Imagine a well-hyped start-up that raises $41 million and receives plaudits from the media. The start-up is going to remake the industry and change the world (and maybe even change civilization). The company markets itself and gets more hype and one of the most famous investors buys in at the very top of the stock price …
and then … all of a sudden … everyone realizes that the emperor has no clothes …
It turns out the company spent almost all of its cash on ineffective television ads and is now unable to raise more money, out of cash, laying people off, and asking the rest of the staff to work for massively reduced pay.
Is this circa 2000? Is this pets.com?
No, it’s Howard Dean for President.
But the similarities to Pets.com (formerly listed on NASDAQ as IPET) are eerie.
Joe Trippi, dot-com maven and former CEO of Howard Dean for President, literally ripped a page from Pets.com’s history. The history of the Pets.com share price almost exactly matches the rise and fall of Howard Dean’s futures price as traded on the Iowa Electronic Markets (see http://128.255.244.60/graphs/graph_Pres04_VS.cfm). If you shorted Dean in January 11, you’d be a rich man.
And like Pets.com, which was able to attract money from some of the most famous investors even at its peak, the Howard Dean for President campaign was able to attract and endorsement from Al Gore at the precise time of its peak. According to the Iowa Electronic Markets, Gore bought Dean (IOWA: DEAN) on December 9 at 36 – and as of Feb 3, Dean was trading at only 5 – meaning DEAN lost 86% of its value in less than two months. Can you say dot-bomb?
John Kerry, by contrast, is nothing like a dot-com. He’s more like a traditionally boring, slow-moving conglomerate – like Heinz (NYSE: HNZ) for instance. He’s steady and dependable – but ultimately will not resonate with the growing Hispanic market which prefers salsa over ketchup.
Feedback Loops
Howard Dean and John Kerry are both products of a massive feedback loop. Basically, they are fads. Like any stock, they have inherent value. But much of the value of a stock lies in its perceived value. Inherently, Pets.com was never worth anything under any measurement – but at certain points of the company’s life it was worth a heck of a lot because investors thought other people would buy it (in the end, of course, it turned out to be a house of cards).
The number one reason people give for voting for John Kerry is “electability.” Voters think he’s more likely to beat President Bush in November than the other Democratic contenders. So basically, the number one reason people like Kerry is not because they like his ideas, agree with his proposals, or even because they think he’s cute — but it because they think other people will vote for Kerry. The argument, of course, is very circular.
And the same thing happened to Dean. He is just another fad (he’s not John McCain, he’s actually Ross Perot). People liked him because he reached a tipping point – kind of like why everyone orders a “Red Bull and vodka” and no one orders “Mountain Dew and whisky.” Frankly, I’m sticking with my beer, chips, and salsa.
I think that Letterman was correct; Howard Dean is just Al Gore on Red Bull. I want Mr. Pets.com to remain in the race and continue to assault the Frenchman look-alike John Kerry.
I struggle with which is worse…the fact the Dems are running on the issue of saving Union jobs or pretending that the US going to Iraq is the responsibility of the Bush administration without admitting he inherited the powder keg from Clinton.
I prefer a Mountain Dew and Bombay Sapphire- we christened it a Bombadoo- invented it circa 1996. Besides, Red bull- that stuff will kill ya.
Mr Hoffman has made a very amusing and, in many ways, spot-on analogy for the Dean campaign. Like the hand puppet, perhaps Dean can be sold to some other corporation and start hawking infomercial products.
However, Hoffman neglects to make the appropriate analogy for the Bush Administration. I couldn’t decide between Enron or Halliburton (HAL). Enron leadership mislead investors for years, over-extended itself to create massive debt, and adopted policies to create huge wealth for senior execs and advisors (I-banks and accountants). Halliburton is autocratic, only concerned with its own bottomline regardless of ethics, is subject to a number of investigations for improper behavior, and is the poster-child of the corporate/governmental revolving door.
Maybe the Bush Administration is like some bastard merger between these two “impressive” corporations.
As an investor, give me Heinz any day. After all, we all know what goes best with that most reliable and tasty of American of symbols– the good, old-fashioned hamburger.
The Dean comparison to Pets.com is dead on. However, this does not tell us much about how much the Internet will influence politics in the future. Take a look at Internet stats since the Bubble burst, and you will see that the Internet has continued to deliver on its promise to change the way we shop, listen to music, communicate and so on. I am confident that the Internet will also deliver on its promise to change the way we politic.
Media and The Democratic Primary
This weekend I was at the a work party where I ran in to Auren Hoffman. He made a comment that I hadn’t blogged in a while, and so today I found something to talk about: his recent post comparing…
I would very much like to see you apply your wit and intelligence to an unlikely subject worthy of your faculties: Bush.
How about the Jewish Neo-cons and the Christians who want Israel to recoup its promised land so the Jews can then perish?
Don’t you think the Israeli ties are a bit outdated for America? Try on impartiality towards the MiddleEast. It is better for national security.
What is your speculation on why no one in the media dares talk about the link between our professed die-hard love for Israel, this ill-fated war and the disasterous image blowback?
Again, Israel is liability if America wants to be a Global moral authority comparable to its power. It has to shake off its Crusader Christian fixation and re-invent its much-damaged image.
Like my Chinese ancestors said: One who has power is one who gets things done without having to use one’s power.
The neo-cons are on the out, because they don’t understand rule no.1: To waste power on the inessential dulls your power!
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