too young to be accepted by that.
Richard Edelman: Totally, totally. Well, so first of all, they have me out, and it's the only client that begins every meeting with a prayer. And they prayed for my father and me for our wisdom. I thought, this is good, I like this, This is helping on all sorts of clients. But then the second thing was, I was to organize a lunch in New York for President Hinckley, who was the head of the church. And so I had, you know, Time magazine and the Associated Press. And but I had a really good friend who was a producer at 60 minutes who worked for Mike Wallace. And so I invited him to come because I said, you know, I think that the church ought to meet the 60 minutes. So my father sees the list of the invitees when he gets to the Harvard club, and he just about has a coronary. He goes, all right, look, I know you're my son, but if this doesn't go well, I'm going to fire you. And so wait, so wait- what happens is, President Hinckley, who's a fantastic man says, because Mike Wallace asks the hard questions about, you know, polygamy or whatever it is. Yeah, exactly. And Hinckley says, Mike, why don't you just come out to Salt Lake and see how we live? And Wallace goes, I'm in. I'm coming. And he goes, and he sees what happens at the church, and he sees that you give 10% of your income, and he sees that the family is all important, and he's completely taken with the church. And I think that 20 minutes of television did more for the Church of Latter day Saints than any other thing. And in fact, President Hinckley wrote about it in his autobiography.
Hal Boyd: And Mike Wallace did the introduction to that book for one of his books.
Richard Edelman: So it just goes to show you take some risks, even in a family business because that that was a really.
Hal Boyd: If the Mormon church were still, you know, just, you know, it wouldn't have gotten that far if it weren't for that same 60 minutes.
Richard Edelman: I'm afraid that's true. I'm afraid that's true. There's a lot of discrimination in this country.
Hal Boyd: Luckily, for for some of us who can make it all the way. No, I'm just kidding. Well, no,
Richard Edelman: I'm going to stay out of that one. I voted for Obama, though, just to be safe. So, I suspect that you'd like to hear a little bit about, you know, how Judaism affects, you know, how I run the business or whatever. And so there are 2 or 3 things that are important to me. The first is ethics and I learned this very early on from my old man. He told me a story about a client, we just won a big tourism account and so, you know, some guy from this country shows up and says, well, congratulations on winning the account. My dad goes, well, thank you. And he goes, now you can make the 5% commission out to such and such person. And my father stands up from behind his desk. He always wore a vest with his little Phi Beta Kappa key, and he stood up from his desk and says, all right, you have exactly 30s to get out of my office before I kick you in the ass so hard that you're going to be running down the hall and just out. And he called me and he said, this is what I did. I said, congratulations. Good. But ethics number one, never, ever, ever compromise that don't take clients. We had one argument. And this is, I think, an interesting argument. When I became CEO in '96, one of the first things I wanted to do was get out of the tobacco business because I thought it was bad, but I also thought it was bad for our business because health care is a big part of our business like CVS.
Richard Edelman: Just practical. My father's, no, it's a legal business, and it's legal, and we should do it and it's a lot of money for us. And so thank God, you know, there was a boom in the economy. It was '98 and I just said, Dan, this is it. If we don't do it now, we're going to be never out. So we just gave it to some other guy and got out of tobacco. But so ethics is an interesting area to talk about. I think the second thing is we've kept this family owned and we don't take on debt and we don't take on big risks. And, you know, our family gets along pretty well. And we don't take dividends. We don't, you know, live very high. You know, we have a driver who drove it off and back instead of the train, but other than that, it's pretty modest. You know, Toyotas instead of BMW. So here we are. And, I think, you know, as a key part of that, you know, we've never had partners. It's just our family as our family, kind of, you know, with the key people. We give them stock, we give them, we pay them a lot of money. We have a good year. But we're really serious about keeping control, and that's important. And I have two kids who are training like this, and they're working and they're expected to work hard and they don't get any favoritism. So they make it, they make it. If they don't, then we'll get professional managers, but they'll be owners so that that's important.
