The acquisition spree in context
As the information network branches into transportation and wearables and health and entertainment and home devices and fiber to the home, the social network seeks to become an information network, too.
But there isn’t any blueprint, only possibilities, as many predecessors have failed to recognize. And even with the recognition, there is the gamble, which is to say, the business value. There is the asset, the core that must be guarded, and the option, or the upside. The two interconnect and one doesn’t exist without the other.
The balance of the two, the relative importance, varies with the circumstance, the market, and the era. Volatility feeds option value and erodes the asset. A deflationary economics does the same. It isn’t a matter of taste, but of survival.
… All of these big tech companies are looking for the next thing to make sure they don’t miss it. And they will pay… for a call option on the next thing. It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else. Larry doesn’t know. Zuck doesn’t know. I don’t know. But the race is on to figure it out. Trillions of dollars of collective market capitalizations are on the line. So a couple billion here or there is chump change…
- @fredwilson, The Search For The Next Platform
And anyway, the opportunity cost of expired options at the expense of building robust assets isn’t high.
Fred’s comments made me wonder: so are smartest minds of our time as clueless about the future as the rest of us? [Or] is it that both Google and Facebook realize that there is only so much they can do with web-based advertising and ensuing revenue stream? If you ask me, that is the real story here…
- @om, Billion Dollar Dart Throwing
The currency of choice also bears noting, because this points to a risk-appetite and financial strategy of its own. When equity is cheap and cash is dear - as doubly happens in a strange bull market characterized by deflationary business fundamentals - strategic option portfolios come to resemble venture capital formation.
His stock currency has given him plenty to play with. It’s the way the Valley has come to think about startup valuations. Consumer Internet success is binary. It’s a home run or a disappointment. As long as there is a liquidation preference to protect you on the way down…
For additional background on converging segments and financial asset classes, on the breakdown of value between the business core and its optionality, on the emergence of a new economics fueled by a new economy, and on the interconnectedness of all these things by way of context…
… a collection of essays about a new technology environment and its new fundamentals.
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