Growthink Blog

REAL Lessons of The Social Network


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At a current U.S. box office of over $84 million “The Social Network,” – the movie about Mark Zuckerberg and the founding of Facebook – is just another example of the public’s fascination with social networking and young billionaires, not necessarily in that order.

Not mentioned in the movie is the unbelievable story of a Peter Thiel one of the founders of PayPal investing $500,000 in 2004 in exchange for approximately 5% of Facebook.

Given that the estimated market value of Facebook is now worth $20 billion, that represents a 2,000x return in 6 years, qualifying it as surely one of the greatest investments of all time.

Now let’s be real people.

Mr. Thiel, while obviously talented as evidenced by both his founding and then selling PayPal to eBay for $1.5 billion before age 35, had the luck of a lifetime with his Facebook investment.

Yes, luck is a key, and sometimes the key, variable in entrepreneurship and investing.

But as opposed to fighting or getting philosophical re this reality, a far better question to ask is, "How can I improve my likelihood of, for lack of a better turn of phrase, getting lucky?"

Here are three ideas:
 
I. Run With the Right Crowd. Thiel is part of the famous PayPal Mafia - former founders of PayPal and their friends that travel in the rarefied Silcon Valley air of next generation Internet ideas and technologies. Through this professional and personal network, Thiel sees lots of great startups. Most of them are duds, but a few are world-beaters. Like Facebook, LinkedIn, YouTube, Yelp, and Six Apart.

II. Swing For the Fences. No doubt Thiel's cat-bird seat as CEO of PayPal in the late 1990's allowed him to "get" instantly the scalability of the Facebook business model. But give credit where credit is due – meeting Mark Zuckerberg in a Palo Alto bar and writing him a check for $500,000 when Facebook was still in its college dorm mode, channeled the Romans and their famous ode to luck - "Fortes Fortuna Adiuvat," "Fortune Favors the Bold."

III. Cultivate Serendipity. How shall we seek the wisdom as to what the next big thing will be? Well, as this example shows us, as much via serendipity as anything else. From conferences, parties, chance encounters, flash and intuitive insights.

From being open to ideas, people and things outside of the normal box.

In many ways, luck and serendipity are the new religions of our age. Books like Outliers, the Black Swan, Fooled by Randomness, and the Age of the Unthinkable profess on them. Successful technocrats like the PayPal mafia toast to them. Aspiring entrepreneurs who seek their name in lights pray to them.

Peter Thiel was both lucky and open to the power of serendipity.

The question, of course is, how about you?

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, please click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Entrepreneurship in the Fast Lane


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What do all of the most dynamic 21st Century entrepreneurial companies have in common?  They:

1.    Pursue Global Markets
2.    Place Corporate Culture Above All Else
3.    Embrace the Black Swan Both Within and Without

1.    Pursue Global Markets. If you don’t have a business that can scale globally, then either don’t bother or just content yourself with staying small.

Try these statistics on for size, from 1999 to today Asia’s share of the world’s Initial Public Offerings grew from 12% to 66%.

In that same time frame, United States IPO volume declined 75% in real terms and now accounts for less than 11% of the global total. 7 Companies in China have raised more than $1 billion in an IPO this year. In the U.S. so far, no company has raised more than $700 million and it is somewhat of a sad commentary that the biggest U.S. IPO by far this year will be the government ward General Motors.

And with their capital and confidence, China and India are stretching their wings. Since 2005, they have been the two leading investors in Africa, investing $31 billion and $16 billion on the continent, respectively.

Why? Well, McKinsey estimates that consumer spending in Africa will double, to $1.8 trillion, by 2020, equivalent to bringing a whole new market the size of Brazil online.

China. India. Brazil. Africa. This is where the growth action is, and while the first reaction of Americans is to feel as if we’re being left out of the game, the RIGHT reaction should be WOW. These are fantastic new markets for U.S. goods and services, especially services, and they are expanding in aggregate at a rate that even 10% U.S. domestic GNP growth couldn’t touch.