Richard Edelman: And then the sort of last thing about Judaism is the importance of community. So we did the pro bono for the Auschwitz-Birkenau 70th anniversary and the renovation. And we've actually, I think, been pretty important in helping raise money from people like Ron Lauder, Spielberg, others. And how many of you been to Auschwitz-Birkenau? It's the most important experience you can have if you ever are in Germany or wherever just go. Just go, because I understand. But in other words, you're dubious and it's dubious that you will be on business in Poland. So my point is, if you're in Europe anywhere, go to Poland. I mean, if you're in Warsaw, go to Krakow. It's nicer. Yeah. Nothing good about Warsaw. Sorry. Beaten up in the war. But anyway so I'm really proud of what we do for community. My brother John runs our foundation. He's deeply interested in- we match. If an employee is going to do a board or whatever it is, we give them the money to be on the board and do community work. And we do a lot of volunteer work like the 9/11 Museum and Memorial. We do volunteer work for that, the whole launch of that. And so it's an important part of it. So I've talked for too long. So you have questions for me, comments, discussion about anything. And, Renee, you should say a few things so I can eat. Say a few things.
Renee Edelman: So he has a question.
Speaker8: Because he should be you only have 50 minutes-55 minutes. And then we'll take questions. Say something already.
Renee Edelman: I just think, you know, it's really important to have mentors. I think that that's- I've been very grateful to be in the business where my father and my brother have been my mentors. But I think wherever you are in life and having and some of it's serendipity and how you actually end up in a business, because I did journalism first and then the advertising business for a while, but eventually found my way into the PR business. And I think that, you know, there are opportunities in life that will present themselves to you, and maybe you haven't thought about it, but I think, you know, actually, I had a job in journalism that didn't work out. And my father said, come into the PR business, try it, you know, and it was the best thing that ever happened to me. And I wasn't planning on it. You know, I went around it, you kind of related skills, but I think that having a mentor and keeping up with people and having people who can counsel you along the way has been very important to me and Richard. And our company runs a trust barometer, which Richard can tell you a little bit about. But I think that that issue has become very, very important. Trust in companies. Trust in media. Trust in your people like you, your friends, who you listen to, basically, which you mentioned before, where you get your news, but who you trust. Having people trust you or issues that we think about. And then the other issue that's a lot on my mind is the changing nature of media and news and how we all as a PR person, I would always be behind the scenes.
Renee Edelman: I've never wanted to project myself. Today, in class with Professor Sonnenfeld, we were talking about when should a CEO speak out on his own opinions and do those represent those of the company? And I just think you have to be very careful today about you want to project yourself, but when you do project yourself, you know that news spreads and you just, you know, more and more have to be careful. And when I was growing up, public relations, you know, people would say to me, well, what does your dad do? And I'd tell them and they'd say, well, what is that? You know? And so I think my father, you know, when we were growing up, had to constantly explain what PR was. And as a leader in the field. We have an opportunity and Richard's done this. You know, he followed the legacy of being a driver of what public relations is, as he said, redefining it, communications, marketing, bringing together the advertising, the brand, doing good, you know, social responsibility which your generation cares a lot about. And so it's fascinating how much business is changing. Every business is being disrupted. The media business is changing. And so it's really interesting that we all have to constantly keep reinventing ourselves, learning new things, you know, not just taking it for granted. If you're not innovating, if you're not staying on the edge of what's happening, you get quickly behind. So, you know, I am passionate about technology, but also learning social media and knowing how to communicate in that way. You guys are born digital, so it's easier. But, um.
Rabbi Shmully Hecht: Okay. Thank you.
Rabbi Shmully Hecht: Thank you. Take your question, but I just I just want to make one comment. Just the fourth thing about Judaism that I noticed in your office the first time I met you Richard. I don't even know if you remember this was that- Toby, what was your name? Who worked for you? One of our founders.
Toby Hecht: Ali Goldberg.
Rabbi Shmully Hecht: Yeah. Ali. So I come in and what is the CEO of the Edelman Group doing? He's learning a new language. Hebrew. Hebrew of all languages and so that was just fascinating. You talk about learning new things in your 50s. You said we got to go back to the Bible and read the Hebrew and learn the Hebrew language. So I thought I'd just mention that we're going to open up the three questions. Sure.
Nick Hathaway: Yeah. So I was reading the trust barometer, and, you know, you made some comments post recession about how, you know, unsurprisingly, banks and a lot of governments rank the lowest on that. How do you think banks have kind of rediscovered or reinvented themselves post recession, or have they even done so in terms of the trust boundary?
