I can’t tell whether this investing dictum, from shaggy-haired hedge-fund manager Cody Willard‘s column in the Weekend FT, is really smart, or is the sort of temporarily sensible sounding nonsense that we’ll all giggle at after the next market crash. I’m leaning at least slightly toward the former:
Those who empower, win. Those who protect, lose.
Believe it or not, that simple principle is all you need to know when it comes to investing in the trend to distribute the world’s information and entertainment content on the internet.
The key is to buy internet companies when they are working to empower their user base and to sell them soon after they shift to protecting their own interests.
Willard goes on to relate the sad stories of the decline of Netscape, AOL and Yahoo! as they moved from helping consumers do cool stuff to trying to control their behavior. Then he has this to say about this other company you may have heard of:
Google, which has been truer to the empowerment principle than any other company, continues to act as an open and de facto conduit to the world’s information. But as it adds content-ownership properties such as YouTube to its asset base, the incentives rise for it to become a protector.
It’s the entirely understandable tendency to try hold on to existing, hugely profitable ways of reaching consumers that has Big Media companies constantly playing catchup when it comes to the Internet. Once you’re a big company, with serious profits to protect, it’s hard to behave any other way.