[Thanks to my dear friend Vishnu Prasad Ramachandran, @rvishnuprasad for recommending the article]
When Marissa Mayer, an engineer with little to no management experience was first picked to lead Yahoo! following the several rounds of fired CEOs, I questioned why Yahoo! was still around and how she was going to be able to help a listless company. Of course, we know when Steve Ballmer made his foolish attempt to buy Yahoo!, Jerry Yang went on a crazed rampage, joining hands with Google to save the company. Save it for what, no one could tell. The Radioshack of Internet Companies, Yahoo! has no meaningful products or services that anyone can remember. It has just been drifting like flotsam, without any point or purpose, besides of course, the only redeeming factor – Alibaba. Their advertising revenues are on a nice steep slide, so that is really not a factor, at least on the plus side.
Instead of focusing on trying to sell Alibaba and pay taxes like they ought to have, and then sell off and wind down the business, the board brought in Marissa Mayer, who wasted time on nonsense such as redoing the logo, and several other acts that kindly put, amount to garbage. And there I was, scratching my head, as I have done standing in bubbles previous, wondering how this was going to save Yahoo! or increase it’s revenues or do any such thing. By then, at least to some of us, it had become clear, the company had no roadmap, and it was just following an instinctive reaction, trying to keep its neck above water for as long as possible, at any expense.
Tumblr – A billion dollar misadventure
This is of course how bubbles are started. All in the name of increasing the user base, and based on inflated valuations, that ought to have been rejected, Marissa went ahead and bought Tumblr for a billion dollars. Instead of raising red flags, people were excited and celebratory of this. I just watched on with shock and disbelief. And more or less, I think she is the one started this whole unicorn business making it commonplace for companies of far less value including Facebook’s buy of WhatsApp, an idiotic act, which will one day most definitely become a topic of a post here. All this has led to bloated valuations, and worthless companies continue to raise money for a LOT longer than they ought to. That is why, no matter what Peter Thiel would like to conjure up into wet dreams, this IS a bubble and it WILL be worse than the last internet bubble. (Link below.)
An Individual Bubble
Of course, nothing really came of the Tumblr purchase, except another 20 something running around the valley, with a bloated ego arising from sheer, dumb luck. Nothing came of several other purchases, some deemed as “acqhires” and others, well whatever Yahoo! spokespersons could conjure up. And yet, just by dangling Alibaba in front of people, this went on and on, the classic way bubbles grow. It is just that it was internal to one company. Then came the “corporate inversions”, where companies went offshore to avoid paying taxes and the eventual panicked response from the Obama Administration that put an end to Yahoo!’s Alibaba shenanigans. And the company was and is still standing!
And of course, finally, things have started to unravel, much to the pain of the employees. Predictions abound to date, since the ax has not yet fallen, of layoffs, anywhere from 10% to 25% or somewhere in between. Obviously, employees are nervous and worried about their future. Regardless of bravado, no one likes to be laid off. Ask me, I know. And in this atmosphere, per this NY Post article (link below), Marissa Mayer actually joked that “there were no layoffs this week”.
She hasn’t ventured to apologize for this, even though it has been over a week, and, though people comment about how it is spreading like wildfire through the valley, the true effect is null and Marissa herself has suffered no damage whatsoever. That is very telling. In comparison, just look at the Chipotle CEO and his travails.
Of course, in a long list of out of touch CEOs, she is not alone.
However, what is unusual is this. Marissa still has her very cushy and pointless job, and still has people backing her. Neither she nor anyone in the Yahoo! Board is in danger of losing their own jobs. And when she is eventually sent home, she will leave with a HUGE golden parachute, quite unjustified.
The Teaching Moment
It is becoming clear that a thousand or more former Yahoo! employees looking for jobs are going to put pressure on the tech job market, and this may get the ball rolling on the next bubble’s expiration. Or then again, like it happened with SideCar employees, where GM came and scooped up several of them, for what, god only knows (and by that I mean no one), some portions of Yahoo! will get bought by other companies. But at least, for them, continued employment, inflated salaries, perks and such will continue for a while. Does anyone know why AOL exists, or what Verizon is going to be able to do with it? That is one possible way, Yahoo! could go on for a few more years or decades.
Meanwhile, the CEOs remain the main problem. The CEOs of America are power drunk, inept and plentiful. You can take several examples from The Meg (Whitman) to Marissa Mayer, and several in between. (No, I am not a pig, but these two are great current examples of people just plowing their companies into the ground). To appease everyone, on the other sex, we have such lumiaries as Dov Charney of American Apparel.
What is surprising is, with stockholders such as CALPERS (which, truth be told, at least fought Bank of America’s Moynihan), Yahoo! had several opportunities to go on a path of correction. However, it is apparent that once companies get past a size, the boards first get out of control, the people they bring in become all knowing, quite powerful, and cannot be controlled. These are the people who are the worst agents in a bubble, more so than crazy VCs or greedy investors.
And, given the trend, many a bubble will form and burst, while the likes of Mayer take home millions, after laughing at their employees as well as the rest of us.
The one thing we can do, is watch the CEOs, their jokes and look for that turning point, where at least that company and everything connected to it will start coming down. That may set off a chain reaction.
- On Marissa Mayer’s cruel jokes: http://nypost.com/2016/01/18/marissa-mayers-job-safety-joke-doesnt-sit-well-with-workers/
- Peter Thiel’s machinations: http://www.bloomberg.com/news/articles/2015-11-03/peter-thiel-says-high-prices-don-t-mean-there-s-a-tech-bubble
- Images courtesy of http://pexels.com