Disclaimer: The following article is not investment advice. It simply only states my opinions.
Twitter is an interesting company to observe. For a long time I have had very mixed feelings about this social media platform. It is very easy to write it off and there are many reasons to it; chiefly one could argue that it is a toxic platform and has a negative effect on one’s mental health. From an investment point of view, there are additional reasons to be cautious. The company currently doesn’t have strong fundamentals and is not a cash generating machine in the same way that say Meta Platforms or Alphabet are. Even with its current share price more than 50% down from it’s $80+ high reached in February last year, it is a highly speculative stock.
However, when I look at Twitter objectively, I do think it’s model as a social media company, specifically how it’s designed, is unique and I would probably argue that Twitter is one of the most effective and powerful social media platforms to use if you want to get your voice or message heard instantly and to make some kind of noise. Traditional newspapers and journals will always have their place and there will always be a demand for quality content, yet for writers and journalists, Twitter is a much more powerful platform to get one’s message across than solely via a newspaper or blog. Twitter is the ultimate vehicle for someone not only to have their voice heard but to have it amplified in an exponential way.
The other thing that is interesting about Twitter is that almost every public figure uses it. Most people that matter and have something important to say are on it. Almost every person in government has a Twitter account. Almost every writer and journalist also has a Twitter account. The bottom line is that nearly every person who is outspoken is on this platform. For me, this is a very important sign and it reveals to me how powerful and disruptive this particular platform is.
Often I will value a company on its fundamentals in order to see what the company’s margin of safety is. Valuing something like Twitter is much more of an art. It requires truly understanding the platform, specifically it’s power and how it will develop as the internet continues to evolve. The fact that so many public figures, businesses and entities use the platform tells me that this platform clearly provides a lot of value and has very strong network effects.
Meta Platforms, which comprises of Facebook, Instagram and WhatsApp, currently has a market cap of just under a trillion dollars. Alphabet, the parent company for Google and YouTube, has a market cap of nearly $1.8tn. Twitter, on the other hand, has a market cap of just under $30bn. Some people may say that for a company that lacks the cashflow generation of Meta or Alphabet, a $30bn market cap is still very high. And they are not wrong. However, what if Twitter were really able to harness it’s power and become a huge cash flow machine? It is often said that it is important that a company still has its founder/s on board to steer the ship and provide a unique vision of how the company should be developing and operating. However, in the case of Twitter it is not unreasonable to say that it’s founder Jack Dorsey may not be the right person to really take the company to even greater heights. He was instrumental in the beginning phases of the company’s growth. Twitter still needs someone who is visionary and completely understands the company to take it forward, yet it also needs a mature, resilient and pragmatic leader and one who is able to realise and, more importantly, monetise all the company’s untapped potential.
Recently, Dorsey stepped down as CEO of Twitter. He was replaced by Parag Agrawal, who has worked at Twitter as software engineer since 2011. In 2017, he became the chief technology officer of the company before replacing Dorsey as the CEO in November last year. I could be wrong, but I sense that Agrawal will have a lot of success in cleaning up the image of the company and improving its credibility by cracking down hard on fake accounts and accounts where individuals and entities spread disinformation. I also think Agrawal will be serious in establishing ways to further monetise the platform and increase its user growth which has been sluggish.
Anyone who has studied the market performance of Twitter stock since it first IPO’d back in 2013 will know that the stock hasn’t really punched above its weight. Yet I think even if user growth continues to be a challenge, at least in the short run, I think the company has the potential to vastly increase its revenue. In Q3 21, the company generated $1.28bn in total revenue. I think there is the potential for the company to at least quadruple it’s total revenues from that point whilst still maintaining a healthy sized gross profit margin and keeping other costs like R&D, sales and marketing, and administrative costs at a reasonable level. If the company successfully pulls all this off, I would not be surprised if it grew into a market cap quite a few multiples from its current market cap of just under $30bn. I think in the next five to eight years, it is entirely feasible for the company to command a valuation of at least $150-200bn provided it makes big changes and succeeds.
The month of January has been a rather volatile one for financial markets. In particular, in the USA, where the markets over there are heavy with technology companies with enormous market valuations; a few of these companies, including Apple, Microsoft, Amazon and Alphabet, currently have market valuations in the trillions of dollars. Already back in 2019, when the NASDAQ index, which includes those megacap tech names, was hovering around 8000 points I wrote an article where I expressed my concerns that I thought the index was looking very frothy. In 2009, toward the end of the Financial Crisis, the NASDAQ was below 1500 points. In a decade it had increased over five times in value. At the height of the 1999-2000 dotcom bubble, the NASDAQ hit an at the time all-time high of over 5000 points. It would be another fifteen years before the NASDAQ would breach 5000 points again.
Back in 2019, some analysts expressed concerns about the heady valuation of several US tech stocks and that with the NASDAQ trading at over 8000 points, it was ripe for a correction. Towards the end of February the following year, those analysts got their wish when global markets began to dramatically correct in response to the outbreak of the COVID-19 pandemic. Investors began to panic and growth/tech heavy indices like the NASDAQ began to drop in value. In January of 2020, the NASDAQ had reach an at the time all time high of over 9000 points. By March of that year, it was trading in the 6000s.
Although, those who had been predicting a crash the previous year may have felt vindicated for a brief moment, very few could have foreseen the response by the Federal Reserve (Fed) and how it would promptly intervene with a dramatic increase in the US money supply and an enormous expansion of the Fed’s balance sheet. As a consequence, the NASDAQ duly rebounded from March 2020 and would embark on a mind-blowing run lasting many months. By November 2021, the NASDAQ hit a fresh all time high of over 16,000 points; more than doubling from it’s mid March 2020 level and almost doubling from it’s 8000+ level from back in 2019 when I wrote my article expressing concerns about it’s then heady valuation.
When the pandemic began to sink in and the Fed reacted via it’s huge financial stimulus programme essentially flooding the US economy with lots of new money, investors began to favour a certain group of stocks that became all the rage as they thought would thrive in this new pandemic environment. Governments around the world imposed multi-month long lockdowns and for many people at the time, there was a feeling that this pandemic would never end. Thus investors turned to technology stocks; stocks investors concluded would benefit the most from a stay-at-home environment. These stocks, already commanding rich valuations before the start of the pandemic, began to get even more crazy. At the same time, boring old school blue chip value stocks began to sell off even more. The travel and hospitality sector suffered greatly by global lockdowns and travel restrictions. The oil and gas industry too had a tough time with the price of a barrel of crude oil briefly entering negative territory. Sentiment in both those two sectors was completely shot to pieces, whilst the technology sector was in full on mania mode. But it wasn’t just the big tech names like Microsoft, Apple and Alphabet that were doing well, a new crop of technology stocks that became darlings during the pandemic, such as Zoom and Peloton, went on an epic tear.
As 2020 turned to 2021, this madness showed no signs of abating. In fact it all reached a brand new level of craziness. With many in the US receiving their COVID-19 financial stimulus cheques, which were originally intended to alleviate the financial burdens of those affected by the pandemic, a large portion of those cheques were used for speculation in the markets. A handful of stocks began to command valuations that just simply made no sense. One example was the struggling video game retailer, Gamestop. At the time it was one of the most heavily shorted stocks in the country. Until a group of investors from the social media site Reddit began to drive up the price of the stock massively with the intention of sticking it to the hedge funds who had large short positions on the stock. In the month of January 2021, Gamestop stock rocketed in value from just under $20 a share to over $300 before crashing to around $40 the following month. Many naïve and inexperienced investors got suckered into this micro rally and got badly burnt on the way down. It didn’t matter that this was fundamentally a worthless stock with no credibility.
