Knowing what we value and how much we value it is the fire that illuminates the dark.
The price is what we pay for something, and the value is what we get.
Most choices in life are value decisions. We choose one path over another because of what we value.
On May 20, 2022, I posted “Me, IG, and Misinformation” about a quote I made on my IG platform that amounted to misattribution. IG compliance labeled the quote misinformation. Misinformation is “false or inaccurate information, especially deliberately intended to deceive.” I thought chasing misattribution was a waste of Meta resources, indicating internal mismanagement.
Do you know what’s cool? A trillion dollars. The line was iconic from the movie, The Social Network.
That was the market capitalization of Facebook just over a year ago, right before the company decided to rename itself, Meta. It has since declined by roughly $800 billion, just short of a cool trillion dollars.
In my May article, I said, “Meta does not have a game plan to deal with the Russia-Ukraine war because they are mismanaged, and its investors know it. IG’s overreaction to my misattribution is a case in point. Look at the chart below of Facebook (Meta) stock since its IPO.”
In my May article, I continued, “Meta’s value has been cut in half since its highs. Mismanagement is the reason for the sharp drop in its stock price. And mismanagement is why TikTok is kicking IG’s butt. My insignificant interaction with IG’s censors is irrelevant, but it is symptomatic of bigger issues plaguing the IG & Facebook platforms.”
Investors’ view of Meta has not changed since May. Investor trust in the social media giant has continued to wither. From $193.54 a share, Meta has lost another $100 a share or 50%.
Ben Cohen, a writer for the Wall Street Journal, has his theory on Meta trillion dollar fall. Cohen writes the Science of Success column for The Wall Street Journal about what makes people, teams, and ideas work in business, culture, and beyond.
In his article, “There Has to Be a Better Way to Lose $800 Billion,” he offers, “Many companies change strategies because they lost money. Meta is losing money because it changed strategies.”
Cohen contends that it has been almost one year since chief executive and co-founder Mark Zuckerberg made the bold maneuver of rebranding Facebook as Meta Platforms because he believed the company’s future was not in social media but the immersive, amorphous online realm known as the metaverse.
“The decision to place so much faith in such an unproven premise will go down as one of the riskiest bets any corporation has ever made, no matter what happens next,” Cohen asserts. But what’s happening now is bleak. It’s still unclear what might be successful, only that Meta is nowhere close to it—and the company has gone about getting there the wrong way.
It’s entirely possible that Mr. Zuckerberg is right about the metaverse, and the company’s stock price will be a bargain in the long run. A website he built from a college dorm room becoming one of the world’s most valuable companies also sounded crazy, and positioning Facebook for mobile at precisely the right time showed that he’s been able to peek around corners of social media that few other people can see.
But his latest vision requires squinting. Mr. Zuckerberg warned that it would take patience, trust, and more than a few quarters of lousy financial results to figure out whether the metaverse bet pays off.
“This is not an investment that is going to be profitable for us anytime in the near future,” he said one year ago.
That prediction turned out to be accurate. The operating losses of its metaverse division amounted to $3.7 billion last quarter alone, and Meta’s chief financial officer said that he anticipates “operating losses in 2023 will grow significantly.” The market reacted appropriately to this comment: It freaked. Meta is now trading at its lowest price since 2016 when TikTok was a sound that clocks made, and the company has shed $23,000 a second in market cap from last year’s peak.
The financial incentives for intelligent failure get more robust the faster a company grows. The price of the all-or-nothing bet on nascent technology that Mr. Zuckerberg made from his dorm room is on the fence.
According to Cohen, Meta also has plenty of headwinds in the real world. The economy is gloomy. A bitter dispute with Apple tarnished Facebook’s advertising business as competition with TikTok dug into Instagram’s popularity. What makes Meta different from the survivors of stock debacles? The others suffered external shocks. Meta’s wounds are self-inflicted.
Allow me to make one parting observation. Facebook, or Meta, was the new new thing or a trend in our social world almost two decades ago without competition. Success breeds fierce competition. Meta’s founder and current leader, Mark Zuckerberg, made a “value decision” to bet Facebook’s future on the metaverse. Only time will tell whether Zuckerberg is right or wrong.
Until next time. Travel safe.