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Opinion The Top Line
‘Fake it till you make it’ — but know when to stop
An appearance of strength can be as good as the real thing
By TOM BRAITHWAITE
Oracle chief Safra Catz erred on the gentler side of exaggeration with her enthusiastic talk of the group's cloud business
“Fake it till you make it” is a well-worn strategy in business. It is a perfectly valid approach, but it has limits.
During the financial crisis Deutsche Bank under-reported huge derivatives risks. Asset prices later recovered and the paper losses evaporated — in finance, in particular, the appearance of strength can be as good as the real thing. Less successfully, Lehman Brothers used an accounting scam known as Repo 105 to boost its liquidity position but it could not fake hard enough to survive.
For years, Vice Media s---ed in attention, investment and staff. At times it relied on a Potemkin village approach. To make it seem like a buzzy, fast-expanding workplace, friends were roped in to wander around toting laptops. New York Magazine reported that for one single, crucial meeting to impress Intel, a potential advertiser, a neighbouring office of architects was implored to vacate their space, which was quickly converted into a swanky annex (“an employee answered a buzz at the door to find a plumber who’d come to install a fancy Japanese toilet”). Vice won the Intel marketing money and, despite plenty of ups and downs, it endures.
Eventually, though, the bluffing can grow wearisome. For a while Oracle, a venerable enterprise software company, has portrayed itself as a cool “cloud” business. You can see why. Upstarts such as Salesforce, run by Oracle alum Marc Benioff, have commanded soaring valuations with their web-based subscription alternatives. Oracle did not want to be seen as a fading old colossus. Yet the company’s spin has never rung true: it has struggled to make the case that it has moved beyond its traditional licensing model.
This week Safra Catz, Oracle’s chief executive, led the company’s earnings presentation by highlighting “a tremendous number of wins in the cloud”. There were a whopping 66 mentions of the C-word on the conference call. But Oracle also surprised investors with a decision to stop disclosing cloud revenues.
“There is no hiding,” Ms Catz insisted. “It’s quite clear that we had a superb quarter and we’re expecting the same next quarter.” The shares dropped 5 per cent.
Oracle is on the gentle side of exaggeration. It has just, arguably, overcooked its presence and prospects in a whizzier adjacent sector. The lure of exciting tech, though, extends even to companies in totally unrelated fields that are looking for a boost.
Long Island Iced Tea Corporation decided late last year to change its name to Long Blockchain Corp. For a brief moment it came good: the company’s shares jumped 500 per cent as cryptocurrency nuts piled in.
Then Nasdaq accused it of trying to “mislead investors and to take advantage of general investor interest in bitcoin and blockchain technology”. This week Long Blockchain was delisted. There was more fizz when Long Island stuck to soft drinks.
At some point the jig is always up.
BP first deployed its “Beyond Petroleum” campaign 18 years ago but is still making the vast bulk of profits from hydrocarbons. The same is true of Royal Dutch Shell — which chief executive Ben van Beurden describes as an “energy transition company”.
They could follow the route of Big Tobacco, wringing plentiful cash from a slowly dying industry. Or they will have to gird investors for an expensive gamble on a real shift to clean energy. The “fake it” part can be fun but the “make it” part matters too.