At the height of the Great Recession, when unemployment crossed the ten percent mark and personal income hit its lowest point, most Americans had already taken action to deal with the crisis on personal terms. In fact, they had begun to increase household savings in 2006, more than a year before the experts saw the official start of the crisis. In the same time, period -- long before the recession -- people had begun to focus their consumer spending on what they called essential "needs" instead of frivolous "wants" and they began to look for new values in the products they bought, the services they sought, and their relationships in the vast consumer marketplace. In the depths of the recession, more than three-quarters of Americans we surveyed said that they had come to realize that their possessions did "not have much to do with how happy I am."
These trends emerged in more than 100,000 detailed interviews we conducted between 2005 and 2009. They showed that among the most desired attribute of a company, the value of kindness and empathy rose almost four hundred percent. Seventy-one percent of Americans wanted to do business with people and companies that were socially responsible (eco-friendly, charitable, humane) as they delivered the highest quality for the lowest possible price.
The American consumer's pursuit of what might be called good feelings and good deeds in the marketplace was matched by a rejection of the markers of excess that characterized the borrow and spend period that coincided with the George W. Bush years. Bling was out as people felt embarrassed by the pursuit of the latest, the biggest, the brightest and most expensive.
- Exclusive -- Down sixty percent.
Altogether, the changing attitudes and consumer behavior, which are embraced by more than half the people we surveyed, suggest a shift in thinking about how we spend everything from our money, to our time, and our energy. With each dollar consumers are voting for certain values -- sustainability, self-reliance, craftsmanship, and yes, kindness -- and rewarding organizations that seem to hold them. This is how Walmart became the nation's biggest purveyor of locally grown, organic produce. It's also how a tiny company called Adafruit Industries, which caters to do-it-yourself engineers and gadget geeks, has grown steadily and added to its workforce through-out the economic crisis. These are just two of fifty companies we interviewed that are riding the spend shift wave to profitability and expansion.
Remarkable as it may seem in the data, this "spend shift" is far more impressive when seen in action. In the past year our team has logged more 20,000 miles criss-crossing the country to discover individuals, families, businesses and communities that are making the spend shift adjustment. In Fallbrook, California we met a retired Marine Corps officer who reflected on his combat experience in the Middle East, studied the collapse of his investment portfolio, and decided that a radically green lifestyle would suit him as a patriot and investor. Replacing his thirsty lawn with desert-style landscaping and trading his muscle car for a gas-sipping subcompact saved him hundreds of dollars per month in expenses. But the big move came when Steve Northam quit the grid and signed a contract with an innovative solar energy company called SunRun.
Instead of selling expensive systems, SunRun leases them for a monthly fee -- typically lower than a household's current utility bill - that stays the same for twenty or thirty years. Consumers free themselves from annual utility rate hikes without having to come up with tens of thousands of dollars. SunRun, using favorable loans from U.S. Bank, gets an income stream just like a utility. The company, which finds more customers among retired military than it does among granola crunching "greens," is growing like topsy and each system installed reduces a household's carbon emissions by fifty percent. Northam, who sees all that he saves with water and energy efficiency as "return on investment" also likes the idea that he's reducing global warming and American dependence on foreign oil.
The notion of doing good while also saving money is something we saw everywhere we looked for the spend shift. In the little suburban city of Everett, Massachusetts we found a retired grade school teacher who was so frustrated with the local recycling program -- and the tax burden associated with landfill operations -- that he threw himself into the problem. Jon Norton found his solution in a for-profit operation called RecycleBank. The company provides municipalities with household bins and outfits its garbage bins with RFID chips that weigh recyclables left out by every household. Residents receive coupons, based on the volume of their recyclables that can be redeemed for everything from pizza to carwashes.
In every place where it has been tried thus far, the RecycleBank system has produced significant increases in recycling, decreases in the demand for landfill, profits for the company, and savings for the taxpayers. In Everett, where a goodly percentage of the homeowners knew "Mr. Norton" as a teacher, families compete over their recycling points, which can be viewed online, and the city have shaved more than $1 million off its budget for sanitation. All this was accomplished on a local basis, without federal or state involvement. Indeed, the leadership for this initiative came from a single interested citizen who didn't wait for any politician or bureaucrat to act and instead, did it himself.
The do-it-yourself component in Jon Norton's response to the new normal in our economy is a theme we saw over and over again on our spend shift travels. In households it manifests itself in a boomlet in backyard chicken coops and frenzy of tiny entrepreneurial endeavors. Shamus Jones, one of our favorite shifter, responded to a terrible job market by starting a pickle company -- Brooklyn Brine -- that required him to work all night long in a restaurant kitchen where he was allowed to process cukes after hours. His collected his first orders by carting a backpack full of samples around on a skateboard. Less than two years later he has almost a dozen products, including minted eggplant and fennel beets, and they are available in Brooklyn, Manhattan, Upstate New York and Massachusetts.
Shamus Jones the pickle man didn't think about seeking a federal small business loan or turn to a bank to finance his start-up and neither did Kim Pham when she opened the Kalesia Tea Shop in Tampa, which became both a successful business and a hub for charitable community activities. In Kim's case, her business was boosted by a 'carrotmob', who pooled their dollars to support her sustainable business practices. These entrepreneurs and many others we met expected nothing from the government or the financial system, both of which seem remote and ineffectual to many spend shifters. At the same time they expect everything from themselves. Nearly half all Americans surveyed believe that "since the recession I am actually more capable of starting my own business."
This optimism was most abundant, we found, in the city most widely identified with the Great recession, Detroit. Despite losing population, jobs, and in some quarters, hope, Detroit is also a place where you can find a remarkable variety of innovators and entrepreneurs. Here government, at least on a small scale, is a reliable partner as a community development organization called the University Cultural Center Association aids start-ups in the Midtown neighborhood with financing, tax credits, cut-rate rents on space and technical advice on everything from bookkeeping to marketing. It was there that we discovered a young woman named Torya Blanchard whose creperie, which is called Good Girls Go to Paris is a handy lunch spot for hundreds of people working at start-ups like Nextek Power Systems, which is pioneering super-efficient direct current electrical systems for industry.
Taken together, the stories of the spend shift confirm what the data show us. In the leaner, new normal of the post recession economy Americans are expecting very little leadership from above and are willing to try almost anything that might work. Executives and politicians who understand this ethos and find ways to contribute to it will be embraced, no matter their party or their product. Those who fail to grasp it will find themselves either irrelevant or out of a job. Either way, the folks most affected by the downturn are finding ways to make sense of a life in a time when having less doesn't mean you can't enjoy life more.
Michael D'Antonio and John Gerzema, chief insights officer of Young & Rubicam, are co-authors of Spend Shift, How the Post-Crisis Values Revolution Is Changing the Way We Buy, Sell, and Live. The data they cite is from Young & Rubicam's BrandAsset Valuator, a quarterly survey of 16,000 American consumers that has been conducted for nearly two decades. More on the Spend Shift at johngerzema.com