Answering Questions

Over the past few weeks have gotten some comments , which I would like to address as a single blog post in detail.

Aren’t you worried about the Nasdaq president’s idea of racial/sexual quotas on all company boards trading there?

Thomas Dell tried all this woke stuff around 2004 and destroyed his company in about 2 years. (He cleverly parked his billions in VMware while his employees lost their jobs.)

Another example is Maytag. This 100-year-old company was destroyed by black CEO hand-picked by a virtual signaling chairman of the board. Also in about 1.5 years.

Scenario: Blacks and their feminist allies get on boards. They threaten chairmen with accusations of racism/sexism if not appoint blacks and incompetent women to senior management. They will publicly denounce during the struggle session via social media; or the chairman anticipates and caves.

The SEC had yet to decide on it, and a decision expected in the summer, but I don’t think it will stand. But if it does, the largest and most dominant of the tech companies, which I have recommended on the blog for years, should be ok. I think wokeness is specially bad for small and medium-sized companies, and one can even argue that large companies are trying to push wokeness, not for PR reasons, but to weaken their smaller competitors. One must not confuse correlation for causation. Typically, a large company will not be done-in by bad management, but that bad management is blamed for a company that is in decline for other reasons, such as loss of marketshare to a competitor, changing trends, obsolescence, etc.

Dell bought VMware and EMC Corp in 2016, and then Dell was relisted as a public company in 2018 after going private in 2013. Since then Dell stock has done very well, up 300%, so it would seem as though it dodged that bullet.

Amazon and Facebook and Microsoft are especially immune this regard because they derive reliable recurring revenues , so as long as the revenue stream itself is not disrupted by some unforeseen factor, then there is no reason to expect things will change even with woke management.

I think consumer goods companies are more vulnerable because they have to keep coming up with new products and have more competitors, whereas something like Microsoft can just keep re-releasing slightly modified iterations of existing products.

I can imagine a scenario in which Nike offends enough people with ‘woke ads’ that they lose marketshare to some other apparel company, but I don’t see Google suffering a similar fate, as there are few good alternatives (whereas shoes are more fungible). [But even so, conservatives continue to patronize Facebook, Twitter, Starbucks, and Apple despite management being very outspoken about their politics.] For example, the NFL has seen it ratings decline, possibly due to the kneeling controversy and BLM. There are tons of alternatives to the NFL, such as Netflix or some other sport, but how many alternatives to Windows? Just two, by a very distant second and third.

I think incompetent, ideologically-driven women in high positions of power is a problem, as we see with YouTube, but YouTube and Google are big and dominant enough to survive this.

I know that you are bullish on large tech companies, like TSLA and FB. What do you think of smaller tech ones, like SNAP or PINS? Their stocks are more volatile, though

Investing in smaller companies is more difficult because there is considerably more research and risk involved. It is easier to just focus on a couple dozen or so huge companies, which can deliver returns that are as strong as smaller companies, but with much less uncertainty and risk. Facebook went from $30 in 2012 to over $300 now. It is hard to beat those kind of returns even with small companies and superior stock picking skill. Only in hindsight it is possible to know which small companies will succeed, but with something like Facebook or Amazon, I don’t have to guess. Another problem is, is that the best companies are waiting too long to go public, so by the time they do, they are no longer small and instead worth tens of billions of dollars. It’s not like buying AOL in the early 90s or Microsoft in 1988. I would have loved to invest in Airbnb in 2015. SNAP and PINS could belong in a diversified consumer tech portfolio, along with the others I recommend, but weighted less.