Action Point: Core to every strategic session for any company of ambition should include these simple questions:

•    What is your China strategy? Your India strategy?
•    How easy / possible is it for global customers to buy your product – to purchase your service?
•    How can they find you? How do you market to them?
•    How / must your business model evolve to leverage these new opportunities?

2.    Place Culture Above All Else. Modern business, shaped by technology, is increasingly diverging to two nodes – on the one hand to great size quickly (see Google, Facebook, eBay, Twitter, et al.) and on the other hand, to corporations of one, to the so-called Free Agent Nation.

The tools of collaboration and connectivity –mobile always-on Internet, cloud productivity applications like Google Apps, Basecamp, Salesforce and Skype – are so good that the natural devolution is to a BREAKUP of the corporate form and to everyone working for themselves, by themselves.

Now except for the very fortunate few (see Google et al. above), almost everyone else is left with the challenge of how to get to scale and once there how to maintain it.

This is HARD. In a world where ideas and technologies and business models and even intellectual property (sad but true) can be copied and undercut worldwide at the speed of a mouse click, what can any company really hold onto?

The answer is corporate culture. There is no one size fits all answer as to what the “right” corporate culture is. Successful cultures are as disparate as General Electric’s famously formulaic one, to Zappos’, Virgin’s, and Mind Valley’s irreverent, almost carefree approaches.

But a few constants remain. A strong results and metrics-focused approach. A vigilant commitment to ethics and integrity. And an environment that encourages and demands learning and constant improvement of people and processes.

The great thing is that via the Internet we CAN copy the principles of the best of them – Zappos’ and Mind Valley’s and scores of others are online for all to see. While the principles of course are NOT the culture itself (wouldn’t it be nice if it was that easy?) they ARE signposts as to what is possible.

3.    Embrace the Black Swan Both Within and Without. At the core of modern entrepreneurship is the sometimes seemingly mystical precepts of The Black Swan.

The concept of The Black Swan was popularized by the great Lebanese thinker and writer Nicholas Taleb in his bestseller of the same name. He describes it best:

"What we call here a Black Swan is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

Taleb continues, "I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."

Bringing it to October 2010, who would have thunk it that a) the fastest growing company in the world is built on the simple premise of 140-character messaging b) that a computer company left for dead 8 short years ago would now have the dominant position in music and telecommunications and c) that one of the greatest angel investments of the past 10 years would be for a prepaid debit card business?

The answer: Nobody. And more importantly, the phenomenons of Twitter, of Apple. and of Green Dot CANNOT be retroactively analyzed for guidance as to what the next new thing will be.

What to do with this? Two ideas:

a) Bet on the Unexpected. Check your ego firmly at the door when evaluating business models. Accept that you (and everyone) for that matter KNOWS NOTHING about what the future will hold other than the fact that we don't know what the future will hold.

That is philosophy - here is money-making: The big outlier events - the 10 to 1 shots and beyond - are UNDER-PRICED in the marketplace. Bet on them.

2) Allow Serendipity To Do Its Work. Startups intuitively get the idea of creating new business models as part of their mission. But this lightness disappears quickly.

The Black Swan teaches us that what we have done to date, what has worked to date, is probably NOT what we will be doing, what will be working in the future.

And where does The Black Swan point us to find the wisdom as to what to do? Well, as much from outside the formal strategic planning process as from within.

As Taleb says, from conferences, from parties. From chance encounters.  From being open to ideas, people and things outside of the normal box.

Incorporate these Black Swan elements into a dynamic corporate culture, cultivate and ACT upon the global view, and let the magic happen.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Election Postscript – That’s Pride Talking


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In 20 years we will look back at the first few elections of the global Internet age the way we remember the smoky backrooms of elections past.

As in I can’t believe we actually did things like that once.

Why? Because for the first time in human history, true competition – the kind of competition that brought us the $300 computer, the electric car that goes 95 miles-per-hour, the $800 HD big-screen TV, and free overnight shipping on purchases as small as a few dollars, THAT kind of competition is coming to a government near you.

Idealistic, you say? Impractical?  Not as much as you may think.

