Sept. 1, 2022

Meta, The Price Of A Reputation

Mention the name, Facebook, and you’re liable to get any of several reactions. For many of my friends, and yes, I’m in that demographic, you’re likely to get raves about how they love Facebook. It is the place they go to post pictures of the grandkids and get the latest updates from their friends. 

But bring up Facebook among my friends who are conservative or libertarian, and you get an entirely different impression. They present the picture of an intrusive, left-leaning organization whose goal is to be a monopoly and whose strategy is to invade every corner of your life. 

This week, we saw this dual image of Facebook again when an interview between fellow podcaster Joe Rogan and Mark Zuckerberg, founder of Facebook and Chairman of its parent company Meta came to light. The interview rekindled the old animosity over the 2020 election. To say this interview created a firestorm would be an understatement. 

At its heart was the revelation that Facebook did indeed suppress “Russian Propaganda.” Or, to use Zuckerberg’s inelegant phrase, they “decreased the distribution” of anything that Facebook deemed misinformation. All those operative words: “misinformation” (by who’s standard?), “decrease distribution” (by how much? Totally?), are subject to the most elastic interpretation. There’s a standard that you could drive a truck through.

Zuckerberg’s alleged that all of Facebook’s actions were on the FBI’s advice, adding fuel to the flames. 

The point of our discussion today is that Mr. Zuckerberg did himself no favor in this interview. He further alienated that half of the country already had a low opinion of Facebook and its founder. Most notably, Zuckerberg seems to have made an eternal enemy out of the New York Post, another principal party unmentioned during the interview. 

In the days leading up to the 2020 election, the Post published some information on the Hunter Biden “Laptop from Hell.” And although it is now known to be 100% factual, Facebook declared that the Post’s reporting was “disinformation” (perhaps of Russian origin). Facebook, therefore, decreased the New York Post’s Facebook page to absolute zero. They banned the country’s oldest newspaper from appearing on any Facebook pages until after the election. 

To many, this appeared to be a bold-faced move by Facebook to support the Biden candidacy. Something we would expect from a man who contributed a total of $419.5 million to two not-for-profits: the “Center for Technology and Civic Life” and the “Center for Electoral Innovation and Research.” Both organizations provided funding for Democratic Party Candidates around the country.

Put it all together, and there can be no doubt that Mr. Zuckerberg has cut a wide swath through the country these last couple of years. Increasingly he’s been willing to commit time and resources to the causes he believes in. Here’s the problem: as the public face of the largest social media site in the nation, he risks alienating half of his audience. 

Remember those grandmas and grandpas I talked about at the beginning of this article? They are becoming increasingly uncomfortable. While about half of them may share the same views as Zuckerberg, half do not. Over the years, Zuckerberg has built up a mountain of positive feelings. And those positive feelings are the centerpiece of Facebook’s appeal. His “Monthly Users” “tune into” his website because of those feelings.

However, his increasingly strident, personal partisan behavior risks the franchise. 

In finance, we measure just how much may be at risk. Every company’s financial statement carries an item labeled: “Good Will,” the company’s worth over and above all the tangible things. Add property, plant and equipment, cash, and other assets. Now subtract that from the total liabilities, stockholder equity, loans, and financing. And just like that, you have “Good Will.”

In the case of Meta, their stated “Good Will” is nearly $20 billion, a number so large that it is greater than the total worth of one-third of the Standard % Poors 500 Companies.

Simply gigantic.

Good Will is as close as we can come, in accounting, to the positive feelings that users and investors have of Facebook. And when, in the case of Facebook, over 10% of your company’s net worth is from Good Will, you know that this has played a significant role in the company’s development. 

Today, Mark Zuckerberg puts that all at risk. He risks it all by playing the kindly internet platform keeper on the one hand and rabid political partisan on the other.

But you already knew that when you looked at the Meta Stock. Down over 50% in just the last five months.

Economic News

China’s up and down Manufacturing Sector reported down last month. After two months of expansion, the Purchasing Managers in China are again slowing their efforts. But perhaps more worrisome for this side of the Pacific, delivery times are stretching out again and indicating Supply chain troubles just ahead. This is the direct result of the current Covid lockdowns and rolling power outages throughout the world’s most populist country.

However, India, Russia, and France appear ready to pick up and slack in worldwide manufacturing as their Managers continue to be in an expansionary mode. Spain and Germany report a contraction in their manufacturing, with the US reporting in a couple of hours.

There is a lot of red on the board this morning, as the market seems none too happy about the reported earnings results. Currently below water are food companies: Hormel Foods and Campbell Soup, garden supply company Toro and networking company Ciena, that’s Ciena with a “C.” Also lower are Science Applications and Ollie’s Bargain Outlet. The only stock that’s sparkling at the moment is Signet Jewelers.