When the preponderance of news stories today appears to be of the bad rather than the good variety, just how smart is it for big companies to keep one eye on the stock market and the other on Twitter?
For just about as long as anyone can remember, “news” could easily be defined as “bad news”. Whether it’s Trump’s latest shocker, Chinese trade wars, North Korea making/not making nuclear weapons, Turkey, or the Middle East, there seems to be no end to them. Even with the US stock market pulling itself out of the post Sub-prime fiasco, recession concerns are never far away. Then there’s MiFID, GDPR, Brexit… We can’t even rely on technology any more. Cryptocurrency and the amazing Blockchain was going to save us all, until that all fell flat on its nose. It’s probably not quite as dead as a dodo, but it’s unlikely to pull the world out of recession if it does indeed fall into one.
So, what are sensible company CEOs supposed to do? Should they employ political analysts on their team as well as financial ones? Should they subscribe to the latest hot-off-the-press news services to gauge the global political mood? Indeed, should they be using experts in Search Engine Optimization to keep a finger on the pulse of social media direction? Or is it all just one big smoke screen? Are good companies going to weather the storm simply because they are “good companies”, and it’s going to take more than a war or recession to keep them growing?
Statista, a great little company that compiles all sorts of statistics on all sorts of subjects, has indicated that the real reason why companies the likes of Lehman Brothers, Woolworth, and Blockbuster have failed was not because the War on Terror. Their analysis shows that poor product fit, cash flow difficulties, and bad management are the real reasons for company failures. Those factors will pull down any company, regardless of the latest flare up in Gaza or even the price of tea in China.
During the big stock market crash of 1987 (to differentiate that from all of the other crashes since), there was an imminent threat of higher crude oil prices. The prevailing price of 40 USD/barrel was predicted to jump to 200 USD and beyond. The impact on the Japanese stock market, with that country’s dependence on oil being virtually 100%, was projected to be dramatically bad. In fact, oil prices did not rally, but fell, and the Japanese stock market continued to climb for the next two years, until it did actually fall and has been caught in a trading range ever since. Compare that to the US stock market that fell 1,000 points after the crash but has been rising steadily until today. Two global markets that should have been affected by the same global activities, but both went off in different directions.
IBM is a global company that has been around for more than 100 years. It has seen world wars, famine, oil crises, and regime changes come and go, but still it keeps on rolling. Nothing seems to faze Big Blue in the general scheme of things. The same could be said of Microsoft, although it’s in its infancy compared to its older and perhaps wiser competitor. Both companies have been able to adapt to changing global circumstances in spite of fluctuating stock market, bond, and commodity prices. Their blend of massive user base, stability, and scalability has been of greater import than any of the hundreds of political upsets that occurred during their history.
So, no – those CEOs should probably continue to focus on the factors that really matter in building strong companies, and leave the politics for the Sunday newspapers.