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Steve Harmon - Digital Abundance

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We've only just begun to tap digital potential
 

Steve Harmon

October 19 · Issue #10 · View online
Beyond the hype, inside the world of venture capital, tech, stocks and trends, from Silicon Valley to Shanghai, from veteran investor and entrepreneur Steve Harmon - followed by many leaders in finance and tech, see more: http://steveharmon.com

We’ve only just begun to tap digital potential

Digital Is Being Held Back By Notions Of The Now
Since 1994 I have analyzed thousands of tech stocks, companies of every stripe, from the noob to the elephant. Did you know in the mid 1990s Microsoft and Intel market caps together were higher than the top 50 Internet stocks?
Now there’s talk of Amazon at a $trillion market cap. This was a stock I recommended at IPO way back in 1997 when it sold only books. My observation then was it could become the “Walmart of the Web.” Many laughed. Except those who rode AMZN to massive gains.
Earlier this year I wrote about Amazon again here if you want to know my thoughts on where it could be headed.
In the bigger picture what’s happening in tech? Well, when a guy like luddite Warren Buffett begins talking about investing in tech stocks you know the reality of the world we’re in finally hit even the most ardent of oil, gas, industrial investors. Oh yeah, and sugary water. He’s a big Coca-Cola investor.
In 2000 I was in Hong Kong keynoting the largest Internet trade show and my presentation talked about how digital will become the new “oil and gas” (drivers of growth) of the 21st century.
Understanding digital takes a mindset opposite of the oil and gas guys. The Chevrons see the world this way, a resource going to zero:
scarcity: this is how oil and gas people see the world
Whereas the digital folks see (or should see) the world another way:
abundance: this is how techies should see the digital world
Ironically, even though Warren Buffett has been a friend of Bill Gates for decades Buffett never understood how Gates got wealthy. That’s because Buffett invests in scarcity. Gates rode the notion of abundance, even before the Internet. A copy of MS-DOS was easy and cheap to duplicate and send to stores back in the day.
Nowadays, with the Web, Windows and all software proliferates at a cost factor even lower than that. Fractions of fractions of a penny to copy and send. I keynoted a company appraisal conference in Canada a few years ago and said Microsoft’s future was as a annuity business. And now it is. Office is sold by monthly subscription of $9.99.
If you tour Silicon Valley even now I don’t believe many grasp the traits of the digital universe. They may have made money off of aspects of it but the traits haven’t been fully cataloged yet. That’s because by default we use the past to define the future.
Example: people called the first car the “horseless carriage” since that was their context. There was even a holder for a horse whip on some of those early cars. We still use the term “horse power” to describe a car engine.
It was thought with the first trains that passengers may die if it went above a certain speed. Again, people using their present to define the new thing.
The fact that we don’t have more digital things being created that are useful lies in the lack of freedom from the formulas that Silicon Valley uses to create “companies”, “equity”, “exits” and other notions.
The box Silicon Valley (and all of tech) is in is of its own design. Now every company that’s formed wants to “change the world.” Uh huh. “Disrupt a market.” Yeah sure.
It’s like every movie writer watching Rocky and then making movies about a boxer in their own town. The “teams” that come together have all learned this “startup speak” and the result is a lack of innovation.
When you walk into any one of these tech companies they don’t really want to “change the world” they want to sell another software license, land another advertiser, make their earnings numbers better than the last quarter.
This is fine.
But the digital universe is bigger than these boxes and constraints. We need new models to explore beyond the constrictions held in place. More on this later…
best,
Steve

p.s. Square (SQ) stock is up 34% since my June recommendation

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