30 Mar 2018

Ten years ago, I was paid to write research on investing in software companies. My USP was that I was pretty much a technophobe with little or no interest in software but with something of a passion for finding how to make money by investing in companies. Back in the early 2000s the world of software was full of exclusive jargon which, deliberately or not, served to discourage scepticism. The following is selected more or less at random from the 2006 Annual Report of SAP AG. THE “NEXT BIG THING” IN INFORMATION TECHNOLOGY Today, the IT sector stands on the verge of widespread adoption of service-oriented architecture (SOA), a development that promises to change the dynamics of the software industry as much as the shift to client-server architecture did 15 years ago. In essence, SOA defines the technical standards that enable the various enterprise software applications used by companies and their business partners to exchange data effectively. Thus, SOA will help reduce the costs of creating and maintaining data exchange interfaces, a factor CIOs consistently cite as one of their top challenges. When I read stuff like this I used to think a) does this mean anything and b) even if it does, how is anyone going to persuade the board of a major company to throw money at it? That is why I hit upon a personal rule that can be usefully extended from the narrow world of software analysis to life itself – never be afraid to ask the stupid question. Experience teaches that it’s often the hardest one to answer. Fifteen years ago the normal software business model was to sell a perpetual licence that allowed the customer to use the software plus an annually payable fee that got him maintenance and upgrades. The analyst community was obsessed with the growth of software companies and consequently watched the “new licence sales” number in every quarterly earnings release. Share prices were highly volatile as a result. A “miss” from the quarterly numbers often resulted in carnage for the shares. I was actually frightened. How I could I make recommendations to buy and sell shares when my view could and probably would be...

29 Oct 2014

This is the transcript of a speech I made this week at the smartfuturelondon conference How to turn a good idea into an investment What makes a good idea?  If everyone agrees that change is inevitable and ‘it’s only a matter of time’, it always seems to take a very long time. Having heard yesterday’s presentation on smart energy – hands up if anyone thinks that’s a bad idea – I suspect that a common drag on the development of really good ideas is that everyone wants a piece. I was watching The Man With The Golden Gun on TV the other day. It was made in 1974 when the world was suffering the first OPEC oil shock. So in the tradition of the James Bond series to be topical, they shoved in a sub-plot in which the Golden Gun Guy steals the Solex Agitator, a device that turns the sun’s rays into energy.  What a great idea. Someone should try that. When mobile payments were agreed to be a good idea in 1997, there were more than 100 companies represented in the first mobile forum. That year, Coca Cola built a vending machine that accepted payment from a Nokia phone. Around 2005 I attended a presentation about mobile payment at which someone said that there was a Coca Cola vending machine in Helsinki. Everybody was trying to get a piece of mobile payments – and it was all taking a very long time. Sometimes, great ideas are just too early. Twenty years ago, Larry Ellison of Oracle thought that the PC was an absurd device, being limited by its own processing power and memory. “Put it on the internet” he said. So Oracle launched what we would now call the first netbook. Unfortunately, the internet was too slow at the time. The Oracle NC failed. But one of Ellison’s managers thought it was a great idea. He was Marc Benioff and he left to found Salesforce.com in 1999. It is now the reference business cloud computing company and has a market cap of $37 billion or 7x forecast revenues. The best and most valuable ideas seem to come from nowhere and often evolve...