VR googles should be banned (when writing financial news)

Microsoft to acquire LinkedIn for $26B.

In the past 24 hours, this news has been sending ripples and making waves in all relevant channels. Articles, short stories and analysts’ reports kept popping up faster than readers managed to comment (the plateau phase will change that, eventually). It is a big news. Some already say it's THE big news.

Reading through several pieces of commentary on the event, I spotted a recurring phrase. A sentence or two, casually thrown in between paragraphs explaining background to this big market event… praising LinkedIn's success story‎… providing essential details of the transaction.

[…] LinkedIn has 433 million users globally… the revenue was up 35% from the year before… but recently, the company found it challenging to grow as fast as before.

That one specific piece of information -- paraphrased in many ways -- appeared in almost all the news related to Microsoft-LinkedIn deal that I've read so far. I'm sure it's going to continue featuring in future articles -- from the New York Times and Wall Street Journal, to iblogthereforeiam.blahblahblah.com

Subtext: the company is struggling.

I'm having a déjà vu. Statements like this (or similar in spirit) can be found in a myriad of publications discussing market standing of Facebook, Snapchat, Uber… General Motors, Toyota, FIAT… Telefonica, Verizon, VimpelCom… etc. etc. etc. (I could keep going with these purely random examples, but there is no point, really -- you get it, right?).

Go and pull an article on China economy from the past 12 months -- I bet you will find a mutation of the same commentary: i.e. the economy had been growing at double digits rate, until it had not any more, and the growth slowed down to a single digit. We are doomed!

This perspective is fundamentally wrong. LinkedIn has been going through a perfectly normal cycle… even if its cycle is unique… and there is nothing strange nor abnormal about the slowing rate of their user base growth.

First, there is no such thing in life as indefinite growth at stable rates -- not for a company, not for a country’s economy, not for an individual. The nature of macro- and micro-economic environments is cyclic. Ups and Downs. Going north, going south. Profit and loss. Success and failure. Repeat.

When describing and evaluating market trends, take off your VR googles, and benchmark to real-world norms.

Second, growth rate curves tend to flatten over time. The more explosive the initial growth, the ‘worse’ the flattening part of the curve is going to appear in comparison. Really simple.

And finally, unlike the Universe that keeps expanding freely (or, many say so), businesses don’t have indefinite room to grow. A user base is not growing at a rate it used to? Well, perhaps the Total Addressable Market is actually finite, and saturation is already quite high? How about that as an explanation, Sherlock?

The hyper-enthusiasm in the news on Tech-dot-coms -- the giants and the unicorns alike -- too often trespasses into the irresponsibility territory.

[Disclaimer: I do not hold any positions nor vested interest in any of the companies named above.]