Businessweek - the perfect contrary indicator?
I was reading the cover story of the latest issue of BusinessWeek about a steel company named Arcelor Mittal. I’d never heard of Arcelor Mittal before and it was a fine article. It was glowing in its praise of the company and, more specifically, it’s father-son CEO-CFO combo. It got me thinking, though, about a theory of mine.
I believe a cover story in BusinessWeek is either the kiss of death (for apparently healthy companies) or the breath of life (for a struggling one). I believe it’s as close to the perfect contrary indicator as you can find. If BusinessWeek writes a positive story on a company, watch out.
Consider but a few examples I found in 10 minutes of searching:
- Home Depot - “Renovating Home Depot,” (3/6/2006) a glowing piece about tough-guy Nardelli. That was followed up less than a year later by this cover story, “Blowup at Home Depot,” (1/15/2007) a damning piece about too-tough-guy Nardelli.
- Martha Stewart Living - “Martha Inc” (1/17/2000), an unrelentingly positive story preceeding a tremendous fall three years later.
- Amazon - The breathless “Amazon.com: the wild world of E-commerce,” (12/14/1998) some year and a half before the equally dark “Can Amazon Make It?” (7/10/2000).
- Boeing - CEO Phil Condit on the cover with the story “Booming Boeing” (9/30/1996). Though it appears to now be coming back, Boeing was on the ropes until recently.
It seems that, roughly speaking, if your company is on the cover of BusinessWeek, you have about two years to find a new job. This is a great reason to ignore the noise of the financial media.
April 16th, 2007 at 1:36 am
It would be a pretty useless contra-indicator if you had to wait 3 years for it to materialize… I don’t know, Business Week has a new cover story every week - and that cover story is typically about some major corporation. Let’s say in a year they do 40 cover stories about companies (the rest being misc stories) - by the law of big numbers you would expect 1 or 2 of these companies to get into trouble within a few years of that cover story.
I don’t think the theory holds water, but it is a fun thing to consider.
April 16th, 2007 at 6:46 am
April 16th, 2007 at 7:34 am
April 25th, 2007 at 1:48 pm
I would assume that the typical cycle to put together a cover story for a magazine like Business Week is several months, plus the amount of time that an issue would need to become sufficiently big before it even merits consideration to be a cover story. By that time, the story has either hit its peak or valley and is moving in the opposite direction. The cover stories are a good look in the rear-view mirror, but probably not a great predictor of the future.
June 19th, 2007 at 9:25 am
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