[Anybody who saw Robin Williams in his student days and early performing days would have recognized the potential for a long revenue stream. Ditto for Placido Domingo.]
yep, and ten thousand also-rans for each of these "oh i recognized him"s.
Now we are getting way off the track here because I believe your initial argument about the Sierra Madre introduced an attempt to compare the realm of paid "top of their craft, star" entertainers and professional athletes obtaining a certain amount of spoils in their respective industries to that of a technology company who had their technology chosen as the standard by the market place. Although the industries that the entertainers and athletes work in could not survive without all the members in those industries who are not the top 20 stars, it is true that many at the top of their craft gather more eggs in their basket than others based on what they bring to their particular craft.
Why does a wide receiver have a more lucrative contract than an offensive guard? Why does a romantic tenor have a more lucrative contract than the lyric mezzo soprano or the character bass? Why does the leading money winner receive more lucrative endorsements than somebody 50 spots down on the money list and golf ranking system? Why does a leading man in Hollywood receive more than the character actor or bit part player in the same movie? Because of the perceived performance level and importance of their positions in the vehicle or sport. Why does a CEO receive more compensation than the employee seated at a desk handling customer support? Why does the CFO receive more compensation than the loading dock employee? Perception of performance and importance of their position.
Randy Moss, Tiger Woods, Luciano Pavarotti, Tom Hanks, etc... couldn't survive without all the front linemen, weekly tournament field of golfers, orchestra/conductor/chorus/other soloists, character actors/leading ladies/key grips/directors/extras to have their careers. A lot of money is paid out to the other "players" in their respective industries as well. Those that survive are not starving. Just as you can tell all of us that Qualcomm, Microsoft, Cisco, Siebel or what have you are not worth their "value", I can tell you Randy Moss is not worth his $72 M contract. Reality is that the market place has placed a "value" on both the stocks as well as the athletes regardless of what we think.
sure, everybody likes to think they were destined or whatever for greatness. but the survivor bias here is severe. ten thousand also-rans. hmmm, sounds like a band name, but odds are they aren't famous...
When we discuss the gorilla game, the issue revolves around industries centering around a particular standard that the market place accepts. Yes, there are a variety of influences as to which standard gets adopted, but that is the crux of the game. A standard is chosen and the owner of that standard wins that niche. If one was investing in the realm of an operating system for the personal computer, Microsoft was not the only stock that one held in the basket. Even as the others "lost" the standards war, an investor would have been easily able to lick his wounds from the rewards that share price appreciation in Microsoft provided. The book highly illustrates 4 tornado type activities that Cisco encountered as well as the participants as the enterprise networking market emerged. Ditto for the CRM market. That market is updated and tracked so well here by thread member Mike Buckley as a real time of example of how that market unfolded and who survived. We could also go back and study the database market, the microprocessor market and others to see how they unfolded.
We have real time games going on at this moment in other areas where standards will be chosen and winners will emerge for the life cycles of those technology adoptions. Regardless of one's opinion on the valuation, those games unfold as time goes on and there will be more games in the future.
The realm of paid entertainers and professional athletes is all about talent - not standards. A technology cannot have "talent". The team that puts together the fix to solve a mission critical need may have the talent to pool together and create the technology, but the technology itself has no talent. Likewise, the team that markets, manages and sells the technology fix to satisfy the mission critical need may have collective "talent", but the product they are pushing and marketing is designed to fix a broken process. Both the broken process and the fix are not "talent". The fix in a gorilla game is patented IPR in the hopes that fix will become the industry standard to solve the mission critical need. However, the collective team has levels of talent involved and the most talented team does not always win the standards game. In sports, there is always another season or another game. In high technology if you lose the gorilla game of having your technology not chosen as the standard - it's pretty much over outside of the chimp or chimps that may survive. It is a high stakes game centering around a standard. The fight for that standard is blood filled because survival depends on winning.