Richard Edelman: Well, I think trust and banks in the United States has risen from the all time low of 20% in 2009. But in Europe it's still devastated. In Spain and Italy, Ireland. Meanwhile, banks in China, India, Indonesia are trusted 80% because they're equivalent to modernity. So I think the problem for banks is just this constant kind of being dragged back. How many of you guys saw Blood Simple. Remember this movie where the guy, you know, the hand comes out of it, right? The hand comes out of the grave. It's just like that for banks. Because, so no, but think about it. The foreign exchange trading scandal of last summer, where, you know, it was disgusting what they were doing, fixing FX rates. And they were ripping off the British mortgage holder because anyway, blah blah blah. And they were doing the same with mortgages. And it's just like one scandal after another. Financial services, it just can't get out of their own way. And so what's happening is they're having to reinvent their businesses. They're selling off all their commodity businesses. So JP Morgan is now rumored to be getting out of oil trading because they can't do it. They can't supervise the breadth of operation. So and they also have to have higher capital requirements. Right. You know, whatever it is, 8% equity instead of 5 or 6. It means that their return on equities are totally changed. So we're still in a recovery mode I would say, and not helped by behavior. How about that?
Sijia Yang: Yes. Continuing my previous advertisement, I'm looking for some advice on PR because like I feel fundraising and like PR works are in a sense similar because we are always trying to target the right person who would like to support and give their money. And now we are so in negotiation with GEE and like trying to leverage those resources for them. But on the other hand, we are trying to target Yale alumnus. But I want to know, like a decent advice from you, like how to target the right person for a project and how to tell the best story. That's a generic.
Richard Edelman: No, no I understand your point. So I would say that it's either a director of sustainability or a chief communications officer. It should probably be a company that has supply chain issues. Arguably something to do with China. I suspect it's.
Sijia Yang: Not about China.
Richard Edelman: No. Where which which part of the world or global?
Sijia Yang: It's hosted by US Energy Department. It's going to happen in California.
Rabbi Shmully Hecht: They're competing. 20 universities are competing to build the most sustainable house. And yet you represent the Yale group.
Sijia Yang: Yeah.
Rabbi Shmully Hecht: I read I read your book.
Sijia Yang: Thank you.
Rabbi Shmully Hecht: She said that to me because I'm the real estate business. So I read it because she figured, okay, you're into real estate development, then you should be interested in sustainability. So yeah, that's a lead off to the question.
Richard Edelman: So so you might want to try and find a local utility. You might want to try and find a company that like Lennar or something that's in the home building business. In fact, who knows this kid Miller from business school who was in the class today? I forget his first name, but he's a tennis player. Senior at Yale. Um, my.
Renee Edelman: Name is Matthew science.
Speaker8: Matthew. Science.
Richard Edelman: Well, Matthew, he's the cousin of Lennar. So, Lennar. Lennar. That's who I would go to. I'm networking for you.
Rabbi Shmully Hecht: Better than LinkedIn.
Richard Edelman: Yeah. I'll keep thinking. Okay. Next question question.
Josh Gordan: So I'd love to know what you guys think about the incredible rise of user generated content and how companies interacting directly with individuals, and vice versa, has changed your business and how you think it's going to in the future.
Richard Edelman: So what's phenomenal is that we now find that influence is not just a function of university brand name or whatever it is, actually people who have passion, who have design skill and others so mommy blogger, etc. So, we are recruiting YouTube stars and others to become producers of content for Starbucks or whoever else. And so, they sort of self create a community of this size and we take them to a community this size.
Speaker8: So fundamental change where you just.
Richard Edelman: Completely. Completely because we used to go to celebrities, you know, whoever the baseball player was or good looking actress or you know nice. Not anymore. It's real people with. Yeah totally different. And celebrities have zero credibility in social just about. Unless they really are, for whatever reason, green which is rare. Yeah.
Rachel Hunt Steenblick: Is it okay? Yeah.
Molly Zeff: Of course. I found your story really exciting and compelling. So thank you for sharing that. And I wanted to ask you about the ethical side of your business practices, which was really heartening to hear. We actually just had a class in business school yesterday on Enron, so I've definitely been exposed to the other side. And so it's good to see, you know, people in a position of power and a field, you know, doing the right thing. And I'm wondering though, you're so you're in you mentioned, you know, being in 66 cities.
