Whose Number Is Up?

Goldman Sachs have just published a research piece suggesting that up to two-thirds of all jobs in Europe and the US are exposed to some degree of AI automation. Sounds like I should be nervous. And yet, I’m not. The reason is a powerful one which at first glance might sound a bit mad. I don’t know. No, seriously, my and others’ ability to say or admit “I don’t know” could be our kryptonite against the AI bots. At the moment, a major flaw in generative AI is the tendency of chatbots to emphatically give an answer with impressive references and confident language. The small problem being the answer could be utter nonsense. Now, before you whisper Minister Donnelly, Lord Frost or Leader McCarthy it is true that current political discourse is plagued with spoofery, dogmatic drivel and occasional outright misinformation. Such is modern or 1930s politics, eh. But what about the commercial world of risk and opportunity where hard numbers should win over spin? Well, I don’t know. And, here are a few illustrations….


The US Conference Board measure of Consumer Confidence in current conditions compared to expectations just registered a negative spread of 83 points. That’s the most negative reading since March 2001. Go sell everything, right? Not so fast. Unemployment is at a 50 year low; US average disposable income is double the OECD average; record new construction jobs have been created and just the $200 billion has been invested back into US manufacturing during the Biden administration. Even the Wall Street Journal is perking up with an “America Is Back In the Factory Business” headline. So, maybe consumers are just hearing a different story?

I don’t know.


The regulator of the public airwaves in the US is the Federal Communications Commission(FCC). However, the FCC is relatively toothless in policing responsible media behaviour on private cable networks. For those hurt or damaged by private media operators the only real available remedy has been incredibly expensive and risky legal proceedings. So, last week looked like a potential seismic media moment as Rupert Murdoch’s Fox Corp faced a personal and corporate stint in the witness box as Dominion Voting Systems sued for defamation damages on the 2020 Election “Big Lie”. The Murdochs balked and settled out of court for almost $800 million. Some commentary suggested the plaintiffs, Dominion Voting Systems, let democracy down by taking the money – just the 7 years’ worth of Dominion’s annual revenues. Yes, Fox’s lying to its own viewers didn’t get the court room airing the pre-trial legal discovery process had already revealed. But then days after settlement, its biggest star, Tucker Carlson, was fired with 10 minutes notice and the Fox Corp share price dropped another $600 million. Oh, Lordy there are 90 tapes too. As we cruise towards a $1.5 billion hit for Fox, you do wonder what exactly the cost needed to be for the Murdochs to actually try to prove their corporate innocence?

I don’t know.


If one thought confidence in the truth was the foundation of news media, what is the average person to think of banking? As First Republic Bank teeters on the brink of failure after the flight of $100 billion in depositor monies, we are reminded that the strength of a bank’s credit status is critical to its survival. However, credit is really a banking jargon word for confidence. And, for banks, confidence has just become a lot more complicated. Check out mighty Credit Suisse which was recently rescued from bankruptcy by the Swiss authorities and a nervous rival, UBS. The takeover is not officially complete so Credit Suisse was able to report its Q1 results. Now, the bots, Wall Street research analysts and probability/trading algorithms would have anticipated Q1 carnage for the wobbling Credit Suisse. But, no. Credit Suisse just reported its best ever quarterly profits, nearly $13 billion. However, that’s an accounting profit thanks to a profitable write-down of a particular bond liability. In the real world, $65 billion of client funds was running out the door through the Q1 period. So, we are faced with a remarkable numerical situation where the assets of Credit Suisse are actually ‘valued’ about $56 billion higher than its liabilities, the bank is profitable and the regulators are happy that it is sufficiently capitalised. But, as a business, the bank is bust. In simple terms, accountancy principles allow assets to be valued on the basis that the sale of those assets will be done over time. The business reality is that in times of uncertainty, creditors will make a judgment on the value which can be realised on an instant sale. No banking model can actually survive that so should we just skip the financial reports(and the auditors) and agree on a bank confidence metric?

I don’t know.


If the bank sectors’ accounting metrics mean different things for different stakeholders, surely food companies can provide easier comparatives? Well, chew on the following. Subway, the submarine sandwich franchise, operates circa 37,000 restaurants in 100 countries and, as recently as 2015, was the fastest growing franchise in the world. Today, Subway generates $16 billion of annual revenues and it’s for sale. Reports would suggest that the private equity arms of Goldman Sachs, TPG and Roark Capital might acquire it for a price in the region of $10 billion. That looks like a sales multiple of 0.63x, and even if the bid surprises, the upper limit looks to be sub 1x sales. That feels like an ex-growth multiple but the company this week actually reported same-store sales growth of 12%. Now, check out a Big Mac valuation. McDonalds is also growing same store sales at a similar clip(13%) and does about 50% more sales every year($23 billion) but the Golden Arches’ valuation is a whopper swallow. Food.. check; franchised.. check; convenience.. check; global footprint.. check; growth.. check. Subway and McDonalds seem to be doing similar business things. But, if you’re a SaaS start-up founder look away now; McDonalds as a publicly quoted company is currently valued at over $200 billion or almost 10x annual sales. Maybe it’s the Big Mac sauce, or the culture, or the breakfasts, or the better margins but actually it is many things that are not so easy to quantify. Arguably, at a ten times valuation divergence, either Subway or McDonalds are trading at the wrong price. Or, they are not.

I don’t know.

We have warned on these pages previously that ‘certainty’ can be a disastrous wealth destroyer. From the illustrations above you can see the snap interpretation of numbers might not necessarily be helpful. However, experience, context, judgment and behavioural IQ can be helpful in understanding those numbers. At the very least, those qualities can support a very human answer, but also avoid a very damaging dash to destruction.

I do know that.



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