I think the pure tech plays in 2019 are doing just fine. Zoom, Cloudflare, and Datadog all look like good companies. They're just not over-hyped and overinflated.
Plus companies like Uber don't exactly own assets, its more tech company than not.
For all the promise of the Web, people live in the real world, that's where the money is to be made, mega tech companies are necessarily going to live at the interface.
Except Buffett did it with non-tech, capital-heavy companies. Where it arguably works a lot more reliably.
How so?
I don't think he invests so much in capital starved businesses, more he just uses the cash generated by eg insurance to invest in high quality businesses. I suppose the difference here is the high quality part. Wework doesn't seem to have much of a moat, have particularly good governance, or have much of a track record of anything.
Holding it for a period of time is "generating float." For many of these companies the float is a large multiple of the profit.
https://www.theverge.com/2019/7/10/20689644/apple-zoom-web-s...
https://www.se-radio.net/2013/12/episode-199-michael-stonebr...
Only on a tangent - it's an otherwise fascinating episode from a database wizard.
Are these good examples, though? Dropbox is down ~35% since IPOing, and Slack is down almost 50%. This certainly suggests the market thinks they were both overvalued when they IPO'd.
Slack went public at $26, it is at $23.50 today. It is less than 10% less than the IPO price.
What happens when the inevitable correction comes? The Fed will run out of monetary tricks, eventually.
No, it won't.
It might run into a monetary-policy resistant situation (e.g., stagflation), but the Fed has infinite range of monetary policy tricks available (literally, there's no floor to rates now that the Fed has taken notice of the use of negative rates elsewhere.)
>In fact, I would be wary of software companies without a base of free users, as that means the company needs to keep spending a lot of its revenue on sales and marketing. I am much more wary of companies that keep or burning cash for years and years with the only excuse that "Amazon did that as well".
I think about this a little differently. Spending money on free users is actually a much more efficient "marketing expense" than classic outbound strategies (e.g., online advertising).
When a consumer realizes they are getting 50% off of a service or product they didn't want or need in the first place, they stop signing up for deals. Also, once the businesses realize these customers don't provide repeat business and they are devaluing their product for consumers who do want it, they stop offering the discounts. Finally, it's trivial to sign up for each of their competitors and play them off of each other.
When does a Cloudflare customer stop needing secure, performant content delivery, and how easy is it to switch to a competitor?