At dinner at the Fortune Global Forum this week, I sat next to a businessman of a certain age who has spent a career managing companies that make products and profits. By the second day of our conference, he clearly had reached the breaking point over Silicon Valley’s magical thinking. “If I hear the words ‘disruption’ or ‘innovation’ one more time, I’m going to scream,” he told me.
I feel his pain. Covering the high-growth, often no-profit darlings of the technology world can be exasperating and confusing. This is so because all the rules one learns in business—earnings matter as much as growth, for example—go out the window for a select group of companies.
Marc Benioff, the cloud-software mogul, gave a great demonstration of the charmed existence that certain companies enjoy. During a panel about leadership I hosted, in which Benioff was joined onstage by Marissa Mayer of Yahoo (YHOO) , the Salesforce CEO extolled the virtues of stakeholder value over shareholder value. Of course investors are important, Benioff said, but not so important as to get in the way of the values he envisions for his company. These laudable and opinionated values include advocating for social justice and corporate philanthropy, to cite two examples.
Moments later Benioff dropped a tiny bit of a bomb by urging the tech industry’s “unicorns,” private companies worth more than a billion dollars, to go public. Only by submitting themselves to the rigor of answering to public shareholders can they ever realize their true potential, Benioff argued.
Putting shareholders second while advocating the benefits of having public shareholders isn’t necessarily contradictory, but it’s darn close. What makes Benioff’s cognitive dissonance more awkward, however, is that at 16 years of age, Salesforce.com (CRM) still loses money. Yes, it generate oodles of cash, and its subscription revenue model pushes revenue recognition out into the future. But the non-magical economy is full of subscription businesses whose profits aren’t erased by accounting rules. Salesforce.com, by the way, is worth nearly $52 billion.
The weather is marvelous, the people are fascinating, and investors throw money at fast-growth ideas. It’s no wonder everyone wants to learn what’s going on in Silicon Valley. They crave their piece of the magic.
This article first appeared in the daily Fortune newsletter Data Sheet. Subscribe here for a daily dose of analysis from Adam Lashinsky and a curation of the day’s technology news from Heather Clancy.