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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Uncle Frank who wrote (12671)12/13/1999 8:35:00 AM
From: Mike Buckley  Read Replies (4) of 54805
 
Frank,

No need to be embarrassed.

I can't find it quickly in the manual and don't have the time to search for it, but somewhere there is reference to the importance of the network effects business models. Because the company with the network effects model enjoys the benefits of the value chain which grows geometrically and at the same time ensures the staying power of the competitive advantage, its valuation reverts to the extreme.

Contrast that with royalty plays or plays with even less strength in the non-tech sectors. They have no particular staying power and comparatively little competitive advantage. When that competitive advantage wears out (and it always happens eventually),valuations revert to the mean.

Make sense? Maybe someone remembers where that is discussed in the manual.

--Mike Buckley
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