Having lived through the dot-boom and the dot-bomb, I was not entirely surprised to learn that Nintendo is now worth nearly the same as Sony. (For a short time it ran higher, leading to silly headlines.)
I’m no fan of Sony management, and haven’t been for some time, but this strikes me as a tipping point. It means the assumptions of the dot-boom now extend all around the world.
Stock prices have never really recovered from the dot-boom. Because stocks are so easy to buy and sell, the public market now puts a higher premium on short-term profit over marketable assets. This did not change with the bust. It has instead become conventional wisdom.
The result of this trend (call it the Googlization of stock values) is that real assets are devalued in the market. (Picture from Small Unmarked Bills.) Sales, employees, buildings, factories — they no longer mean what they once did, in terms of stock valuation, because the stock market has become a fashion market. What have you done for me lately, what are you going to do for me in the next quarter or two, is all that counts, because I assume that I can always get out fast if you disappoint me.
(Picture from Perfect Economy, of World War I veterans protesting conditions during the Great Depression.)
To avoid this nonsense many, many companies are perfectly happy to sell out to
so-called "private equity" firms like Blackstone, which in fact are
anything but private. They are exploiting a legal loophole to call themselves
that. They are, in fact, limited partnerships, and such partnerships
have always had to report their results to the government.
You devalue real assets, you push all income streams to the wealthy
few, and you avoid regulation of their holdings. Someone thinks this is
a recipe for prosperity.
In fact it is a recipe for revolution. The capitalist system now
faces the greatest threat we have seen since the 1930s. As the housing
bust devours the middle class, the stability which underpins all real
wealth in this country will be tested as it hasn’t been since the
Depression.
Do American billionaires think their money will be safe, if the
government and its military fall into the hands of people who resent
their power? Really?
In 2008, I believe, capitalism will need a savior.
A few things Dana. (1) The template progressive argument “We can only save [freedom thing] by doing [government thing]” is already tired and cliché. I know this because those of us who make a blogging career from the peanut gallery have spent the past month making fun of it everywhere. Progressives distrust (and many hate) capitalism. To offer advice about how to save something you don’t like is silly. And transparent in a bad way. 🙂 Oh, and unoriginal, bordering on cliché.
(2) NTDOY pays double the dividend of SNE. Dividends aren’t hot in the US markets, but are still important in Japan. Additionally, production and tangible assets aren’t the only valuable things or endeavors. Arnold Kling calls this “anti-finance bias” but it’s a far broader phenomenon that might be called “anti-design bias”. It’s unsurprising that it overlaps with open source enthusiasm, but it doesn’t have to.
(3) This spring, I purchased two toys for my living room. One was a $250 Nintendo Wii and the other a $3400 Sony 46″ XBR3 (their best TV at the time, and arguably the best on the market). I dislike video games in general, but I love playing Wii Sports golf. I occasionally pack up the Nintendo and bring it over to the 80-something year old grandparents and play golf with them for an hour. Wii is outselling XBox and PS3 because its appeal reaches beyond 20-29 males. The Sony is a beautiful TV, a true piece of consumer art. But its usability suffers from Sony’s heritage as a consumer electronics company. I have a Mac Mini hooked up to it as a media server and general housekeeping computer. When in PC mode, I can’t access the Sony’s menus for simply switching inputs. Instead I have to hit the “next input” button on the remote. Difficult to see in the dark… The remote has no state information from the TV, it’s line of site not Bluetooth or WiFi… I could go on and on. The user experience is on par with Linux, i.e. lovely for dorks and annoying for anyone else. My expectations for the respect the machine gives to me are at the Mac level. BTW, the Wii delivers that. I wish my Sony had the cute Wii menu and “channels” interface, with a simple 12 button remote to control everything. Sony still makes good products, but they fall short on ease of use. 5 years from now, I could see Nintendo controlling product and Sony supplying flat panel screens, with Nintendo’s brain/design portion commanding the majority of the profits.
At any rate, the beauty of the capitalist system, with its stock markets, is that if you think there is a serious financial imbalance, you can take your cash and purchase a position that will generate profits from your superior knowledge! Let us know how you’re allocating your investment cash…
A few things Dana. (1) The template progressive argument “We can only save [freedom thing] by doing [government thing]” is already tired and cliché. I know this because those of us who make a blogging career from the peanut gallery have spent the past month making fun of it everywhere. Progressives distrust (and many hate) capitalism. To offer advice about how to save something you don’t like is silly. And transparent in a bad way. 🙂 Oh, and unoriginal, bordering on cliché.
(2) NTDOY pays double the dividend of SNE. Dividends aren’t hot in the US markets, but are still important in Japan. Additionally, production and tangible assets aren’t the only valuable things or endeavors. Arnold Kling calls this “anti-finance bias” but it’s a far broader phenomenon that might be called “anti-design bias”. It’s unsurprising that it overlaps with open source enthusiasm, but it doesn’t have to.
(3) This spring, I purchased two toys for my living room. One was a $250 Nintendo Wii and the other a $3400 Sony 46″ XBR3 (their best TV at the time, and arguably the best on the market). I dislike video games in general, but I love playing Wii Sports golf. I occasionally pack up the Nintendo and bring it over to the 80-something year old grandparents and play golf with them for an hour. Wii is outselling XBox and PS3 because its appeal reaches beyond 20-29 males. The Sony is a beautiful TV, a true piece of consumer art. But its usability suffers from Sony’s heritage as a consumer electronics company. I have a Mac Mini hooked up to it as a media server and general housekeeping computer. When in PC mode, I can’t access the Sony’s menus for simply switching inputs. Instead I have to hit the “next input” button on the remote. Difficult to see in the dark… The remote has no state information from the TV, it’s line of site not Bluetooth or WiFi… I could go on and on. The user experience is on par with Linux, i.e. lovely for dorks and annoying for anyone else. My expectations for the respect the machine gives to me are at the Mac level. BTW, the Wii delivers that. I wish my Sony had the cute Wii menu and “channels” interface, with a simple 12 button remote to control everything. Sony still makes good products, but they fall short on ease of use. 5 years from now, I could see Nintendo controlling product and Sony supplying flat panel screens, with Nintendo’s brain/design portion commanding the majority of the profits.
At any rate, the beauty of the capitalist system, with its stock markets, is that if you think there is a serious financial imbalance, you can take your cash and purchase a position that will generate profits from your superior knowledge! Let us know how you’re allocating your investment cash…
Brad’s second point is very important, because this idea that investment can be about something other than growth appears to have been forgotten even by many who do a lot of writing on the subject. This fixation on growth started with Apple and Microsoft and really went over the top with the dot-com boom. At some point, sanity is likely to return to the market (could be next year, could be 20 years from now) and people will remember that investing is all about risk vs. reward. From an investment point of view, Nintendo with their consistent dividend payments was briefly a better investment in aggregate than Sony, with its inconsistent growth, and as such valuations were adjusted to compensate.
Brad’s second point is very important, because this idea that investment can be about something other than growth appears to have been forgotten even by many who do a lot of writing on the subject. This fixation on growth started with Apple and Microsoft and really went over the top with the dot-com boom. At some point, sanity is likely to return to the market (could be next year, could be 20 years from now) and people will remember that investing is all about risk vs. reward. From an investment point of view, Nintendo with their consistent dividend payments was briefly a better investment in aggregate than Sony, with its inconsistent growth, and as such valuations were adjusted to compensate.