Nice use of symbolism Don. The fact that you're an ex-professor shows off quite well. That's probably the one thing I might lose out on should I chose to drop out: college may not directly help out with my investing skills, but it does wonders in regards to helping people think in patters, relate and fuse seemingly unrelated thoughts, ideas, and arguments, and create new thoughts, ideas, and arguments out of them. Any, job well done, and I agree completely with the last quote.
With that said, I do think that I have some sort of grip on the "rules" that you're bringing up here. Don, Mike, Frank, perhaps I should've worded myself better. Although I'm not a gorilla gamer per se, I have occasionally thought about my investments in a GG context, and I'm sure that the majority of my investments would undoutedly be classified by most of you as gorilla or king plays. I really don't see anything in wrong in an investor taking a religious GG approach, if that's what works for them. After all, you can do much, much worse than that. My point was that if you are investing using a GG approach, or any other approach for that matter, you should take a "common sense" view of it.
Consider Intel, for example. In the end, if you're considering Intel as an investment, what matters the most to you is to figure out how well the company's stock is going to end up performing for the time frame you're consdiering investing in it for. The gorilla game is just a means to achieving that end. Now we could debate for hours upon hours regarding whether Intel's struggles in putting up their choice of DRAM standard, or whether AMD's success with the Athlon, or something else altogether, constitutes a significant threat to Intel's title as gorilla, and whether Intel is a king or a prince in the other markets it's competing in (i.e. flash memory, DSPs, etc.).
But regardless of where this debate leads us, I'm sure that we'd all agree, gorilla gamers or not, that the end result of such a debate would be to analyze Intel's long-term investment potential. This is where I'd push a "common sense" approach rather than analysis only by means of using terms "proprietary open architecture" and "discontinuous innovation." For example, the first question to ask yourself would be: if you were buying a $1000 or $1500 or $2000 PC, would you want it based on the PIII or the Athlon, and why? Then you might want to ask: if you were the head of a corporate IT department, and had to make the same decision, only for hundreds of PCs, and reliability mattered just as much to you as performance, which kind would you buy? Then, if you were Nokia or Ericsson, and needed to make huge flash memory and DSP orders for your cell phones, who would you buy from? And it would go on and on.
That would be the first step, standard Peter Lynch/Warren Buffett analysis. Then you'd want to start extrapolating into the future, asking questions like: will AMD still have a better chip than Intel once the Williamette rolls out? Or, will RDRAM become the dominant DRAM technology, and if so, will Intel's intimate knowledge of RDRAM allow the Williamette and future CPU lines to offer performance benefits over the Thunderbird and future AMD processors? Will Intel's sales and marketing clout put a limit on any market share gains AMD's able to obtain? And, will the value chain TI's created via its huge DSP developer base in nearly every major handset company in the world, combined with Qualcomm's expertise in CDMA chip design keep Intel from attaining a major position in the cell phone chip market?
Then, finally, this "common sense" approach would take you to the metaphorical/semantical/gorilla game stuff, questions like: will Intel be able to wipe out any future competition simply by means of influencing standards for things such as motherboard chipsets and DRAM, and does this constitute a proprietary open architecture? Does AMD's success with something that obviously was an evolutionary rather than a revolutionary breakthrough mean that Intel can no longer be considered a rock-solid gorrilla? Does TI's value chain constitute an impenetrable proprietary open architecture in its own right?
When it comes to investing, like most of you, I'm thoroughly right-brained. I'm hardly the "numbers type," and I try to look at the big picture, much like GG devotees. My only criticism was that when you're analyzing companies by means of using such an approach, you should still start with the basics first, analyzing the nuts and bolts of a company's operations, and the quality of the products and/or services it offers. Once all of that's done, and have made sure that it checks out, you should move further on up in the "value chain," getting into the metaphorical/semantical arguments regarding a company's long-term value/potential. If you don't do this, and chose to start off by asking the more complex, "big picture" questions, you could easily get mired into highly theoretical debates about proprietary open architectures, discontinuous innovations, and so on, all the while without having your feet planted on the solid ground of basic Buffett/Lynch analysis, grwoth numbers, market share figures, product specifications, partnership agreements, licensing deals, etc. If you don't do this first, debates that focus on GG terminology could lead to highly skewed conclusions regarding a company's investment potential, the latter being, of course, what matters the most.
Once again, just my two cents here.
Eric |
