Hope often supersedes the lessons dished out by history, especially when you have what seems like a fountain of cash. Microsoft has copious amounts of money – $106 billion (R1.57 trillion) at last count.
“Money,” said Peter Lynch, a former money manager of rock star proportions, “is like urine. The more it accumulates, the more you want to piss it away.”
Microsoft pissed way $7.6 billion on Nokia, a brand that was once the market leader in the cellphone industry. The disaster was expected as the company committed a series of rookie errors, including the retrenchment of Nokia’s staff – the very people who made the business attractive in the first place.
Many businesspeople like to turn a great business into a crèche for their managers, and allow them to gain experience in a totally new industry at the expense of shareholders.
But Microsoft hasn’t learnt its lesson from the Nokia fiasco. The company is now buying what some call the “Facebook for old people”, LinkedIn, for $26.2 billion.
Microsoft CEO Satya Nadella is trying to stop the rigor mortis by swallowing another corpse. LinkedIn’s share price dropped from a high of $269 to a low of $101 in one year, indicating it has reached saturation point, at least according to experts. Its management seems to have run out of fresh ideas.
Social media is an industry in which there is no margin for error and the penalty for any slight error is death.
Another social medium, Storehouse, which competes with Instagram, is shutting down its devices in July. Cash is the forgiver of all sins, but for mere mortals like us, if we run out of ideas, we’ll soon run out of customers.
So we must focus on the fountain of our ideas and maintain it. Many businesspeople fail not because their market has died, but because they didn’t stay in their lane.
They see other people becoming successful and then leave what they are good at to queue in an industry they have no knowledge of. When Patrice Motsepe was reported to be the richest man in South Africa, many people left the businesses they understood well to prospect for new opportunities in mining.
This was after the Oppenheimers, who had been in the industry for more than a century, began exiting the sector. This family understands the cycles and the lives of mines. Mike Teke, a good friend of mine and the president of the Chamber of Mines, always tells me that mining has very good summers, but they’re very short; and the winters are long and bitter.
He would know – after all, he’s been going underground for a long time. He can see the signs and hear the murmurs long before financial analysts use their indicators. And as a result, he has done exceptionally well.
If you thought secondhand car salesmen were the pits, then treat people who are exiting a business as the latrines. At least you can see the oil leak in a used car, but you can’t see where the money leaks in a business.
It could be in the form of disappearing stock; it could be in a poor procurement strategy; it could be a hand in the till; or any of the 1 000 small things that could go wrong.
I read Nadella’s statement about the acquisition of LinkedIn in the Wall Street Journal. I hate to say so, but I didn’t understand it. It was long-winded and, unlike the bank balance, it was empty.
You do not have that luxury. Many charlatans will come to you under the cover of the new BEE codes, so think carefully before you buy someone else’s headache, and make sure you have enough cash of your own to buy a mountain of painkillers.
Kuzwayo is the founder of Ignitive, an advertising agency