In addition to those shenanigans, the beginning of 2021 saw another heady bull market emerging in the cryptocurrencies space with the price of Bitcoin entering the new year on a new high. But the increase in the price of Bitcoin during this period paled in comparison to other even more speculative areas of the crypto space. One of these was the booming popularity of NFTs or Non Fungible Tokens. These tokens are digital files that can be bought and sold with certain cryptocurrencies. During the first few months of 2021 this area of the market reached a complete fever pitch with a some individual NFTs even fetching millions of dollars. An NFT by an artist called Beeple fetched over $60m – an eyewatering amount of money; the kind of money that would exceed even the kind of money fetched for some of the best known and highly prized paintings by the most famous old masters of the ages.
Yet by the end of the year, cracks were already starting to appear. The last 13 years since the Financial Crisis has been dominated by a period of extremely loose monetary policy. It is no surprise that such a long period of rock bottom interest rates has led to one of the longest and most spectacular bull markets in history. And because of this it feels artificial. Wages have not gone up anywhere near the same level during this time period. In fact they have been rather stagnant. This has resulted in the USA experiencing a level of inequality not last seen since the 1920s. Or more specifically, the end of the 1920s. The so called Roaring Twenties ended with an epic stock market crash leading to a brutal multi-year long Depression. The Dow Jones Industrial Average (DJIA) hit a high of over 6000 points in August 1929, at the apex of the 1920s stock market bubble. In December 1920, the DJIA was just over 1000 points. When the this near decade long bubble burst during the last few months of 1929, the DJIA continued to crumble over the next few years during the Depression reaching just 910 points in May 1932. This was less than the low breached by the DJIA in 1920. In a little under a few years, all the gains the DJIA had accumulated had been more than wiped out. The next time the DJIA went over 6000 points was in 1959; a staggering thirty years since that level was last reached.
Many investors and analysts like to compare the current stock market boom, especially over the last few years, with the dotcom boom of the late 1990s. Whilst there are many similarities, namely with all the exuberant valuations of many tech stocks with poor fundamentals, I find the stock market boom of the Roaring Twenties a better comparison. This is especially true when measuring inequality in the USA over a 100-120 period. The incredibly loose monetary policy over the last 13 years had made this current bubble not only one of the largest in financial history, but also one of the most dangerous. Total US government debt before the 2008 Financial Crisis was already very high. However, between Q1 2008 and Q3 2021, total US government debt has near trippled from $9.4tn to $28.4tn. This is an astonishing increase for such a comparatively brief time period in US history.
During the last year, inflation has began to rear its ugly head. Some have been taken by surprise by this inflation, but I am anything but surprised. This was a long time coming. It is amazing that it has taken so long to appear. Of course, the super lax monetary policy of the last 13 years has seen incredible asset price inflation, but not so much consumer price inflation. But this all began to change last year when the US rate of inflation hit 6.8%, it’s highest level since 1982. The Federal Reserve now finds itself in a difficult position as even just a very modest raise in interest rates can have reverberating effects on the US stock market and economy as a whole. Over a decade of rock bottom interests in the US has, as already stated, almost tripled the total amount of US government debt and created a stock market bubble of absolutely epic proportions. In November 2008, the NASDAQ was trading below 1500 points. In November 2021, exactly 13 years later, the NASDAQ traded above 16,000 points. This is a more than ten-fold increase of absolutely dazzling asset price inflation. So much is now at stake, yet this bull market has never looked more fragile.
As of now, US interest rates still stand at zero. However, the last month has seen the NASDAQ fall quite sharply in value. By the end of last week, the NASDAQ was trading at 13770 points. Whilst this is a not inconsiderable drop from the 16,000 points plus high of last November, it is still more than double the low it reached during the brief stock market correction of February-April 2020. Moreover, it is still more than 9 times the value that it was in November 2008. What has been interesting is that the NASDAQ falls of the last month occurred before any interest rate hikes. The Fed intends to raise interest rates in tiny increments. However, the real question here is how much of a problem will inflation continue to be? This is where the Fed under Jerome Powell has really been asleep at the wheel completely underestimating the long term consequences of a decade plus of uber low interest rates, quantitative easing and cheap and easy money. Some economists make forecasts as if their projections will come into fruition with complete certainty. Yet the truth is no one can predict the future, regardless of one’s credentials and brain power. Not so long ago, the prevailing narrative was that inflation would be ‘transitory’. I didn’t and still today don’t agree with this narrative. I also don’t believe that the sole root of this inflation is the supply side shocks induced by COVID-19. As I have already mentioned, I am simply just surprised that, after over a decade of very loose monetary policy, it has taken so long to rear it’s ugly head.
What can really cause the current bubble to unwind much more is precisely if inflation continues to be a much longer term headache. The Fed may want to only slowly increase rates by small amounts, but what happens if inflation were to get worse and go into double digits? If inflation were to get out of control, I suspect that the Fed would have to increase interest rates by much more than it originally intended. This would bring an abrupt end to the cheap money era that has prevailed for so long. The biggest winners of this era have been growth stocks – particularly those in the technology sector. Invariably, companies with weak fundamentals would be trading on gargantuan market valuations. These companies would not be making any money and would be burning through cash. Yet often investors would be attracted to them by the story they projected rather than doing a deep dive into their financial statements. The cheap money era has been particularly favourable for startup companies not even publicly listed yet. It wouldn’t matter whether or not these companies were making any money. With so much cheap money sloshing about Venture Capitalist funds would throw ever more money towards them. In such an environment valuations do not seem to matter. And this is why I find this current rise in inflation very interesting as there is every chance that it will force the Fed to raise interest rates by much more than it was expecting thus bringing an end to this party. All of a sudden valuations will actually start to matter and all those companies that had heady valuations without ever making a profit will be in real trouble.
Already some of the darling stocks of the pandemic have had drawdowns of more than 50%. The video teleconferencing platform Zoom, which became increasingly popular as the pandemic unfolded, saw it’s stock motor from $76 at the beginning of January 2020 to a peak of over $550 in November of that year. Last week the stock traded below $140. The other darling of the pandemic, the exercise equipment and media company Peloton, saw it’s stock increase from around $30 at the very start of 2020 to over $160 just before the end of that year. Today it currently trades at $25 more than wiping out it’s 2020 gains.
The larger and more robust tech titans like Apple, Microsoft and Amazon have also experienced drops during the last month but they have overall still managed to hold on to their mega valuations. Apple recently hit a market cap of $3tn making it the most valuable company by market cap on the planet. At the beginning of the year it traded at over $180. Today, it’s trading at $170 with a market cap of nearly $2.8tn. It was only in 2018, when Apple became the first company to reach a $1tn market cap. In just a few years it has trebled its market cap. This is simply amazing growth for such a juggernaut of a company. Yet Apple is not cut from the same cloth of the more speculative tech stocks. Where Apple substantially differs is that it is a colossal cash generating machine of a company. Apple has a very rock solid moat and phenomenal pricing power. Even with at a near $2.8tn market cap, it currently trades on a not unreasonable PE of 28. Apple and the other tech stocks with solid cashflows that don’t need to raise money, will likely fare much better, despite their rich market caps, than the more fundamentally shaky tech stocks that still don’t generate adequate cash flows. However, Apple is not completely immune from any future shocks. I suspect that a continued rise in inflation will not only put a bigger strain on the finances of consumers, it will also further inflate the prices of important raw materials that are integral to Apple products. There could also be unforeseen future problems in China that severely affect the manufacturing capacity of Apple products.
