Brain Food

50 Reasons We’re Living Through the Greatest Period in World History – Jan. 2014  Morgan Housel of the Motley Fool has done a good job compiling a list of facts that provide a powerful case for the dramatic advancement in health, education and welfare in the U.S.  The following quote is “spot on” . . . “We ignore the really important news because it happens slowly, but we obsess over trivial news because it happens all day long”.  The overall consumer sentiment in the U.S. is too influenced by shallow, sensationalistic news reporting and bias politicians.  Here is a link to a pdf file of the article. 50 Reasons we are in Greatest Period in World History 1-29-14

10 Reasons Why America Will Continue To Dominate The Global Economy For Years– June 2013  Joe Quinlan  of US Trust has assembled a straight forward and short analysis of driving factors for continued US dominance.  The factors include: massive scale and world leading productivity, leading exporter, leading technology investment, the only feasible world reserve currency and an energy renaissance that is changing world oil pricing and production dynamics.

The Secular Bear Market in Stocks Is Over – C Puplava Feb 2013 This piece makes a strong case that the secular bear market that started with the tech crash in 2000 is ending and we are entering a secular bull market that can last well beyond 2020. The author bases much of his belief on the demographic condition and outlook for productivity in the U.S.  He sees the baby boomers’ children hitting the full bloom of household formation and child rearing and exceeding the relatively smaller generation of children born to Generation X.  He also highlights the worldwide rotation from bonds to equities and exhaustion of the outperformance of bonds over stocks.

GE Report – Industrial_Internet Nov 2012 jbt marks   Many of you know that we at Aberdeen have been following and investing in the machine to machine concept (“M2M”) of the “internet of things” for many years.  GE recently published an informative report that attempts to add metrics to many of the concepts embodied in the grand notion of an always on, always connected fabric of people and machines.  The intersection of Moore’s Law and Metcalfe’s Law is enabling cloud computing models that were barely imaginable only a few years ago.  All of us will become connected participants and beneficiaries of these developments.  The opportunities for investing may increasingly resemble the late 1990’s if the patterns of adoption and productivity gains described in the report play out according to the authors’ model.

The Next Great Growth Cycle 8-25-2012  “Today’s techno-pessimists say technology and America have plateaued. Such naysayers flourish during economic recessions. They have been wrong in every one of the 19 economic downturns we have experienced since 1912. They’re wrong again.” – Mark Mills Aug. 25, 2012.  Mark, co-author of “The Bottomless Well” (see :Books We Read) penned the linked article to stimulate and awaken. Enjoy! Jeb

Ten Baggers Are . . . v5 7-2012  When I was getting Aberdeen up and running in 2003/2004 I prepared a screen for micro-cap technology stocks that had appreciated 10X over the prior 5 years.  You will recall that that 5 year period included the tech bubble burst in 2000-2001.  The “Ten Baggers Are . . . ” title is a link to a brief analysis of 5 companies that were identified by the screen.  The characteristics of these 5 top performers helped define our screening criteria.  There are several takeaways from the work.

  • Three of the companies have been acquired or taken private – this is consistent with our experience.
  • Four of the five started their run with less than $50 million in revenue.
  • The key metric is revenue growth.  The biggest price appreciation occurred as revenue growth accelerated in a pivotal year.  The average revenue growth jumped to 6% in 2001 to 28% in 2002 to 41% in 2003.  The average price appreciation was 34% in 2002 and 230% in 2003. [Current AIM stocks have 2012 expected avg. growth of 34%]
  • The micro-cap stocks far outperformed the broad market indexes.  They went up 34% in 2002 when the NASDAQ fell 32%.  They gained 230% when the NASDAQ started to recover in 2003.
  • The volatility in the prices can be severe in the short run.  Volatility compresses as the market cap grows.
  • Investors in micro-cap high growth stocks must have patience and conviction that businesses have a significant opportunity for accelerated growth.

We can attest that not all micro-cap stocks with characteristics similar to the above will perform as well as those in the screen.  We have learned the hard way that companies need to be big enough and funded enough to afford the quality management teams and product development to drive growth.  There are multiple other factors that impact performance in a “risk seeking” portfolio such as Aberdeen’s.  We cannot assure anyone that we will be able to generate the level of returns achieved by the stocks in the analysis. We continue to look for businesses that can share the above characteristics and afford us an opportunity to outperform the market.