You see, there is another form of voting going on all the time. It is far less covered and far-less TV-friendly than the personality-driven “horse-race-type” coverage that dominates the airwaves, but it is THE kind of voting that shapes our world just as much.

It is the choices that capital makes. As in where to build that electric car plant, where to put that server farm, where to assemble that team of software engineers.

Sequoia Capital recently made headlines with the NASDAQ IPO of Mecox Lane, a Chinese Internet retailer and the seventh IPO by a Chinese company backed by Sequoia in the last 18 months.

By comparison, only two of the 12 companies backed by Sequoia to gain public listings have been U.S. – based. 

Now when any patriotic American reads this their heart sinks more than a little bit.

But you know what? Capital voting with its feet like this, in the long run, is the only way for real jobs and business-friendly reform to take place.

Why? Because even more so than money, it is PRIDE that talks.

Now, in the old days the battlefield of pride was literally the battlefield.

But, blessed are we all, the pride battlefield of our age is the marketplace.

And the rising powers of our age, the Brazils, the Indias, the Chinas, fight not with tanks and guns but with bits and bytes and rent-a-coder and hard work and hustle.

And how do the incumbent powers respond to all of this energy? This challenge? To dare I say it – to all of this entrepreneurship?

Well, as humans do when any disruption to a cozy order occurs, first they resist it. They whine about it. They play the blame game. They have a natural instinct to just shutter the windows and keep all of the change, the disruption, the competition OUT.

But then pride talks.

Well-educated, ambitious people say “Hey – they aren’t any smarter than us. Any harder-working. We CAN compete. And we can win.”

And unlike the bad old days, when governments would respond with muskets and bigotry to challenges from afar, today have NO CHOICE but to put ideology aside and just make things work.

To embrace the mantra of the Internet age and do more with less.

Kids learning more, faster, for less money.

Regulations simplified. Best practices codified. Productivity multiplied.

Why will this happen? Why will cushy government bureaucrats change like this?

Because in an always-on 21st century global Internet age, we’re all naked.

And when cities and states and countries fall behind, EVERYONE sees it.

And after the shame, pride kicks in. It may be hard to hear about the political noise and chatter. But if you listen carefully, it is there.

And when pride talks in our modern, always-on global Internet age, governments DO change for the better.

And much, much faster than expected.

Pride has that kind of power.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink

 


Wall Street, Football, and The Great Deception


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Watching my beloved New England Patriots barely escape with a victory this Sunday, I was both amused and appalled by the constant T.D. Ameritrade advertisements touting their “great selection of ETFs (Exchange Traded Funds).”

Now while I have a very high regard for the intellectual capacity and market savvy of the typical football fan, these ads did beg the question – “Are football fans, between commercials on Sundays, really out there checking the opening of the Nikkei, gathering market intelligence, and placing their buys and sells before the game action returns?”

And of course its corollary, in the annals of bad ideas, where exactly would such a strategy rank? Alongside the Edsel? New Coke?  Sub-prime mortgage lending?

How about with Decca Recording in 1962 turning the Beatles with this famous line: “We don't like their sound, and guitar music is on the way out."

Let’s take a step back. Now there once was a very special time when everyone made money in the stock market. It was the great golden age of mutual funds, of variable annuities, of the brokerage firm.

It was also the golden age of heavy metal, of Larry Bird and Magic Johnson, and the VCR.

It was known as the 1980’s.

Starting in August 1982, the average annual returns on the Dow were as follows:

1982: 19.61%
1983: 20.27%
1984: -3.74%
1985: 27.66%
1986: 25.58%
1987: 2.26%(!)
1988: 11.85%
1989: 26.96%

Wall Street bankers made billions.

But even better, that Joe Six-Pack investor made money too.

He mostly followed the “buy and hold” principles of Warren Buffet, John Templeton, and Peter Lynch and his portfolio just went up and up.

And in the 90’s, the good times rolled, with the Dow skyrocketing from 777 in August 1982 to 11,028 in September 1999.

But as the century turned, the music stopped. And for the last eleven years it hasn’t played again.

BUT when the music stopped, some got to keep on dancing.