Over the last 13 years whenever there has been a sharp correction in US equity markets it wouldn’t last for very long. The Fed would promptly intervene by pumping liquidity and thus causing the markets to sharply recover all it’s lost gains. The bull market would continue to just hit new highs. It is because of this that the USA still hasn’t experienced a prolonged bear market since the last Financial Crisis. For some time investors have simply taken it for granted that the Fed would just simply come to the rescue whenever there was any major market turbulence and stocks would duly rebound. But what if this time, the Fed finds that it has limited options to calm a plunging stock market? Higher than predicted inflation will almost certainly force the Fed to substantially increase interest rates. Money at much higher rates will cease to be cheap and the market, like a raging drug addict, will find that it is unable to get it’s usual fix of central bank stimulus. I suspect this will all have the affect of leading to markets being volatile and plunging to bigger lows over a much larger time frame leading to a bear market of many months or even years.
Don’t think the tech heavy US markets could experience a painful multi-year long bear market? Well, think again. It took almost 30 years for the Dow Jones Industrial Average to reach it’s all time high reached at the height of the Roaring Twenties stock market boom. When the dotcom bubble of the late 1990s burst in 2000, it took the NASDAQ 15 years to reach it’s all time high reached at the height of that bubble. Some stock market indices never again reach their all time high. Japan in the 1980s experienced an absolutely wild stock market and real estate boom. At the very end of that decade, the Nikkei 225, was trading at an all time high at over 38,000 points. Over the next year in 1990, the Nikkei 225 almost halved in value and over the next several years drifted downwards eventually bottoming below 8,000 points in 2003. The Nikkei has since recovered and as of today trades at around 27,000 points. Yet this is still short of it’s all time high it reached more than thirty years ago.
Some big names in the music world in the last few years have sold the rights to their songs for mega bucks. In 2020, Bob Dylan sold his back catalogue to Universal Music Publishing Group for a reported $400m. Then more recently last month, Bruce Springsteen sold the rights to his songs to Sony for half a billion dollars. Other names like Neil Young and the estate of David Bowie have also sold their song rights or at least a percentage of their rights for big money.
I’ve thought a lot about all this. On one hand, these may be shrewd moves especially with that kind of money offered. Yet alternatively, one could argue that song rights/publishing may over time end up being an increasingly desirable asset class. The last decade has been very rough on artists and the music industry in general. The growth of the internet and streaming platforms has had a huge dent on physical record sales. Even though there has been a revival in vinyl sales it is a small market and gone are the days one could make a comfortable living on CD sales or any physical record sales alone. To exacerbate this, the disruption created by COVID-19 over the last couple of years, has dealt a huge blow to arguably the most crucial source of income for music artists, which is playing live. All in all, the last few years have been pretty rough for music artists.
Yet I believe that the future is bright for music artists and the music world in general. I think the last decade was the nadir point, but I am optimistic that things will get better. And this all comes back to my point about the value of song rights. When the music industry was really growing in the 70s, 80s and 90s, record sales made up a huge part of the total revenue of this industry. So much so, that it would not be uncommon for the record label of a major artist (or sometimes even a new artist) to spend hundreds of thousands of dollars on a new album.
When upstart streaming sites like Napster started to appear and be increasingly adopted in the late 90s with the then recent rise of the internet, it was already a sign that in the future consumers would turn increasingly more to digitally downloading and streaming their music over buying physical records. By the early 2010s, it was clear that this trend had already had a huge effect on physical record sales.
Yet what the internet may have taken away, it may also give back generously. I believe that the full potential of song rights as a serious source of money generation has only barely been scraped. There will be so many new ways for songs via the internet to generate money. It is well known that streaming platforms such as Spotify pay artists very little every time a song of theirs’ is played on their site. And there may eventually be growing pressures or new laws passed to ensure that these platforms pay artists more fairly. However, music streaming sites will just be one way out of many other new ways for artists to make money from their songs.
Whenever a song is played on the radio or in a film/TV programme or advert, the songwriter receives royalties. With the growth of film and TV series streaming sites like Netflix and Amazon Prime Video, there are new opportunities for songs to be licensed to shows and films on those platforms.
I think for new and up and coming music artists, sites with oceans of video content by all kinds of people and entities (known and unknown) like Alphabet owned YouTube offer lots of opportunities for songwriters to earn additional royalties on their songs when content creators on those platforms use their songs in their videos. In the case of YouTube, some of the statistics are off the charts; 720,000 hours of content is uploaded to YouTube daily of which 500 hours of content is uploaded every minute. This simply phenomenal and abundant growth and with that immense opportunities for songwriters to earn income from their songs if their are used in any of these videos.
It is also important to see where the internet may be going and how it will develop in the future. Currently, there is a lot of hype over something called the ‘Metaverse’. And I can see why. To put it simply, this is a kind of ‘Virtual Reality’ stage of the internet. We already spend a large portion of our lives on the internet, yet it is a 2D experience – via our smartphones and laptops. In the so called ‘Metaverse’ it is a more immersive 3D experience. Although there is a lot of noise about the Metaverse and it is generally impossible to make predictions, it is possible to spot trends and I think the next stage of the internet will be a much more immersive one were people will be living in more virtual worlds via Augmented Reality (AR) and Virtual Reality (VR) technologies. I think this could grow exponentially, especially once it experiences mass adoption.
This will again create lots of new opportunities for songwriters as well as music artists/performers in general. In the case of the latter, I can see a huge growth in revenues for so called ‘hologram’ concerts where the artists don’t have to be present but the viewers receive a fully realistic and immersive live music experience where they can even interact with the artists and others in the virtual audience. But I digress. To get back to the point of song rights, I see lots of new income streams from songs to be made in these new worlds every time a song is used. Plus there will be lots of new opportunities and demand for songs to be licensed.
This is why companies like Universal, Sony and Warner Brothers have been paying huge sums of money for the catalogues of these blue chip artists as well as lesser known artists too. They are playing a long term game. Even though the sums they paid may seem like a lot of money, when these new digital platforms and worlds develop and grow exponentially, these catalogues could be worth even more money. So much so that it may end up being much more expensive for those artists to buy back the rights to all those songs they sold in the future.
Uncut Gems is a high-octane anxiety ridden trip of a film. Yet, whenever my body tells me to turn off the film, I keep feeling compelled to watch it all the way through until by the time the film is over, I need the peace and tranquillity of a white room with no external objects or fast moving stimuli. A ten day Vipassana meditation course may be needed!
The main protagonist of the film, a Jewish New Yorker jeweller named Howard Ratner played by Adam Sandler, keeps unnecessarily falling into tricky and at times dangerous situations. On one hand, I want to sympathise with him and his misfortune, but on the other he ultimately creates his own problems. It’s like he wants to spend his life swimming in quicksand when it would be less painful just to take the smooth plain vanilla road.