Talent is such a rare item in terms of producing a total package that is marketable for an entertainer or is so rare to produce a physical specimen with the competitive drive to win that the pool is not ten thousand also-rans. I'm talking about real talent that sticks out like a 6' 9" white man wearing cowboy boots and a hat in the middle of Japan. In sports, such a hot talent sticks out above every other team player in the entire school from very early on. In music, such a hot talent sticks out above every other musician in the school. In comedy, such a hot talent sticks out above every other wannabe comic that comes close to hamming it up. Sure, we've all seen "talent" at younger ages and too many are pushed into the pursuit of their talent, but the real cream of the crop rises easily to the top. Not because of standards, but because of their ability to do something with their natural gifts better than anybody else. Recognition of unique talent comes in a variety of forms, but a Robin Williams, a Placido Domingo, a Michael Jordan, a Tiger Woods - all stood out in their youth.
True talent like that is as clear as a bell from day one and it carries all the way through their school levels of grade school, middle school, high school and university. That same talent sticks out heads and tails above all the others - no matter how you slice it and dice it. You may have some late bloomers, but the fundamental basis of talent is in the physical specimen package and ability to deliver the product better than all others on a consistent basis no matter what the medium. Going back to the mention of Robin Williams or Placido Domingo or Michael Jordan or Tiger Woods or Renee Fleming or Jerry Rice or Tom Hanks or "insert a star in their field" here _______ - their talent stood out heads and tails above others from the get go. In each case, there may have been people along the way that tried to hold back their talent or missed the recognition of the special gift, but each has a unique talent package that came together to dominate their craft and it showed up very early.
You can take 1000 young violinists that all appear to be "talented" as they deliver their skill and music, but out of that group there will only be one or two that deliver that extra spark from the heart that comes from within and rockets out above all others in the execution of a piece of music. When you hear those one or two up against the other 998 or 999 - you immediately hear it and feel it and say "of course". You can take a 1000 young athletes, but only one or two have the unique combination of complete execution of their athletic skill and burning desire to win at all costs on a consistent basis. When you see those one or two up against the other 998 or 999 - you see it and recognize it immediately and say "of course". The talent is a given, but that extra ability to deliver it better than all others is such a unique and rare thing that it sticks out like that tall cowboy in the middle of Japan. If you work in a talent based industry, it is not difficult to spot.
Some hardly even need to be nurtured and tended to in order to bloom into the best at their game. Others, with some nurturing and tending, bloom into their full potential. It's that extra special unique delivery of their talent that creates the superstar. That's not the case for the ten thousand also-rans. Although talented, they lack that unique delivery which can be spotted. There may have been ten thousand young tenors during the youthful days of Placido Domingo and Luciano Pavarotti, but nothing emerged out of their throats and hearts no matter how hard the tried to challenge the level of what came out of the two respective throats and hearts of Domingo and Pavarotti. No amount of nurturing or tending could reproduce what wasn't there to begin with on the same level of beauty as the timbre and innate musicianship of those two famous singers. No standards war involved - just sheer talent and unique delivery.
In the case of Hollywood, professional sports, the stage for plays, musicals, concerts, ballet and opera - there are not enough superstars to fill each venue on every night - so plenty of work exists for others in the industry. The talent is a given for all the performers, but only a rare few possess that unique quality of unique delivery as well as importance of their position (leading man, leading lady, QB, wide receiver, running back, shooting guard, etc...) to land the larger contracts. And in all cases, it is the medium they perform in or participate in that is the true gorilla. Whether it is the film industry, NBA, Major League Baseball, NFL, opera, musical, comedy, PGA, etc... - they are all more important than the individual superstars within those industries.
In the technology gorilla game, it is all about winning the standards war of fixing a mission critical need that sets the stage for the lucrative contracts to reward. Win the standard - win the war. If you don't agree with the framework outlined in GG, Tornado, Chasm or other attempts to analyze the high tech industry, feel free to explain it in a better manner.
getting back to your original question, large cap growth has been the second worst performer in US equities since 1926. only small growth was worse. small value did best, followed by large value. these are the results spit out from the terrain of the entire market over its modern history, and the findings are highly statistically significant. you can check it out--read Fama/French.
