Here's the entire article. Since the WSJ and Barron's have to be delivered with the mail where I live _and_ I am the last stop on my carrier's route (4:30-5:30 p.m.), I only subscribe to the online editions:
MONDAY, MAY 26, 2008
TECHNOLOGY TRADER
A Trendy Gathering of Investing Futurists
By ERIC J. SAVITZ
TECH INVESTORS OFTEN EXHIBIT SIGNS OF MORBID MYOPIA, zeroing in on the next data point to the exclusion of any consideration of the long-term view. For traders, this is simply logical behavior: Tech stocks ping-pong all over the place. Miss the quarter by a penny, the stock gets whacked 10%. Miss by a dime, it can get cut in half.
There's no little irony in that behavior, though. When you talk about technology, you're really trying to imagine the future. Computers of unimaginable power! Tiny devices with impossibly huge storage capacity! Personal jet packs! Time travel! Or with the inevitable Grand Theft Auto V, incredible virtual mayhem, even more impressive than GTA IV! And all you people can think about is the next quarter? C'mon!
What inspired my little rant about the future was my recent attendance at the Churchill Club's 10th annual Top 10 Tech Trends dinner. Held in San Jose's cushy Fairmont Hotel, the event featured predictions on tech from five Valley investing celebs: Steve Jurvetson, a partner at Draper Fisher Jurvetson; Vinod Khosla, Sun Microsystems co-founder and former Kleiner Perkins partner now running his own shop, Khosla Ventures; Joe Schoendorf, a longtime VC at Accel Partners; Josh Kopelman, a serial entrepreneur who now invests via First Round Capital; and Roger McNamee, founder of Elevation Partners, tech investor extraordinaire and a wicked guitar player.
I came away from the dinner a little worried that investing in new-technology companies will not provide the kind of returns for investors that it has in the past.
Consider this: Of the 10 trends discussed by the group, none of them involved significant innovation in enterprise computing, aside from increased use of mobile devices. There was very little discussion about innovations in PCs, or enterprise software, or even the Internet.
What, Us Worry? SanDisk's sour outlook hurt tech shares, but Merrill, Goldman and JPMorgan say the sector's attractive. The Nasdaq fell 3.3%, to 2445.
On Mad Money on CNBC recently, Jim Cramer has been ranting about how the new-tech companies are industrial companies trying to solve big problems -- providing the world with enough food, water and energy -- rather than the companies we traditionally think of as tech. Some of that same vibe floated through the discussion at the Churchill Club: The old tech business is getting, well, old.
On with the list (I'm giving them to you in the order they were presented at the dinner, not as a ranking):
Jurvetson, who has a well-earned reputation in the Valley as a precocious egghead -- it doesn't help that he looks 12 years old -- started things off with a big concept: "Demographics are destiny, creating opportunity." What he really meant is that aging baby boomers, "the first Internet savvy seniors," offer a potentially alluring market. Jurvetson says that by 2025, "the entire country will look like Florida does today." (Scary thought.) He says that the boomers' interest in media provides the opportunity to create an "eBay for information" that exceeds the market for physical goods. He also likes the prospects for the "mental exercise" market.
Khosla asserts that "the mobile phone will be a mainstream personal computer." He sees phones becoming digital Swiss Army Knives. They'll have digital projectors. Credit-cards on your SIM card. Your driver's license and passport. And all the data will be on the network: lose the phone, and you simply buy another, without any worries about lost data.
Kopelman predicts "the rise of the 'implicit' Internet." He says we're all leaving a trail of "digital bread crumbs" around the Web whenever we do online transactions: movie rentals, restaurant reservations, books purchased, sites surfed. He says that "the silos are coming down" and that the data will be aggregated, in particular to provide better targeted advertising.
McNamee brings us back to mobile. "Betting on smartphones: The mobile-device migration to smartphones from features phones will produce even greater disruption than PC industry moving from character mode to graphical interface." He's making the case for smartphones; not a surprise since Elevation owns a big stake in Palm (ticker: PALM). He says the shift to more powerful wireless devices will be "intensely disruptive"; he predicts it will "take out" Motorola (MOT) and at least one of LG Electronics (066570.Korea), Samsung Electronics (005930.Korea) and Sony Ericsson, as well. And he says it will hurt Microsoft (MSFT), since "you cannot make a great consumer product with an unbundled operating system." He sees this trend as bullish for Nokia (NOK), Apple (AAPL), Research In Motion (RIMM) -- and Palm.
Schoendorf says, "Water tech will replace global warming as a global priority." He contends that a shortage of potable water "will kill millions more in our lifetime than global warming." He says that one billion of the world's six billion people do not have access to healthy water; in 15 years, he says, that number goes to three billion. "If nanotechnology can work, and we can figure out desalinization, we can prevent many wars over the next 30 years," he says. What we need, he says, is "the Al Gore for water."
BACK TO JURVETSON, who declares: "Evolution trumps design." On this trend, the rest of the panel agreed that they didn't quite know what Jurvetson was talking about. He says "evolutionary algorithms" are a powerful alternative to traditional design in many disciplines, first in neutral networks and microbial engineering. One example: If you cripple a microbe so it really can only do one thing, it tends to do that one thing better and better over time.
Khosla's second idea is "fossilizing fossil energy," no surprise given his investments in green tech. Khosla contends oil will eventually have trouble competing with biofuels; he says in four to five years there will be biofuels for under $2 a gallon at today's tax structure and with no subsidies. He also sees solar beating coal and natural gas for electric utilities.
Kopelman calls his second idea "Venture Capital 2.0." The idea: There is change coming in the venture business, which as he notes "has underwritten most of the transformative software and Internet companies over last 20 years." Kopelman says returns are eroding; he wonders if the pickup in investing in green tech involves "people running from something, not to something."
Schoendorf sticks to wireless: "80% of the world population will carry mobile Internet devices within five to 10 years." Almost everyone over the age of 6, I think.
What do you think? If you have ideas of your own on what the big trends in tech will be the next couple of years, send them my way; I'll publish the most interesting ideas in a future column.
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E-mail: eric.savitz@barrons.com |