What’s more he is a father with kids to support. If he were single, hell, get into any kind of hot mess you want. But if you have a family, that is beyond selfish. Ratner’s mind is like a fast flowing river. There are seldom any moments of peace in his frantic dome. It is a gamblers mind he possesses and the thrill of it all seems to be his raison d’etre. A pretty pathetic one. He’s like the quintessential stock market speculator who never does any thorough due diligence on a stock and gets excited simply by a hot tip or any kind of hype. He will be the first to catch the FOMO (fear of missing out) fever.
Even when he wins big, like towards the end of the film, there is no grace in his behaviour. His gamblers’ mind simply glows more red hot. And if his life weren’t abruptly cut short, you can bet your bottom dollar he would keep gambling with whatever money he has left until he’s back to a no money situation or worse, further deep in debt.
People close to him find him draining. Especially his long suffering wife who bears the bulk of his chaos. One night she tells him to his face; ‘I think you are the most annoying person I have ever met’. And she’s right. He’s an exhausting and draining motherfucker. An impulsive, low grade hustler bereft of wisdom. I think any woman in a relationship long enough with Howard would get so beaten down to the point where a boring but dependable relationship devoid of even a modicum of drama would seem very attractive.
As ghastly and shady as the people pursuing him may be, they ultimately do him a favour by gunning him down. Throughout the film he is a hazard to himself and those around him. He’s like some insufferable stray dog constantly barking. A broken record. In the end someone somewhere was bound to lose patience and say, ‘Somebody shoot the dog’.
Tesla is arguably the most divisive and one of the most high profile and hyped stocks in the world today. I have written about Elon Musk and his companies in previous blog posts over the last few years . During that time I was in awe of the projects he was working on. How he has been able to take Tesla from a niche electric car company and scale it to a massive mainstream global company is beyond impressive. Ditto his progress with his other company, Space Exploration Technologies. Although the space industry is still a very nascent industry, he has arguably done more than any other commercial entrepreneur to create the infrastructure to make it possible for space exploration to potentially become a thriving and fast growing industry.
Since Tesla first became a public company, it has always attracted a lot of attention. On one side, there are millions of Tesla supporters and fanatics who worship Elon Musk almost elevating him to the status of a powerful religious figure. In their eyes he and his companies can do no wrong. Then on the other side, you have a group of sceptics. The most extreme contingent of this group are full-on haters who intensely dislike Musk and everything he stands for. Where the most passionate supporters see Musk and his companies as the future – the most powerful narrative being that some see him as the man who will pave the way to make the world an interplanetary species – his most damning critics see him as a fraud and a charlatan – an emperor with no clothes. The most fervent haters are the yang to the yin represented by the most fervent fanboys. However, the more thoughtful doubters are not cut from the same cloth. They draw their own conclusions on Musk and his companies based on facts and rigorous research.
Back in December 2019, I wrote a post on my predictions for the coming decade . One of my predictions was that I stated that it may be unwise to bet against Musk and his companies – basically echoing Peter Thiel’s mantra of “Don’t bet against Elon”. Since I made this prediction the share price of Tesla has been on an epic tear. Although I could see a lot of potential for the share price of Tesla to do well – merely on the prevailing sentiment alone. I could never in a million years have expected the share price to have gone absolutely parabolic in such a short space of time. Back when I made my prediction, the market cap of Tesla was around $50bn. Today, it is just over $1tn.
For the last decade or so, like many others, I had a lot of admiration for Musk and his companies. I was even in awe of him as I couldn’t think of another entrepreneur who was doing what he was doing and had the same breadth of vision as he had. However, today I have very mixed feelings. What has changed? I think in the past I was most definitely swayed by the narrative. But I don’t think it was just that. As I just said, who else is doing what he is doing? Nobody else has a pure EV and energy company on anywhere near the same scale as his. What’s more, no other entrepreneur has a commercial space exploration company at the same level of development as his.
I suppose any scepticism I had of Tesla back then was purely related to the company’s financial statements and how out of whack they were with it’s market cap. Yet, unlike the sceptics of the time, I reasoned to myself that Tesla was not only a high growth company, it was also more than simply just a company selling EVs. It was and had the potential to be much more than that and that at some point in the future it would eventually grow into it’s high market valuation. This was also along the same lines as the Scottish investment firm, Baillie Gifford, who are one of the earliest investors in the company and have seen their stake grow exponentially since then.
Many of the Tesla sceptics operate with the ticker symbol TSLAQ via Twitter. Whilst a section of this group may be hateful and spread lies and misinformation on Tesla, there are a good number who have legitimate concerns about the company based on facts. And I think it’s important that these are not swept under the carpet. One high profile example are those shared by the fund manager David Einhorn back in 2019. Einhorn is known for his bet against Lehman Brothers bank just before it collapsed during the 2008 Financial Crisis. It is easy to dismiss Einhorn today, especially since he (like others) had short positions on Tesla stock at the time and got badly burnt when the stock exploded in value in 2020. Musk also famously sent Einhorn a pair of “short shorts”.
However, I wouldn’t write Einhorn off so fast. One of his major criticisms of Tesla relates to it’s acquisition of Solar City back in 2016. Einhorn went as far as saying that Musk “knowingly orchestrated a significant fraud by arranging the $2.6 billion acquisition at a time when SolarCity was insolvent. Musk and his family had a huge conflict of interest, but rather than properly recusing himself, Musk initiated the transaction and drove the process.” Indeed, this acquisition was controversial. Solar City was a company founded in 2006 by brothers Peter and Lyndon Reve who are both cousins of Musk. Musk himself was the chairman of the company and instrumental in helping to found it. Solar City since it’s inception was, however, quite a cash intensive company. Although it was growing at a fast pace, it was also losing a large amount of money. For example, in Q1 of 2015, the company generated $67.4m in net revenue, yet made a loss of $146.9m with operating expenses alone being $147m. Back in Q1 of 2014 operating expenses were less than $90m . Often such losses are normal for a high growth company since it is often assumed that in the longer term the company may develop a sufficient moat as well as a level of scale and market leading position meaning that over time there is every possibility that it would be generating much higher revenues and solid net income profits. A low interest rate environment has also been very favourable for these kinds of companies since it means that money is cheap and thus it doesn’t matter if they are not making any net profits any time soon. However, in 2016 Solar City desperately needed a bridging loan of $200m  to avoid defaulting on it’s debt and it was struggling to raise money for it. It seemed that no one was prepared to lend Solar City the money. Failure to secure this loan would have likely resulted in the company going bankrupt. This would have had significant consequences for Musk and his companies. SpaceX owned 77% of the Solar City bonds  and if Solar City were to go bankrupt, this would have affected SpaceX in a huge way and possibly even it’s ability to continue as a going concern. It would have also been a huge financial blow for Musk since he personally owned over 22 million shares of Solar City stock worth nearly half a billion dollars . Thus, Einhorn, whether one may like it or not, is quite correct in his assessment that Musk committed fraud on a grand scale and that there was an enormous conflict of interest. Musk may have dressed the acquisition up as a takeover of a company aligned with Tesla’s own ambition’s as a clean energy company, when the truth is it was a bailout of his cousins’ struggling company not just to save his cousins’ skin but also his own and that of his companies.