Myth Of Decline – US is Stronger Faster than Anywhere Else 4-30-12 Daniel Gross has written a great article about the sustainable strengths of the U.S. economic culture and why myth of American declinism is wrong.

Intelligence Is Overrated 4-12-12: The linked article from Forbes by Keld Jensen is short and insightful about qualities in addition to intelligence that determine success and happines – enjoy!

The Future of Mobile – Business Insider 3-21-12: The linked chart deck does a good job laying out the metrics and trends for smartphone and tablet adoption.  The advent of truly affordable, portable and robust computing will impact all of you individually and professionally.

Abundance_Future Better than you Think -Chapter_1: I have linked this to a pdf of the first chapter of the book, Abundance -The Future is Better Than You Think by Peter Diamandis and Steven Kotler.  I also have a link on a video of Peter’s presentation at TED in February 2012 entitled “Abundance is our Future“. This book and 15 minute video can open your eyes to the progress and possibilities of technology that the Keynesians you hear everyday just don’t get.

Warren Buffett – Why stocks beat gold and bonds 2-9-12:In an adaptation from his upcoming shareholder letter, the Oracle of Omaha explains why equities almost always beat the alternatives over time.

The Coming Tech Led Boom 1-30-12: Mills and Ottini, WSJ Jan. 30,2012 Great article profiling three “grand technological transformations” of 1) Big Data, 2) Smart Manufacturing and 3) Wireless Revolution.  We have investments and prospects that play into each “transformation”.  Hang on to your hats folks!

All Revenue is Not Created Equal 5-24-11: Bill Gurley, Benchmark Capital. Good blog post addressing the keys to the 10X revenue club.  He lays out the traits define the high multiple companies in technology. His blog is here.

Internet 2011 in numbers 1-17-2012: Amazing statistics on the scale of the global internet – both wired and wireless. This is a great collection of stats prepared by Royal Pingdom. I have highlighted a few of the most interesting bullet points on wireless and online video activity. Over 50% of the internet connected people of the world are doing so on a mobile device.  Mobile content, mobile commerce, mobile marketing and mobile payments are all realities still in early days of adoption.

My Optimism Is Off The Chart K. Kelly 9-20-11: Kevin Kelly, author of What Technology Wants and founder of Wired, offers provoctaive insights in an interview in The European magazine from Sep. 20,2011.   Here are couple of choice quotes “The defining force behind life is not energy but information. Evolution is a process of information transmission, and so is technology” . . . “My optimism is off the chart. I got it from Asia, where I saw how quickly civilizations could move from abject poverty to incredible wealth. If they can do it, almost anything is possible. Let me go back to the original quote about seeing God in a cell phone: The reason we should be optimistic is life itself. It keeps bouncing back even when we do horrible things to it. Life is brimming with possibilities, details, intelligence, marvels, ingenuity.”

The Great Tech War Of 2012 10-19-11:  Apple, Facebook, Google and Amazon battle for the future of the innovation economy.  This is a great article by FastCompany posted Oct. 19, 2011 that compares and contrasts the four emerging titans of the internet economy and how they are disrupting the media industry, the advertising industry, the telecom industry and soon the payments industry.  Understanding these companies has become vital to understanding the future of modern enterprise.

Made in America – Again Why Manufacturing Will Return to the U.S. –Boston Consulting Group  has published an interesting piece laying out the reasons why the U.S. is becoming increasingly competitive compared to China for manufacturing sophisticated products. There is a long term renaissance in U.S. manufactuiring that is being missed by most pundits.

The Handicap of Experienced Investors 9-12-11JJ Abodeely of The Valuation Restoration Project has written an interesting piece on characterisitcs of successful investment managers. Out of the box thinkers with flexible strategies and organizations tend to outperform long tenured and large organizations.

Why Software Is Eating The World 8-20-11– Marc Andreessen: The Wall Street Journal published an insightful article by Marc Andreessen, co-founder of Netscape, creator of the first massively used web browser and VC extraordinaire, regarding “a software revolution” that is coming and that is “a profoundly positive story for the American economy”.  As we at Aberdeen concentrate on investing in software related enterprises you can guess where I come out on Mr. Andreessen’s thesis.   While too many people are distracted by recent market volatility, it is important to consider Marc’s statement that “Our combination of great research universities, a pro-risk business culture, deep pools of innovation-seeking equity capital and reliable business and contract law is unprecedented and unparalleled in the world”.

