my position is that under conventional metrics (or in other words by looking at past performance ) you would assume that it’s a winner takes all market and a premium positioning is not sustainable.

However, with services like Facebook, Spotify, and SaaS solutions for e.g. for job applications and HTML 5 as a lingua franca which can be processed by all web browsers there are network effects to a much lesser degree. Network effects are created by the interaction of humans or corporations. This interaction layer is now going away from the file-based way of collaborating to a more service oriented way.

So to judge future performance you need to take into account the change of user behavior. The scenario which could be affected by network effects would be if you have a proprietary app on the Android but not on the iPhone and you would need to port the app to the iOS system. This is unlikely to be a large barrier:
1) if you have apps, a large part of the complexity is usually handled on the server. The app is a frontend which have reduced complexity
2) Accordingly, apps are comparatively cheap (a standard proprietary app costs about EUR 60k to develop)
3) The iOS ecosystem (which has 118m iPhones + Tablets) is sizeable enough that EUR 60k should not be an issue for a serious app
4) Usually you can always fall back on a web browser with HTML5; there is a trend to “mobile first” apps, which first and foremost launch as a mobile app, but usually they also offer a web frontend once the business grows to a certain size

Cheers,
Markus

thanks for asking. You are right, I don’t think Apple is currently a good investment (risk/reward). There are considerable risks from competition, Apple needs to break into and conquer gigantic market opportunities to fuel further growth, as well as from a financial point of view – not in terms of P/E but just posed by the size of the firm.

Cheers,
Markus

I completely agree that 50 years cycles are controversial to forecast economic growth phases. To my knowledge they are good approximations on time frames when it comes to diffusion of technologies, though.

My statement about getting smarter was based on that start-ups and the financial community pay much more attention the underlying economics. In the dot com boom it was not uncommon to hear people say that somebody is too old economy and doesn’t get it if he was pointing out to profits.
E.g. Tier 1 providers were valued based on kilometers of fibre cable they deployed. It is very rare for a startup today to receive funding without a clear business model.
Boo.com (http://en.wikipedia.org/wiki/Boo.com) is another extreme example which spent USD 188m in 6 months and generated only 300k of revenues. This is pretty remarkable for an ecommerce site.

Of course there will always be uncertainty in a new business. But in 2011 we have processes such as the lean startup and cloud infrastructures which allow to de-risk a new business before large amounts of capital are deployed. Further, if you want to go IPO you need to have substantial revenues and have ideally profits or are at least close to break even. There are very few “leaps of faith” these days.

Your point about the need for physical resources shaping previous waves is absolutely right. “Factors of production” used to include land, labour, and capital. Land is of very low significance in most new ventures. The type of labour is changing, and while capital is still required many times, the way in which it is spent has changed. How much VC funding is spent on building factories and buying machines these days, and how much is spent on marketing campaigns and salaries?

One of my favourite ways of understanding the future is the concept of ephemeralisation – the gradual replacement of energy and goods (both forms of capital) in production with more and more knowledge. If K-cycles were ever true, it’s not obvious that whatever made them true still holds. Without reference to any figures (this isn’t a strategy class, I won’t encumber myself with facts if I don’t have to!), I would assume that the developed world’s expenditure share on services and non-physical goods has been increasing since the middle of the last century. The seemingly inevitable depression may dent that progress, but I assume it will pick up again within a few years.

The thing I really want you to defend is this:
“I think we will get smarter and fluctations of company values will be less extreme because we understand value added better.”

If entrepreneurs are bringing something genuinely new (or at least, not yet mature) to market, I think the truth is that no-one really knows how to value it. You might get a stamp of approval from an i-bank saying “This company is worth $x million”, but they’re guessing too.

Right now the value of everything is being rocked by macro-economic volatility and uncertainty. But even when that eventually settles down, at whatever level, I don’t think that valuing *new* things will be any easier.