In football, that would be what we call a misdirection, a fake, or even a quarterback sneak.

Or to be more blunt, the reason why Ameritrade focuses their ads on buzzwords like ETF selection is because Wall Street CAN’T talk about any recent track record of investment return for the Main Street investor.

Because there isn’t one.

So they advertise ETF selection. As if that is going to work.

Now, there are MANY better ways:

1). NEVER listen to a brokerage firm advertisement ever again. Or if you love football and must watch, then treat them with the same wariness that we once gave used car salesmen before public and competitive pressure forced them to clean up their act.

2). Start Your Own Business. In the history of humanity, no form of investment has ever approached the return on time and money that investing in one’s own business has.

Easy? Heck no. But when compared to the stock market at least it is a fair fight.

3). Invest in a Portfolio of Startup Businesses. Prediction: portfolio startup investing, either in the form of super-angel funds like Right Side Capital, SoftTech, and Floodgate or incubators like Y Combinator and Tech Stars will be the KEY financial innovation of the next decade.

Like starting a business, not for everyone of course, but many of the best thinkers in academia and entrepreneurship have arrived at it independently and are hitching their wagons to it.

And unlike the public markets it remains human-sized enough to follow investment cause and effect.

And that, of course, is much better than following the herd.

Looking for Opportunities Now?


Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


363 CEOs All Can’t Be Wrong


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A fantastic October 2010 survey of 363 emerging technology company CEOs by the law firm Dorsey and Whitney is a fantastic snapshot of how the “old Silicon Valley boys club” world is gone forever.  Highlights:

The Super Angel Funds Are Coming. While individual angel investors still account for the largest percentage of funding for startup entrepreneurs, the new portfolio-based funding models – either in the form of incubators like Y Combinator and Techstars or in the form of Super Angel funds like Right Side Capital, SoftTech, and Floodgate are coming fast.

Close to 50% of the CEOs surveyed expected to get funding from portfolio angels in the next 12 month, up from less than 20% this year.

Sequoia, Kleiner, et al – Your Best Days are Behind You.
Quoting the report, “The perception of the investor’s brand no longer appears to carry the same prestige and value, with slightly more than 75% surveyed thinking that a tier-one “brand name” VC was only “somewhat important” to “not important.”

Speed, in the Internet Age, is EVERYTHING. Fully 92% of the CEO respondents expressed frustration with the slowness of the funding process. In a word where one can buy a car, get a mortgage, and trade millions of dollars of securities with a few clicks of a button, why does it still take 6 months for a venture fund to make a decision?

As the “super-angel” fund model begins more and more to more to displace the traditional VC model, look for speed to funding to greatly accelerate. Hallelujah!

Small Funding Rounds Dominate. As always, the most interesting companies from a growth and return potential standpoint raise relatively small rounds, with less than 2% of all of the CEOs surveyed had raised more than $5 million.

The World Needs Leaders. My favorite CEO comment from the survey, “They were willing to take the lead, and not simply wait around for someone else to take the lead. I want an alpha investor.”

Aint that the truth. Both being an entrepreneur and backing one requires all of those human qualities we celebrate in art and in life: foresight, guts, rugged optimism, a can do spirit, and laughing charitably at the naysayers.

21st Century entrepreneurship is all that and more. Yes, it is risky, but the opposite is far, far worse. As Teddy Roosevelt put it, it is that grey twilight that knows neither victory nor defeat.

And as this great CEO survey shows, luckily our world is filled like never before with men and women truly in the arena.

And about to make lots of money for themselves, their families, and those that back them.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Foursquare? A Bakery?


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Picasso once famously said, “Work is the Ultimate Seduction.”

Well, when it comes to the debt we all owe the world’s entrepreneurs and innovators, we should all thank our lucky stars that he was right.

Why? Because never before in human history has there been as much opportunity to make as much money as fast as there is right now.

This fact may be hard for many to see – blinded as they are by the constant drumbeat of negativity that passes as economic news these days, but it is true.

