It’s a confidence business
In the summer of 2025, WPP lost Paramount, Mars, and Coca-Cola’s North American media business within just a few months. Its share price fell by more than 60 percent. The CEO stepped down. Then, in the autumn, new chief executive Cindy Rose said on her first investor call: “Our recent performance has not been acceptable.” It was the sentence that sealed the narrative, not reversed it.
What had happened? WPP had not suddenly started doing bad work. But the story the company was telling about itself had stopped being convincing. Clients sensed a lack of leadership. Investors saw no clear AI strategy. And Publicis, similar in size and facing similar challenges, won almost everything because its narrative held together.
It was not the balance sheets that decided 2025. It was sentiment. Cindy Rose herself had captured the essence of the business back in the summer on the international Campaign podcast: “It’s a confidence business, a lot of it.” She was right. And WPP had just provided the proof, albeit not in the way she meant.
Ludwig Erhard already knew this. “The economy is 50 percent psychology,” he said in the 1950s. The latest GfK consumer climate data proves his point: German consumers’ propensity to save is now at its highest level since the 2008 financial crisis, even though inflation stands at 2.1 percent and income expectations are rising slightly. Objectively, the data offers little reason for restraint. But confidence is missing. So people save instead of spend.
What Erhard meant had already been sharpened by John Maynard Keynes in 1936: markets are not driven by fundamentals alone, but by animal spirits, that irrational mix of confidence, herd behaviour, and collective narrative. When business leaders stop investing because they feel uncertain, the economy contracts, whether or not the numbers justify it.
Kim Notz
03. March 2026
The myth of the rational decision-maker
Since Adam Smith, classical economics has invoked the idea of homo economicus, a being that maximises utility, assesses risks correctly, and calculates with cool precision. That person does not exist. Never has.
Daniel Kahneman described how we actually make decisions instead: System 1 and System 2. System 1 thinks fast, intuitive, emotional, automatic. System 2 thinks slowly, analytically, consciously, and with effort. Around 80 to 90 percent of all decisions are made through System 1.
Richard Thaler showed just how deeply loss aversion is wired into us: people fear losses roughly twice as much as they value equivalent gains.
George Akerlof and Robert Shiller identified five psychological forces that shape economic cycles: confidence, fairness, corruption and bad faith, money illusion, and above all, stories. The narratives we tell ourselves about the state of the world.
The conclusion is clear. At least half of every economic decision is grounded in emotion, driven by psychology, and not fully rational.
No industry is more shaped by this than ours
Clients do not choose agencies in Excel. They choose the team they trust. The idea they can picture. The presence that conveys confidence. Pitches are not won by the best strategies alone, but by the most compelling story about the best strategy. Animal spirits, right there in the conference room. Whoever creates the sense that something big is possible wins. Whoever does not, loses, even if they answered the brief better.
That is not a weakness of our business. It is its essence.
And that means confidence is not a soft skill that is nice to have. It is working capital. An agency that does not believe in itself sells that doubt too, in every pitch deck, every client conversation, every presentation. Mood is contagious, upwards and downwards.
WPP learned this the hard way in 2025, and has been trying to turn the narrative ever since. Last week, Cindy Rose presented the “Elevate28” plan: Stabilise, Build, Accelerate. Three phases, a target year in the name, and a CEO projecting confidence before the numbers justify it. That is no coincidence. It is an admission that confidence does not return through better quarterly results alone, but through a better story.
The real problem
The agency world is talking a lot right now about transformation, AI, and new business models. These are important conversations. But sometimes they obscure a simpler question: do we still believe in what we do?
The mood in many agencies has been subdued for years. Budgets are shrinking. Pitches are increasing. Margins are tightening. AI is creating uncertainty. All of that is real. But something else is happening too, something harder to measure: the industry’s collective narrative about itself has become defensive. We explain why we are still relevant. We justify our prices. We ask for trust instead of assuming it.
That is the real problem. Not because confidence magically makes problems disappear, but because its absence makes them bigger. Low morale leads to weaker work, which leads to poorer results, which depresses morale even further. A mechanism Keynes already understood.
What follows from this
The good news is that mood can be changed. And it can change quickly, faster than balance sheets can.
For agencies, that means three things in particular.
Take your own story seriously. Who are we, what do we do better than anyone else, and where are we going? Not as boilerplate in a pitch deck, but as a lived conviction. Clients are not buying a service. They are buying a vision of the future.
Project confidence, even when it is difficult. This is not a call for self-deception. But there is a difference between an agency saying in a difficult conversation, “We know things are not easy right now,” and saying, “That is exactly why you need us now.” Both statements can be true. Only one of them has force.
Make success visible. Agencies celebrate awards, but rarely the impact of their work. The revenue a campaign has generated. The market share a new positioning has shifted. Making those successes visible, internally and externally, is not vanity. It is mood management.
That sounds easier than it is. But the first step is also the most conscious one: understanding that the economy really is 50 percent psychology, and that this is not the soft part. It is the part that decides who wins the business.
