CEOs that allow themselves to be ruled by ego and emotion, that need to see their name in news headlines (“Narcissist” CEOs as defined by Stanford Professor Charles O’Reilly), are more likely to take significant risks – including impulsive M&A transactions – at the expense of a thoughtful, long-term operating strategy.
Stanford’s O’Reilly has done much work on this subject (I communicated with O’Reilly at length in 2018 for our CEORater CEO Personality service). We have previously written about O’Reilly’s work in “Narcissistic CEOs Carry Greater Legal Risk” and “CEO Narcissism & Company-Specific Risk“.
Oracle (tkr: ORCL) founder & CTO Larry Ellison (Oracle’s driving force) is a narcissist. Oracle’s TikTok deal is a great example of a CEO (in Oracle’s case a founder), allowing his ego to win the day over logic. We have written about the deal on two previous occasions. Our thesis is that Oracle should abstain from the TikTok deal given that TikTok’s recommendation engine will not be included in the deal.
The TikTok deal is 99% “sizzle” from our perspective. It smacks of Ellison trying to re-write his legacy. Oracle has been late to the party or entirely missed major Technology trends over the past 20 years. Examples include: Search (miss), Cloud/SaaS applications (late) and moving its Database offerings to the cloud (late).
Oracle isn’t getting meaningful IP in the deal. User data is the consolation prize. Typically that user data would be used to improve the recommendation engine. Since Oracle won’t own the recommendation engine it means that Oracle won’t be able to strategically leverage the user data that will reside in Oracle Cloud. It also means that ByteDance will have access to that data set.
Thus, Ellison and Oracle win newspaper headlines but gain little of value. Publishers such as the WSJ (who do not know what they are talking about) praise the deal as a win for Ellison and Oracle. Oracle shareholders should be less than thrilled.