Until recently, you had to be a failure to be in trouble. Now, it’s enough for you to be weak

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To get a sense of what the tech landscape may look like if, as expected, the capital markets dry up next year, consider Angie’s List.

Angie’s List went public at $ 13 a share four years ago, rose as high as $ 28 a share in 2013 and fell as low as $ 4 a share last June. Earlier this week, the stock jumped as much as 13 percent back near $ 9 a share after IAC/InterActive Corp. (a company so good they named it twice) offered to buy it at a 12-percent premium to its market value at the time.

The board of Angie’s List politely said no. But investors signaled their thoughts on the proposed buyout by bidding up not only Angie’s List but also Yelp. The message was clear: In this tech market, there is no longer a rising tide lifting all boats. There are the strong, and there are the weak. And the strong are getting ready to eat the weak.

If you look back at the performance of technology companies in 2015, you can see a pretty definite bifurcation of the two groups. Many of the better-known consumer tech companies are faring poorly: Yelp is down 54 percent, Pandora 25 percent, Twitter 26 percent and Yahoo 34 percent.

Contrast that to the biggest consumer tech companies, those that have been able to deliver strong revenue and profit growth: Alphabet and Facebook are both up 40 percent, Microsoft is up 15 percent, Amazon is up 117 percent and Netflix is up 131 percent. Apple is up a more modest 5 percent, but remember that Apple had two pretty spectacular years in 2013 and 2014.

What’s happening is that investors are growing jittery at the thought that the Fed will start to raise interest rates later this year or early next year. They are switching from a bullish mindset to a defensive mindset, pulling money out of the weaker companies still trying to prove they can generate strong profit growth, and putting more into the ones that are doing just that.

Investors aren’t just placing bets on the likely winners, they are also helping to arm them with more capital and resources. When a tech company that pays workers in options or restricted stock units sees its stock price rally, it is better positioned to retain and hire the best talent in the industry. Conversely, a company with a sinking stock price could see a drain of their top talent.

A report this week from Bernstein Research, cited in Barron’s, underscored how stock performance affects the retention of engineers. Alphabet’s engineers are likely to leave when its stock is languishing, and vice versa. Yahoo’s talent pool has deteriorated in recent months as its stock declined.

The report concluded, “It is very hard to become a giant… and companies that do not become one of these large scale players (which some might call “platform companies”)… will be always subject to the competitive threat from the giants.”

A similar advantage exists in M&A as well. If Facebook, say, sees its stock appreciate while smaller public and private tech companies find their valuations diminishing, its stock will go that much further when used as a currency for acquisitions.

Most of the larger, successful tech companies also have tens of billions of dollars in cash, and are generating more each quarter. Much of this cash is overseas, to be sure, but if the economy slows you can count on many of them lobbying, as they did during the last recession, for a generous tax break to bring their overseas cash back to their US-based accounts. Some of that cash could go to fuel more acquisitions.

And as we’ve seen this past month, it’s not just the public companies that are having investors divide them into the strong and the weak, it’s the private ones as well. Uber, Xiaomi and Airbnb may have plenty of cash to carry them through a slowdown, but others aren’t so lucky.

Square’s IPO looks to price $ 2 billion below its last private round. Blackrock, which invested in a round that valued Dropbox at $ 10 billion in 2014, cut its estimate of Dropbox’s per-share valuation by 24 percent last month. Fidelity marked down its investment in Snapchat by a similar amount this week. Fortune discovered others, like Dataminr and AppNexus, that Fidelity marked down, as well as non-tech companies like Blue Bottle Coffee.

Smaller private companies that want to remain independent may have no choice but try to go public, especially if their venture backers want an exit sooner rather than later. But in down times, investors lose interest in companies that don’t have a proven record of profits. Atlassian, which filed for an IPO Monday, should have no problem on that count. Square, which is still losing money, will be an important test case for other IPO candidates in the red.

If IPO investors continue to grow choosier, an acquisition will be the be best remaining option for many companies needing new capital. But by then, the M&A market will be a buyer’s market, and companies are likely to be selective about targeting acquisitions that strengthen their own offerings. IAC, for example, sees Angie’s List as a strong fit with its HomeAdvisor business.

Angie’s List is profitable and far from a failure. But that’s my point. Until recently, you had to be a failure to be in trouble. Now, it’s enough for you to be weak. Angie’s List has had four years as a public company to improve on its subscription model but it never caught on at scale. Yelp’s reviews were free and had a deeper database of reviews.

Investors aren’t close to panicking, but they are moving away from faith-based investing. They want to see profits, and more than that, they want to see vitality: growth, yes, but a compelling story of why it will continue. The companies that can deliver may face some setbacks in a downturn, but they are positioned to grow stronger over time.

Those lacking vitality, however, might find themselves facing flow charts of choices like this: If there’s no more venture money, go public. If there’s no IPO demand, get bought. If there’s no acquirer interested, start cutting costs and hold on. As things are looking now, this is turning into a market that doesn’t favor the weak.

 …

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Putin isn’t Strong. Obama is Just Weak.

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While the United Nations and the United States chitchat about how they’ll try to put together a transitional government once Bashar al-Assad’s regime in Syria falls, Russia is busy doing everything they can to prevent that from happening. Everyone else seems to understand this other than President Obama’s administration in general and Secretary of State John Kerry in particular.

