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August 22, 2013

Whither the Disrupters?

Posted by Simon Towers (View Profile | View All Posts) at 5:57 AM


Why Icahn's Betting More Than $1 Billion on Apple [Source: Bloomberg http://www.youtube.com/watch?v=Qfj4Ll_lG4k]

We learned recently that one of the greatest investors of all time, Carl Icahn, did what he's never did before: helped raise the stock price of a company by sending an upbeat Tweet about it. Talk about a powerful 140 characters. In this case the company was Apple, in which Icahn said he'd taken a large position and had enjoyed a nice discussion with CEO Tim Cook. Carl Icahn  is a hardnosed businessman. What's interesting to him is innovation as far it feeds into the company's long-term success and earnings potential.

Also, look at one of the most fascinating acquisitions of the year. Jeff Bezos, the disruptive mind behind Amazon.com, bought the Washington Post newspaper and its assorted holdings from the Graham family. Another smart Wall Street investor, Warren Buffett, had always backed the Grahams with the reasoning that they knew their space better than anyone else. That space is changing though, and we dare say it will take a thinker like Bezos to figure out what to do with a small army of journalists in an era when the very nature of news and how we consume it is changing. The financial model of a company paying to send out its reporters to collect and analyze news is an increasingly quaint one, especially if you argue that everyone armed with a smart phone and an email link can more readily transmit data than any great journalists of old ever did. In purchasing the Post, Bezos no doubt places value in two things: the brand name and the experience of the staff.

One of the reasons Carl Icahn made an investment in Apple is that he remains convinced the company is capable of thinking big. That's important from the standpoint of his faith in an entire company and not just in a high profile founder or two.

Much of what we're seeing today in Silicon Valley and beyond are founders using their personal fortunes to test hypotheses and boldly making innovations that were once the hallmarks of their companies! Part of the swagger that put the Amazons and PayPals of this world on the map is that they were willing to take risks and disrupt markets, flying in the face of the careful watch of analysts. Why is it today that we're seeing a transformation where people more than companies feel safe to disrupt markets? Has the prying eye of Wall Street again become so influential, especially in light of the ability to receive funding, that it's easier to pin the fortunes of a new project or idea on one, prominent tycoon?

Maybe there's the rub. Sometimes, keeping that corporate nest egg protected comes at the expense of innovation.

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