Illustrated by Shoshana Gordon/Axios
Bet on the future or focus on the present. Bear markets and fears of an economic slowdown have a way of lending urgency to the issue for public companies.
News promotion: Meta and Ford Motor Co. — two very different companies with two very different survival challenges to face — have taken different routes in navigating similar decision trees.
State of play: On Wednesday afternoon, Ford, in partnership with Volkswagen, announced it was ending its long-term self-driving car project, Argo AI, and said it wanted to focus on more short-term partially autonomous technology.
- Ford’s stock is up about 1.4% despite a $2.7 billion write-down on the Argo AI shutdown, described as Ford’s reaction to Tesla’s Autopilot and General Motors’ Cruise.
vice versa, Facebook’s parent company, Meta, has declared that it is pushing ahead with major investments in the Metaverse, even as its modern digital advertising business is drowning.
- Meta investors don’t like what they see. The company’s shares fell 24.6% to close Thursday.
Reality check: Risk works both ways.
- The decision to go big with far-future technology or commit resources to short-term execution reflects a turning point in the success or failure of even the largest companies.
- “Too early or too late can catch fire,” Eric Gordon, a business professor at the University of Michigan, tells Axios. “It’s difficult.”
What they say: Meta CEO Mark Zuckerberg, referring to the Metaverse spending, told investors on a conference call:
- “But as far as I know, I think this is going to be very important. I think it would be a mistake not to focus on any of these areas. The future.”
- In contrast, Ford CEO Jim Farley says automakers are bailing out the pursuit of self-driving cars because it is “probably the most difficult technological problem of our time.” “It will require major breakthroughs in many areas,” he said.
- He suggested the company could buy or license the technology later if needed — when it was ready.
Be smart: In 2022, it’s impossible to know whether Facebook’s investment in the Metaverse or Ford’s cutback in self-driving cars is the right move.
- For Ford, AVs are very expensive. So “the insiders know that full AV is a lot more than it looks in the mirror, so there’s a reason they’re reluctant to join with both feet,” he said Gordon. say.
- “But the danger to Ford is that if they don’t invest enough in the technology that will make up the bulk of the value of their future cars, and they have to license it from someone else, Ford will basically make a small profit. It’s about being a driver shop that creates money to ruin all the precious things other people make up.”
- For Facebook, “the Metaverse could be New Coke,” a new formula that turned out to be a fiasco – “Or, Amazon’s Cloud Computing Services division is going to be a huge success. “It could be Amazon Web Services, which is a big deal,” says Gordon.
Please note the following: As Meta’s controlling shareholder, Zuckerberg hasn’t been under much pressure to deal with investors upset that the stock has fallen to its lowest level since 2016.
- “Zuckerberg has luxuries that Ford doesn’t have. Zuckerberg controls the votes. He can’t be fired. So he can think long term. He can ignore the stock price,” Gordon said. says. “Ford’s CEO is more constrained.”
💭 Our speech bubble: Investors want short-term results. But ignore the long term and they will soon abandon ship.