Ed Zitron (Better Offline Host) (15:41)
We'Re now entering initiatification stage 4 where businesses turn on shareholders, analysts and investors have become trapped in the same kind of loathsome platform players, consumers and businesses and face exactly the same kind of punishments through the devaluation of the stock itself. Where platforms have prioritized profits over the health and happiness of users or business customers, they're now prioritizing stock value over literally anything and have, through the remarkable growth of tech stocks in particular, created a placated and thoroughly whipped investor and analyst SEC that never asked questions and always celebrates whatever the next big thing is meant to be. And I hate to dunk on one guy, but go look up Daniel Newman on Twitter if you want to see what I mean. Someone just oinking at every thing that a company says, like whoa, Nvidia is going up. These people are very popular and people make stock decisions based on what they say. They're a problem. And the value of a stock is not based on whether the business is healthy or its future even certain, but on its potential price to grow. And analysts have, thanks to an incredible bull run of tech stocks going on over a decade, been able to say, I bet software will be big for most of the time going on CNBC or Bloomberg and bladly repeating whatever it is that a tech CEO just said, all without any worries about responsibility or the truth. And I just want to say, any analyst who might hear this, I'm taking a lot of screenshots. I've been taking screenshots for several years. And this is because big tech stocks and many other big stocks, if I'm honest, have made their lives easy as long as they don't ask questions. Number always seems to be going up for software companies, and all you need to do is provide a vociferous defense of the next big thing and come up with a smart sounding model that justifies eternal growth. This is entirely disconnected from the products themselves, which don't matter as long as, like I've said, number go up. If net income is high, meaning profit, and the company estimates it will continue to grow, then the company can do whatever the fuck it wants with the product it sells or the things that it buys. Software has eaten the world in the sense that Andreessen, Marc Andreessen, who wrote it, of course, got his wish with investors now caring more about the intrinsic value of software companies rather than the businesses or the products themselves. And because that's happening, investors aren't bothering to think too hard about the tech itself or the deteriorating products underlying these tech companies, because these guys have always worked it out and these companies have always managed to keep growing. As a result, nobody really looks too deep. Minute changes to accounting and earnings filings are ignored, egregious amounts of debt are waved off, and hundreds of billions of dollars of capital expenditures are seen as the new AI revolution versus a big huge waste of money by incentivizing the rot economy, making stocks disconnected from the value of the company. Beyond net income and future earnings, guidance companies have found ways to initiatify their own stocks, and shareholders will be the ones to suffer, all thanks to the very downstream pressure that they've chosen to ignore for decades. You see, while one might correctly say that the deterioration of products like Facebook and Google Search was a sign of desperation, it's important to also see it as the companies themselves orienting around what they believe analysts and investors want to see. You can also interpret this as a weakness, but I see it another way. Stock manipulation and a deliberate attempt to reshape what value means in the eyes of customers and investors. If the true value of a stock is meant to be based on the value of its business, cash flow and earnings, and of course, future growth, a company deliberately changing its products is an intentional interference with value itself, as are any and all deceptive accounting practices used to boost valuations. But the real problem, well, one of them is that analysts don't. Well, they don't seem to analyze, not at least if it goes against market consensus. That's why Goldman Sachs and JP Morgan and Futurum Group and Gartner and Forrester and McKinsey and Morgan Stanley all said that the Metaverse was inevitable because they do not actually care about the underlying businesses themselves, just their ability to grow on paper. Now I'm just going to click through to the future and groups thing. Let's see. Contemplating market criticism of Zuckerberg's Metaverse focus now. This is a really funny piece because you read it. Analysts take in some parallel universe. Zuckerberg would be credited as an entrepreneurial hero, an executive willing to invest in something big in order to create something bigger. Unfortunately for Zuckerberg, he lives here with us in this universe where $15 billion in investment so far has created a nerdy cyber wasteland that few people seem interested in visiting. The numbers are undeniably ugly. Blah, blah, blah, blah, blah. And of course we would have hoped for more progress. Blah, blah, blah. Meta's most deadly sin in managing the Metaverse initiative has nothing to do with adoption metrics or the money that has been allocated to these efforts. Rather, Meta's failure stems from its inability to communicate its vision properly. It's an ironic twist given the company's heritage in creating social media platforms designed to help billions of people communicate worldwide. This was written to defend the Metaverse. And I just want to be clear. The defense appears to be give Zuck a chance now the Metaverse is quite dead. I should be clear. And many of you have emailed me about this and I'm kind of calling one person out because I see these sell side analysts as genuinely harmful to society. I think people going out there and misleading. Well, in articles, actually. Let me take an aside here. You're gonna love this. This is not in the script. Matt, I apologize, but analysts have two customers, they have investors, and then they have you sell side analysts. They burp and fart on CNBC or Bloomberg and they say, hey, I will be big. Then behind the scenes they have a completely set different set of institutional investors they give the real info to. That should bother you. You ever read an analyst in an article? I'd be a little bit suspicious. I like Gil Luria of DA Davidson. Except even Gil just raised the target for core weave. Nothing has changed. Things have actually got worse with the economics but because the of the markets exist, analysts are tweaking things in public, in private, I don't know what they're saying, because you need to pay, I think, tens of thousands, if not more to get those reports. Anyway, that all aside, regular retail investors are the first to get inside in stage four. And by the way, if you ever need proof that none of these people actually give a fuck about value, it really was the Metaverse and the $77 billion that Mark Zuckerberg burned on it. And