The Impermanence of Business Models

It has been some time since I have last written. Too much time actually.

It is now earnings season, giving analysts the opportunity to view who is "hot" and who is "not". DELL announced that they would be off by 30% in their earnings versus analyst expectaions--the stock tanked by 10% and now trading at its lowest point in recent memory. Google on the other hand blew through their numbers--their annualized revenue and earnings is in the range of $10BN an d $3BN, respectively based on their most recent announcement. The lesson is that business models come and go quickly in technology--what is hot for one period can quickly dissipate.

This was brought out most succinctly in an interview by Charlie Rose of Warren Buffett and Bill Gates together. As is well known, Buffett never invested seriously in Microsoft despite his deep friendship with Gates, as he could not see ten years out in the industry. But as Gates said, you can make significant returns if you learn to surf the industry--ride the waves of technology. And one of the keys of "riding" such waves is knowing when to get off. I encourage you to view this interview--it is not just about business, but also about deep friendship. The interview was the last of a three part interview of Warren Buffett and delves deeply not just into his investment philosophy but also his way of life.