Passive-Aggressive ActivismJanuary 12, 2018
Activist investing has been a successful asset class for decades. I spent a hot minute as an activist, puking myself on to corporate boards over the objections of families (Sulzbergers), governors (Rick Snyder was chairman of Gateway), and fishermen (Eddie Bauer). The key attributes of an activist are being aggressive and a great investor. I proved to be just the former and would (mostly) go on boards, wreak havoc, and watch the stock decline. I invested $600M of other people’s money to get on the NYT board, only to watch the stock go from $18 to $3 in 15 months.
I still go on boards, but only if the CEO wants me there, as life is too short (i.e., being the bad cop is exhausting). There’s a new class of activism emerging that advocates doing well (financially) by doing good — sustainable activism. Most recently, Jana Partners teamed up with with CalSTRS to push Apple to take a leadership role in protecting children from the effects of their devices. This is an interesting move, as there’s a lot of opportunity in big tech to course correct and build firms that are more sustainable, increasing shareholder value — win/win. Some ideas:
Apple. The Cupertino firm can reasonably argue they are the good guys (or the least bad) here, as they’ve taken tangible steps that demonstrate their concern for kids. However, the obvious damage being done to children and teens drastically outpaces the actions taken to understand and remedy the problem. I sat next to a mother, her four-year-old son, and infant daughter on a flight from LGA to PBI. Overwhelmed, the mom, as many of us do, pacified the boy with an iPad. About two hours into the flight the kid (no joke) chucked the iPad and began slugging his sister. That’s not the scary part. The mom instinctively shielded her infant from the iPad-hurling Damien and blurted, “too much time on the iPad.” As the four-year-old writhed in seizure-like anger, he lurched forward, revealing a small mark on the back of his neck that read “666.” (All of the above is true except the last part.)
I have boys at home, and taking their iPads from them is tantamount to grabbing a crack pipe from an addict’s lips in the reaction it invokes. My boys watch TV and play video games, but there’s something seriously amiss when it comes to the iPad and its effect on the developing brain. I know, you’re thinking what Jim Cramer and others have said: parents, not Apple, need to take responsibility for their kids. Just take away the iPad. Yes, and that sounds like someone who doesn’t have kids at home. The Nancy Reagan “Just Say No” mantra is not realistic given the 1B active iOS devices out there. Kids are now getting iPads assigned to them at schools. Admittedly, the issue here is also one of the content, and not just the hardware they are accessing the content through.
Whether Apple is the good guy, or the least bad guy here, I believe there are ripe opportunities for sustainable activism across big tech.
Amazon. The Seattle firm is actively engaged in information age steel dumping, using the profits from AWS to subsidize losses on the retail platform, neutering other retailers’ ability to compete. The result is that good firms are being euthanized prematurely, and startups can’t get out of the cradle. I’m contemplating acquiring more stock (I’ve owned Amazon for a decade) and advocating for a spin of AWS. Note: I doubt Mr. Bezos is losing any sleep over this. AWS has little to no synergy with the core platform, and a spin would slow the napalming of traditional retailers and retail workforce. It would also be accretive to shareholders, as AWS would trade at a crazy, Amazon-like valuation as an independent firm.
Twitter. Buy shares and renominate the board, sans the CEO, Jack Dorsey. Negligent to have a part-time CEO who has 90% of his net worth tied up in his afternoon job. Stupid, just stupid. Twitter is gaining relevance and could be a viable competitor to the duopoly (Snap is done), which would be good for the ecosystem. But first, the board needs to get their heads out of their asses and hire a full-time CEO. A part-time CEO of an important firm sends the wrong signal to Twitter’s workforce (“please work your ass off and demonstrate real ownership for a guy who’s super-committed… when he’s here… mornings”). Worse still, it sends the wrong message to young people, and buttresses the notion that there is a class of young, bearded, billionaire innovators who play by a different set of rules, promoting charisma and youth over character and grit.
There’s a title for people who are talented, have made a huge contribution to a firm, and (for whatever reason) no longer want to devote their efforts 24/7 to creating stakeholder value for the people counting on them: Chairman, or Chairwoman.
Alphabet. Spin YouTube. Having two monopolies (search, video search) under one roof only makes them more of a, well, monopoly. Again, the whole is less than the sum of the parts, and a win for privacy would also be a win for shareholders.
Facebook. The ripest, as they’ve become the bad guy. Specifically, the guy who screwed over his good friends in college, then fucked over his best friend after he dropped out of college, and we’ve discovered (shocker) he’s not concerned with the condition of our souls or national security. The last year for Facebook has been repeated lies (“we want to give voice to the unheard”), a gateway drug (social media platform for kids), and a series of half-measures after their media firm was weaponized by an intelligence arm of Russia. Similar to 99.9% of CEOs who are unable to scale the entire lifecycle of the company, the Zuck has proven himself unfit to oversee the broadest community in the history of our species. I speculate Sheryl Sandberg is sick of being the moral beard for the Zuck and lying for him (“we’re not a media firm”) and deserves to be elevated to CEO.
