Hello Maurice, does this guy sound like someone we know?
Appreciate that this man is weak, naïve or both, and so, do not be Gilder-ed. Repent now. Save yourself.
I have condensed the story for fuller and more immediate impact, but recommend the full article as a good read to guard against hubris and sure bets:
Message 17608486
“"My miscalculations were the commercial effect of this revolution, especially as I chose particular companies that were spearheads," Gilder says. "The companies did function as spears, but spears often break." … "My subscribers hate when I say things like this, but I think we'll look back on the current period as a fairly trivial event."”
“Gilder hardly played the hapless bystander. He began slipping stock tips into his articles. In one for Forbes in 1999, for instance, he advised those wanting to "make a killing over the next five years" to buy shares in either Globalstar ("a supreme telecosmic play") or the Loral Corp. (Globalstar declared bankruptcy this past February, and shares in Loral are down 88 percent since Gilder's recommendation.) In another piece, published in 1997, Gilder suggested that readers short Microsoft. (An investor who took Gilder's advice and shorted $10,000 of Microsoft stock would have lost as much as $25,000, depending on when he or she decided to sell.)”
“So in March of 2000, at the market's peak, he bought out his partners and started over as Gilder Publishing LLC. "I thought we'd go public," he says. "Merrill Lynch and Hambrecht were competing to be underwriters. There was talk of a $200 million valuation. I thought we were rich. What was $8.5 million for me to buy out my partners?" At around that time, he also decided to spend $2.5 million on The American Spectator, a money-losing conservative political journal. "Effectively we let $11 million walk out the door at precisely the worst time, just as we were about to go off a cliff."”
“All the while, Gilder was feeling haunted by the immense responsibility. "In retrospect, it's obvious that I should've subtly said, 'Hey, things have gotten out of hand at JDS Uniphase, and it's not worth what you'd have to pay for it,'" he says. Each month, he thought about providing a warning to his subscribers, and he decided against it every time. He had witnessed firsthand what others had dubbed the "Gilder effect": the steep spike in a stock after he added that company to his list. It wasn't unheard of for the price of a stock to jump by more than 50 percent within an hour of a newsletter's release.”
“"If I had said, 'Hey, this is a top, you should all sell,' it would've been a cataclysmic event," he says. "I'd think about telling people that they should sell half their holdings, and each time I'd conclude that my subscribers would be enraged. I also wondered what I'd precipitate if I did it." Fully 50 percent of his readers had signed up for the report at what Gilder now calls the "hysterical peak" of the market. "Half of my subscribers would have been eternally grateful [for a warning], but the other half -†the new ones - would've been enraged because they had just come in," he says.
"It was quite terrifying. I really didn't know what to do."
In the end he did nothing.”
“Any analysis of where Gilder went wrong has to begin with his near-evangelical faith in J-curves and the perfectibility of humankind. The notion of a new economy that created its own set of rules represented no great leap for this man who was inclined to see history as the determined march from savage to enlightened being.”
“"If there was no George Gilder, the venture capitalists and investment bankers would've invented one," says Fred Hickey, editor of a newsletter called the High-Tech Strategist. "They needed some kind of pied piper to put the words on paper to justify the insanity of paying any price for anything that offered any kind of technical promise."”
“"The error George made is to assume that the economics of surplus are positive for investors, when in fact surplus means cutthroat price competition, over-provisioning, and all the things we're seeing happen in the telecom sector."”
“Gilder was in Silicon Valley when the news came, at the end of January, that Global Crossing had filed for bankruptcy protection. In the Telecosm Lounge, people were in shock. Gilder had stuck by the company even as share prices fell; if anything, he supported the stock more fervently. "Your current qualms will seem insignificant," he had declared midway through 2001, in response to frightened investors. Upon hearing the official news that their shares in Global Crossing were indeed worthless, some posters were philosophical. A few were angry, like the man who asked Gilder, "Are you a villain or just naive?" But mainly people seemed annoyed that for days their high priest remained silent despite their suffering. One loyalist even sought investment advice: "All I ask is for you to give us one stock right now which will offer the greatest upside potential with the least amount of risk to make up for Global Crossing," wrote a poster named Phil.
A different kind of man, feeling chastened after a disaster of such magnitude, would have declined. By then a full 50 percent of his subscribers had fled the Gilder Technology Report, and there had been similar circulation drops at his four other newsletters. His list of telecosmic stocks had lost 75 percent of their value since the start of 2000. He'd lost his own fortune. Yet, incredibly, when Gilder finally appeared in the Telecosm Lounge nine days later, he had an answer for Phil: "I would buy National Semiconductor."
So what has Gilder learned from his flirtation with imponderable riches? Everything and nothing. He expresses relief that he can return to what he knows best, studying the inner workings of cutting-edge technology. He expresses deep regret for the role he played in the telecom crash.
But Gilder is first and foremost a man of faith. He continues to add new companies to his list, and he still tries to predict the future. "My view is that all this stuff is going to come back very rapidly," he says, citing the wisdom that results from "being old enough to have lived through many cycles." Science can now place 280 wavelengths on a single fiber and transmit data at a rate of 10 gigabits per second. Soon we'll be measuring the flow in petabits. All of the world's knowledge is near-instantly available. Ghetto kids will have access to the same information as rich preppies. Government can't help but come to its senses. A recovery - nay, the next boom! - is just around the corner.
That, at least, is what the technology is telling him.”
Reference for National Semiconductor
siliconinvestor.com
Chugs, Jay |