Here’s why:

1. Today’s Startups grow faster and with less investment needed than ever before. Google’s growth velocity blew away that of Microsoft’s. Facebook that of Google. Twitter that of Facebook. And now Groupon and a host of others that of Twitter.

Sure, these new breed Internet companies far more often than not flame out than make it but, but ignore them at your peril as they will continue to be the big growth stories of our age.

2. Growing Globally Has Never Been Easier.
The teapot dictators in Iran and North Korea may get all the ink, but it is the Chinese, Indian, and Brazilian technocrats with their quiet defense of free markets and trade that make hay.

And it is they, by leading their once developing economies into huge import markets, that have made America’s service exports – scientific, engineering, financial – be in greater demand worldwide than at any time, ever.

U.S. Companies are generating, on average, close to $50 billion per month in service export revenues, and this number is trending up fast.

And unlike our huge “hard goods” trade deficit, the value of service exports is running on average 40% greater than that of service imports.

3. Who Needs the Stock Market? Someday soon we will talk about the New York Stock Exchange the same way we do about travel agencies, real estate agents, and going to the racetrack to place a wager. Maybe with nostalgia, but also saying how the heck did we ever get by doing things so inefficiently?

Traditional public markets, with their arcane pricing and regulatory mechanisms simply can’t keep up with the new speed of information.

Look at it this way – who does a better job of market-making – your Power Seller on eBay with their thousands of reliability comments and cutthroat pricing competition…

…Or your pot-bellied 70-year old NYSE specialist signing out at 1 pm in the West, vacationing in the Hamptons, and who thinks Foursquare is a bakery?

Yes, the future that is here now is investing the same way you buy over-stocked tube socks.  On fully efficient, 100% transparent, and vigilantly monitored buying and selling private exchanges like Second Market, Prosper.com, and Lending Club. 

And soon to be here, via even more liquid and efficient exchanges like eBay and Amazon Marketplace.

Scary, you say? Maybe, but anymore than the way things are done now?

I don’t know about you, but I’ll take my chances on eBay as opposed to the unholy alliance of hedge fund speculators, the plaintiff’s bar, and the fatigue inducing regulatory scheme that passes as vibrant public markets these days.

And oh yeah, nobody has made a dime in those public markets than the above parties in eleven long years.

Luckily for all of us, their time has past.

For this is the age of the global entrepreneur. Those whose hearts are fully seduced by their work.

They are the ones who really run things now. And they are both all around us, and all around the world.

Back the best of them wherever and however you find them.

And you and the world will be richer for it.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company investing opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Learn how John Noel is Revolutionizing the Insurance Business - Again


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In 1985, Mr. John Noel founded Travel Guard in his basement with a 0% market share. Over the next 21 years, John and his team grew the business from pure startup to a 60% U.S. market share and 1,000 global employees.

In 2006, TravelGuard was sold to American International Group for an undisclosed sum.

In 1998, Multi National Underwriters was founded by two entrepreneurs and in 2002 was purchased by the Noel Group in partnership with the original owners. The vision of the company was to provide affordable short term health insurance with a relentless focus on customer service.

The Peace Corps, national universities, as well as U.S. foreign service groups came to rely on MNUI for their health insurance needs, and within five short years the original founders and the Noel Group were able to sell MNUI for 10x its purchase price.

Two great entrepreneurial success stories.

And The Noel Group is About to Do It Again


The insurance industry, long sleepy, is undergoing a disruptive technological transformation driven by the Software - as - a Service (SaaS) revolution, by hyper-informed and demanding customers, and by extreme margin challenges caused by poor investment asset performance.

For better or for worse, the days of the mom-and-pop insurance agency, like the mom-and-pop travel agency, are fast coming to an end.

And for those that manage the consolidation wave about to sweep the industry, the rewards can be immense.

Best regards, and look forward to your attendance and feedback.

Jay Turo
CEO
Growthink, Inc


Meet Mr. Greg Rorke – CEO of America’s Next Great Technology Company


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Some people talk about building disruptive technology companies – companies that are “cloud” – based, high revenue growth, and profitable.

Many more complain about how BAD their company’s customer relationship systems (CRM) are – bulky, unintuitive, not in line with how work actually gets done in a modern company. 

