A quick recap of a recent conversation on Telegram that revolved around the Tech ecosystem and the current investing landscape for the space.

Tech Landscape & Market [Telegram]

• Recap: Fast followers in Tech tend to improve on the first mover and reap rewards. The current market environment is particularly conducive for Tech

• Comment: Tech companies are the main ones investing and creating value. Be wary of tech posers (e.g. WeWork - real estate company posing as Tech) - gross margins are a key indicator (worthwhile read here)

• Highlights:

  • First movers, in Tech, often fail. Second mover tends to win/reap rewards

    • Pioneers get shot. Settlers get rich
    • Examples: Blackberry (first/loser); Apple (winner). Yahoo, Lycos, Alta Vista (first/losers); Google (winner)

  • Today, big Tech companies (AMZN, FB, GOOG, NFLX, AAPL, etc.) have a ton of cash, and a lot of innovation is now occurring in-house

    • Or they have the capital to purchase innovative companies at an early stage

  • Recommended book: In the Plex: How Google Thinks, Works, and Shapes Our Lives

    • Google built a flywheel, whereas it’s competitors (primarily first movers) all had siloed solutions

  • The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

    • Hard not to at least mention Christensen’s book given the conversation above

  • Backdrop for QQQ (Tech stock index) has been/is positive: interest rates are near 0% (low discount rate); USD is the world reserve currency (everyone needs it); Technology adoption is accelerating in a WFH environment (fundamentals); Tech companies, in general, have clean balance sheets (cash; limited debt)

    • Druckenmiller comment - low discount rates benefit Tech more than other industries due to the % of value in the terminal value (higher % for most Tech companies)
    • Well-timed watchlist post - many of these stocks have substantially outperformed since the post (3/23) and remain well positioned