SoftBank: Blindsided by a Virus

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“Everything was going great. Then I got this bug.” SoftBank

Everything bad that happens over the next several months will be blamed on the coronavirus. This will be done by the usual gaggles of amnesiac journalists and pols, who think history is what happened last week, and especially by their bosses, the industrialists who brought us globalization, climate change, morbid wealth for the chosen few and deaths of despair for the rest of us.

A few titanic train wrecks ago, the people of the criminal enterprise Enron celebrated themselves as the smartest people in the room because they figured out how to steal electricity from poor Peters in one part of the country to sell at a stiff markup to rich Pauls somewhere else. Today the malefactors don’t even pretend to be smart.

SoftBank is the criminal enterprise I have in mind. In the first place, who names a bank soft, as in soft touch? A better message would be conveyed, I would think, by calling it the hard-ass bank. But then we find out it’s not a bank, it’s a wealth management company.

My favorite person’s favorite coffee brand is “Chock Full O’ Nuts,” which features a label next to, and almost as big as, the brand name that says, “Contains No Nuts.” So the art of draining the last drop of meaning from our language for purposes of manipulation is not new. It’s just more advanced. And depraved.

Anyway, back to SoftBank, which is not soft, and not a bank. Neither is it very good at what it really intends to do — make money. “Chock Full O’ Profits” is the brand promise. But “Earns no money at all” is the reality. The brand trumpets its vision in risking bales of other peoples’ money on startup, high-tech, “smart” artificial-intelligence enterprises that are exactly like the dot-com-bubble kids. (I know, that was more than a week ago and nobody remembers.)

Here’s a short list of SoftBank’s most inspired investments:

• Uber, whose business plan involved breaking — simply ignoring — all the laws and regulations governing taxicabs and letting people use an app on their smartphone to call a private person to come in a private car and give them a ride.  Uber has been in operation for 11 years and has never made a dime in operating profit. For three years it has been losing about a billion dollars per quarter on operations. Uber and its cheerleaders thought it was worth $76 billion when it went public last May but even this crazed stock market wasn’t that dumb. The stock immediately tanked to about $13 billion. Softbank lost $3.5 billion in three months. Still, Uber looks quite good when propped up beside the other visionary beneficiaries of Softbanks’ softness. 

• WeWork’s vision was to buy up tons of empty office real estate and rent it out in tiny little increments to “technology startups.” Those magic words, coupled with an indifference as to why the office space was empty in the first place, led to a bloated valuation of $47 billion. But WeWork’s profits turned out to be as scarce as nuts in Chock Full O’ Nuts coffee. They have laid off 4,000 employees and sold themselves to Softbank, a deal on which Softbank is now reneging because, you know, coronavirus.  WeWork’s founder Adam Neuman was last seen walking out over the hill with a billion dollars and change. 

1. Zume was an automated-pizza company whose robots, it said, would assemble and cook the ordered pizza in a truck on its way to the consumer, thus guaranteeing fresh, perfect, hot pizza. “Valued” by Mr. Market at $2.25 billion, the company hired 500 people, began operations in several cities, and tanked. Turned out the pizza was inedible. 
2. There are dozens more examples, but I’ll close with my personal favorite, Wag, the dog-walking company. That’s right, Uber for dogs. This beauty was “valued” at $650 million, and Softbank invested $300 million to get it going. Walking dogs. Softbank made the investment in January of 2018 and bailed out in December of 2019.

All of this added up to a third-quarter 2019 loss for SoftBank of $6.5 billion. Billionaires by the scores were going nuts trying to figure out what could possibly have gone wrong. And suddenly, there it was. Coronavirus.