But there is one man who is actually doing something about it.

And in the process, he is building America’s next great technology company.

Meet Navagate CEO Mr. Greg Rorke

Greg Rorke’s resume speaks for itself. Former CEO of Kaplan Education Centers.  President of Danskin.   Harvard MBA. 
 
Instrumental in the development of ACT! – the #1 suite of contact and customer management software in the world, with over 2.8 million users. 

And now CEO of Navagate – a next generation cloud computing company customer that is disrupting “business as usual” in the CRM space.

Greg has graciously agreed to share with us his experiences and perspectives on, among other topics: 

  • Why CRM as done by the Salesforces and the Siebels of the world simply does not work and what to do about it.
  • How a small, fast-growing technology company in an industry dominated by giants overcomes the famed “Innovator’s Dilemma” and makes money doing so.
  • How to finance a tech. business via an “Early Exit” strategy, including how to creatively access the public markets via a merger into a public shell
  • And much, much more!


Jay Turo
CEO
Growthink, Inc

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Note to Gordon Gekko: 1985 is Gone For Good


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Gordon Gekko may have a new movie coming out, but the days of the jolly old stock market he once knew are gone forever.

I guess I shouldn’t be surprised as to how little known the horrific U.S. public stock market performance over the past 11 years has been.

But I was shocked by the number of people who expressed incredulity regarding the note in my column last week that all major U.S. market indices (Dow, S and P, NASDAQ) are trading lower today than they were in September 1999.

And many of them asked – does it portend a “Japan” situation for the U.S. - where we could be facing ANOTHER 11 years of similar return performance?

And if so, what to do about it?

First of all, the long-term woes of the stock market have been under-reported because there really isn’t anyone that has a vested interest in pointing it out.

Certainly not the financial services establishment. The whole mutual fund / brokerage firm/ insurance company ecosystem would much prefer the public see 20th and not 21st century stock market return statistics.

Certainly not the financial media, which has figured out that it is just a lot more fun to focus on the daily ups and downs of the market and personalities, than the more stuffy and far more ratings-unfriendly focus on return metrics.

And then there is the government. With 90 million Americans with money in the stock market, there is zero political hay in noting that 99.9% of these investors (i.e. voters) haven’t made a cent in the markets in a long, long time.

So that begs our next question – will we all be sitting here in 2021 with the Dow in the 10-11,000 range and the NASDAQ in the 2,000 – 2,500 range. Remember, the Japanese stock market is trading much lower today than it was in 1988 – 22 years ago.

The answer, of course, is that nobody really knows. Or more to the point, everyone certainly hopes this won’t be the case.

There is a factor, however, that is almost certain to continue in the next 11 years. And that is that the stock market will continue to be increasingly dominated by traders versus “buy and hold” investors.

Traders. Computer algorithm – based investor, where the short term is measured not in months but in hours and seconds.

Obviously, the smaller, individual investor can’t win this game.

And for what it is worth, given that most of them follow the “20th Century” Warren Buffet / John Templeton / Peter Lynch buy and hold approach via mutual fund holdings, very few of them even play it.

So what is the individual investor to do? Three ideas:

1.    If You Can’t Beat Them, Join Them. Give up the buy and hold mutual fund ghost, especially if it involves paying management fees, and if you insist on investing in public equity, then attempt to do so via more trading – driven investment strategies. Obviously, very, very difficult, but not less difficult than seeing your retirement nest egg not grow for another 11 years.

2.    Invest Internationally. Global stock market performance has significantly out-paced the U.S. markets over the past 11 years, and the long-term GNP growth trends are very favorable for the China’s and the India’s of the world. These growth trends should continue to drive their stock markets higher.

3.    Invest in U.S. Startups. U.S. startup companies are still by far the greatest source of innovation in the world today. And from all that innovation, a lot of money is made.

And even better, the same technological trends that have made public market investing so difficult in the last 10 years have made startup (i.e. angel) investing easier. The angel market is characterized today by a far greater liquidity, transparency and portfolio approach alternatives than ever.

