“Here’s a tune that’s really moving fast. When I say fast, it was recorded at 9 o’clock this morning. At 12 noon, it was No. 15. At 3 o’clock, it was the No. 1 sound in town. And now it’s a golden oldie!” — George Carlin, FM & AM (1971)
What a difference a month makes. A week. Even a few hours.
Prior to its first day of public trading, Facebook was pure glamor. Individual investors who could not get into the IPO were camped out in the lobbies of retail brokerages. Where they couldn’t get shares prior to the first day open, some were moving cash into their accounts ready to buy at the commencement of trading. We loved Facebook, all 900 million of us with an account. We may have heard a bit of light background noise about how its advertising wasn’t working all that well for some clients like GM, or whether the company was making enough strides in mobile, but few people listened. It was frenzy. We had to have it. Then it all changed.
The question is, what changed? Did the facts change? Did the market conditions change? Did the technology change? In 24 hours? Sure, there were analyst reports that didn’t find their way to everyone, but how many individual minds would those have changed, for the people who had to have it? Not many, I suspect. One Wall Street Journal story that especially caught my attention noted: “… a 30-year-old actor in Toronto, bought 15 shares of Facebook on its opening day. Before then, he had bought just one stock, yet saw the market as a place to make his savings rise in the long run. Now he feels burned.”This fellow is upset, yet his investment strategy was to own two individual stocks in minimal quantities to increase his net worth. As they say on SNL, really?
For my mind battle, Facebook was as exciting and pioneering a company before the IPO as it was after—the critical question was whether enough people considered what its stock was actually worth. We like to believe in fundamentals, until we don’t. What changed was the hangover. We sobered up and asked the questions we should have asked after we acted. Opinion reversed in this instance to an unprecedented polar opposite, a trend we now see too often.
Around the turn of the millennium, we experienced astonishingly rapid adoption of the commercial internet. The public couldn’t wait to buy stock in this emerging set of companies. Earnings be damned, this was the new economy! We used new online brokerage platforms at our fingertips to day-trade nascent listings on something called momentum. About a year later came the dot-bomb implosion and we couldn’t dump these equities fast enough. As soon as mass opinion declared most of them worthless, it was a self-fulfilling prophecy.
In the mid 2000s, popular opinion declared home real estate values going in one direction, to the stratosphere. Credit was easy, because with prices rising, properties could be flipped quickly, debt retired and profits tabulated with presumed certainty. When home prices crested and credit markets began to freeze, homeowners found themselves “underwater,” owing more on properties than they were worth. It happened that fast. People asked themselves how a home they bought for $600,000 could be worth less than $200,000 when only a year ago it was assessed at $400,000. How did prices go up so quickly, then down so quickly, then lock up without some form of fair warning?
JP Morgan Chase escaped the mortgage-backed securities meltdown and CDO liquidity crisis largely unscathed, only to follow-up this year with a series of disastrous derivatives trades that resulted in billions of dollars in losses. The company’s CEO, James Dimon, went on record saying the bank’s strategy was “flawed, complex, poorly reviewed, poorly executed, and poorly monitored.” Does that sound like a dependable financial institution gone temporarily astray, or a speculative gambling pit operating without normalized controls?
How do we make choices in a world where assessment can change this rapidly and radically? What is a grounded opinion?
Is the public manipulated? You bet we are. Witch’s brew opportunism is all around us. Are well-meaning individuals subject to baffling contradiction and confusion? To my knowledge it has never been any other way. The problem now is the fever pitch, the speed at which information and misinformation travels, the global pace of relentless throbbing that blinks and bubbles and burns and overwhelms our better judgment. We act because the parade is leaving town and the horns are blazing, not necessarily because we have decided it’s a good parade celebrating a cause we wish to trumpet. We don’t want to get left behind, until we too late discover there’s no place like home.
How fast is fast? In the original Star Trek series which debuted in 1966 and was set in the 24th century, Gene Roddenberry envisioned Warp Factor One as travel at the speed of light. Any kid who had taken high school physics got the joke, but for sheer late night discussion it seemed a decent enough way to talk about speed in the extreme. Warp Factor Ten was considered unachievable, a “purely theoretical” value, yet in the later sequels, Warp Factor Ten was used all the time, no big deal. I don’t think stretching of the metaphor over time was accidental. When fantasy portrays the speed of light no longer as a milestone, any definition of fast requires new parameters. I think we’re getting there, or at least the hyperbole is catching up with our perceived experiences that don’t involve beaming up our bodies, just harnessing some constancy in our opinions.
The 24 hour news cycle is well understood by those who create it, so much so that top public relations firms often suggest just waiting for a worse story to wipe out your current bad news. Rapid and seismic change has been a recurring theme in this blog since its launch, where the patron Pre-Socratic philosophers Parmenides and Heraclitus now have us wondering if you can even step in the same river once.
We like, we don’t like. We know we are fickle, but we allow conflicted voices all around us to vacuum us in one direction, then whiplash us in another. We become certain something is worth our hard-earned money, then we see our money vaporized and want it back. With all the experience we have around vast shifts in sentiment, why do we still allow ourselves to act before we have enough facts to make a reasonable judgment?
Robert Burgelman, one of my former board members who teaches business strategy at the Stanford Graduate School of Business, likes to define the shift between strategic thinking and consequence as the moment when valuable resources are committed to action. In a company, that’s when you move from the planning and consideration phase of a project to the substantial deployment of capital—financial, material, and human. These decisions are not trivial. There are experts involved, and even then, too many times they are wrong. In your own life, it’s when you go from liking a company for what it does to investing your savings in an equity stake. That too is a big leap, one you want to think about very hard.
Indeed, creative destruction is a norm, we know we have to move fast or risk missing opportunity. How do we apply the essence of urgency, the realities of internet time, to factor out hype and not be shifted into a higher gear than makes sense?
For starters, don’t be afraid to take an extra breath. Be appropriately careful with your convictions. It’s admirable to be resolute, but if facts are going to be relative, how really certain can you be today when someone else with a vested interest is bound to change the story tonight? Living in a world where unformed argument too convincingly sells itself as conventional wisdom can make skepticism a virtue. I am not one to resist change, but when I listen to opinion, I want convincing debate, not anxious pressure. Opinions can be interesting, facts are better. When you don’t understand something, never let others make you feel inadequate because “You Don’t Get It” and the clock is not on your side. You might be getting it just fine.
Your pace of decision should be your own. If you don’t like the story, don’t buy the book solely because someone stacked the deck with a stockpile of boilerplate reviews. Opinions will keep changing at lightning pace. Anticipate change in the assessment of change; you can bet on that because you have evidence. Beyond that, there’s a reason they call it the cloud.
Facebook just might beam itself into a valuation you wish you could have seen coming. Mortals like us can no more see the future than travel at the speed of light. If you want to win long-term in a race against noise, listen more closely to what’s under the noise. Cruise control at top speed will never be as comfortable as the manual suggests.
CorporateIntel 