Sometime last week, Tesla’s equity share price topped $300, which means the company is worth more than GM or Ford.
Only it isn’t.
I see at least three lessons for communicators:
First, forget telling your stakeholders (or worrying) that stock valuation has any connection to reality. There is no objectively reliable math that supports Tesla’s price; it’s what James B. Stewart in the New York Times calls a “story stock,” which means that investors have bought into a narrative of future success that is qualitatively hopeful instead of quantitatively likely.
The phenomenon is far larger than Tesla, however, which actually sells what it makes for real money, versus the digital tech darlings that give stuff away for free.
A vast infrastructure of financiers, lawyers, marketers and their advocates in the media are dedicated to creating and promoting such story stocks. A generation of potential employees has come of age only to find no real jobs available to them, so they presume they’ll become the startup entrepreneurs who’ll be the subjects of the next one. Governments and universities spend tons of money hoping to enable it.
It almost never works out.
Equity is a measure of the value other people find in a company’s story, not an a priori metric of a business and, obviously, some stories are more compelling than others. One could argue that there’s an inverse relationship between the amount of excitement over a company’s story, and the likelihood that it’ll ever live up to expectations.
The good news for communicators is that your work is more important than ever. The bad news is that the Disruption Hype Complex I mentioned earlier is utterly biased against what you have to say (if you work for an established company).
There’s a startup tech story being told in your industry right now, if not many of them. Equity valuations reflect the simple fact that those stories might be better than yours. You can’t operationally perform your way out of the challenge.
You have to communicate…
Read the entire essay at Linkedin