Apr

15

 I'm very skeptical about ANY credible way to reliably value small and moderate tech companies. Scalability (in both directions) is a part of it. How do you value something that can be multiplied by 0.99 or 100 in short order? Having (or not having) complementary technology to someone else is another problem. For all you know, Instagram may have two competitors that didn't get chosen, but were close, and as a result their valuation got affected by perhaps a factor of 10 or more. The nature of this type of competition could even be such that there was a choice of different, unrelated technologies that some fixed (but knowable by an outside observer) amount of money was to be spent on, so these "competitors" could not be determined by any reasonable means. Then there is the effect of bugs, flaws that only get discovered with time, etc. Couple that with the subtle nature of tech management skills and technological ebbs and flows, and a myriad of other factors, and the whole thing looks hopeless to me.

Rishi Singh agrees: 

Agreed,

I think attempting to predict the next big tech winner can be incredibly difficult and similar to picking "the next big penny stock."

The question I'm trying to dig into is established software companies -what separates AAPL from MSFT. Is GOOG heading in the direction of MSFT ( http://www.forbes.com/sites/robenderle/2011/10/27/steve-jobs-final-lesson-to-me-microsoft-google-and-obama/)? We could compare Microsoft today from 1998 or Google today from 2005. What can tech companies do to become better?

How do we backtest Steve Job's ideas of focusing and simplification to see if that's what separates successful tech companies, or is there something else?
 


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