Richard Edelman: Yeah.
60% of your business in an area of the world. You know, there's obviously some human rights issues. And I wanted to ask you about when when you do see a client, shell comes to mind, for example, this is I'm giving an outdated example of shell from the 90s Nigerian protesters, political prisoners ended up, you know, Ken Saro-Wiwa being executed for for that, for his work against shell. Um, I'm just wondering and that's obviously an outdated example at this point. But I'm wondering.
Chevron in Ecuador. Chevron in Ecuador. Ecuador.
Molly Zeff: Yeah. There's obviously, you know, a huge risk in your with the kinds of clients that you work with, of having them get involved or, you know, having them be involved in some questionable practices. And I wondered, how have you dealt with or how do you foresee dealing with a client who you've already you've started a project with, or you've done previous work with, and then you realize that they're engaged in some deeply unethical work and it challenges your own morals. How do you deal with that?
Richard Edelman: Well, there's sort of two ways to do this. One is to quit and just say we can't. And the second is to try to move them towards a better place. And I think that the second option is a better option, actually. And that's not always accepted by my colleagues, but I'd rather walk towards a better place than run away. And, listen, if we have the option of not having ever been involved, that may be better, but that doesn't work that way sometimes. And so if you're in, you may as well, you know, be in the tent, you know, trying to fix things.
Rabbi Shmully Hecht: Go ahead. I'm going to say something that Toby wants to ask. Last question, but do you know what the word Edelman means?
Richard Edelman: Noble.
Rabbi Shmully Hecht: Noble.
Richard Edelman: Yeah.
Rabbi Shmully Hecht: So Edel is Yiddish right. For refined or noble. So that's your-.
Richard Edelman: In German.
Rabbi Shmully Hecht: Moving them in the right direction.
Richard Edelman: Well I don't know I hope that it's, it's presumptuous for me to say that we have some sort of monopoly on goodness. It's not the case. And we do work and we work with the oil business and we work on Arctic drilling. Me, I think that's good. I think it's also good to work on the oil sands. Some of you would disagree with me. Probably you. If you're a greenie and that's fine. And people can have different points of view on this. And by the way, I have to say mine is partly geopolitical, which is I'd rather have oil from Canada than oil from Venezuela or some other of these funny business places like, you know. Yeah, that's right. That would be the right place. Yeah. Yes. Middle East. But, there are others who say, you know, we don't need this oil. You know, we have plenty. And look, we have shale gas. And, you know, this is ridiculous. This is all good for debate. But, you know, in the end, I have to make a decision, so I do. Teddy Roosevelt has the best line. He said the best thing is to make the right decision. The second best thing is to make the wrong decision. And the third and the worst is to make no decision. That's why I love Teddy Roosevelt. I don't think he had any trouble making decisions.
Erifer Fernandez: I named my son Teddy, so.
Richard Edelman: Oh, perfect. Oh that's good.
Toby Hecht: So I have a quick question. So I noticed recently, and it sounds to me like part of the public relations is for you is shifting also in a little bit of consulting because you're. So I'm just curious just and.
Richard Edelman: You want to know my most fun case. I'll give you a really good one. So tomorrow I'm sitting with a client. This is a true story. We are planning a national rollout of his marijuana sales campaign.
Rabbi Shmully Hecht: The legal kind?
Richard Edelman: Yeah, the legal kind. I mean, for for for medicinal because we're on tape. No no no no, no, but for medicinal purposes only. I mean, you know, now you you could you can edit you can edit this out. I cannot say and I will not say, but, um.
Erifer Fernandez: But Willie Nelson.
Richard Edelman: It's Willie Nelson. It's actually not. But we'll let you fantasize that it is.
Erifer Fernandez: No. Go ahead.
Toby Hecht: I just noticed. So I'm from Seattle, and Starbucks is like, you know-.
Rabbi Shmully Hecht: That's the marijuana connection.
Toby Hecht: Exactly. That's what I'm asking if you're from Seattle. But, you know, the little leaves over some of the pharmacies. Anyways, so, I just noticed that Starbucks recently started promoting.
Rabbi Shmully Hecht: You're from New Haven?