The other glaring concern for me are the sheer number of lawsuits against Tesla. There are over 1000 lawsuits against the company of which 200 are in China alone . Aside from the Solar City case, perhaps one of the biggest and most unnecessary burdens on the company is Musk’s own erratic and unpredictable behaviour, which have led to lawsuits and fines. Perhaps, the most well known one is from back in August 2018, when Musk stated via Twitter that he was considering taking Tesla private and that he had ‘funding secured’. Not only did he not provide any evidence of having ‘funding secured’, he also violated federal securities laws with his tweet. The plain fact is that if any other CEO had done what Musk had done, they would have been fired on the spot and probably would have faced consequences of a far greater magnitude. I remember that time well and the whole furore that ensued. Yet, at the time I thought it was inconsequential in the grand scheme of things. My mindset was very much, ‘Ah, that’s just Elon being Elon. Fundamentally, he’s a genius and a visionary and this kind of behaviour is just part of his eccentricity.’ But I don’t know whether it is morally right to be so lenient on something so serious and to just shrug it off. This is especially true since this is not the first or the last time when Musk has behaved in an erratic and destructive way on his Twitter account. Sometimes, his tweets have been beyond the realms of bad taste. There is of course that well known incident from 2018 where he called a British diver who saved a group of young boys trapped in a flooded cave in Thailand a ‘pedo’. Then, rather more recently, he sent the following tweet earlier this month to Ron Wyden, a Democratic Senator from Oregon; “Why does ur pp look like u just came?” Wyden was critical of Musk’s decision to sell portions of his Tesla stock to pay taxes in accordance to a poll he proposed on Twitter. Wyden quite rightly stated that Musk paying tax, ”shouldn’t depend on the results of a Twitter poll.” . Just a few days ago on November 13th, US Senator Bernie Sanders tweeted, “We must demand that the extremely wealthy pay their fair share. Period.” Musk responded to Bernie’s tweet with, “I keep forgetting that you’re still alive”. In a perverse kind of way, I find a lot of this quite entertaining. The world of Twitter would most certainly be a duller place without Musk’s tweets. Yet the difference is that Musk is no ordinary Joe. He is currently the richest individual in the world due to the explosive rise of the share price of Tesla. It is also never wise to taunt or provoke prominent people in government positions, especially with that level of power. After all, even if you are the richest person in the world, it is ultimately the government that operates the switch, not you.
There have also been cases regarding the safety and shortcomings of Tesla’s vehicles . These have included battery fires. As early as 2012, there were leaked emails saying that Tesla had knowingly sold Model S vehicles that had design flaws in it’s batteries making them very vulnerable to catch fire. This has been a never ending issue and even involved the National Highway Traffic Safety Administration (NHTSA) intervening in 2014 and 2019. Even as recently as this year, Chinese regulators also stepped in after a number of customers in China reported and complained about the batteries in their Tesla vehicles catching fire. Furthermore, there have been reports of break failures, “whompy wheels” (where the suspension system of the vehicle breaks sometimes resulting in a wheel collapsing or falling off), and cases of sudden unintended acceleration. Perhaps the most high profile safety issue relates to Tesla’s Full Self Driving (FSD) software in it’s vehicles. This is controversial as it’s very misleading. The FSD software is anything but and requires drivers full supervision. However the fact that it is advertised as such is dangerous as it has resulted in multiple accidents where the drivers were under the misapprehension that they had full self driving software in their vehicles. Whether Tesla will ever develop true self driving software is another matter but by falsely selling products advertised in this way is not only misleading it also poses a serious risk to the drivers of it’s vehicles as well other drivers, cyclists and pedestrians.
I could go on but I think I’ll leave it at that. What is quite astonishing is that in spite of all these issues, millions of people continue to worship Elon Musk in an almost blind and blinkered way. On Twitter, he currently has over 60 million followers. When Peter Thiel says, “Don’t bet against Elon” he means don’t bet against a visionary a la Steve Jobs. And I continue to echo Thiel’s words too, but for different reasons this time. For me, betting against Musk implies betting against a universal chosen one with millions of fanatical and devoted fans. All the aforementioned issues and concerns don’t matter and have barely made a dent to his popularity. This is why for many years, short sellers, have lost staggering amounts of money betting against Tesla. And not all these short sellers are fools. Some of them like David Einhorn and Jim Chanos (who famously made a fortune betting against Enron) are highly respected and do tremendous amounts of fundamental analysis on the companies they focus on. They were both right in their analysis on Tesla, but what they forgot to account for was the sheer fandom and worshiping at the Temple of Musk. As a wise bulletin board poster once told me when commenting on the amount of money lost by Tesla short sellers; “Never bet against the great levitator”. Quite.
The economist John Maynard Keynes said it best with his immortal words about financial markets being able to stay irrational longer than one can stay solvent. I think it was Keynes who said those words yet it doesn’t matter. What matters is how important and powerful those words are. I personally think these are some of the most important words of advice for any investor whether they are a novice or seasoned. One may have complete confidence and conviction in a security they are investing in yet there is always the chance that things don’t go according to plan regardless of how much due diligence they may have done on it.
The Big Short is a well known book by Michael Lewis, which was later made into a successful film. The book is about an investor and fund manager named Michael Burry who places an enormous bet against subprime mortgage bonds. He was one of a small handful of investors who at the time discovered how rotten those bonds were and how they had the power to create an enormous financial crisis, which they eventually did in 2007-8. He placed his bet relatively early in around 2005. At the time, it was seen as a rather contrarian thing to do as the majority of people in the financial world were amazingly unaware of how toxic those bonds were.
Although Burry would eventually be vindicated and handsomely rewarded for his bet, I personally think that the way he went about it wasn’t so smart. To be clear, I am not for one moment knocking his deep research and analysis. In fact, I applaud his diligence and ability to discover serious flaws in that corner of the market whilst everyone else it seemed was asleep at the wheel. Yet I don’t think it was a smart move for the following reasons. Firstly, his move to short those bonds represented a very high percentage of his total fund, which made a lot of investors very nervous. If you are a fund manager or work for a fund, it is quite common for an individual security to not represent more than 10% of the total fund. Anything higher than that percentage has the potential to create a lot more risk and volatility to the fund. What’s more, it was expensive to hold such a large short position as large payments to service it were due every month. It was understandable why those investors and others at his fund were nervous and had very little patience. Secondly, and more importantly, I don’t think Burry ever familiarised himself with Keynes’ quote. Although it took about two years for his bet to come good it could have taken much much longer. It is entirely plausible that had his fund had to wait even longer for his bet to come good there would have been so much pressure on Burry to finally close his short and thus cut the loses the fund was making by holding it.
You see it doesn’t matter whether Burry was fundamentally right in his analysis. He was completely correct. These bonds were a train wreck waiting to happen. But that’s not the point. The point is that timing the markets is very very difficult. Alternatively, Burry could have done the following. He could have still made his bet yet it wouldn’t have represented more than 10% of his total fund for example. That way, there would be less tension and pressure on Burry to close his position in the event that it was going to take so long to come good. What’s more, it would have still made him and the investors in his fund a lot of money when that day would eventually arrive.
This brings me to another well worn adage in the investment world of never having all your eggs in one basket. Although this may be a cliché it is so very true. Although enormous fortunes are made by putting all one’s huevos in one single basket, it is also the fastest way to blow up a portfolio. Burry’s enormous bet came good and he was rewarded, but he could also have been fooled by randomness by some unusual twist of fate.
