If you've been following this Netflix thread (and, yes, there's more to come), may be wondering what it is about the company that justifies all the pixels. It provides a pretty good service for its customers (I've always been disappointed with the selection but the price is very reasonable). I don't consider it a good investment, but there are certainly worse run companies with more incompetent management.
What's important here, at least to me, is the way we discuss business. Over the past thirty plus years, we have largely accepted the central role of business in our society-- companies will solve our problems; markets will make our decisions -- but we haven't gotten very good at business journalism (wiht notable exceptions). We let hype drive investment, propping up bad companies while good ones gasp for air. We miss abuses and underprice negative externalities. We waste a lot of money.
When I look at the coverage of Netflix, I see some trends that remind me of the coverage of Groupon, Facebook's IPO, and JC Penneys, particularly:
A symbiotic hype relationship between executives and journalists, where executives would say and do buzz-worthy things and journalists would reciprocate by depicting the executives as bold visionaries even when the statements and decisions didn't really make any sense from a business standpoint.
A ddulite tendency to assume that the greater the association with cool technology (indirect but still significant in the case of JCP), the smarter the move.
A simplistic view of business. Not looking at metrics in context. Assuming that a business model that works one place will work another. Ignoring the history of the industry in general and relevant precedents in particular.
Failure to ask, or at least ask vigorously, basic questions about the company's competence and business practices.
This similarity of coverage does not mean that we're talking about similar companies; we aren't. Netflix is a company that started out with a decent business model but which is facing serious external and internal challenges. JCP was a fixer-upper nearly destroyed by spectacular mismanagement. Facebook was a great idea questionably managed and wildly overpriced. Groupon was a couple of notches away from a Ponzi scheme. What they have in common is that their problems were made worse by the practices mentioned above.
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