Masayoshi Son’s turbulent fate: Admits defeat because of greed, “eating too much”, helplessly watching Vision Fund lose tens of billions of dollars

Masayoshi Son’s strategy of “eating a lot” seems to have proven to be a failure.

According to the Financial Times, Softbank is about to lay off 30% of the workforce at the Vision Fund as the Japanese corporation seeks to drastically cut costs. The move comes after Softbank suffered a record-high quarterly loss amid the tech market’s shock.

The Japanese corporation began to notify employees of the upcoming cuts on Tuesday. The source said that about 150 of the 500 employees of the Vision Fund branch will lose their jobs.

This move has in fact been rumored before, but the number of employees being laid off has been revealed to have doubled compared to the previous prediction. It is not yet clear which divisions will be affected by the cuts, but the cuts are expected to affect employees at all branch offices around the world.

The value of technology companies and a weak yen left billionaire Masayoshi Son’s company with a net loss of 3.1 trillion yen ($23 billion) in the three months to June. Son recently admitted he should invest more selectively and tell investors that they feel “shame on themselves for being so greedy for profits in the past”.

Son added in August that Softbank would restructure itself into a “strong cost-cutting group after the 7 trillion yen investment return in the Vision 2 fund had completely evaporated in the past six months.”

Softbank’s Vision Fund, which focuses on investing in companies with good technology, reported a combined loss of 2.3 trillion yen for the April-June period, followed by a loss of 2.2 trillion yen last quarter. The company also suffered a foreign currency loss of up to $6 billion due to the weak yen.

“ If we were a little more selective and invested in the right way, the loss wouldn’t be much ,” Son said.

The company’s stock has fallen 23% over the past 12 months.

Two days after reporting its worst quarterly results, Softbank said it would make a profit of 4.6 trillion yen ($33.6 billion) by selling Alibaba shares. As a result, Softbank’s stake in Alibaba will also decrease significantly after this deal.

MASAYOSHI SON’S FAILURE

At the age of 65, Son has built a reputation with a pretty impressive style. He bought one of the most expensive homes in the US, boasted of his penchant for investing in “crazy guys” (referring to the founders of startups he considers potential) and is known for having great ideas. tortuous and surreal PowerPoint presentations.

During a 2010 talk about his long-term vision, Son showed a slide in which a human hand passed a large red animated heart to a robot. In 2019, in an effort to turn WeWork around, Son displayed a chart of the company’s future profits titled “Illustration of the EBIDTA Hypothesis.”

His most recent presentation was equally impressive. Son began publishing his quarterly results by showing a portrait of a feudal Japanese shogun named Tokugawa Ieyasu. Son’s implication of this image is not entirely clear, but it seems that Son promises to take a clearer approach to investing in the future.

He said SoftBank would invest less and would lay off employees across the company. SoftBank, he said, is in “defensive mode.” The company was a victim of “market turmoil” and “pricing bubbles”.

According to Bloomberg, what Son said above is true, but incomplete. If there is a tech bubble, it was Son who played a key role in inflating it.

The Vision Fund was born in 2016 during a flight to the Middle East, when Son, who was preparing to reach investors in the region, crossed out his then-expected fund size of $30 billion and replace it with a more impressive figure: $100 billion. “Life is too short to think small,” he told a deputy.

SoftBank tends to present itself as having a complex investment philosophy – combining an optimistic view of technological innovation with the view that the companies in the company’s portfolio will help each other.

In fact, his approach is simpler: SoftBank tries to dominate nascent industries using huge amounts of cash. Starting in 2017, Son identifies entrepreneurs he considers promising and then gives them double or triple the capital (or more) they require. If the founders flounder or try to negotiate the terms of the deal, he threatens to give his investment to a competitor.

The strategy has resulted in huge bets on Chinese ride-sharing company Didi Chuxing Technology, plus WeWork and Uber, with investments of $5.5 billion, $4.4 billion and $7, respectively. $7 billion in 2017 and early 2018 — as well as a host of other deals for more modest amounts. Son invested $300 million in Wag! (dog-walking startu), $375 million into pizza company Zume and $1.5 billion into an Indian budget hotel chain.

In a way, this is an outgrowth of the business development strategy that became standard by the time the Vision Fund started executing deals. The premise of the strategy, sometimes referred to as “Blitzscaling” and pioneered by PayPal co-founder Peter Thiel. This strategy can be understood simply as internet markets tend to be monopolized by a single player (Google in search, Facebook in social…).

Accordingly, startups should spend as much as they can to establish market positions even if it means spending more to acquire customers than you can earn or understand. It’s simpler than selling at a loss. Once the company has established dominance, they can raise prices and eventually turn a profit.

There’s a logic to this approach — and indeed, it also helps to explain the growth of some losing tech companies years before they turn a profit. But, there are still two important loopholes. The first is that it can be predatory, harming consumers and finally running after regulators. The second is that it only succeeds if the businesses are actually tech companies with a solid underlying economy, rather than low-margin businesses pretending to be tech companies.

This is Son’s fatal flaw. SoftBank’s approach is primarily concerned with creating disruption to normal and barely profitable businesses — taxi rides, food delivery, dog walks, pizza. This is especially true in the case of WeWork founder Adam Neumann, who has the ability to match Son’s “greatness” and the natural ability to turn a commercial real estate business into a profitable business. looks ordinary into something cool.