they create little revenue or shareholder value and burned all that money without any real explanation as to where it went. No, really, does anyone know where the money went? $77 billion went nowhere. You think it went into fucking glasses? Are you crazy? Even if they made hundreds of thousands of those glasses and they took, I don't know, $5 billion for Orion and the Meta ray bans, that I'm still having trouble working out where this cash went. I think one day we're going to find out. I think we're gonna find out something dodgy happened there. But nevertheless, the street didn't give a shit about the Metaverse because Meta's existent ads business continued to grow. Same as it didn't give a shit that Mark Zuckerberg burned those $70 billion on CapEx, even though we also don't really know where that's going either. In fact, that really is the story of the GPU era. We don't know where the money is going. These companies don't tell us anything. They don't tell us how many GPUs they have, or where those GPUs are, or how many of them are installed, or what their, their IT load capacity is, or how much money they cost to run, or how much money they even make. Why would we, why would we know that analysts don't even look at earnings beyond making sure they be on estimates. They've been whipped, trained for 20 years to take a puddle deep look at the numbers to make sure things vaguely look okay, look around at their peers and make sure nobody else is saying something bad and go on and collect fees and go on cnbc. And the same goes for hedge funds and banks, propping up these stocks rather than asking meaningful questions or demanding even more meaningful answers. In the last two years, every major hyperscaler has extended the useful life of its servers from three years to either five and a half or six years. And in simple terms, this allowed them to incur a smaller depreciation expense each quarter as a result boosting their income to Explain really simply. When you depreciate something you say okay, the useful life of this is six years and I'll spread the cost of that across six years. Or in this case you'd probably say three years for a gpu. But no, they've just said due to the magic of math is 6. So they get to spread it out for longer and claim it's more useful for longer so they don't have to do an impairment. Which is when you admit the real cost of something anytime soon it's wank. Nobody seems to cares. Nobody seems to cares. I'm keeping that. Anyway, those who were meant to be critical analysts and investors sinking money into these stocks had effectively no reaction. Despite the fact that Meta used per the Wall Street Journal, this adjustment to reduce this expense expenses by $2.3 billion in the first three quarters of 2025. This is quite literally disconnected from reality and done based on internal accounting that we are not party to. Every single tech firm buying GPUs did this and benefited to the tune of billions of dollars in decreased expenses which bumped their revenues. And analysts thought it was fine and dandy because number went up and they don't care. Shareholders are now subordinate to the shares themselves, reacting in the way that the shares demand they do, being happy for what the company's behind the shares give them. And analysts, investors and even the media spend far more energy fighting the doubters than they do showing these companies scrutiny. Much like the user of an initiative platform, investors and analysts are frogs in a pot. The experience of owning a stock deteriorating since Jack Welch and General Electric taught corporations that the markets are run with the kind of simplistic mindset built for grifter exploitation. And much like those platforms, corporations have found as many ways as possible to abuse shareholders, seeing what they can get away with, seeing how far they can push things as long as the numbers look right. Because analysts are no longer working in any sort of rational headspace, nor are they looking for sensible ideas. Let me give you an example I've used before. Back in November 1998, Windstar Communication signed and I quote a 2 billion dollar equipment and finance agreement with Lucent Technologies where Windstar would borrow money from Lucent to buy stuff from Lucent, all to create and I you notice $100 million in revenue over five years. Now we're going to go even further back in time now to December 1999 to a piece in Barons called in 1999 Tech Ruled. Allow me to quote a few paragraphs from it. Okay, here we Go. George Gilbert, who manages the Northern Technology Fund, predicts the Web centric worlds of consumer services and software will fare well next year, too. A lot of people are increasing their access to the Internet, says Gilbert. And E commerce and business networking are very high priorities for the Fortune 100. Lawrence York, leading portfolio manager of the WWW Internet Fund, is bullish on semiconductors, telecommunications and business to business or B2B E commerce software. But he's wary of online retailers. That model won't work long term, he asserts. His top B2B picks Ariba and Official Payments in wireless. He likes Windstar, Sienna and Annette Commun, which went public earlier this month. So what do you think Larry's scoreboard is? Do you think Larry did well or did he do badly? Let's find out. Annette bankrupt Windstar, horribly bankrupt. Had to sue Lucent while Sienna survived, it had spent over a billion dollars to acquire other companies, all in stock, of course, only to see its revenue dwindle basically overnight from $1.6 billion to $300 million as the optical cable industry collapsed. Now, one would have been able to work out that WinStar was a dog or that all of these companies were dogs if you were to look at the numbers such as how much they made versus how much they are spending and the demand for their services. I mean, I just put out a piece, a premium piece about the dot com bubble that I'll inevitably turn into a long one like this. But basically the signs were all blatant and obvious. But instead analysts, the media and banks chose to pump up these stocks because the numbers kept getting bigger. And when the collapse happened, rationalizations were immediately created. There were a few bad apples. Enron, Windstar, WorldCom. The fiber was useful and thus laying it was worthwhile and otherwise everything was fine. And just to be clear, some of those statements were true. It doesn't mean that any of these companies should have existed or that this growth should have happened at that speed. The problem in everybody else's mind at the time was that everybody had got a bit distracted and some companies that weren't good would die. All of that lost money was only a problem because it didn't pay off. This was a misplaced gamble. It taught tech executives one powerful lesson. Earnings must be good without fail, by any means necessary. Otherwise nothing else matters to Wall Stream. I mean, companies like Lucent did this, Windstar did this, Global Crossing did this. Outright frauds like Enron did this. They proved it again and again and again.
