stocks

Everyone has wondered how they could have latched onto a stock that would have turned a few thousand dollars into over a million. In recent years, EMC, Cisco, and Microsoft provided such opportunities. Yet few bought and held those stocks to get the full benefit of the ride. In this book, you will find some ideas for locating the next stocks that could do this for you. Keep in mind that the odds are long against you though. A lot of serendipity is involved.

A popular pastime for the past 50 years (and possibly before that) has been to look at the stocks that would have made you the most money in the last 10 or 20 years and then to devise an investment approach to find the next ones going forward that will do as well or better. I have lost count of how many books I have read that have taken this approach.

I found the Gorilla Game to be refreshingly above the pack in this area. The authors do an excellent job of describing some of the ways that technologies get adopted, when the stocks do well (and when they don't), and when to buy and sell stocks in technology companies. They also devise a fairly detailed, somewhat risk-controlled investment process, and detail how it would have done in a number of case histories. From the backward-looking perspective, the book is solid.

The weakness of such backward looking methods shows up in their new material in the revised edition (1999) on the Internet. Although some aspects of their model apply to the Internet, many do not. They are left needing to vaguely explain how so much money was made so quickly in Internet stocks (before they began to plummet to nothing in March 2000). Their explanation is actually pretty solid, but they never quite come out and say that their methodology will not get you all of the fast-growing stocks in technology. I doubt if any methodology could do that for you.

They needed not be defensive. No methodology is perfect. The main weakness of this one is that is designed around semiconductors, software, and computers. The technology patterns can look a lot different in future technologies. For example, what will happen with companies like Gemstar that lead in new television technologies that could disrupt the Internet for direct marketing? The reason this point is important is that the barriers to switching are higher in the technologies studied here than in many other areas. If you get into a low cost of switching sector (like business to consumer marketing on the Internet), you could invest in an industry leader and still lose your shirt. Although the book acknowledges these issues, it probably doesn't create a substantial enough warning.

The book is aimed at the medium knowledge investor (about the markets and technology). I hope they bring out a more advanced version. They decided not to go into specialized semiconductors like analog devices where enormous profits may lie in the future, because of concerns about not going over the heads of readers. A lot of the best run technology companies with enormous growth potential in markets with high bariers to competitors were not discussed in this book. I am sure most readers would be willing to spend some time learning about these other markets in order to make enormous gains.

Despite my quibbles, this is a fine book that will help all but those who are already quite knowledgeable about technology companies and technology investing. Good luck in capturing those irresistible gains in the future! Perhaps you will be the first person you know to identify the next irresistible growth enterprise that creates over a thousand to one gain! I hope you do.

May you be that one person in one hundred who outperforms the market over a lifetime.

Otherwise, I suggest you play the odds and buy indexed mutual funds. John Bogle's book, Common Sense about Mutual Funds, will be very helpful to you in this regard.

The high-tech stock collapse has led to a lot of agonized soul searching from burned investors in the past year. How in the world did all those dot-com pet stores get funded? How did Cisco ever get a $500 billion dollar market cap, and how did so many other companies get valued at tens of billions of dollars with no profits and little sales?

Well, one problem was that too many people read this book.

Don't get me wrong--Geoffrey Moore is definitely a heavyweight business thinker. His earlier books were tremendously helpful in explaining the strange, non-intuitive ways in which high-tech markets work. But here, he and his coauthors attempt to build on his earlier work to offer a "gorilla investment strategy", which has now become a victim of its own popularity. *Any* mechanical investment scheme will eventually fail if it becomes too widely used, and it is easy to find the roots of the investment idiocies of the late nineties in this book. Just look for emerging high-tech market leaders, he says over and over, with little attention paid to just how much this eventual market dominance might be worth. Worse, he asserts that you can't know which company will emerge as the dominant player in a given sector, so invest in them all. Venture capitalists, once they realized how many investors were following this strategy, responded by cranking out unlimited numbers of startups doing exactly the same thing; as long as they were competing in a market that might eventually select a "gorilla", then they could be confident of "flipping" a successful IPO to naive investors. Anyone who used this book as a basis for investing over the past couple of years would have, in effect, been getting suckered into a Ponzi scheme.

Moore creates a vivid symbolic menagerie to explain the dynamics of high-tech marketing, but any high-tech investor needs to know that in addition to the authors' gorillas, chimpanzees and monkeys there are a lot of dogs. Also sharks.

Great insight into what makes a Microsoft, Oracle, Cisco, or other high-tech monster. Very instructive for spotting trends even if you are not into investing.

Sadly funny (in hindsight) closing remarks, however, when mentioning criteria for the gorilla-game theory to work: "...you need equity markets which have... high legal integrity... in the realms of ethics and legal integrity, US markets lead the world in policing their own ranks...". In light of the many recent financial scandals I'm sure the authors will rephrase this in the next edition.