Fascination for Prediction – The Expert’s voice

It is human nature to look out to industry insiders to understand trends and the future. Be it in business, technology, markets, investing and our life, we are fascinated by the ‘expert’s view’ on the tomorrow.

Throughout history, the common aspect of growth has revolved around innovation. The concept of survival of the fittest has meant that we have constantly grown as a race. In this article, we look at some of the best industry minds and the role each played in ‘predicting the future’.

As Internet was evolving in the mid-90s, there were multiple business models that were growing around the Internet as the backbone. Robert Metcalfe (who many consider as the inventor of the Ethernet) spoke about his prediction around the same time talking about the collapse of the internet where he used the following words – ‘I predict the Internet will soon go spectacularly supernova and then catastrophically collapse’.

He had a very sound logic for making such a statement – which revolved around the storage capacity not being built to handle the growth of the internet alongside the security issues that resulted in open-sourcing content. While both were genuinely valid concerns at that time, what he did not foresee were multi-billion-dollar businesses being built around this, to solve the concerns he had.

• The era of personal computing was dismissed by the Intel CEO Andy Grove who was as close as one could imagine to the mobile computing world. While it is widely believed for Apple to have created the market around Steve Job’s vision, Intel was the best positioned to build the market. However, Andy Grove dismissed this trend as a fad and viewed this as a ‘piped dream driven by greed’^.
• In 2007, the then Microsoft CEO, Steve Balmer who was critical of the iPhone price (at USD 500) and form factor (without a keyboard), was dismissive of the device with his famous last words – “There’s no chance that the iPhone is going to get any significant market share. No chance.”

In the mind of the Microsoft CEO, he was keen on being the software provider on the devices where his market share was growing. However, by being dismissive of the device, one of the key aspects of the iPhone’s growth he missed was the business model innovation. Apple had worked on their model of subsidizing their phones through the operators, they instead worked on recouping the money through the monthly cell phone bill.

• In 2003, the then Apple CEO, Steve Jobs made a prediction and prognosis on the music subscription business calling the business, essentially bankrupt. In an interview with Rolling Stone, Jobs spoke about the subscription business not having a future.

From his perspective, the statement made a lot of sense, as up to 2003, consumers consumed audio through 45s, LPs, cassettes and finally CDs. The idea of an all-you-can-eat-music was not congruent with history and how the consumer patterns were. Moreover, there were subscription businesses at the point, who were not very good and did not have full catalogs.

• In 2008, the Oracle CEO, Larry Ellison was dismissive of the evolution of the cloud. In an interview he gave to Oracle World, he said – “The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is cloud? It’s complete gibberish. It’s insane.”

From the mid-1970s, Oracle was the premier database provider. Cloud computing was a direct thread to its on-premise model. However, one of the aspects of being open-minded and experimental in nature was, he was able to correct his views over time. Today, the business has pivoted in its entirety by moving to the cloud and is one of the leaders in the space.

Be it industry insiders, experts, or CEOs close to an industry transition, we all get our predictions wrong, irrespective of how close we are to the data. This cannot be truer in the investing world, where we are meant to ‘predict’ on a weekly, quarterly and annual basis. The dangerous aspect of prediction, though it’s done with very little success, is it blinds us to the changes around us and keeps us rigid and away from reality.

Inherently, an investor adopting the philosophy of growth is moving away from the zone of prediction, but more to a domain of innovation. This has a natural aspect of innovation and being open-minded towards change. From the purview of an investor, over periods of time, this results in capturing significant upside while eliminating the aspect of prediction and movements of the markets.

Source

https://quoteinvestigator.com/2020/03/09/collapse/

https://www.nytimes.com/1992/07/19/business/the-executive-computer-mother-of-all-markets-or-a-pipe-dream-driven-by-greed.html

https://www.pcworld.com/article/434836/in-his-own-words-best-quotes-of-steve-ballmer.html

https://www.rollingstone.com/culture/culture-news/steve-jobs-rolling-stones-2003-interview-243284/

https://www.cnet.com/news/oracles-ellison-nails-cloud-computing/

The performance-related information provided in this newsletter/blog is not verified by SEBI. The content is intended solely for internal circulation and general informational purposes. It does not constitute investment advice or any form of financial recommendation.

The research information shared herein may contain inaccuracies or typographical errors. All liability for actions taken or not taken based on the content of this newsletter/blog is expressly disclaimed.

No reader, user, or browser of this Newsletter / blog should act or refrain from acting based on any information in this newsletter/blog without seeking independent financial advice. Use of, and access to, this publication or any links or resources provided within do not establish a portfolio manager-client relationship between the reader, user, or browser and the authors, contributors or Itus Capital.