I am excerpting on this blog roughly 10% of my next book, The New Technology Elite due out in February (and available for pre-order on Amazon – see badge on left) . Chapters 18 through 20 focus on how society, regulators and analysts need to also evolve in a world of the “technology elite”. Note: the text is going through the publisher’s edits and subject to change.
Of course, analysts need to balance “knowing too much” against the growing tech talk they are increasingly being exposed to. Mark Little, Senior Vice President of GE Global Research, uses terms like Biomimetics in presentations to financial analysts. That refers to the discipline of science mimicking nature, as in GE drawing innovative inspiration for moisture repellants from the lotus leaf. As we saw in the UPS case study in Chapter 1, its CEO tells investors “we’re about half a transportation company, half a technology company.”
As we saw in Chapter 2, Tony Prophet of HP explains to financial analysts the gory details of its global technology supply chain. We saw in Chapter 18, David Meline, CFO of 3M, present to Wall Street a slide on 3M’s “periodic table” that summarizes 46 different areas in which it offers technology products.
As more companies talk that way to investors, the more tech-savvy Wall Street analysts will have to become. In the end, it comes down to what Jeff Bezos, CEO of Amazon points out in his letter later in this chapter: “Now, if the eyes of some shareowners dutifully reading this letter are by this point glazing over, I will awaken you by pointing out that, in my opinion, these techniques are not idly pursued—they lead directly to free cash flow.”
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Dr. Paul Kedrosky is an investor, author, entrepreneur, and a technology analyst for CNBC. On his blog, Infectious Greed, and in presentations at various industry events, he covers a wide range of technology and financial topics.
His perspective on analysts keeping up with technology:
“Wall Street’s sell-side (those that work for investment banks and publish much of the stock research we see) has a very low competency hurdle when it comes to domain expertise. As long as your results are non-toxic (that is, you make money for the firm), and your clients and trading desk don’t hate you, that’s all that matters.”
“There are some very good analysts with deep domain expertise who make terrible picks, and there are very bad analysts with no/errant domain expertise who make good picks. Further, the financial side of the Street more than trumps the industry side, so being able to geek out about thin-film polysi is much less important than having a developed cash flow model from 2011‒2015.”
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Gartner, the technology research firm, covered the Amazon outage mentioned above extensively and has reports for its clients with titles such as “Protecting Sensitive Data in Amazon EC2 Deployments.”
But search the Gartner database for 3M and you get very few hits. In Chapter 18 we saw 3M says it has products in 46 different technology platforms. Gartner is the largest technology research firm. What gives?
The reality is the research analyst marketplace is itself morphing. Over the course of the book we have mentioned firms like Redmonk, Horses for Sources, iSuppli, and other specialized analyst firms. In the Lexmark Genesis story in Chapter 16 we saw how they targeted technology blogs for their product launch, rather than traditional technology media and analysts.
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Chris Selland a former analyst at Yankee Group in the 1990s and later at Aberdeen Group says:
“During the ‘90s, there was a tremendous thirst among corporate executives for better understanding of how they could leverage technology and particularly this newfangled ‘World Wide Web’ thing.”
“But during the past 10 years that’s been changing dramatically—the typical executive today has a much better understanding of technology, and much less motivation or desire to read a 100-page report that takes a team of analysts 6 months to develop.”
“Today’s best ‘analysts’—those who deliver the most true insight and perspective—are almost entirely individuals, not big brand-name firms. Many models for confederating analysts and influencers are being brought to market. I participate in two confederations of independents. The Enterprise Irregulars which is a loosely connected discussion group for many (including the author of the book) former big-firm analysts, and Focus Research which has applied a community and Q&A model to the market.”
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