Right now, with all the negativity surrounding the technology sector, let us play a little game. Let us assume that the world will continue to fall apart, that death has come to technology, that social media, mobile and the cloud are finished. The social media critics have finally gotten their moment of glory, they have actually made money on their short positions. The game I hate to inform these bearish fools, has just begun. Let us attempt to create an argument that the future of both mobile and social media has collapsed, attempting to infer the worst case scenario.
In this factitious scenario, everything has obviously fallen apart. One will immediately ask, how will these horrible bubblicious tech companies make it through the next phase of technology growth? The answer comes easy, and the critics shall be dumbfounded, they will take part in the next exciting tech phase. Look at both Apple and Zynga, they have tons of cash. From my modest understanding of business, cash reigns supreme (just ask those that bought stocks in 2009). So assuming the worst has befallen many of the tech companies, mobile phones quit selling, people around the world turn off there cell phones, the 900 million Facebook users quit sharing, many tech companies will be able to profit from the next phase by merely buying into it with their hoards of cash.
Well you say, you have looked past the tech companies like Yelp, that lack cash on hand. Patron of capital overlook, critic of the social media, you sir seem to miss the big picture once again. What would a company like Yelp and those similar to it do without the potential of mobile and the foreshadowed profit from it? Innovate. Being a product of innovation and entrepreneurship, technology companies are some of the greatest innovators and entrepreneurs of our time. Mark Zuckerberg has been compared to Bill Gates and many other greats. These comparisons are not made because these young technology CEO’s are stupid. The comparisons are made, because these young men and women are the leaders of their field and will continue to innovate to stay on the top of their field. What seperates them from other companies is the fact that their CEO’s are often times serial entrepreneurs, so innovation comes with ease. Even if these company leaders are not serial entrepreneurs, they emanate entrepreneurship, just look at the progress in the last few years of many of their products. This may be a far stretch for some, but Apple did not get its gold star through a lack of innovation. For example, look at the story for Yelp is similar, they see a need and they fill it. If this need exists on a phone, in a tablet, or in a spaceship headed towards mars, they will innovate and profit from it.
Let us make some more rash assumptions, that these new companies have no cash and no innovation. Making the assumption that these technology companies will never be able to monetize anything and that their entrepreneurial spirit is a giant scam, where are we left? We are left with everyone in Silicone Valley being wrong, all the big money supporting the mobile and social media space being, take a guess, WRONG. In this hypothetical world we create, all these new companies that continue to get funding and grow users are not the future. We are assuming all the big and smart money has no knowledge. So again where are these companies left, without mobile and social media (and cloud)? The answer is simple they profit in the old way. They will take the massive amount of date they have collected and sell it in paper form. Yelp will publish reviews on paper and hand them out, Facebook will cease to exist and people will talk to each other in person, and Zynga will produce games for the Nintendo 64. If technology is not the future, go ahead buy stakes in the Yellow Pages and the Nintendo 64, while you are at it, invest in some rotary phones, because hell, the best investing takes place ahead of the curve.
Disclaimer: I am long some social media stocks, the social media critics are coming for me, so I’ll stay strapped.
Photo by Rob Boudon