Years ago, something called fourth-wave advertising emerged. Only highly pretentious people remember what that is. But I was reminded of it when a few people spotted the marketing opportunity in what they call the fourth industrial revolution.
At first sight, conditions in today’s market look like a rerun of the 2000 Nasdaq crash, when IT company share prices came down to earth.
When Warren Buffett was criticised for buying into the old-economy Fruit of the Loom underwear business by a firm of supposedly tech-savvy brokers, he replied: "And you were the nincompoops who tried to sell me Pets.com."
These dot-com businesses were priced not on earnings, as they didn’t have any, but as a multiple of sales, and sometimes of forecast sales.
There were few profitable businesses on the Internet then, at least on the content side — only the less glamorous support businesses such as Microsoft and Oracle were doing well. And, of course, social networks still had to emerge. Facebook came only in 2004.
Twitter’s shares have slumped, as it had "only" 328m users in the second quarter of 2017. Such numbers would have been unthinkable in the early years of the Internet.
But in those days we had to get onto the Net via dial-up — will we ever forget the awful noise it made?
And almost all of us came online through our PCs, pre-iPhones.
I can understand why almost every global equity fund has Amazon, Apple or Alphabet (Google), or sometimes all three, in their top 10. They all generate tons of cash. Even technophobe Buffett has a holding in Apple.
Jeff Bezos of Amazon overtook Microsoft’s Bill Gates for a short time to become the richest man in the world. Bezos doesn’t believe in hoarding cash; he prefers to redeploy it into less mature ventures such as the cloud business.
As for the other mammoth tech businesses — whose cash reserves equal the GDP of even rich countries such as Ireland, Portugal or Belgium — I suppose a lot of investors get comfort from that fact, though eventually they will surely ask for a special dividend.
It reminds me of Mutual & Federal, which, in the halcyon days when it was the strongest brand in short-term insurance, held 20 times more capital than it was required to do by law.
And IT companies don’t even have the excuse of regulatory capital.
Key player
I am sure the Alexander Forbes CEO Andrew Darfoor has made some good appointments, but none with as much star power as John Anderson, who came back to Forbes after a spell at a Polish-owned start-up. Anderson certainly has the gift of the gab, so he is playing a key role in Darfoor’s schmooze offensive.
But the new head of the Forbes insurance business, Rudi Schmidt, brings some genuine star power too, to the extent that he could be a successor to Darfoor one day.
Schmidt was a disciple of former Stanlib Wealth boss Ian van Schoor, one of best financial services marketers I have come across.
He went on to run SEI, one of the first-generation multimanagement businesses. It was the archrival of the better-known Frank Russell. And then he moved on to Assupol, the former police insurer, overseeing its demutualisation process.
Forbes had to go big or go home with its insurance business. There’s a good chance that it will no longer be a niche business in a year or two.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.