William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."
You know the world is really upside down when Masayoshi Son decides to become a day trader.
What other way to read the about-face by an investor famed for having a three-century time horizon? For years, the SoftBank founder lathered shareholders with talk of investing in the "singularity," that moment when machines outthink humans. How ironic then for the world's most watched venture capitalist to have essentially pivoted toward high-frequency trading machines.
Admittedly, the past 12 months probably feel like a computer simulation Son wants to escape. His $100 billion Vision Fund got bamboozled by WeWork's fantasies of becoming another Apple, not just an old-economy leasing outfit. Then COVID-19 upended Son's giant bets on the sharing economy -- Silicon Valley's Uber, Southeast Asia's Grab, and India's Oyo.
Shareholders rebelled. To stop the bleeding, Son is engaging in what looks like the biggest yard sale in 300 years. Some Alibaba shares here, a bit of T-Mobile stock there, perhaps stakes in chip designer Arm will be next. And suddenly SoftBank is on a winning streak. Asset sales helped Son swing from an $18 billion loss in fiscal 2019 to a $12 billion net profit in the three months ended June.
Oyo's logo in Mumbai, pictured on Mar. 9: COVID-19 upended Son's giant bets on the sharing economy.
© NurPhoto/Getty ImagesDonald Trump gets an assist for this magic trick. By morphing his Federal Reserve into an ATM stuck on "Print All," the U.S. president is driving global stocks to record highs as the pandemic ravages economic growth. It's that surreal rally that is bailing out Son's bets on Uber, workplace software outfit Slack Technologies, online insurer Lemonade and myriad others.
Son had an epiphany: why search for tech unicorn candidates that might let him down when he can ride market uptrends in Amazon, Apple, Facebook, Google and other monopolies. Son's new toy is a $555 million vehicle -- just for starters, of course -- for investing in America's Big Tech establishment. Tesla, too, where Son has $200 million riding on Elon Musk.
Yet Son is arguably taking the wrong lessons from his $2.8 billion investment gain in the most recent quarter. Rather than realizing how lucky he was to ride Trump's unsustainable COVID-era stock boom, Son appears to think it was his own genius.
Son's career shift to short-term momentum trading appears to have front-run news that Japan's economy is contracting at a 27.8% annualized rate just as the country is experiencing something of a second wave of coronavirus infections.
Where, though, is the investment sweet spot? Coronavirus cases are on the upswing across Southeast Asia and the Indian subcontinent. Germany, France, Spain and other European economies are veering back into COVID-ville. Americans now hold the world's most useless passport as hot zones flare up in all corners of Trump's economy.
If Son's big plan is loading up on tech blue-chips already at Fed-inflated valuations, he should reconsider. Even Wall Street must surely take notice when America's bull market in COVID-19 cases blows past 10 million? At that point, the Fed's monetary medicine will lose potency and Son will be left with a crumbling sharing economy, plunging stocks and few options for selling more assets.
Why not, instead, make the Vision Fund live up to its name before pivoting to a new one?
Son wisely dropped plans to create a second $100 billion fund. Turns out, Saudi Arabia, which helped bankroll the Vision Fund, wanted no part of another one. The problem with the new Big Tech push is that it seems more an effort by Son to recreate Vision Fund 2.0 in the aggregate.
One priority for Son is pulling a Warren Buffett. Son loves comparisons between himself and the "Sage of Omaha." They stem from Son's prescient bet on an obscure English teacher in Hangzhou in 2000. When Alibaba went public in 2014, the $20 million he had handed Jack Ma was worth $50 billion.
The Vision Fund was a ploy to recreate that grand slam. What Son doesn't seem to understand is that the secret to Buffett's Berkshire Hathaway is the steady income from boring insurance giant General Re. Son flirted with a stake in Swiss Re in 2018 and should consider creating his own cornerstone income stream that can steady the Vision Fund and help him swing for the fences with less risk. He should also stop overpaying for startups and be more skeptical when eccentric founders like Adam Neumann of WeWork infamy -- promise the world. Son's days as a one-man bubble blower in Silicon Valley are over.
What would really be a shame is if the world's biggest VC player turned away from startups, because disruption has never been more vital. Crises always drive innovation. Health risks from the pandemic alone are sure to catalyze advancements in medical testing and monitoring, teleworking, cashless transactions, remote learning, safer travel, social interaction apps, you name it.
The world has enough hedge fund managers. It is bubbling with day traders adding zero value to the global discourse. It would be very sad indeed if a few bad quarters drove a man once famed for thinking in 300-year increments pivoted to 300-minute trading positions.
