Era of public investment confusion
Everything that is written here is done in simple and non-professional way, language-wise. But using the correct and market oriented language was not the idea. The idea is to try to determine where are we? Where the global economy is heading? What is happening with investment market? What is investment climate and what investors are looking for? Who are the investors? What is a role entrepreneurship plays in a investment market? Why small business is in decline? What is a pragmatic approach in product/service development and how pragmatic approach is negatively influence current investment climate.
Let’s have 4 companies as an example as they are playing an extensive public roles, not only as a public companies (one of them is not even public) but just because they have different impact on a future of world’s economy. Those are: Google, Apple, Tesla and Raiser LLC (Uber)
They have some common and some very distinctive criteria. We are going to talk about current public attitude towards those companies. 1. Public believes and 2. Investors approach.
I am not an professional investor, neither an economist. I also have to apologize if some of the statements would seem delusional to some of you guys, who might have economy/engineering/computer/or whatever other background. I still have to bring factors up, because i believe they are true in general, not in particular sentence or phrase. Let’s get started:
Google — 744 per share. Is this a joke? What Google does or did or doing to be priced like this? Let’s be completely honest and straight. Adwords? Gmail? Google glass? Driverless car? Oculus rift? You gotta be kidding me.
Apple — 108 per share. Like really? Apple with billions of their physical products and users all around the world, only 108 per share???
Tesla — 230 per share. Hmm… This is something in between price-wise. Let’s skip it for now.
Uber- private company. Price are not known, but some recognizable investment appraisals valued it at 50 billions.
Now let’s discuss what makes those companies worth what they worth and how their capitals are built up, grown up and supported.
Based on what factors? How those factors influence economy and investment market itself.
Again, I don’t need to bring up financial/fundamental explanation of why Google worth 700 dollars per share. I am pretty sure there will be a decent accounting background backing up this price. This is not my point.
I want to find out how Google been popped up to this price level.
Why public trusted Google more and more in terms of investments? What last projects that Google developed or developing is making public positive Google’s projects success in the future? Are you one of those investors? If so, I think it’s just a right time for you to start wearing Google glasses for shortsightedness. Why? The answer is “Pragmatic approach”.
There is no pragmatic approach behind most of Google’s products besides software based, except Gmail and Adwords.
No google glasses, no oculus rift, no driverless cars have nothing to do with pragmatic approach, not even Boston Dynamics in some sense.
Although….there is one HUGE and important ALTHOUGH….all mentioned product and just cool and fancy and picks up so easy in the mind of shortsightedness crowd. This creates a “product trend in terms of its attractiveness with a connection to the future”. I would call it “Investment trend”. Investors trust Google, just because they think that Google will play a major role in building up the future by presenting some products/services that will be demanding in the future, but this may not be the case. I am personally sure of it’s failure and i have a detailed explanation why, but let’s just skip my own understanding and keep digging further.
So now, we know that Google’s attractiveness for investors are based on their 1. Trustworthiness 2. Connection to the future, by visioning future the way Google presents it to public and public happily agrees totally relying on Google. In other words, there is something public believe will be a part of future just because 1st (this is important) ” It’s just cool “ and 2nd “It’s made by Google”.
Now let’s step aside and look at Uber, before coming back to Google again. Uber is a private company, so no public investors dependent. Totally private investors meaning the approach to the product/service must 100% be tighten up with pragmatic approach. Slightest imbalance of this approach will lead to the collapse.
Indeed, Uber is an economy transforming business model in terms of implementing a new relationships between customers and providers. The most amazing part of Uber that they have publicly implemented something i call “Transparency of financial distribution”. Both customer and provider knows how much they spend and can see in front of a screens of their smartphones how this amount is being distributed. This is a beauty of a future. More distinctive and transparent financial distribution is leading to trust and professionalism. Of course, it has to be backed up with proper competitive pricing and more or less sophisticated rating, but this feature has already been introduced to wide public and it’s revolutionary.
Why are you paying 1 dollar? Because 50 cents goes here. 30 here. 20 here 10 here and for 5 cents. This 3 cents are paid for this and this 1 dollar is go here and here to support it. This is how it should be.
If you compare this model to MBTA or TAXI, then you will understand why this 2 are in constant decline. There is always either corruption or “imbalanced financial distribution” behind the scene. In case of MBTA public has no idea how their 2–3 dollars trip is being distributed. The same is TAXI. If I paid 20 dollars for a ride, how much of this money goes to the driver and how much to the medallion owner? No clue.
But let’s get back to Google. Now we can see how public companies are dependent on public investors and public investors will be buying only something that public can “clearly read and understand” to go for it. If Google would start supporting project based strictly on pragmatic approach they will end up investing to the projects with “poor execution”, “confusing”and “raw models”, from public perspective. There are an obvious disadvantages investing into this type of project, just because they might seem embarrassing to public. Public would not buy something not obvious, working, fun, cool, etc. At this point “technology” and “future of technology” matters less than public investment attractiveness or as i called “Investment trend” of the project. Google is absolutely dependent on this attractiveness.
Here we come to the explanation of why Carl Icahn called Apple undervalued company. Simple just because Apple is not falling under “investment trend” category, but Google or Tesla does. Apple has very “pragmatic approach”. Apple will never launch or present products/services that has unconfirmed and doubtful practical usage, neither in current market situation nor towards the future. Say, if we compare Apple watch and Google glass, we can see that Apple watch is very pragmatic approach based product VS. Google glass has nothing to do with pragmatism. It’s just “Cool Trend” of “Investment trend” oriented product with doubtful features and executions. Financial success at this point is almost irrelevant to Google investors, but relevant to Apple investors just because they “trust” Google more, than Apple. Such a “Trust” has nothing to do with development of a product and just wrong approach.
Thus, Google is forced to stick with “investment trend” projects that are “cool” for public while Apple can not use same tactics. Apple has to perfect in develop existing products/services based on pragmatic approach and practical usage which public is viewing as a total “marketing trick” and produce some soft of “disbelieve” in public view.