Bet on the future, or focus on the present. Bear markets and fears of economic slowdown have a way of lending urgency to the question for public companies.
Driving the news: Meta and Ford Motor Co. — two entirely different companies with two vastly different existential challenges to confront — are taking divergent routes as they navigate a similar decision tree.
State of play: Ford on Wednesday afternoon jointly announced with Volkswagen that it's shutting down its long-term self-driving car project, Argo AI, saying it wants to focus on more near-term partially autonomous technologies.
- Ford's stock is up about 1.4% despite taking a $2.7 billion write-down with the closure of Argo AI, which had been described as Ford's response to Tesla's Autopilot and General Motors' Cruise.
Conversely, Facebook parent Meta declared that it's plowing ahead with massive investments in the metaverse, even as the company's modern-day digital ad business is taking on water.
- Meta investors don't like what they see. The company's stock closed down 24.6% Thursday, at least in part on that commitment.
Reality check: The risks run both ways.
- Deciding whether to go big on far-out technologies or plunge your resources into near-term execution reflects a turning point that can make or break even the largest of companies.
- "You can flame out by being too early or too late," University of Michigan business professor Erik Gordon tells Axios. "It's a tricky thing."
What they're saying: "I get that a lot of people might disagree with this investment," Meta CEO Mark Zuckerberg told investors on a conference call, referring to the metaverse spending.
- "But from what I can tell, I think that this is going to be a very important thing, and I think it would be a mistake for us to not focus on any of these areas, which I think are going to be fundamentally important to the future."
- Contrastingly, Ford CEO Jim Farley said the automaker is bailing on its driverless car pursuits because it's "perhaps the toughest technical problem of our time" and "will require significant breakthroughs going forward in many areas."
- He suggested the company can later buy or license the technology if it needs to — when it's ready.
Be smart: In the year 2022, it's impossible to know whether Facebook's investment in the metaverse or Ford's disinvestment in self-driving cars are the right moves.
- For Ford, AVs are massively expensive — and so "there is some reason to be hesitant about going in with both feet because insiders know that full AVs are a lot further away than they appear to be in the mirror," Gordon says.
- But "the danger to Ford is that if it doesn’t invest enough in the technology that accounts for most of the value of future cars — and has to license it from somebody else — Ford basically becomes a screwdriver shop that makes a little bit of money for screwing together all the valuable stuff that other people make money up."
- For Facebook, "the metaverse could be New Coke" — that is, a new formula that turns out to be an epic flop — "or it could be Amazon Web Services," the smash-success cloud computing services division of Amazon, Gordon says.
Keep in mind: As the controlling shareholder in Meta, Zuckerberg is under less pressure to respond to investors who are angry that their shares have plunged in value to their lowest point since 2016.
- "Zuckerberg has a luxury Ford doesn't have — Zuckerberg controls the vote. He can’t be fired. So he can think long term. He can ignore the stock price," Gordon says. "The CEO of Ford is more constrained."
💭 Our thought bubble: Investors want short-term results. But they'll soon abandon ship if the long-term is neglected.
