By Dominique Jacquet

Renault’s market capitalization (14.6 billion Euros) has just exceeded that of its Japanese industrial partner, Nissan (2,360 billion JPY, or 14.4 billion Euros).

Renault’s return to favor with investors deserves, in itself, a long analysis, but what is interesting to remember is that the company’s stock market value has long been reduced to the value of its stake in Nissan. Louis Schweitzer, then CEO of Renault, had committed the company to the recovery of Nissan (which no other car manufacturer wanted…) by initially taking (1999) 36% of the firm, a stake later increased to 43 %, and by injecting 5 billion Euros. The team responsible for transforming Nissan was led by Carlos Ghosn and the turnaround was spectacular. But a calculation showed, a few years ago, that Renault’s market capitalization was lower than the sum of two values, its stake in Nissan, on the one hand, and the value of its financing activity, on the other hand. The stock market value of the industrial footprint was therefore negative, which is quite frustrating and raises questions. And then, there was a rapid and spectacular turnaround, which is rather unusual for an industry that, a priori, is punctuated by long cycles and which gives rise to reflection on the stability of business situations.

I often introduce the example of Walmart and K-Mart into my financial strategy course. In 1986, K-Mart generated sales of $24 billion, exactly double that of Walmart. In 1990, the two groups were tied with $26 billion. So, in 4 years, K-Mart grew by 8% and Walmart more than doubled. You know the end of the story. Walmart’s revenues amount to $648 billion in 2023 and K-Mart disappeared financially in 2006 (after acquisitions and restructuring) and completely in the memory of my young (and even less young…) students.

The history of businesses is full of this type of emergence-disappearance. The Dow Jones Industrial Average, created in 1896 (the oldest stock index in the world), lost its last initial representative, General Electric, in 2018. GE was an institution that seemed more “eternal” than many firms, notably the one of the other firms in the initial index which produced leather belts for agricultural machinery, and yet.

Today, we can imagine that AI will be a tool for accelerating creative destruction, but we see that large firms are applying to themselves the wish for eternity of some of their founders by ingesting everything that can pose an existential threat. Their financial power is such that any firm can be acquired without difficulty. Moreover, it is enough to pay in securities in order to save cash flow and lines of credit. Hence the very sophisticated strategy implemented by certain start-ups which are neither in B2C nor in B2B, but in B2BB, which means “Born-To-Be-Bought” (expression borrowed from Bernard Maitre, The business models of the new economy, 2000): the objective is not to develop the company, but to attract the attention of deep pockets by constituting either a nuisance or an opportunity, in order to be acquired at a good price.

But, if you wish to continue your development without being integrated by a GAFAM or equivalent, is this possible? The answer is positive, if legislation protects competition and if a regulatory authority has the power to refuse certain operations, as was the acquisition of ARM by NVIDIA.

Pareto had theorized the stability of elites by invoking a combination of cunning and force, but he had also observed the phenomenon of “circulation” of elites by considering in his Treatise on General Sociology (1917) that “history is a cemetery of ‘aristocracies’.

Let us hope that AI does not constitute a means of concentrating power, but, thanks to “intelligent” regulation and an optimal level of competition, allows for the distribution of power and the creation of wealth.