ARBOR: Springsteen, Travolta, Shark Tank and WhatsApp
“The foreman says ‘These jobs are goin’ boys …
And they ain’t comin’ back…’” “My Hometown” by Bruce Springsteen
There’s a poignant campaign speech in the political drama “Primary Colors,” one of my favorite movies. John Travolta, playing a Southern governor running for president, is addressing a group of downsized workers in a small New England factory. And he’s informing them that while he sympathizes over recent employment cutbacks, the jobs his audience once held are simply not coming back. And the future jobs which may become available are going to require significant new training.
“Primary Colors” was released in 1998, but the message is even clearer today: the job market in which our parents labored has disappeared forever.
Last week we examined how globalization and automation continue to eliminate jobs. Now, consider Facebook’s recent offer to purchase WhatsApp for $19 billion. WhatsApp, a company that allows free messaging, is only five years old and employs 55 people. Of these 55 employees, 32 are engineers, according to Robert McMillan of Wired.com. WhatsApp is the primary texting device used in countries like India, Brazil and Mexico, and is adding one million new users a day.
Compare other U.S. companies whose market capitalization is in the same general ballpark, writes J. J. Calao of Forbes Magazine. These include Chesapeake Energy ($17.2B); Consolidated Edison (Con Ed) ($16.2 B); Dr. Pepper Snapple Group ($10.2B); Harley Davidson ($14.1B); Hertz ($11.5B); Sherwin-Williams ($19.4B); and Tyson Foods ($13.1B).
Some historical economic context is helpful. Henry Sherwin and Edwin Williams ventured into the paint business in 1866, one year after Lee surrendered to Grant at Appomattox. Consolidated Edison traces its roots back to 1882. William Harley and childhood friend Arthur Davidson partnered in motorcycle design in 1901.
Tyson Foods employs 115,000 people. Hertz has some 41,000 workers. Dr. Pepper employs 19,000 across North America.
“The companies (previously listed) are storied brands, many of which have slogged along for years and years, inching up their market caps basis points at a time,” says Calao. “In a blink, they’ve all been matched or surpassed, in terms of market value, by a no-name startup in Mountain View, (Calif.).”
WhatsApp may be the face of the future of U.S. employers. The company’s value lies not in its profitability, but in the number of eyeballs that it can attract. And it employs shockingly few folks.
Whose cutting edge business concept will debut on “Shark Tank” and make them the next billionaire? This type of business model may be exceptionally profitable for a few successful entrepreneurs, but bad for those in the labor market seeking long term employment and security. The model doesn’t promise to sustain a viable middle class that can drive consumer spending, power GDP and grow the economy.
Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, chartered financial consultant and accredited investment fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” and fiduciary registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.