How many gorilla game winners started out as a large cap company? I doubt you would have found Microsoft, Cisco, Intel, Siebel, Oracle or others when they were small-cap to mid-cap size as having 'value'. Yet, look at their performance to date due to winning the standard in high technology for a specific mission critical need that required a fix. Winning the war and enjoying the spoils has allowed them to grow into larger cap status than when they went public. Don't overlook the concept that this particular board is focused on studying high technology dynamic markets that emerge and the players that provide a fix to address mission critical needs. Likewise, I don't overlook the reality that there are other areas that attract my investment money. I'll cherry pick a few more for you: Wal-Mart, Home Depot, Harley Davidson, Pfizer, Amgen, Cardinal Health and on down the line. None of them began as large caps.
please show me the statistically significant results from academic studies showing that people can identify underpriced stocks in advance in today's market according to gorilla game theory and make massive profits on them.
Why don't you show me? We most likely require another decade or two of high technology standards games to construct some sort of "academic study" if that is what you need.
Massive profits from "underpriced" stocks? Is that the goal? Let me cherry pick the enterprise networking company that was outlined in the book as a case study.
Cisco has never been "underpriced" since it went public in 1990, but it is up 23,522% since its closing price on IPO day. Had one waited a year from the IPO date, it's up 11,357%. Had one waited two years from the IPO date, it's up 3,290%. Had one waited three years from the IPO date, it's up 1,482%. Had one waited four years from the IPO date, it's up 984%. Had one waited five years from the IPO date, it's up 844%. Had one waited six years from the IPO date, it's up 317%. Had one waited seven years from its IPO date, it's up 242%. Had one waited eight years from its IPO date, it's up 72%. Had one waited nine years from its IPO date, it's down 26%. Had one waited ten years from its IPO date, it's down 75%. Had one waited eleven years from its IPO date, it's up 11%. It's difficult to make the case that Cisco - the company is going to fold, so although those figures only measure a brief slice in time and the random date of their IPO closing price - I would be happy to run year 12, 13, 14, 15, 16, 17, 18, 19, etc... as they come.
You don't like the concept of identifying an emerging niche in technology that crops up to address a mission critical need - so why should I provide anything to alter your opinion of the subject? If you have followed along with Mike's Front Office Game from the beginning, you may not see "massive profits", but you will see market beating returns using a strategy designed to help one understand the unfolding game in a niche segment. In addition to the cherry picking above of Cisco, if you cherry pick back to the microprocessor for the PC game or the box maker royalty game for the commodity based PC, or the games outlined to follow in the original manual, you will find pretty good performance from the category leaders. Intel, Dell, Checkpoint, etc... . There are strategies to play groups as well as consolidation into the winner along the way that time and time again illustrate a framework for understanding the high technology market to invest a portion of one's investment capital as well as where not to invest one's capital. Whether or not they result in massive profits which you seem to be fixated on isn't the point. What do you consider massive?
The point is to understand if an Ancor (QLogic) or a Brocade or a Gadzoox or a Vixel or a BEA Sytems or an IBM or a Microsoft or a Nvidia or an Intel or a Broadcom or a Qualcomm or a Juniper or an Agile or an ARM Holdings or a Checkpoint or a VeriSign or a Veritas or a whatever is in a game and has the potential to win either a standard or grab the majority share in a royalty game. Massive profits are not the end result of each instance, but a framework for a risk reward scenario to invest in the high tech market if that is one's choice to do. Sure, things got out of whack in the bubble (and are still so in your opinion), but let's judge the overall premise using a little broader amount of time.
I won't even bring up some of the current, younger games because I'm happy enough that you are discontent to avoid such games. Maybe I will be able to cherry pick a few for you from the gorilla and royalty games that involve companies known today to point out at a future date. Some of them are doing quite well since they began their games and are still in their technology adoption life cycles of providing a fix for a mission critical need. Some are involved in industries where no clear cut standard has been chosen yet. All of them would not pass the mustard test for "value" using your terminology whether they are small-cap, mid-cap or large cap.
You don't like it and we all understand that.
BB |