Over the last few years many investors, including some well known names, lost a lot of money shorting Tesla. Although the rationale behind their decision to short the company was completely understandable, namely that the market capitalisation of the company was not reflective of it’s fundamentals, the share price has nonetheless continued to climb even higher. This right there should be a warning in the perils of going for that ‘big short’. As I already stated, it is ok if such a position is not so great that it poses a serious risk to an entire portfolio. But one can only imagine those legions of investors having a Michael Burry style moment with Elon Musk’s company.
Interestingly, it seems that Burry himself has now thrown his hat in the Tesla Short ring. I may be wrong, but it appears that his fund is betting against Tesla to the tune of 40% of the entire weighting of the fund. I wish him luck. Will his bet come good again? Or will he join the scores of other investors who got badly burnt betting against Elon?
Whenever someone asks me to choose between The Beatles or The Stones I will sometimes reply with ‘neither’. Instead I will say The Kinks. There is something special and close to my heart about that band. Throughout the 60s they had hit after hit and were certainly one of the leading British groups of that era. Yet many listeners of The Kinks I feel only penetrate the surface of this great band. They know the hits, but few venture beyond those songs as popular as they may be. I came to the band a little late. I first got into the group via a greatest hits compilation I purchased when I was 19. As much as I cherish all those well loved songs, what struck me as odd was that the compilation ended at the 1970 hit single Apeman; as if the group ceased to exist after that song. It seems to be the same with many other Kinks compilations.
Most of their well known hits are from the time when they were signed in the UK to the Pye record label from 1964 until 1970. The vast majority of their most well known songs such as You Really Got Me, Sunny Afternoon, Tired Of Waiting, Waterloo Sunset, Days and Lola fall within those years. Personally, my favourite years are from 1968 to 1975. I love those early songs and they will never get stale and always retain a timeless quality to them. For me though, the most exciting years are when the group’s chief songwriter Ray Davies began to compose these brilliant and ambitious concept albums starting with the 1968 album The Kinks Are The Village Green Preservation Society(TKATVGPS) and ending with the 1975 album Schoolboys In Disgrace. Those albums receive mixed reviews from fans. For example, the former is today frequently heralded as a classic landmark album and can be seen in many ‘greatest albums of all time’ polls. The latter album, on the other hand, gets invariably torn apart. Perhaps those journalists and listeners never even bothered to actually listen to Schoolboys? They probably saw the hideous front cover and decided that they didn’t need to investigate further; their prejudices already set in stone.
During the few remaining Pye years, The Kinks released some very strong albums. In 1968 they released the aforementioned TKATVGPS album. Then the following year they released the album Arthur, which is just as good as VGPS and is equally held in high esteem. The final two albums they released on Pye were the 1970 studio album Lola Vs Powerman And The Moneygoround and the 1971 soundtrack album Percy for the film of the same name. Lola Vs Powerman… produced the hit singles “Lola” and “Apeman”. The former is one of the band’s best known songs.
After the band left Pye, they signed a new deal with RCA records in 1971. Their tenure at RCA would last for four years and during this time the band continued on it’s trajectory of releasing concept albums. Just as they signed to RCA, they released the album Muswell Hillbillies. It’s a strong album with some fine songs on it. The next year they released the album Everybody’s In Showbiz. Personally, I have mixed views about this album. On one hand, I like Ray’s ideas and inspiration behind it as well as songs such as Celluloid Heroes and Sitting In My Hotel Room. Both these songs are excellent. Celluloid Heroes has gone on to be covered by multiple artists – most notably Bon Jovi. It contains some of Ray’s finest lyrics.
Then in 1973 and 1974, the band released two albums; Preservation: Act One followed by Preservation: Act Two. All in all, neither of these albums were particularly well received by music critics at the time; especially the Preservation: Act Two album. However, after listening to both those albums I have come to the conclusion that they are the two lost masterpieces of The Kinks’ cannon of albums. And it is those two albums that I want to make the centre of this article. Whilst it may be too controversial to say that they are the best albums by The Kinks, I think I can firmly say that they are Ray Davies’ most ambitious works. It doesn’t matter whether one thinks those albums are a success or a failure. I don’t personally think they are a failure. What I will say is that those albums took Ray down avenues he never, or at the minimum only casually, ventured down before. He had already explored subjects like greed, poverty, inequality and injustice in society earlier on via songs like ‘Dead End Street’,‘Brainwashed’ and ‘Powerman’. But on the Preservation Act albums he goes right into the heart of darkness. The Village Green Preservation Society(VGPS) album is almost soft liquor by comparison. Whilst the songs on VGPS are very strong and vivid, they are also accessible. They don’t rock the boat nor do they, at least superficially, take the listener to an ostentatiously dark and uncomfortable place. The Preservation Act albums, on the other hand, are much more polemic.
We’ll start with the Preservation: Act 1 album from 1973 before delving more deeply into Preservation: Act 2. One of the gems of this album is the song Sweet Lady Genevieve – a song that could fit quite comfortably with the cannon of better known Kinks hits. Of the two Preservation Act albums this one is lighter in tone and there are even echoes of the earlier VGPS album via songs like Sitting In The Midday Sun and Daylight. Another pearl on this album is the song ‘Where Are They Now?’…
I’ll sing a song about some people you might know They made front pages in the news not long ago But now they’re just part of a crowd And I wonder where they all are now.
For me this song is an affectionate tribute to all the mavericks. The individual and special people who were a blast of colour in a world that is becoming increasingly colourless and homogenous. In the context of the earlier VGPS album that would be characters like Johnny Thunder. Some strands of humanity are evident on Preservation: Act 1. But this is deceptive. The presence of the song Money And Corruption/I am Your Man poisons any idyllic and romantic notions…
Money and Corruption Are ruining the land Crooked politicians Betray the working man, Pocketing the profits And treating us like sheep, And we’re tired of hearing promises That we know they’ll never keep.
With this song Ray dives straight into the underbelly of the system – taking it on like a firebrand revolucionario a la Hugo Chavez. This continues and is reinforced in the end refrain part of the song with it’s Communist Manifesto overtones…
I visualize a day when people will be free And we’ll be living in a new society. No class distinction, no slums or poverty, So workers of the nation unite, Workers of the nation unite, People of the nation unite.
This song sets the tone for the follow up Preservation: Act 2 album. On the later released bonus edition of the Preservation: Act 1 album is the song ‘Preservation’, which wasn’t featured on the album when it was originally released. It’s lyrically not only a very strong song but totally encapsulates the spirit of both Preservation albums as a whole. It also, along with the song Here Comes Flash, introduces the character Flash, a central figure in the follow up album who represents everything that’s wrong in the world – a psychopathic, greedy, amoral, corrupt and duplicitous individual who lacks empathy and is only out for himself. He is the type of person that would make Gordan Gecko blush…
Once upon a time In a faraway land Lived a villain called Flash He was such a wicked man He terrorized the people He broke arms and crushed hands He ruled with a fist and he purchased all the land
Then he plowed up the fields and cut down the trees For property speculation And he did it all for a pot of gold And for his own preservation
Preservation: Act 2 is a dark unsexy beast of an album. Whatever light there was on Preservation: Act One has now been blocked out. If VGPS is all rural fields, church fetes, strong bonds of trust, tea and scones and strawberry jam, then Preservation Act Two is polluted rivers, eyesore landscapes, revolutions, and societal collapse where everyone just looks after number one. The VGPS album has a kind of innocence to it. Even the mildly dark characters in the album like in the song Wicked Anabella completely pale in comparison to Flash. The world of VGPS is a paradise compared with the world of Preservation: Act Two, which represents a paradise that is well and truly lost. It is about as east of Eden as one can get.