The firm should also spin Instagram and WhatsApp. Having four of the five top apps under one roof leads to monopoly-like abusive behavior (coordinated execution of #5, Snap), privacy concerns, and unacceptable risk, as the firm has proven itself unable to prevent weaponization of its multiple-nuclear-head platform. A textbook case in how power corrupts, and the gross idolatry of youth and money gone berserk. Again, a breakup would be accretive for shareholders.
Regulation can be ham-handed or wasteful. But it’s clear the Friedman/Welch school of “shareholders first and always” is failing. I’ve recently argued for DOJ-led trust busting as the cleanest path to a capitalist solution for the increasing concentration of power of the Four. Also, call me naive, but the emerging field of sustainable investing might be an opportunity for the US to be a beacon on a hill and unleash the conscience of capitalism. We’ll see.
As a straight white guy I haven’t endured much (i.e., any) discrimination. Yesterday a journalist told me I was immature for an “old guy.” Ageism, no? Hard to argue with, I’m both those things. Context: the journalist reached out about a story on Alexa. To protect the ignorant, I won’t disclose the firm he works for. Let’s just say it’s a Journal named after a Street in downtown New York. The journalist spent 20 minutes asking where he could find research on different topics related to Alexa. I got fed up being his research flunky and told him if he wanted my views on Alexa, then feel free to reach out, but not to call again if he’s looking for someone to do his work for him.
Below is the email back and forth. I’ve scrubbed it, as the person is young, and I did worse at his age. No big lessons here, but I enjoyed the dialogue and hope you do as well.
I thought about what you said just now about how I should only call you in the future to get your opinion as an academic rather than to ask you to point me towards data that could be useful in informing my story and our readers.
I won’t be calling you again or quoting you in anything.
I was interested in getting your opinion in the hopes that it would inform the course of my reporting. As a news reporter for a business paper I also need to find data to support any story that I write and I had assumed that you would be enthusiastic about pointing me towards any you knew of in the interest of shaping people’s understanding of this emerging topic.
Asking someone who is supposed to be an expert in their field if they are aware of data about certain topics in that field is basic reporting and something all of us here to do every day. It’s how I make sure I’m not missing anything crucial, how I make sure I know who the smartest people in the industry are, and how I make sure that our readers get a full and complete picture.
Your primary interest in agreeing to have the conversation with me seemed to be to say something quotable that I would then take and insert into a story that would bolster your brand. I don’t work like that and apologize for having wasted your time.
|Scott Galloway <email@example.com>
Bummer, was hoping to be a research flunky for you.
Pretend you’re a journalist, do the work.
Sent from my iPhone
Real mature for an old guy.
Sent from my phone
|Scott Galloway <firstname.lastname@example.org>
Yes, I’m old. Impossible to argue this point, as I (no joke) just came from the dermatologist, where Dr. Fromovitz (nice guy) cut all manner of things off my person.
However, is that really the best you can do, xxxx, an ageist comment? When it comes to insulting me,,,there’s a ton of better material. Let me help:
Key point… and this is what might be termed a “learning” moment:
This was, on a risk-adjusted basis, an ill-considered insult. The upside, calling me “immature” is not that great, as it’s pretty damn obvious you’re not dealing with Maya Angelou or Angela Merkel here — I do stupid shit all the time,,,publicly. However, the real synapse misfire, or lack thereof, was not assessing the downside. Try to base your insults on things that don’t subject you to career risk, or your firm to legal liability — as you have just done… in email… that lives forever. So, if I were to call you lazy, and a hack that suffers from poor judgment… that does not threaten my livelihood, as it’s not seen as blatantly discriminatory, vs. mocking someone for being old. In addition, there is direct evidence you do suffer from poor judgment (see above: sending discriminatory emails from your work account).
As journalism goes full throttle at juniorization (replacing old people like me w/younger, less expensive people like you), the age discrimination suits against these firms are hungry for emails such as yours to buttress their case.
So,,,next steps. I think we take this whole thing to Twitter (publish the emails?) as I think we’d both learn a lot (mostly you as my cognitive skills are in free fall — btw, have you seen my keys?). Or maybe, given my advanced age, I’m not thinking clearly or (worse) might slip and break a hip going toe-to-toe with someone so youthful working for such a powerhouse brand. Finally, whatever we do, let’s do it in 40-minute increments — how often I need to stop what I’m doing and pee. God I’m enjoying this. You?
Yours in AARP, @profgalloway
P.S. Regardless of your remarks, I’ll continue to appear/work with Stuart Varney (69), Maria Bartiromo (50), and Bill Hemmer (53).
Life is so rich,