Minority rules: Scientists discover tipping point for the spread of ideas: Scientists at Rensselaer Polytechnic Institute have found that when just 10 percent of the population holds an unshakable belief, their belief will always be adopted by the majority of the society. The scientists, who are members of the Social Cognitive Networks Academic Research Center (SCNARC) at Rensselaer, used computational and analytical methods to discover the tipping point where a minority belief becomes the majority opinion. The finding has implications for the study and influence of societal interactions ranging from the spread of innovations to the movement of political ideals.  A pdf file of the article is accessible here: Minority rules -Scientists discover tipping point for spread of ideas 7-25-11

High Tech Will Rebuild Our Economy: George Gilder presentation at the Discovery Institute, The restructuring of the U.S. economy is as significant as the recession. George Gilder (author of Microcosm, Telecosm and, most recently, The Israel Test) describes the way new technology can rescue the US, and the world, from a sluggish economy and the debt crisis. Some think the high tech revolution is exhausted; Gilder strongly disagrees. (JBTSR 7-21-11)

50 Things You Should Feel Great About: Great article that appeared on The Motely Fool on July 15, 2011 by Morgan Housel

The Upside of IrrationalityDan Ariely makes fascinating points on how people make decisions – particularly economic decisions in a presentation at the DigitalNow conference in April, 2011.  There are lessons here for all of us but especially for those of us involved in marketing. (click on the underlined title to go to the presentation or go to day two of www.digitalnowlive.com)

TheMobileMovement Google 4-2011 Google published an insightful presentation with data gathered on traits and activity of smartphones users ( I will refer to them as “SUs”) – No wonder Google is so excited about the “Google Wallet” announced May 26, 2011.  Here are some tidbits: 89% of SUs use their smartphones throughout the day.  90% of SUs who have searched the internet on their smartphones have taken action as a result.  Over 50% of smartphone users who searched using a smartphone have made a purchase either in-store, on line or on their smartphone.  82% of SUs notice a mobile ad. . . .

What is next in healthcare – D Kraft – TEDxMaastricht 4-2011 I encourage you to view a presentation by Daniel Kraft at the TEDxMaastricht conference on April 6,2011 regarding the future for healthcare from a technology point of view.  Several of our companies are already engaged in areas mentioned. Daniel is involved with Singularity University which is associated with Ray Kurzweil. HT to Steve Waite – a cancer survivor and all round smart dude!

The Trillion-Dollar Mobile Industry – The fastest growing giant industry on the planet Here is an article from Feb. 17, 2011 with fascinating data on the depth, breadth and rate of growth in all things “mobile”.  It should be required reading for anyone interested in technology investing. The pdf of the article is here: Mobile Facts – Trillion $ Industry- Ahonen 2-17-11

Choosing Happy – Jan 2011  An article the January 2011 issue of SUCCESS Magazine is worth considering for its message of one’s ability to choose to be happy and the beneficial consequences. Perhaps our founding fathers knew something we have long forgotten when they wrote in the Declaration of Independence of our unalienable right to life, liberty and the pursuit of happiness. Here is the closing quote from the article: “you don’t need success to have happiness. Instead, happiness is a building block of success in all areas of life.””

Betting on green -Khosla 3-10-11 enlightening article on Vinod Khosla, one of the most successful VC investors ever, and his views and focus on “green” investments that appeared in The Economist, March 10, 2011. Here is a sample quote ” My willingness to fail gives me the ability to succeed.”

USA Inc – America’s Financial Statements KPCB Meeker 2-2011 Caution – this piece is long, detailed and totally revealing of the financial strengths and weaknesses of the USA and the absolute imperatives needed to correct current trends. The data is presented in financial terms vs. government budetary terms. ENLIGHTENING – MUST READ

Top-Mobile-Internet-Trends-2-10-2011 from-KPCB Mary Meeker updated her view of the world of mobile technology.  Stunning growth lies ahead.  Every serious technology investor must be engaged in mobile.

REASONS TO BE CHEERFUL 1-2010 an insightful blog post by Matt Ridley, author of The Rational Optimist about the amazing progress of the last 10 years and the outlook ahead.

100 Things to Watch in 2011 – JWT Worldwide 12-2010: research by JWT (FKA J Walter Thompson) on trend setting technologies, products and personalities.  You will notice several Aberdeen themes included such as digital cash, virtual medicine, smart grid etc.

How the World Works – C Gave 12-2010: research by Charles Gave of GaveKal Research as presented in Dallas, TX 12-8-2010.  It has a very provocative rebuke Keynesian stimulus and illustrates how increased governement spending leads to lower growth, lower profits and fewer jobs.

