I’m late to the party on this… Let’s start with the fact that this whole GameStop thing has led me to a bit of an epiphany. As a self identified deep thinker and introvert, I tend to experience periods of extreme thought, and often frame and re-frame ideas in my head, trying to understand the why.
As an observer of this week’s chaos, it’s occurred to me that for elder millennials and older generations, the world they grew up in was rooted in asymmetric information, and there was often an assumption that incumbents must know something others don’t, or at least an accepted flaw – that’s just how it is 🤷♂️
Now, people won’t stand for it, and may even revolt against it ($gme). In the case of businesses and market structure, those using the veil of opacity as a competitive moat has become antiquated. Sure, there are trade secrets and lines of code that need to be protected.
Ultimately, Technology has allowed a generation to grow up in a world of greater information symmetry and an ability to easily share, and they’re coming of age.
As an elder millennial myself I’m still struggling with the idea that it’s taken me a while to come around on tech – especially since I remember when we had to have .edu emails to register for ‘the facebook’ accounts. I probably should have had more foresight having experienced the force of rapid tech adoption and contributed to it then.
Anyway, my point is that businesses and industries that depend on a structural lack of observability to drive commercial outcomes will continue to struggle and two things happen 1) those who feel it will search for new areas deeper into opacity and continue to run that play to survive (or become extinct) and 2) businesses that offer an approach which resonates with the themes of transparency, efficiency, and offer their customers real solutions, will win.
Think fintech (robinhood notwithstanding) vs traditional banks, streaming vs cable, and on and on.
This is mostly a shift in dynamics based on new expectations and a proverbial passing of the torch.
Eventually we’ll get to a place where we can look past this shift in dynamics, and as investors, we’ll start to actually compare and analyze the newer entrants or re-modeled businesses, with these base line expectations in mind – transparency, efficiency, solutions. In many ways this already happens today, but you get the point…
Ultimately we still ask the same questions – what drives their profitability and value creation? And, what is it worth?
With the follow ups being – is their value based on future growth prospects? the current mood of the mob? unit economics and margins? Maybe some combination of each.
Also, there will still be risks. For example, today there’s often a broad brush of ‘tech’ applied to companies and as long as you have that branding you’re worth some premium. I think there will still be many winners and many losers here (Nikola?)
For this reason, I believe that those who have built a truly superior product and can account for inevitable and fast moving changes in needs and expectations, will win. Despite this, there may always be a market for those offering a fancier mouse trap, “tech washing” their org, or relying on opacity.
For me, quality wins, trust is earned, and information is to be respected, not preserved (govt classified notwithstanding).
It took me a while to realize the role tech had been, and continues to play in driving value creation. It’s more obvious with “FAANG” type stocks, but there are just so many areas where it’s disrupting, and with AI, machine learning, etc etc, we’re likely still in early innings.
I guess it’s better late than never.
Thanks Technology
Streams of Consciousness 