Warren Buffett once famously identified a natural progression of “three I’s” as to how good new ideas go wrong. First come the innovators, who see opportunities that others don’t. Then come the imitators, who copy what the innovators have done. And then come the idiots, whose avarice undoes the very innovations they are trying to use to get rich.
Just fifteen years ago, Kodak was one of the most famous companies in the world – a position it had held for more than a century. It was one of the earliest mass manufacturers of film, and its products set the quality standard for professional and amateur photographers all over the world. The company made up part of the Dow Jones Industrial Average from 1930 to 2004 – reaching an all-time high stock price of $94.75 in 1997.
Of course, all that went horribly wrong because, incredibly, Kodak didn’t anticipate the total destruction that digital photography would wreak on its traditional film business. In recent times, its stock has been trading at around $3. But this week, its share price more than tripled – reaching the dizzy heights of $10.70. The reason? Kodak announced it is going into the cryptocurrency business, with the ICO of Kodakcoin.
It’s not completely unrelated for a brand to enjoy a stock price boom caused by reflected crypto-glory. When Long Island Ice Tea Corp. changed its name to Long Blockchain its shares soared 400 percent. Initial suggestions that the name change would be accompanied by a move into Bitcoin mining have already been dramatically scaled back – but some of the rise in the share price has stuck.
Kodak’s business plan is simple – and superficially, it sounds attractive. Photographers are missing out on large amounts of money because people download and use their photographs in websites and other material without making royalty payments. Imagine how much simpler, wealthier and generally more wonderful the world would be if Kodak created a vast online vault for all photographic material, with a transparent and traceable blockchain system that would ensure the owners of photographic content could see exactly who was using their photographs. Payment for these royalties would, of course, be made with Kodakcoin, which would become the default global currency for anything related to photography.
Nonsense. I’d love to see this once great brand come back from the dead. But I’d also love to see world peace and an end to global warming, and frankly, these aspirations are more likely based on current information. While there are occasional “niche market” businesses that succeed, currently the entire cryptocurrency space is a niche market.
A coin that can be spent on anything is much more likely to prosper than one that is targeting customers in a niche of a niche. Plus the buyers and sellers of photographs are, by and large, artistic types – not financial or technical experts. Does Kodak really think that they are going to install a wallet, transfer cash to an international account, buy Kodakcoins, and pay the photographers using their new currency? And if so, why is that preferable to today’s system of – err – using a credit card?
The real problem that photographers face is that it’s hard to enforce digital contents right management if internet users are able to easily make and use unlicensed copies of images without being detected. Kodak’s share price may yet enjoy an indian summer, but I suspect there will be few seasoned cryptocurrency types among their new investors. Frankly, given that Kodak already missed its own industry’s entire digital metamorphosis, I’m not sure why they think we should listen to them now. “This time it’s different” is one of the most dangerous phrases in investing.
Kodak’s sub-brands used to follow a matching theme – Kodachrome, Kodapost, Kodacolor, etc. Why couldn’t they at least have called it Kodacoin?