Impatience … the definition of America’s investment strategy!

Here we are entering Day 2 of the post Facebook IPO; and we have a whole lot of Wall Street types in their ivory towers crying in their caviar and truffles. The millions they expected to pocket by doing nothing … well, didn’t happen. In fact, many lost millions. Let’s all pull out our violins and play a pity song for them.

Can Ron Johnson make it three in a row?

This event coincides with two posts I read in the Harvard Business Review over the weekend. The first was a commentary on Facebook and their disappointing IPO and the other was on J.C Penney and the lukewarm reception it’s gotten on it’s retailing strategy, specifically its new “fair and square” pricing. After reading these two pieces I thought  we were staring in the face of Wall Street Armageddon.

In fairness, the Facebook post by Rita McGath was well thought out. In summary, it questioned Facebook’s business model and the whether its focus on advertising revenue would justify the $100 billion valuation. And of course Rita had to bring up the high-tech of the 1990’s, and how we’re looking at a possibility of history repeating itself. I know she couldn’t help  herself – and I should cut her some slack. Consider it done.

I have a problem with this short-term focus in looking at the value of Facebook though. My comment on the post pretty much sums it up:

Good piece Rita. I share your concern about the possibility of a bubble. Investors, or should I say the often unenlightened heads of institutions – often just follow the lead of their mega-dealers (i.e. Goldman Sachs, etc.) in pursuit of quick rewards. I question how many of these institutional investors are even active users of Facebook.

I agree with you bringing up the “getting big for the sake of bigness” error that many social media companies often make. Groupon, as you stated – is a prime example. I believe they (along with their flawed business model) will gone sooner than later. Quality over quantity is a much better philosophy for numerous reasons.

I believe viewing social media platforms only from their potential to generate advertising is very short-sided. I hope we can see past this, especially considering the impact companies like Facebook and Twitter had in the Arab Spring and here with the Occupy Movement. 

A highly engaged customer (member) base can provide opportunities we can’t even image. Who would have imagined eighteen months the over-throw of Mubarak in Egypt? Nobody! An investor that has the mental acuity to look past the end of the week for a company’s performance may do very well investing in a company such as Facebook or in the future Twitter. 

Bubble or not, social media isn’t going away. The only thing that may, is the current basis for how we value them.

I didn’t look as favorably on the piece by Rafi Mohammed about J.C Penney. His views exemplify the American investment view, both professionally and personally – PERFECTLY! Below is my response in the Review:

Rafi, this is a good topic to bring up. It was inevitable there was going to be “armchair quarterbacking” once Ron Johnson took over the helm.

Any transformation of a retail icon, or should I say dinosaur, is going take patience … and lots of it. First, there’s going to be a shedding of customers (and employees). Some just won’t have the ability to accept change, no matter if it’s better or not. We’re in the shedding phase right now.

The next phase will be re-building. This will happen with new customers primarily – maybe from Kohls or even maybe some from higher end stores such as Macy’s or Nordstroms (for certain items). Johnson made it hip to shop at Target – so much so it adopted a French pronunciation. The boutiques, simplicity of pricing and up-graded ad campaign are part of the re-building and “re-imaging.”

This re-building process will take time, and as I said above patience. It hasn’t even been six months since the new J.C. Penney was born. Give it some time. I think Ron Johnson’s track record warrants at least that.

How in the world can any company, or a person for that matter, build a future when their only focus is as far as they see, with 20/150 vision. God forbid we don’t all become rich by the end of year, or even the end of the month. Arguably this country’s greatest investor of the last two decades, Warren Buffett – over and over professes patience. “Invest in good companies in industries that have long-term futures …. and wait it out.”
And it doesn’t just happen in stock market investing either. Look at one of the main premise of home buying. Most think buying a house is one of the best investments you can make …. supposedly, until the bubble hits and you’re and your family sit upside down in a mortgage that does nothing but strangle your future. A house is to live in, period! No one individual has control over the plethora of factors that dictate what that house will be worth in the future.
While I don’t condone the centuries long economic view the Japanese have. There has to be a happy medium.
Supposedly, patience is virtue. You wouldn’t know it these days.
_______________________________
…..
I can be found on Twitter at @clayforsberg
_______________________________
…..
Related post:
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s