The life portrayed in Village Green is overall idyllic and peaceful. Yet it is a bubble shielded from the truly evil and disruptive forces of life. It is naïve to think such a life like that one can just go on forever. Flash hadn’t yet pitched up to turn things upside down.
The first song on Preservation: Act 2 to really get things going is the song When A Solution Comes…
When a solution comes, It’s gonna breathe right down on everyone. When a solution comes It’s gonna cover up the clouds And eclipse the sun And black out a pale blue sky, And everybody’s gonna be terrified, Because they’re all going to feel the bite And there’s going to be a revolution
‘Days’ this song is not; in that iconic song from 1968 there is sadness, loss and grief. But there is no bitterness. There is no hate nor is there fear. This is evident in the following lyrics;
You took my life, But then I knew that very soon you’d leave me, But it’s all right, Now I’m not frightened of this world, believe me.
Yet in When A Solution Comes there is a change in the weather. This is the beginning of a new period of fresh hell that will reign down on all of society. In the book The Fourth Turning, the authors William Strauss and Neil Howe look at the world over the last 500 years and locate a series of cycles each lasting a generation. Within each generational cycle are four turnings. The first turning represents a ‘high’: this is a period of stability. Trust in institutions is strong and individualism is weak. A new civic order is established the old values regime collapses The second turning represents an ‘awakening’ where the civic order established in the first turning begins to come under attack from a new values regime. The third turning represents an ‘unravelling’. During this era trust in institutions begins to weaken and individualism strengthens. The first turning civic order collapses at this point and eventually taken out by the new values regime. The forth and final turning represents a ‘crisis’. By this time the world is in chaos as the the new values regime replaces the original civic order created in the first turning with a new one.
In the context of the trilogy of all three Preservation albums, the song When A Solution Comes represents the ‘unravelling’ phase of society. It is not in the full ‘crisis’ phase yet, but it is already well on it’s way. On the other side of the coin, the opening title track of the VGPS album in some ways represents many attributes of the first turning….
We are the Village Green Preservation Society God save Donald Duck, Vaudeville and Variety We are the Desperate Dan Appreciation Society God save strawberry jam and all the different varieties Preserving the old ways from being abused Protecting the new ways for me and for you What more can we do
The lyrics of the title track of that album for me evokes a strong sense of unity. A sense of everyone looking after each other. Not allowing society to disintegrate. Keeping the peace. And that requires making an effort and caring. Once people stop caring, apathy begins to prevail and with that goes the ties that bind paving the way for disruptive forces to take over. The consequences of this are probed deeply in Preservation: Act 2.
The song Shepherds Of The Nations is one of the strongest songs on the album and in my view represents the new horror show of this dark turning….
Down with sex and sin, Down with pot, heroin. Down with pornography, Down with lust. Down with vice lechery and debauchery.
We are the new centurians. Shepherds of the Nations. We’ll keep on our guard For sin and degradation. We are the national guard Against filth and depravity, Perversion and vulgarity, Homosexuality. Keep it clean.
When all of a sudden all basic freedoms that were once taken for granted have now been eroded and a new cabal of neo-puritan Gestapo-like folk have taken over the asylum. Rather than the world taking a step forward and continuing to evolve and flourish, it has been abruptly thrown off its course and has taken a thousand steps backward towards some unfolding new sterile, lifeless and fearful Middle Ages era wasteland; where all the flowers start to wilt and die, and turn a new shade of grey. All the colours of the Village Green world now dulled to cigarette ash.
The song Nobody Gives is another dark slice of what it’s like to be in the living in the middle of a turbulent fourth turning style world…
I can’t understand why everybody’s quarreling, Nobody gives in case they lose face, And everybody’s guilty and everybody’s innocent, And the fact of it is nobody gives any more.
Once upon a time there was a period of peace, stability and trust amongst one another. The aforementioned VGPS title track nails that sense of societal harmony perfectly with the lyrical couplet, ‘Preserving the old ways from being abused / Protecting the new ways for me and for you‘. But in the song ‘Nobody Gives’ everyone has turned against one another. They have become fearful and full of mistrust. Any attempt at simply performing any altruistic acts of kindness is simply not worth the bother and in a climate of unanimous fear this could even backfire. Thus it is easier and safer to just not care anymore.
As the song gathers pace, it takes the listener on a vivid and sombre journey through the roots of this social breakdown leading to, in the example of this song, the rise of Hitler…
Back in nineteen hundred and twenty-five There were thousands of people struggling to survive. There was hunger, unemployment and poverty, Then in 1926 they decided to be free So they all went on strike and The workers told the unions, who blamed it on the government, The politicians blamed it on the strikers and the militants, Everybody’s guilty and everybody’s innocent, But the fact of it is nobody gives any more.
Back in nineteen hundred and thirty-nine There were scores of German military waiting in a line, And the Fatherland wanted what the world wouldn’t give, And then Hitler decided he could take what was his, So they all went to war and said Kill all the left-wing intellectuals, Annihilate the Jews and wipe out their race, Eliminate the weak because they’re ineffectual, And the fact of it is nobody gives any more.
In 1923, when Germany was then the Weimer Republic, the country experienced a period of devastating hyperinflation. This had the effect of throwing millions of citizens into acute poverty – especially those who didn’t own any hard assets that could protect them from this inflation. Any savings in the local currency that had been accumulated via hard work and over a long period of time had very quickly become worthless. The grinding poverty and desperation aside, one can also only imagine the extreme anger and injustice felt by those who had lost all their life savings. They wanted blood and someone to blame. Hitler emerged at a time when this anger and desperation was reaching boiling point. It is only when a society is in meltdown and in the eye of a fourth turning that a figure as evil Hitler can rise to the top. In a Village Green world of togetherness and mutual respect for one another, Adolf wouldn’t stand a chance.
Overall, I think both these Preservation Act albums should be essential listening and certainly deserve to be much more wildly known. They not only complement the earlier and more well known VGPS album, they also give the listener a glimpse into the more intricate and visionary workings of the mind of Ray Davies. I think this was perhaps lost on some of the music critics who were reviewing both albums at the time. The lyrics aside, I think some credit also needs to go to Ray’s brother Dave. Generally, I don’t think he gets another credit as a guitarist. His guitar work is a really important part of both albums and I feel it sets the tone very effectively on some of the songs.
Two further albums followed in 1975, Soap Opera and Schoolboys In Disgrace, before the group left the RCA record label. Like the earlier Preservation Act albums, neither album got overly favourable reviews. Yet I think they are both interesting in their own ways. Soap Opera is a flawed hit and miss album yet the concept behind it is strong and very relevant. I particularly like the songs Everybody’s A Star (Starmaker) and You Can’t Stop The Music. The former song quite simply describes how anyone can be a star; even the blandest and most personality and talent bereft of individuals. Ray created a character called Norman to personify such people.