And it is a relatively small and fragmented market – less than $50 billion in total angel and VC investment spread over thousands of companies as compared to Apple’s market capitalization of $200 billion+, angel investing.

This small size and fragmentation make it mostly inaccessible to the global hedge fund, Wall Street speculator-types that have made it so hard for individuals to make money in the stock markets.

Whatever you do, don’t just bury your head in the sand.

And don’t be like Gordon Gekko and think it will ever be 1985 again.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company investing opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


Residential Real Estate - Time to Move On


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For opportunities that Growthink is following now, click here.

Believe it or not, the great residential real estate crash of the last few years will turn out, in the long run, to be VERY good for the U.S. and the global economy.

Here's why:

The Fixation on Housing Prices Has Been and Is Unhealthy: The word that comes to mind when reflecting upon the government subsidies (see mortgage interest deduction, first-time home buying credits, etc.) and media attention given to housing prices is distorted.

Sure, the price of homes is important, but is it more important than educating our children? Than the health of our startups and small businesses? Than our global competitiveness?

Maybe it's me, but the America I love isn't one whose economic and social health is judged by how climate-controlled the big-screen TV room is, or how comfortable the couch.

Now I am not saying that a lot of people haven't been badly hurt by this recent (though not unprecedented) popping of the real estate bubble nor that our love of homes has turned us completely into a nation of unadmirable shut-ins and couch potatoes.

But if we must choose (and we must), I'll cast my lot with the young, highly educated, preferably immigrant software entrepreneur, working out of  their cramped garage, over the slow-to-innovate home-builder or mildly educated real estate agent.

Innovation, Not Bigger Bathrooms, Drives Wealth-Creation. As noted in my review of Matt Ridley's fantastic book, "The Rational Optimist," the source of all wealth-creation is innovation (i.e. technology).  While there have been of course many meaningful innovations in housing over the years, it is illustrative that the basic living schematic - bed, bathroom, kitchen - hasn't really changed much since Roman times.

Following up on this point and to my blog post last week let's remember that it is services not "stuff" that power the U.S. economy. And while the real estate industry creates a lot of service jobs for sure, you have to look elsewhere to find the really high value-add, high-paying ones (see software, financial services, energy, healthcare).

So what to do about it? Here are three quick ideas:

1. Eliminate the Mortgage Interest Deduction and Replace it With a Startup Business and Investment Credit.  As opposed to the government granting a $100 billion annual tax break to homeowners with the mortgage interest deduction, give it instead to the entrepreneurs - who, on average create 4 net new jobs every time they start a new business - and those that invest in them.

How transformative would this be? Remember that total venture capital and angel investing in a typical year doesn't add up to more than $50 billion, or about one-half of the mortgage interest tax break.

A tax break re-allocation of this nature would at least double the number of new businesses and investments in them every year. In addition to the millions of jobs created, the innovation gains that would result would be awe - inspiring.

2. Let Prices Fall.  It is time for all homeowners to just take their medicine (or, more accurately, even more medicine) and let prices fall to where the housing demand meets supply.

In addition to being the right thing to do in a market economy, significantly lower prices would be a huge boon to new homeowners. 

And as these new homeowners tend to be younger people, the time and money savings of lower housing costs could go to more societally beneficial pursuits than remodeled bathrooms - like perhaps going to back to school or starting or investing in a business?

3. Just Stop Talking About It.  My favorite because it is easiest and will have the quickest effect - let's just stop talking about residential real estate. Too much ink and mindshare have been wasted on it these last few years. 

This would not be all that bad if the coverage was somewhat balanced, but as it is almost universally presented in an "the end is near" tone and focus, falling home prices have been unfortunately equated with the health of our economy and our society.

Let's use better, more 21st century measures of well being - like our kids' science and math scores  or the speed of innovation in those high value-add service fields like healthcare, energy, and software.

More attention here will mean more human progress, more wealth for all of us.

And maybe this time, with all that new wealth, instead of building bigger bathrooms, we do something with it that's just a tad more...inspirational?

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

--
Jay Turo
CEO
Growthink


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