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Welcome To The Dark Side Of "It's Different This Time"

Authored by Mark St.Cyr,

There has not been a mantra that’s emulated a teenagers go-to excuse of “Because!” for both tactical effect, as well as childish reasoning than the term “it’s different this time.” And for nearly the last 10 years that phrase has meant something entirely different to two distinct groups.

The issue at hand is that one side (i.e., “The Valley”, Wall St., and its sycophantic chorus of enablers throughout the financial/business media) is going to suddenly become aware that this once reliable sword against any and all reasoning not only had an ominous double entendre like quality, but also a double-edged-sword. And the cleaving of reputations, along with investment dollars and sense has only just begun.

So what about the other side you may be wondering since I said there were two? Fair point, and it is this:

The other-side as we’ll now call them (where you can place me if you wish) also understood that, yes, it was different this time, but not in the way that the prior believed. And that is the key. e.g., Believed.

The prior truly believed and embraced that it was different this time. In other words, fundamentals of any sort whether they be tried and true business metrics, paying customers, profits, net profits, __________(fill in the blank) were suddenly immaterial for measuring a business for what its valuation could, would, or should be.

Business 101 was reduced to: Get an idea, Get funded, Get listed, Get out, rinse repeat. And if you didn’t “get out?” Then the only metric that mattered is “eyeballs for ads.” i.e., Spend (or lose) $100mm per quarter is perfectly acceptable, and even encouraged, as long as you can show 102 million eyeballs came for free. Why? “It’s different this time.”

This is what business, valuations, metrics, and fundamentals had now become, and again here’s the key – they believed – would remain forever more.

The others understood (and argued) that yes, it was indeed different, but not for any of the reasonings or defensive arguments put forth by the prior. It was different but for only one key distinction: it was only made possible via central banks (the Fed. in-particular) pumping $TRILLIONS into the markets via one channel or another.

And here’s where “belief” comes into play that works against the farcical belief that it was – different.

Once the Fed. and others began withdrawing or halting their “free money” programs, the first to suffer the consequences would be the true believers, disciples, and evangelists of the “it’s different this time” paradigm. And guess what? That is precisely what has, is, and will continue to happen. Why? I’ll just use the abbreviation, IDTT.

When the Fed. seemed ready, and all too eager to continue printing, anything and everything seemed not just possible in “The Valley” but also for much of tech in general, especially for anything deemed disruptive. Fundamental business metrics be damned.

Losing $Billions quarterly? Have no fear; raise a few $Million and declare you’re worth $Billions. And if you’re truly daring: Raise $100’s of millions and declare you’re worth $10’s of Billions! e.g., The more you’re losing means, the more you’re winning! Why? IDTT!

But as I alluded to earlier – then comes the dark-side of the new “religion.” For you can’t have the good without the bad, right?

To illustrate this I can’t help but be reminded of a scene that comes near the end of the movie “Constantine” (2005 Village Road Show™) starring Keanu Reeves. (a personal favorite I’ll add)

The scene takes place between the Devil (Peter Stormare) and Gabriel (Tilda Swinton) where Gabriel who had been stirring up quite the mischief on Earth tries to muster his angelic powers to smite the Devil only to find – IDTT – when suddenly nothing happens; and the Devil rebukes the entire affair with one simple, but foreboding phrase, “Looks like somebody doesn’t have your back anymore.” And with it renders Gabriel to now live according to the effects of the mortal world.

The entire “It’s different this time” complex along with its evangelists, and true believers just had a very similar revelation or experience. For the Fed. has now declared in no uncertain terms – they too – no longer have someone’s back. And the IDTT resulting effects can no longer be contained behind the closed doors, or closed minds with any IDTT prayers for salvation.

Where’s the proof for such a claim? Fair enough, to wit:

(Chart Source) The above are: Twitter™, Twilio™, Snap™, Blue Apron™)

I initially used the prior three back in March in the article, “Silicon Valley: From Rarified Air To Exhaust Fumes” to demonstrate how the IDTT model has reacted since it became apparent it was – different this time. i.e., Once the Fed. and other central banks remove their largess in any way? “Looks like somebody doesn’t have your back anymore.” Seems appropriate, no?

What’s so telling of the above is the progression of time it now takes to show the fallacy of the IDTT model and belief. For the last chart of the above (far right) shows Blue Apron’s inability to not only hold any semblance of “so worth it” valuation, it couldn’t even stay above its IPO debut of $10 that was dramatically cut back from a $15 – $17 range, where it closed well below its offering some 13 trading hours later.

Yes, that’s hours, not days, not weeks, months, or years. That’s why the above chart is so telling. Those bars on the far right chart above represent 15 minute intervals. You think IDTT? Hint: You better believe it is.

All I heard across much of the main stream business/financial media when it came to the now ill-fated IPO debut of Blue Apron were phrases such as “bad business model” or “bad metrics.” They were bandied about with so much consistency I couldn’t help but marvel when only months prior such heresy talk was euphemistically met with IDTT arguments for the likes of Snapchat. (Remember all the video reports of everyone on “news” desks and reporters augmenting their photo looking ridiculous prior to the IPO to show how “cool” or “so worth it” this was?)

But if you’re still one of the “true believers” and think this all just some IPO hiccup in the road to 401K salvation where the next one will more than make up for any losers? I’ll just share with you something which I said would also appear that the entire IDTT complex stated could or would never happen. From the article “Is This Uber’s Theranos Moment” To wit:

“The revising of valuations and more came when suddenly everyone no-longer could justify the valuations based on “it’s different this time” arguments.

 

That argument works fine when the Fed’s QE program is in full effect and works like some magical cloak to hide the naked fallacy that a company with less than $100 Million in revenues is worth some $9 BILLION because the VC’s invested say it is. (I can’t help myself from laughing as I typed that, it’s so far beyond ludicrous.)

 

But once the term “law suits” and more get thrown across a unicorns saddle? Let’s just say – viewpoints, and valuation metrics begin to change, and change quickly.”

Today’s proof for such? Fair point, here’s something from none other than the Harvard Business Review™ and again, to wit:

“Uber Can’t Be Fixed – It’s Time for Regulators to Shut It Down”

When you do nothing but defend an argument against any and all business reasoning or sense, using nothing more than “Because!” or “It’s different this time” type arguments, along with the other coveted types of “disruptor” styled defenses as to just label or group critics into some form of conspiratorial, tin-foil-wearing, gloom-and doom, Chicken Little’s, nay-sayers? It works fine, until IDTT comes face-to-face with the prospects of:

“Looks like somebody doesn’t have your back anymore.”

Welcome to the dark side – aka – reality.