Toby Hecht: I'm from Seattle promoting advertising on commercials. I've never seen that before. Is that a new thing? That Starbucks they have commercials now? Probably, maybe the last 18 months. I don't remember seeing before. Is that true? Yes, yes.
Richard Edelman: They've started advertising both in print and in tv.
Toby Hecht: Yes.
Richard Edelman: But.
Toby Hecht: So what's shifted? Is it?
Richard Edelman: Well, I think that word of mouth reached a saturation. And I think also, um. Listen, of all the CEOs I know, Howard Schultz is actually the most exciting and willing to take risk. What he's done on race is unbelievable. To convene in 7 or 8 cities, discussions among police departments and citizens. And, you know, people speak up and say, you know, you beat me and I or you, you bet. And the cops say, well, you know, I'm sorry, but, you know, this is our job to keep the order. And it's very raw. And what he did also for Iraq and Afghanistan veterans and giving them jobs and what he also did in 2010 to say, I'm not giving any money to political candidates. Why? Because you idiots can't work it out. So I'm organizing a boycott of political contributions. He got a call from all sorts of people you can imagine, saying, how can you do that? You're ruining my campaign. Fix it. Cut the crap. He's an amazing guy. He's deeply he's actually his origins as a Jew in Brooklyn are deeply important to him. He's a fantastic guy. Really. He should be president. I keep telling him this.
Toby Hecht: No, no, I was thinking, no, it's just, you know, I go to Starbucks all the time, and for me, it's not a phenomenon. But it was just interesting. I thought it was like, oh, they don't need commercials. Like, who doesn't go to Starbucks? But it's just I was just interesting. What created this?
Richard Edelman: Well, no. There's thing called Costa Coffee. There are all sorts of imposters. Dunkin Donuts, the worst. Even worse than that is McDonald's. Forget about it. No way. Always do Starbucks. And I don't even drink coffee. I just drink tea. But I do the one with the milk in it. Whatever it's called Chai latte.
Toby Hecht: Chai Latte.
Richard Edelman: Mhm, I love that. It's sort of sweet too.
Toby Hecht: Yeah.
Richard Edelman: It's good for you. It's really good for you.
Richard Edelman: Yeah.
Nick Hathaway: So I was wondering, you talked a little bit about, uh, cutting the underbellies away from some of these other divisions and merging boundaries. I'm just wondering, where do you think those lines should come from, between, you know, consulting and marketing and PR? Or is it just as much as PR can take?
Richard Edelman: You got it. So it's a mosh pit, and whoever's got the best idea I think the client will go for. I don't think there's any hard line anymore between. Oh, because right when I started my career, it was the agency, met the ad agency, and the secondary agency was the media buying agency. And we were the peasants, believe me. Like cleaning the doodoo, you know. Oh, here's the great ad campaign with Morris the Cat. Make Morris the cat famous in PR. Okay, well, we can do that. Or, you know, Tony the Tiger or whoever. Well, we've grown up. And now the next thing is, do you have an idea that moves people like eco driving for Shell and design? Actually, at universities, we have a contest that kids can design an eco car. And what goes the farthest on a on a gallon of gas? One car, they did 257 miles or some insane thing, um, designed by high school students. So anyway, eco driving and we had group go around the world anyway, these are just PR ideas and clients love these. The Taylors went all over the world driving on relatively few gallons, I can't remember. So yes. So as much as we can get, we will take.
Emily Caruso: So when I was at GE, I actually had the opportunity to work on the response to Fukushima. And that was something that your team was pretty instrumental in as well. So crisis management has kind of since then been something that's really been to me. And it sounds like it's a growing part of what you're doing too. I'm also interested in the whole life cycle of crisis management, where it used to be kind of a cleanup activity. It's now also identifying opportunities to prevent crises. So is that starting to resonate with your clients or are they completely.
Richard Edelman: And I'll tell you that, you know, some of this is actually related to work we're doing with university. So we work with Penn State, we work with Duke. You know to get the board of Penn State to agree to the NCAA sanctions was not easy, which meant to take the statue away, to take the victories away. These are people who are true believers and Happy Valley and Paterno and, you know, but they had to accept their punishment and then also pivot towards taking care of kids and making that an important issue. And now they're back with football. And they have their wins back and they have their statue back.