Cha2,
I think we've been through most of this stuff in the past so I'll be brief.
Mike: Re your hunting grounds for gorillas comment, where do you see the best as of now?
Front office software, storage software and hardware, e-business software such as products by Ariba, Vertical Net and Vignette, laser surgery for eyes, and of course CDMA.
Yet telecom equip seems to be ignored or misunderstood by Geoff Moore, viz. his stumbling around on the Q. What to do?
LOL. Do what you always do. Do your own research and don't let the so-called experts sway you when their comments reveal that tney don't know nearly as much as you do.
By the way, you and I called the Moore situation perfectly. Hopefully he'll be equally respectful of us should the day come that we're as wrong as he was.
And since new full gorillas seem likely to be scarcer than hen's teeth,
Of course new ones are scarce! Old ones are scarce also. Consider the most prominent gorillas (MSFT, INTC, SAP, ORCL, CSCO, IBM, etc.) and think about the number of years it took to spawn so few of them.
On the other hand, my guess is that there are a LOT of industries requiring specialized knowledge, such as having a career in the industry, to appreciate the gorillas in them. Those gorillas probably aren't serving nearly as large or so lucrative a market as the Softees of the world, but I think it's important that we not forget that the definition of a gorilla has nothing to do with total revenues or the size of the market being served.
shouldn't the focus be on royalty with potential to possibly, maybe, with luck become gorillas in the distant future?
How does a a royalty game ever become a gorilla game? By definition, I think that's an impossibility. Am I missing something?
Last, the GG book starts with a focus on a "basket" which is then narrowed over time to a gorilla or king? Isn't that valid?
Sure it's valid, in the sense that there are a lot of successful approaches to investing.
I don't think the book promotes buying a basket of potential kings. However, the approach to buying a basket of potential gorillas should also work with kings. The authors would tell us that using the strategy with gorillas will yield greater returns and I suspect they are right, simply because gorillas don't hit the brick wall quite so quickly as kings are prone to do.
I think the whole issue of the basket approach is subject to personal opinion and also subject to the point in the product adoption cycle that an investment begins. I'll explain.
Regarding the personal opinion, I think it's valid to say in certain situations that buying a basket of stocks forces the investor to buy lesser quality stocks. My study of the front office stocks would support that. In that industry, it would have been far better to run with Siebel Systems than to have the others drag the performance down. Though I didn't start my front office game extremely early in the industry's evolvement, in the last 15 months the game is up 75% (not bad!) but not nearly so good as investing only in Siebel which is up 162%.
(To be completely fair about that, I have to point out that Clarify, a lesser front office company than Siebel, is up 164% due to the timing in those 15 months having to do with their turn-around. It just happens that 15 months ago was a GREAT time to buy Clarify though nothing about that has anything to do with gorilla gaming.)
Regarding the issue of beginning a gorilla strategy relative to the timing of product adoption, I think the earlier the timing the more valid the basket approach becomes. Your great posts about your investing history provide anecdotal but powerful evidence of that. And when we think about it, it makes common sense.
However, if we wait until much later in the gorilla game to begin an investment I think the basket approach becomes much less valid. That makes common sense also because, as the game progresses, the easier it is to determine the emerging if not the emerged gorilla.
All just my opinions.
Sorry if I've rambled on (more than usual!), but this was a bad day at the day job, no doubt the result of it being Friday the 13th.
--Mike Buckley |
