Andy Kessler

WSJ: The Market’s Tough Love Delivers

https://www.wsj.com/articles/the-markets-tough-love-delivers-1495403585

Foot Locker’s stock imploded on Friday—crashing down $12, or 17%. It happens all the time, one of the great features of the stock market. A week earlier, Snap, which went public two months ago, saw a chunk of value disappear. It dropped almost 25% overnight after the social-media firm revealed that sales were up only 5% and the number of users was a little light—oh, and that it had lost $2.2 billion. That’s billion with a “b.” Even if you take out one-time costs, the company lost $200 million on $150 million in sales. Impressive.

Did I mention CEO Evan Spiegel got a $750 million bonus for taking the company public? Investors who bought the stock didn’t want to ruin the party, figuring it was going turn into the next Facebook. Snap’s stock was selling at 44 times future sales, on the expectation that growth and profits were coming. Or not. After lousy earnings, investors basically shouted, “Enough!”

No one sits around and says, “we need to teach Snap a lesson.” Rather, it’s the collective selling that sends the message. That same day, CEO Travis Kalanick of Uber, another company with gargantuan losses and personnel issues, tweeted and then deleted, “Thank God we’re not public.” But Uber should be public. If only for the discipline of the public markets that its board of directors refused to impose.

Many people think the stock market is a cesspool of Wall Street greed. I look at it differently. To me, the stock market is the greatest enforcer ever invented. No person controls the market. Investors separately make decisions every day to buy and sell. But collectively they enforce discipline on corporations.

WSJ: How Deadheads Sped Ahead...5-8-77

 https://www.wsj.com/articles/how-deadheads-sped-ahead-1494187483

Forty years ago Monday the Grateful Dead played in upstate New York at Cornell University’s Barton Hall. Memorialized as “5-8-77” on a million cassette tapes, it is considered their best, a legendary show, the band’s Holy Grail. A good friend ran the concert commission and assigned me, a lowly freshman, to turn on the house lights when the show ended. Things have changed over the past 40 years, but it took time to make out what was illuminated that night.

The Grateful Dead began playing in 1965 as the Warlocks, right before the flower-power era they ushered in. Their opening gig was a Wednesday night at a pizza joint named Magoo’s in downtown Menlo Park, Calif. I’d be surprised if more than 20 people showed up, but they still planted seeds of what you’ll recognize as modern innovation in the heart of what is now Silicon Valley.

Eventually a vast army of fans known as Deadheads arose. Though not me, as I didn’t look good in tie-dye. Deadheads were nonconformists but amazing trendsetters. As they trucked into the show, I noticed many clumsily hobbling on crutches. It wasn’t until the concert started that the audience turned these crutches into makeshift microphone stands, rising high above the crowd to tape the performance. Most of the band’s more than 2,000 shows were pirated. From this emerged a peer-to-peer network: bootleg cassettes passed between fans, an early sharing economy.

Networks were a powerful thing, but the recording technology was rudimentary. When a cassette was duplicated, the sound of the tape moving over the playback head would end up on the recorded copy as an annoying hiss. The further from the original, the worse the hiss. I used to walk into friends’ rooms and snark, “Is this Cow Palace ’74? Man, the hiss player was really on that night.” I haven’t changed much since then.

The Grateful Dead could have put a stop to it all, frisking concertgoers as they entered, but the band accepted piracy. A viral marketing campaign started. Free music lured new fans, who practically toured with the band and bought tickets, shirts and posters. They then made more cassettes, enchanting even more fans. This is the power of free that Facebook and Google have since perfected. Also, I’m pretty sure the band’s fans invented virtual reality. I heard many at shows say they could see things that weren’t really there.