The Power of the Post Recession Consumer: article by Gerzema and D’Antonio on the emerging “Spend Shift” taking place toward quality, affordability and connection.

When Its Darkest Men See Stars 11-24-10: Steve Blank on the beginning of an entrepreneurial revolution Nov. 24, 2010 (JBT marks)

The Network is the Platfrom for Transforming the World: Wim Elfrink, Cisco’s Chief Globalization Officer presesnted at Web 2.0 on 11-16-10.

10 Questions Internet Execs Should Ask & Answer: A very data rich presentation by Mary Meeker of Morgan Stanley at the Web 2.0 Summit 11-16-10.  A pdf of the slides follows below.

Meeker ten questions web 2 11-16-2010

Is Social Media a Fad? I am providing a link below that will take you to a compelling short video on YouTube by Erik Qualman. The video is a fast paced, multi-media display of amazing data points the explosive growth in social media such as Facebook, Twitter, LinkedIn and Wikipedia.  This is a must view for anyone attempting to understand the new leg of the information revolution. – Jeb Terry, Sr. 11-5-10

Social Media Revolution 2 (Refresh)

When ideas have sex – Matt Ridley at TEDGlobal 2010

Untangling_Skill_and_Luck_-_Mauboussin 7-15-2010

Schumpeter – In His Own Words – M Cox Dallas Fed 4-6-2010

Who’s Afraid of a Sideways Market – Legg Mason 1-2010

Growth post Crisis C Perez 6-2009 jbt marks

The Mind Set of Great Investors 11-13-09

Friends :

Warren Buffett and Bill Gates were recently presented on CNBC at forum held at Columbia Business School (my alma mater BTW).

As Warren answered questions about what made him such a good investor I was reminded of a very interesting piece written by Michael Mauboussin back in 2007 which I have attached herewith.  You may recall Michael’s name from other “brain food” messages I have sent in the past.  He is Chief Investment Strategist at Legg Mason Capital Management.

Michael’s piece was occasioned on the announcement in 2007 that Mr. Buffett was formally seeking his successor(s) as the chief investment officer at Berkshire Hathaway.  It has many choice nuggets of Warren’s wisdom as well as insights from a famous experiment on whether great traders are made or born that was started in the 1970’s.  Two well known commodities traders – Richard Dennis and Bill Eckhardt – determined to see if they could train a group of inexperienced individuals to be successful in the Chicago trading pits.  The story was told in a book written by one of the candidates – Curtis Faith – entitled Way of the Turtle.

It is my hope that you will recognize some of the traits described in the piece as being practiced here at Aberdeen.  We cannot control price but we can control our process.  We make a conscious and accountable effort to measure risk and reward and publish our results weekly.  We are committed to transparency.  I do not know of any other investment manager that adheres as openly and publicly to our disciplines.

A particularly pertinent quote can be found on page 5.  “A trader, or investor, can put on a positive expectation bet (correct process) and still have poor results (outcome) for some period of time due solely to randomness.  But many investors attribute bad outcomes to bad processes, which leads to substantial error.  As insidious is attributing good outcomes to a good process.  A thoughtful investor must carefully consider process and recognize long-term outcomes will follow.”

I hope you enjoy the piece as much as I did.  As is my practice, I have marked some lines of interest.  You will find application of these thoughts in all of your business endeavors . . . and for that matter – your life.

Mindset of Great Investors JBT marks 5-23-07

Cheers

Jeb

More Brain Food:

Kurzweil’s “The Web Within Us” – Selected charts from Telecosm 2009  11-12-09

I have selected a set of charts from Ray Kurzweil’s presentation at George Gilder’s Telecosm 2009 conference.  Ray’s data and views are always enlightening.  I have edited his 122 page slide deck down to 28 and added some comments.  It is presented below in three parts due to size constraints. – Enjoy!

Kurzweil Selected Charts Telecosm 2009 (PART 1 OF 3)11-11-09

Kurzweil Selected Charts Telecosm 2009 (PART 2 OF 3) 11-11-09

Kurzweil Selected Charts Telecosm 2009 (PART 3 OF 3) 11-11-09

Prior Brain Food:

Myopic Loss Aversion

Long-Term_Investing_Short-Term_World JBT Marks

Think Twice Mauboussin Interview -JBT marks Nov 9 2009

The Rationale of Hope – Rowe speaks with Terry 4-27-09

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