Schoolboys In Disgrace also has it’s moments. Unfortunately, it suffers from a front cover that is quite frankly a veritable abomination. I feel it unfairly undermines the whole album. That is certainly one reason why many listeners do not give this album a proper chance. However, those who look beyond this monstrosity of an album cover will be rewarded for their curiosity. It is not a perfect album, but there are some gems on there like Schooldays, I am In Disgrace and The Hard Way . It is also conceptually a very interesting album as it is based around a disruptive and unruly schoolboy who would eventually develop into the vile and evil character Flash of the earlier PreservationAct albums. So, in a way, this album plays an notable role next to those albums. It is an important part of that complex puzzle.
Fame can be a dangerous thing. Some people seek it because in their minds it fills a void. If you are talented and have a lot to offer it presents the opportunity to be valued and respected by many people. Fame has always had it’s drawbacks yet I feel there are two different periods of time that one must be aware of. These are Before The Adoption Of The Internet (BTAOTI) and After The Adoption Of The Internet (ATAOTI). In The last 25 years, the growth and development of the internet has been staggering. We currently live in a world of instant hyper connectivity.
If I had to pick a time to be famous I would pick BTAOTI in a heartbeat. News travelled slower back then. The digital world was less developed. I have no nostalgia or desire to live in the past, but when I look at the growth and development of social media today I flinch at the concept of fame. I would even go as far as saying that eventually it may even lose it’s appeal. It would take real guts to go down that path so much so that anonymity would become increasingly attractive. Andy Warhol said that everyone would be famous for 15 minutes. The internet has provided a platform for everybody to publicly project themselves if they want to. There is so much content on the internet today. There is no way one would be able to absorb all the digital content out there in one lifetime. According to Statista, as of May 2019, more than 500 hours of video content was uploaded to YouTube alone every minute.
It is increasingly a rarity nowadays to not have any personal platform or content online. To be purely anonymous will be rarer and more cherished than fame itself.
A few years ago I wrote a post entitled ‘Talent Is Cheaper Than Table Salt’. In this post I outline how talent is actually not so rare and rather it is hard work that matters when it comes to finding success.
I’ve often thought about this post, especially as it is one of my most viewed posts. Yet since I first wrote it, I’ve increasingly began to question it, even though, at least at a logical and basic level, it may be correct. But what if, just what if, I may have got it completely wrong regarding talent? Maybe genuine talent is actually rather scarce. To be clear, when I say this, I mean a kind of talent that is just so special and very hard to replicate.
The quote in my original article by the writer Stephen King goes like this; “Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work.”
King is correct, especially if one also takes into account the second sentence of his quote. It is all true. Yet talent and hard work are two different things. Anyone can develop a hard work ethic, but not everyone has real god given supernatural talent. I think we need to really reassess how we define talent. I also dispute this notion that if you work hard you will automatically be rewarded. We fall victim to something called ‘Survivorship Bias’ – only looking at success stories and overlooking all the failures.
There are countless stories of those who worked extremely hard and didn’t ‘make it’. Yet those stories seem to be lost on us. But that doesn’t mean that one should not work hard. Absolutely not. Hard work, unexpected challenges and multiple failures are an important part of one’s character building. Saying that hard work is a waste of time sets a bad example.
As a whole, we often neglect to take into account just how random the world can be. Please see my other post Fooled By Randomness. Life is not as linear as we think it is. There are some things that are simply beyond our control.
But getting back to the subject of talent. When I look at the people I admire throughout history one thing they all have in common was that they were special. They were not like everybody else. They had talent in spades and often there was hardly any chasm between their life and their art. Now THAT is rare.
Start-ups are an important part of the business landscape. More crucially, the best start-ups provide much needed solutions to long standing problems. They provide real value to consumers. However, one thing I have observed over the years with certain start-ups is this mantra of ‘growth at all costs’.
If you are the founder of a start-up that provides a product or service that people really need and for a reasonable price, it is fair to say that this start-up has a bright future with a large potential for sizable growth over the coming months and years. That is all well. Yet, it does concern me when I observe the ones that have this ‘growth at all costs’ mindset.
No matter how driven or ambitious a founder may be, it is absolutely paramount that there is a healthy working environment amongst all the people who work at the company. There is currently a huge scandal with the UK craft beer company BrewDog over the maltreatment of many of its workers. BrewDog has been a huge success story. Ever since it’s founding a little over a decade ago, it has grown exponentially and is now the largest craft beer company in the country. It’s become a ubiquitous brand with it’s beers sold in all major supermarkets.
I could be wrong, but I am guessing that during those years when BrewDog was growing at such a fast pace, there was very much a ‘if you can’t stand the heat..’ atmosphere in the organisation. Even though BrewDog do make very good beers, the craft brewery industry is very competitive. There are many players and the way that BrewDog has been able to get to the position it is currently at today has been by scaling very fast in a relatively short period of time. By growing at such a rapid pace, it has now got to a size that gives it a clear edge over it’s competitors. If it had not embarked on this journey of aggressive growth it likely would have lost out to another competitor in the space.
Yet a big consequence of adopting an aggressive growth strategy is that it can create a toxic environment in the workplace. It suddenly becomes very easy for founders/chief executives to forget to care about the wellbeing of the other workers in the organisation as, in an almost single minded fashion, they have their eyes set on reaching their lofty targets they have set themselves out to achieve. They fail to understand that the workers are an integral part of the growth/success of their business. Without those workers, it is unlikely that their company would have been able to grow so spectacularly. This is especially true of those founders with very large egos and a lack of empathy for others.
A more extreme example of a growth at all costs business that makes Brewdog look like a plain vanilla enterprise is the rise and fall of office rental space company WeWork under the leadership of it’s colourful founder Adam Neumann. Unlike Brewdog, WeWork never made a profit and simply haemorrhaged cash. Billions of dollars of venture capital money was thrown at the company, most notably by Softbank whose founder and CEO, Masayoshi Son, really believed in the company. At one point WeWork had a valuation of over $40 billion. An eye watering valuation when one takes into account the fundamentals of the business.
WeWork also suffered from a toxic workplace culture. Those Brewdog workers, who via the Twitter group Punks With Purpose are bringing to light the less than perfect behind the scenes picture of the business, accuse the company of being ‘built on a cult of personality’. They take aim at how the company and it’s founders cultivated an image of the company as authentic (applying a ‘punk ethos’), caring about the environment, being forward thinking and progressive, and an amazing and cutting edge place to work at. Yet the irony is that it was anything but rosy. In their own words they scathingly say that “The true culture of Brewdog is and seemingly always has been, fear”.
Yet compared with WeWork this is small beer (no pun intended). The larger than life WeWork founder Adam Naumann would make make Brewdog co-founders James Watt and Martin Dickie blush. He took the term ‘cult of personality’ to another level. To the point where he was able to get some of the most powerful heavyweights in the venture capital space to invest megabucks in his business. Even though, with just a modicum of due diligence, it would soon seem apparent that WeWork was essentially a start-up with very poor fundamentals. The emperor had no clothes. Those VCs who were smart enough to see beyond the hype and mega personality of Neumann and actually did some stone cold research on the fundamentals of his business, saved themselves a packet.
Sometimes it is not necessary for a start-up to pursue a ‘growth on steroids’ strategy. It may be that you can create a lot of value and provide a unique solution without the need to aggressively grow. Sometimes large growth can happen by default if suddenly there is a massive demand for your products and services. And that is fine. There is nothing wrong with growth. Hell, there is nothing wrong with full on hyper growth. But not when it’s at all costs. Not when workers are not feeling valued and a dysfunctional and toxic workplace environment manifests.