Whatever he thinks he’s hearing from his counterpart in Moscow, Foreign Minister Sergey Lavrov, it’s either getting lost in translation or falling to the hopeful whims of an administration that missed their opportunity. You see, Lavrov might be talking hypothetically about what a transitional government might look like once Assad falls, but he knows that his boss isn’t going to let that happen. Russian President Vladimir Putin has no intentions of allowing a populist rebel uprising to take down another Middle Eastern nation, particularly an ally.

This doesn’t reflect a love for Assad. It’s Putin’s passionate hatred for populist uprisings in general. He views Syria as a great place to get entrenched in the Middle East, but more importantly he wants to maintain a stability that has been systematically destroyed by the United States and United Nations for the last decade.

Don’t get me wrong. I’m not supporting Putin by any means. Rather, I’m pointing out how he feels in regards to intervention. He gave the United States the opportunity to get involved when Assad crossed President Obama’s “red line.” To understand this, we have to speculate intelligently about how all of that went down.

Intelligent Speculation

Vladimir Putin Barack Obama

Let’s look at a hypothetical but very likely scenario that probably unfolded in 2013. When it became very likely that the red line was crossed by Assad’s use of chemical weapons, President Obama’s phone rang. It was Vladimir Putin. He said that he frowned upon any use of force on Assad. He promised that he would work with Assad to get rid of any remaining chemical weapons.

He probably threatened Obama with “supportive action” if the Americans got involved.

Let’s look at the two primary red line statements by the President:

“I didn’t set a red line. The world set a red line.”

— President Obama, news conference in Stockholm, Sept. 4, 2013

“We have been very clear to the Assad regime, but also to other players on the ground, that a red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized.  That would change my calculus.  That would change my equation.”

— Obama, remarks to reporters, August 20, 2012

Somewhere along the lines, his calculus was changed, but not by the red line. It was changed by Vladimir Putin. The Russians made a threat and the Americans blinked. That was the beginning of the end for the rebels. All Putin needed was a valid excuse to save Assad’s regime. The Islamic State gave him that excuse.

Obama’s JFK Moment

Obama's JFK Moment

This was it. This was the time for President Obama to do what other Presidents had done. He was virtually face-to-face with an enemy in the form of Russia and he had every right to initiate another regime change in the Middle East. Assad used chemical weapons on its citizens. Russia threatened. Obama was poised to show his strength and the might of his country by opposing evil and the monsters who defended it.

When John F. Kennedy faced a similar situation, one that posed an existential threat to the United States in the form of the Cuban Missile Crisis, he acted decisively. When Ronald Reagan faced a Soviet Union that wanted very much to destroy him, he was bold and allowed the strength of the United States to stare down the arguably more powerful USSR. The Cold War ended as a result.

President Obama had less on the line. The enemies were weaker. The direct threats to the United States were minimal. The importance was high for both the Syrians as well as our Israeli allies. Most importantly, he had the mandate of the world that was outraged at Assad and ready for the United States to save the day.

Instead, he caved. He demonstrated a weakness towards the Russian interests that has resulted in tens of thousands of additional deaths, a crisis that is now spreading to Europe and other countries in the form of millions of refugees, and a gift wrapped base through which the Russians can now influence the entire Middle East.

After much thought, it’s impossible to claim that this is pure weakness. President Obama is without a doubt the worst foreign relations President in recent history, possibly ever, but this particular scenario goes beyond his failings. There are only two plausible possibilities and one of them is pretty crazy.

The first possibility is that his Nobel Peace Prize has never really been earned and he’s been trying desperately to live up to it ever since he won it.

The other possibility is more of a conspiracy theory – he’s under orders from someone else to not act when action was clearly warranted. We’ll go ahead and dismiss that option as paranoia and focus on the overly-peaceful option.

Earning His Peace Prize

Obama Nobel Peace Prize

The President has a legacy domestically. He forced Obamacare through and he painted the White House with rainbow colors. While both will go down in history as tragedies, he’s happy with what he’s built. On the foreign relations side, his best claim to fame is that he was in office when Osama bin Laden was killed. Otherwise, the world around us has fallen apart on his watch and in many ways as a direct result of his actions… or inaction.

In the hypothetical situation above, I would imagine that Putin invoked the Nobel Peace Prize in his appeal to prevent Obama from acting on his threats. He doesn’t want the world to regret his Presidency any more than it already does. This more than anything is what prompted him to take such a weak stance on Syria.

Keep in mind that he expected aid to the rebels to do the trick. He didn’t anticipate the rise of the junior varsity Islamic State. He didn’t realize that leaving Iraq would open the doors to the worst turmoil the region has seen in decades. He didn’t think that the Arab Spring would result in the chaos that has ensued nor the rise of Islamic extremists pulling the strings and forming makeshift theocracies where once there was secular stability.

Vladimir Putin has learned that Barack Obama is weak. He didn’t anticipate that the US President was incompetent as well. That was just a bonus. Now, Assad’s regime will remain indefinitely, Russia’s position in the Middle East will be solidified, and ISIS will flourish outside of Syria as a result.

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