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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (110484)	10/14/2000 4:05:53 PM
From: Eric Wells	Read Replies (3) \| Respond to of 164684

Now here is the strange part: GST - I agree with you, that many companies that build business models on new technologies go through some sort of unprofitable development phase. I should have, perhaps, included the words "in the long" run in my "be profitable or die" premise of my previous post. But in addition to what you have stated in your post, another strange thing has happened in the market over the past 2-3 years - something that William has written about on occasion. And that is the fact that individual investors have taken over part of the role that private investors and venture capital firms primarily played in the past - that of funding unproven and undeveloped technologies and business ideas. It's not news to anyone that more unprofitable companies have gone public over the past two years than probably at any time in the market's history. But the problem with individual investors taking on the role of VCs is this: individual investors don't have the same level of knowledge, access to information or control that VCs have in funding a company - and as such, individual investors are not in as good a position to make judgements regarding business models as VCs. Additionally, individual investors have relied on investment banking and brokerage firm analysts to do their "research" for them and to tell them which companies are the ones with models that have a high promise of future profitability. But in truth, the analysts are nothing more than sales people. And that brings us to where we are today, where a lot of investors have lost a lot of money investing in companies that analysts told them would be profitable, but as of yet, have shown no signs of being so - or are proving to be much less so than originally thought. And of late, we've also seen the strange phenomenon where the open spigot of individual investor funding has allowed insiders at companies with unproven business models to become fabulously wealthy - while their companies drown in red ink. In my view, this all adds up to one thing: the more active role of individual investors in funding new technologies and business ideas has in essence, made the market "less smart". I don't mean to be deriding individual investors by writing this - I am, after all, an individual investor. But I don't believe that popular vote is the best way to predict the future success of new technologies and ideas - and individual investor funding essentially amounts to a popular vote. No, I believe that one knowledgeable individual with a lot of experience in a particular industry is probably much more capable of evaluating future profitability of a company in that industry than a million individual investors who are relying on an investment banking analyst to do their research for them. These are strange days indeed. The good thing about investors, and humans in general, is that they tend to learn through experience. And hopefully the pain of the recent 1700 point Nasdaq decline, and the sinking of stocks like AMZN, PCLN, CMGI, ICGE, DSCM, etc. has taught us all something. Thanks, -Eric