More Financial Report Follies

Today’s post is about financial reports and badly managed businesses. Feel free to skip it if that’s not your jam.

Ah, remember WeWork? Last year I busted a gut while reading their pre-IPO paperwork and I commented that their stock offering appeared to be based on pure bullshit, that combination of paradigm shifts and unicorn farts. Before long, market sensibility prevailed, and WeWork did not go public. Investors rejected their nonsensical offer, and I felt a small measure of relief at the rationality of it all. WeWork is welcome to return to the IPO table when they can prove they have a real business worth actual money, and I wish them luck with their new path and their new leadership.

Well, WeWork’s major investor cough enabler cough was a venture capital company called Softbank. And Softbank just had an earnings call in which they attempted to explain their 17.7 Billion dollar loss. In true WeWorkian style, the earnings call came complete with confusing PowerPoint charts, incomprehensible (to me) financial formulas, and a few slides that had that had literal unicorns falling into a ditch and then sprouting wings to escape the coronavirus.

This is an actual screenshot from their slide deck. You can’t make this stuff up. We’re experiencing full-on, coked-out, three stooges style capitalism here! I mean, I don’t do drugs, but reading a Softbank slide deck is what I imagine it’s like to be high on shrooms. Bloomberg has a worthwhile opinion piece on the earnings call, and you can peruse the full whacked out earnings report here. My favorite slides are at the end, where “new” technologies like food delivery apps save humanity from our impending economic doom.

Whew! I’m feeling better already. Aren’t you? /s

Today, according to the Financial Times, Softbank’s founder is saying this:

Ah, those quirky billionaires and their Jesus comparisons. Bless their hearts!

I’m not a Softbank investor, so my interest in this situation is limited to the harm that venture-financed stupidity can do to our actual economy. Right now, we seem to have a surfeit of app-based industries being propped up by wealthy investors with more capital than sense, and in some cases the ethics on display are less than admirable. The food delivery industry is one such area, and there’s been some interesting reporting lately:

Doordash and Pizza Arbitrage

Even if You’re Trying to Avoid Grubhub by Calling Your Favorite Restaurant Directly, Grubhub Could Still be Charging it a Fee

I laugh, but honestly these business practices are pretty bad. Business can and should be a force for good in the world, which is why crappy businesses are doubly painful. They suck because they suck, and they also suck because they lower the standards for everyone else. Big businesses can be awesome! Small businesses too! There’s a kicker though. A business needs to meet the needs of multiple stakeholders or it will inevitably fail over the long term. At a basic level that means:

  • Value to the customer.

  • Compliance with the law.

  • Quality of life (pay & equity) to the worker.

  • Profit left over for the investor or owner. (Unless a non-profit or co-op)

Call me old fashioned, I guess? Multi-stakeholder satisfaction is not an easy thing to achieve! That’s true. And in an environment of artificially depressed interest rates (thank the Fed for that one), we have surplus billions being funneled into money-losing ventures. Literal Monopoly money. Burning billions for the vague hope of outlasting everyone else and creating a monopolistic market is a pretty dumb business strategy, but that seems to be the game being played.

My take? I’d love to see a non-shitty business create a solution for the food delivery problem. That’s a real market, and it deserves a solution that isn’t built on lies and exploitation. But consumers have little incentive to pay for the true cost of a delivery service so long as billionaires are deficit financing their own crummy apps.

Like most perverse incentives, we may need to wait for this dynamic to burn itself out. But thanks for the LOLs, Softbank, your slide deck almost made me pee my pants.

And in times like this, laughter is a perk we can all appreciate.