Good morning.
The Economist does a good job in its new issue dissecting the current IPO boom. The most compelling factoid is this: “A dozen unicorns that have listed, or are likely to, posted combined losses of $14 billion last year. Their cumulative losses are $47 billion.”
Think about those numbers. The last IPO boom, two decades ago, also brought to market a boatload of profitless companies. But they didn’t have the scale to generate such gargantuan losses. That was before Blitzscaling, as LinkedIn Founder Reid Hoffman calls it, became the reigning zeitgeist of Silicon Valley. The goal of the game now is to get big before anyone else. Only then do you worry about profits.
That, of course, worked nicely for Amazon and Facebook. But will it be the same for Uber, Slack, Airbnb? Not clear to me that the latter have the same scale economies of the former, or that barriers to entry are as high.
At breakfast on Friday, a former tech-CEO-turned-investor told me he worries about how this will end. The “blitzscaled” companies will get picked up by index funds following their IPOs, then turn south when the lock-up periods for early investors expire. That will leave ordinary investors holding the bag – and fueling sentiment, once again, that the system is rigged for the powerful.
On that last point, there’s an interesting piece in the Washington Post this weekend headlined “Capitalism in Crisis: U.S. billionaires worry about the survival of the system that made them rich.” CEO Daily, of course, has been peddling that message for a while. But it’s interesting how widely accepted it has now become. I was reminded of this testy exchange with venture investor Marc Andreessen at the Fortune Global Forum in 2015, when I asked if the winner-take-most dynamics of the tech business were contributing to inequality. “Is this Fortune magazine?” Andreessen sneered back. “Did I stumble into an International Workers Party conference?” Today, it has become clear that the issue is an existential one for the future of business, as well as society.
News below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
Oil Prices Jump on New Iran Sanctions
The State Department is ending a waiver program that let eight countries, including China and India, continue to purchase oil from Iran despite sanctions while they sought other sources of supply. The move is part of a U.S. effort to tighten the economic screws on Iran, and caused the price of crude oil futures to increase more than 3 percent. Reuters
Arrests in Sri Lanka Bombing
Police in Colombo have arrested 24 people tied to a series of suicide bombings that killed nearly 300 people in churches and hotels on Easter Sunday. Authorities also blocked social media sites, including WhatsApp, in a bid to stop misinformation about the attacks, which were carried out by a little-known Islamic terrorist group. New York Times
Comedian Wins Landslide in Ukraine
Volodymyr Zelensky, an actor whose character accidentally becomes President of Ukraine in a satirical TV series, won more than 73% of the vote in that country's election. His platform includes peace talks with rebels backed by Russia, whose Prime Minister said in a Facebook message that he expects Zelensky to show "sound judgment and pragmatism." BBC
Boeing Plant Plagued by Shoddy Production
The aircraft maker's factory in Charleston, South Carolina has long had a culture that valued speed over quality, accordingly to internal emails and whistleblower claims. An investigation suggests Boeing cut corners on safety as it scrambled to crank out jets and catch up to its rival Airbus. New York Times
Around the Water Cooler
The Generation That Won't Drive
Only a quarter of 16-year-olds have a drivers license, which is down from nearly half in 1983. While some of this can be explained by cultural reasons (access to Uber and app-based social activity), part of it is economic. Cars today contain technology that makes them more expensive, and Detroit is scrapping the smaller sedans that better fit a teenager's budget. Wall Street Journal
Microsoft Debates Diversity
A female program manager at Microsoft posted remarks to an internal chat service, directed at CEO Satya Nadella, that questioned company incentives to promote more women. The posts received more than 600 comments, and echo a controversy that arose at Google last year after an engineer wrote an inflammatory memo on gender. Quartz
Terror Groups (Still) Thriving on Social Media
Hamas and Hezbollah are thwarting crackdowns by Facebook and Twitter by posting images of rallies and other standard political fare instead of violent pictures. This has helped them maintain large online followings. The "companies did not reckon with the organizations’ abilities to manipulate their platforms by posting material that went up to, but did not cross, the line of being flagged." New York Times
Kroger Struggles to Adapt
The difficulties facing traditional grocery chains are well-documented, but Kroger may have exacerbated those challenge by being late to technology and mishandling efforts to jump-start its delivery business. The result has been skittish investors and a recent wave of executive departures. Wall Street Journal
This edition of CEO Daily was edited by Jeff Roberts. Find previous editions here, and sign up for other Fortune newsletters here.
