Sometimes when we find ourselves on the third base, we think we hit a triple. It doesn’t matter if we got there by series of luck of the draw. I mean a botched throw that turned a single into a triple. Or a passed ball that helped with a stolen base or two. The point is that sometimes being successful is a series of unseen random events. However, that is a good reason for many to assume that they are the smartest guys in the room. Enron folks, often thought they were. Except, when they weren’t. They just were just self-dealing.
Fast forward to today, and we have the problems faced by Softbank and its founder-CEO Masayoshi Son, and his game-changing $100 Billion Vision Fund? The company reported some staggering losses, thanks to investments that had a whiff of self-dealing. Keep buying WeWork or Oyo at higher prices, even if others won’t? Why, because you think you are the smartest guys in the room, and you have the best data.
Except, you don’t. The same company that was once worth $47 billion — why, no one knows — is now worth $2.9 billion. This is less than the cash Softbank invested in WeWork. Bloomberg reported:
The drop in Uber’s share price was responsible for about $5.2 billion of Vision Fund’s losses in the period, while WeWork contributed $4.6 billion and another $7.5 billion came from the rest of the portfolio, SoftBank said. The $75 billion the Vision Fund has spent to invest in 88 companies as of March 31 is now worth $69.6 billion.
Who knows how many other such disasters are ahead of the fund and its leader, who (according to FT) had no qualms in comparing himself to the son of god and the Beatles.
“Our unicorns have fallen into this sudden coronavirus ravine,” Son told his investors. “But some of them will use this crisis to grow wings,” Son said on the investor call.
What is that saying about wishes, horses, and beggars? [PS: I don’t know who is running Softbank PR, but if we had the old Business 2.0, we would have Son’s comments and that visual from the investor presentation at the very top of the 101 Dumbest Things of 2020.)
And that brings me to the reason I really started to write this piece — unicorns: and what a bunch of baloney they are. I bristle at the idea that technology companies are happy to label themselves as a mythical creature and does not exist. Time and again, the faulty valuations and lofty expectations prove that.
Whether it was Square, Snapchat, Box, Pinterest, Uber, or WeWork — the label matters zilch when it comes to the real world and real markets. Private markets are notorious for getting the valuations wrong — both on the upside and the downside. You either have good companies, or you have terrible companies. Labels don’t matter.
I hope the pandemic snuff the life out of this unicorn meme that has dominated every aspect of Silicon Valley narrative over the past seven years.
No more unicornonsense!
May 19, 2020. San Francisco.