We’ve got trade wars, spectacular start-ups, crypto-currencies, scandals, and mad, stomach-churning swings in the stock market. Do you feel the excitement?
It’s almost like the good old days – the Wind of heart – pounding financial ride that led to the dot-com crash of early 2000 and, yet again, to the calamitous economy of the mid – 2000s. Everybody needs a distraction from the unending hellscape that is the news from Washington.
I recommend the business world : For that vertiginous feeling of riding a roller coaster, the stock market is better than ever. Companies that combine technology, convenience and bewitching back stories have been shouldering their way to fame.
These are the fabled “unicorns” – the tech start-ups that investment firms pumped up to a valuation of 1 billion US-Dollar or more. Lately, though, some of the unicorns look more like dogs. They don’t earn profits but have a knack for making headlines. Take WeWork, a company that, basically, leases office space, and loses a lot of money doing it. That’s not very glamorous, in itself. Yet that dull-sounding business became “disruptive”, in Silicon Valley jargon. The most disruptive thing about it may have been the antics of its hard-partying co-founder, Adam Newmann. What is the WeWork business plan, anyway? They basically offer open office space, Wi-Fi and coffee. No other added values. The mess at WeWork continues to simmer. Newmann stepped down as chief executive in September, but the company has had to put off its initial public offering (IPO) of stock, and it continues to lose enormous sums of money.
Disruption mantra
I Personally can hardly wait to read the book about WeWork, once somebody writes it. Disruptive companies make great reads “Super Pumped”, the new book about Uber, the ride – hailing giant has become one of my favorites. Mike Isaac described Uber’s corporate excesses, including a private multimillion-dollar Las Vegas party featuring superstar Beyoncé, as well as numerous incidents of lawbreaking and a toxic culture for women. Uber bid its founder, Travis Kalanick, goodbye as chief executive in 2017 – he remains on the board of directors – and it has been on a more stable management footing since then. But the company continues to be a money loser. In August, it posted a quarterly loss of 5.2 billion US-Dollar.
For a terrific read about a company that flew high, then crashed and burnt in scandal, don’t miss “Bad Blood” by John Carreyrou. It is about “theranos”, the blood test company, a stock market wonder not so long ago, and now, an example of enormous fraud – almost comparable to the book “Billion Dollar Whale” by Tom Wright about Malaysia’s Sovereign Wealth Fund 1MDB. Books like these have found a proud place on my bookshelf and provide wholesome diversion from political news.
There is one major problem, though: This kind of excitement makes for riveting entertainment, but it isn’t necessarily what you want in an investment portfolio. Going over Niagara Falls in a barrel is exhilarating. Compound interest is not, yet it is more likely to float you safely to retirement. I’ll concede that a conversative approach isn’t for everyone. A handful of companies make it colossally big while taking outsize risks, and some investment firms – and individuals – get rich when these companies turn out to be world beaters.
The Japanese giant SoftBank, for example, invests regularly in highly disruptive start-ups. It made a fortune as an early investor in Alibaba, the Chinese internet company. SoftBank has funneled enormous amounts of money to Uber and WeWork, investments that have suffered lately.
Investing genius turns up in unexpected places. Punk rock legend Iggy Pop recently told “the New Yorker” that he credits his independence from the whims of the music industry to an early investment in Apple stock. The singer – songwriter, who gave us gems like “Lust for Life”, had so many wildly self-destructive moments onstage – slashing his chest with glass, throwing himself into the audience – that he has made even the wildest CEOs look like sleepy Florida retirees. But as an investor, apparently, he is a sober, risk – averse, calculating machine. Picking individual stocks is iffy. I know for a fact that I’m no Warren Buffett or Iggy Pop. At times like these – that political hellscape is impossible to disregard entirely – it seems wise to play it safe and park your money where smart advisers tell you to: in low – fee index funds that track the broad stock market.
If you are currently worried like me, you can buffer your portfolio with conservative choices, bulking up on funds with bonds and money market securities. I have to admit that when my own future is involved, I am after plenty of lessons fully committed to being boring.
Boring is fun
While I’ve taken lots of risks for work, I am not a fan of thrills for their own sake. Making other people sick to their stomachs is more my style. I’d love to start a company so disruptive that nobody understands what it is. A visionary start-up like a “yoga babble”. Ka-ching! If I can come up with an idea that is nutty enough, I might even be able to get SoftBank to put money into it.
Beyond these pipe dreams, if you want to give me some investing advice, I’m listening.