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- THE FRIDAY LETTER -
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from Gilder Publishing,
for friends and subscribers)
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| http://www.gilder.com/ | Issue 351.0/August 15,
2008
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HEADLINES:
- The Week / “Olympics on the Go” Powered by Wavexpress
- Friday Feature / Investing in Disruptive Innovation
- Friday Blogger Bonus / Never, Ever Add to a Losing Position
- Readings /
The
Week /
NBC’s “Olympics on the Go” Powered by Wavexpress
George Gilder, Gilder Telecosm Forum (8/13/08): Has anyone tried the NBC-TVTonic Olympics-on-the-Go
download system? Requires Microsoft Vista but it's worth it.
__________________________
Wavexpress
Provides Internet Video Download Service for NBC’s Coverage of the Beijing
Olympic Games: The NBC Olympics On the Go
service is now live at www.NBCOlympics.com/onthego, with a photo link at the
bottom of the home page: http://www.nbcolympics.com/index.html. This free,
download-and-play service, created by NBC and Wavexpress (a provider of broadband
media technology and services, majority-owned by Wave Systems Corp./WAVX), is a first-of-its kind for
on-demand, full-length Internet video coverage of the Summer Olympics. You can
also access the service just by launching Windows Vista Media Center.
Here's
how the service works:
Any
user with a PC running Windows Vista Media Center will be able to subscribe to
up-to-HD quality channels of their favorite Olympic sporting events and have
them automatically downloaded directly to their PC or laptop, so content will
be ready for viewing whether the user is online or offline, at home or on the
go.
The
free service, powered by Wavexpress' TVTonic, offers channels to match the most
popular events of the Games, including beach volleyball, swimming, gymnastics,
basketball and more. It also provides DVR-like functionality to organize,
pause, rewind, fast forward and re-watch videos with the click of a mouse.
Additional
details about the Olympics On The Go service can also be found via http://www.microsoft.com/windows/products/winfamily/mediacenter/olympics.mspx
|
The Gilder Telecosm Forum To
learn how to join this powerful network of talented, tech-savvy investors and
thinkers online daily to debate, discuss, and decode new and emerging technologies
and share valuable and actionable investment advice, visit www.Gildertech.com today. |
Friday Feature / Investing in Disruptive Innovation
Leslie Feinzaig, Forbes.com (8/13/08): In a world of perfect
information, a public company’s stock price would precisely reflect the present
value of its future earnings. But there is no such thing as perfect
information. Public markets value companies based on results--both the actual
results and expectations of what future results might look like.
Whether
the market rewards or penalizes companies depends on how closely they meet the
results that are expected--whether the actual numbers are north or south of the
forecast, and how far.
It makes sense, then, that there is a lot of money to be made from accurate forecasting. A return-seeking investor would love the ability to spot surprises--positive or negative--before the market does. Our readers know that disruptive innovators promise exponential returns. And incumbents targeted by disruptors can surprisingly stumble.
So,
given the market impact of disruption, it is somewhat surprising that the body
of research on disruptive innovation is not generally applied to financial
analysis and forecasting.
Clayton
Christensen’s seminal works have had a profound impact on industry
practitioners, with a growing number of prominent companies incorporating disruptive
initiatives into their innovation pipeline in order to achieve growth.
If
companies are turning to Christensen’s tools on behalf of their shareholders,
why don’t shareholders factor in these initiatives to their investment
strategy? Why don’t Wall Street analysts pay attention to disruptive
initiatives when they make their predictions and reward disruptors in their
recommendations?
How to Value Disruption
In
considering these questions, we thought perhaps the problem is that no one
really knows how to properly value disruption. And because of that, no one
really knows just how large disruption’s upside is. To find out, we conducted
an experiment to compare the returns of disruptive innovators to those of the
incumbent companies they directly disrupted.
We
rummaged through our database of disruptions, on the lookout for cases that
would allow for a meaningful financial comparison. We built a sample of eight
disruptive companies, matched to a sample of eight incumbent companies that
were disrupted. Then we looked at total returns indexed for each company
starting on the year of the disruptor’s IPO.
When
that was done, we compared the returns of our portfolio of sustaining companies
and our portfolio of disruptive companies to the Standard & Poor’s returns
over time periods equivalent to each of the disruptor–incumbent pairs. The
sample included disruptors whose IPOs occurred as recently as 2004, such as
Google, so as companies “expired” (i.e., reached the most recent data
available), we reinvested returns proportionally in the remaining companies.
There
are obvious caveats to this experiment: The starting sample is tiny, and
shrinks further after several years; we also picked winning companies in both
portfolios, so there is substantial survivor bias.
Stellar Results from Disruption
The
results are eye-opening. In the three years after the disruptors’ IPOs, the
S&P 500 portfolio had yielded 34% returns, equivalent to a 10% compound
annual growth rate (CAGR). The incumbent portfolio yielded 41% returns (12%
CAGR), and the disruptive portfolio yielded 200% returns (44% CAGR).
At
the five-year mark (with six pairs of companies remaining in the sample), the
S&P 500 returns were 31% (6% CAGR), incumbents’ returns were almost 68%
(11% CAGR) and disruptor’s returns were an astounding 350% (35% CAGR).
At
first blush, it might seem surprising that the incumbent portfolio produced
such strong returns. But remember, disruptors often win by creating new market
spaces. Incumbents can continue to thrive for many years after a disruption
takes root. For example, it took a full 15 years for Digital Equipment to
meaningfully feel the results of the personal computer disruption, and
newspaper companies weren’t meaningfully affected by Internet-based disruptors
for about a decade.
What About Risk? Read on:
http://www.forbes.com/claytonchristensen/2008/08/12/google-digitalequipment-disruption_leadership_clayton_in_lz_0813claytonchristensen_inl.html
__________________________________________
Friday Blogger Bonus / Never, Ever Add to a Losing Position
Gilder
Telecosm Forum Member (8/12/08): In light of my disastrous Anadigics
(ANAD) investment I don't think I can even afford McD's dollar menu...
George Gilder (8/13/08): I
love this company, but anaddiction to the shares as they sink is like heroin.
In the John Mauldin collection Just One Thing,
Dennis Gartman declares that the number one rule of investing is: "Never,
ever, under any circumstance, should one add to a losing position...not
EVER!"
As a confessing anadadict, I am beginning to believe that he is right.
Read more posts by George Gilder and the Gilder
Telecosm Forum members, logon with you subscriber password at www.Gildertech.com
today.
__________________________________________
Readings
/
Copper comes
back?
http://lirneasia.net/2008/08/copper-comes-back/
US
falling further behind on broadband speeds, reach
http://arstechnica.com/news.ars/post/20080814-report-us-falling-further-behind-on-broadband-speeds-reach.html
Buy Where the Fear Is
http://www.forbes.com/personalfinance/forbes/2008/0901/114.html
Vishay
Offers $1.6 Billion For International Rectifier
http://online.wsj.com/article/SB121880599889944319.html?mod=hpp_us_whats_news
Five Easy Reads
http://www.forbes.com/business/forbes/2008/0901/029.html
Agilent's Net
Falls 8.6%
http://online.wsj.com/article/SB121874589050141915.html?mod=2_1571_leftbox
You've got jail! AOL spammer sentenced to seven years
http://arstechnica.com/news.ars/post/20080814-youve-got-jail-aol-spammer-sentenced-to-seven-years.html
__________________________________________
Friday Letter Editor: Mary Collins George / mcollins@gilder.com
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