Conrad Black saw it coming


Conrad Black saw the Internet coming and got out while the getting was good. Speaking of his encounters with Richard Breeden, his nemesis, he wrote:

“there were complaints by some institutional investors about compensation at Hollinger, one of the world’s largest newspaper companies until my associates and I got a good look at the Internet and started to dismantle the company at great advantage to the shareholders,…”

Two observations here. The first is that a true businessman has no loyalties to an industry. If airlines are more profitable than banks, or vice versa, he exits one industry and invests in another. Thus Black, a lifelong afficionado of newspapers, got out when he realized that the Internet would strip bare the business model of newspapers.

Second, I am reminded of a time before the turn of the century, when I attended a conclave of Internet illuminati. A high-powered investor was asked what she had done since the same conference of a year before. She said that she had arrived home after the previous year’s conference and immediately advised all her clients to get out of all Internet-related stocks immediately. In that following year, Global Crossing, Nortel, and a host of other high tech companies went under or into terminal decline.

Why? Partly it was an investment boom similar to 19th century railroad crashes. (Andrew Odlyzko writes about these issues well). The principal reason why these companies crashed was a tendency of the Internet to engender a host of rivals, creating an environment in which the market was so competitive that everyone’s nose was barely above water.

Whatever could be commoditized by the Internet would be commoditized. Now this may seem either plain wrong or ironic when you consider the market capitalizations of Apple, Alphabet, Google, Netflix and Facebook. These companies have avoided commoditization. Others that have depended on scarcity in the distribution channels (printing presses, broadcasters, book stores) have been massacred.

The point, I emphasize, is that Conrad Black saw it coming and got out. And, if I may indulge in a stretched comparison here, there was a lot of naive public support for his getting shafted for pretty much the same reasons as otherwise intelligent people think Trump should be getting shafted: because he pissed off a lot of people for being right too early, and he pissed off a lot of people for being too clever for their tastes, and not shy about his talents.

Never be more than fifteen minutes a head of fashion, said Truman Capote. With Black it was the Internet, and with Trump it is Islam, that Quaker-like religion of peace. Sometimes crude people whom we do not like and would never invite for dinner are saying things that resonate with the common experience of mankind.

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