Overnight on Wall Street the crusty old world ‘Empire’ struck back and the Luke Skywalkers of the online world look like they’re in for a Star Wars experience, as old star businesses and government hit back.
In seemingly unrelated actions, the FANG stocks on the US stock market — Facebook, Amazon, Netflix and Google (or Alphabet, as they’re named on the stock market) have been clobbered.
Meanwhile, the value of Uber has been questioned following London’s decision to ban the star of the shared economy with its share-riding business.
That’s what they call it nowadays but, in reality, it’s a taxi-service founded on breaking all the rules that taxis have to commit to. Many of these rules were designed to help consumers with things such as guaranteed insurance cover and a regulated price, but Uber targeted the weak points of taxis — reliability and its old world service that often comes with a monopoly-like industry — and has actually helped raise the standard of taxis.
I’m not arguing Uber is bad but it grew from a faulty standard — let’s break the rules, service the customer and see if governments have the guts to disappoint their voters.
Personally, I have no problem with these businesses and what they do, though I have doubted the integrity of them not playing by the rules that their rivals must play by. For example, a taxi driver has to have insurance in case a customer is hurt in a car accident but Uber’s business relationship with their drivers could make insurance cover questionable.
Aside from that, London City struck a blow for the old world by banning Uber for conduct unbecoming and its boss has now apologised for its behavior.
News outlets, including The Guardian are reporting that Uber's chief executive, Dara Khosrowshahi, apologized for ‘mistakes we have made,’ but says he still plans to appeal London's decision to revoke the ride-hailing app's licence to operate in the city.
London transport bureaucrats say they will not renew Uber's licence due to "a lack of corporate responsibility" in dealing with safety issues.
Transport for London (TfL) has said that Uber was not a “fit and proper” private car-hire operator and cited four areas of concern, including its approach to reporting criminal offences and carrying out background checks on drivers.
Its use of "greyball" technology, which can be used to block regulators from fully accessing the app, is also an issue.
Richard Branson took on monopolies and oligopolies but he played by the existing rules, cut prices and won over consumers. However many of the FANG businesses have broken rules to get an advantage.
FANG businesses such as Facebook have been in legal hot water for practices in their early days that saw them penalized by authorities. And a lot of high tech businesses are accused of not paying the right taxes worldwide and, interestingly, part of the stock price fall overnight for FANG shares has been the belief that President Trump’s tax cut plan will see these businesses pay more tax!
The Nasdaq stock market index fell 0.92% overnight, while the Russell 2000, which houses smaller more normal US businesses, rose, while all other market indexes fell.
This old world organisation called the Department of Inland Revenue and tax offices around the world wants IT businesses to pay up like other businesses.
Meanwhile, Netflix has another problem with old world TV businesses deciding its success has to be challenged. In the USA, 21st Century Fox is adding more inventory to its streaming service. And Foxtel’s On Demand product is certainly bound to be targeting the likes of Netflix and Stan here in Australia.
“Confidence among Netflix investors also wobbled on August 9, when Disney, announced it will remove its movies from Netflix to launch a direct-to-consumer service in 2019,” CNBC reported. “Likewise, Fox's move now caters to paying TV customers — but only at an additional cost to the TV packages they have already bought.”
Disney CEO Bob Iger told CNBC in August that Disney had a "good relationship" with Netflix but decided to exercise an option to move its content off the platform.
The old world is striking back and it’s about damn time.
In Melbourne, there’s a new fangled bike service where these yellow bikes are left willy-nilly all over the place but the old world councils would never allow a business to take over the footpaths and potentially leave pedestrians at risk to trip over them — ask café owners who pay to have tables and chairs on the street!
Amazon is also in the questionable taxpayer class and has long traded without profit to kill business rivals. It’s funny when China does that with cheap steel, there are laws against dumping to beat, and even kill, local businesses as well as jobs. However when Amazon does it, no one seems to call “foul!”
Another high-profile tech company, Apple, hasn’t done anything all that wrong (apart from its tax strategy) but its latest iPhone offering hasn’t done all that well. I saw three TV business commentators explain it in terms of:
The striking back old world is getting tired of throw away technology and coping with new processes.
(Last night, I lost an hour of my life trying to work out why Netflix wouldn’t turn on and just show me what I’ve paid for. Despite endless entering of my password, changing the password and checking credit card details, it still denied me, so I read a book!)
Of course, many young and IT-savvy people will buy the new phone but the old world might just have buyer fatigue, especially with power prices starting to eat into our budgets.
My whole life and business has been linked to innovation and thinking outside the square. And I admire the FANG businesses, but most of them have had a side to their businesses, like not paying the right tax and heading overseas to low tax regimes to do it, that has made them look like ‘a not quite right’ corporate citizen. The old world is biting back at the FANG businesses and they might end up being less valuable — some of the valuations are crazy! — but they might end up as better businesses too.
Obviously, if other cities around the planet jump on the Uber ban bandwagon, which would please taxi drivers worldwide, it would not only force Uber to play more by the rules but lower its unbelievable valuation that ranges to as high as $100 billion!
This valuation was based on an unfair approach to competition. The old-fashioned idea of playing fair looks like it might be making a comeback, which is a damn fine thing.
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