RE: Investing

From: Phil Osborn (
Date: Sun Jun 15 2003 - 16:27:07 MDT

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    I bought a bunch of Commodore stock in the mid'80's at
    about $8/share. In late '92, I believe it was, some
    prominent analyst said that Commodore stock was the
    hottest buy around, and the stock shot up to
    $20/share, and, I think, maybe to $30 at peak. From
    there, a few months later, it had fallen to $3/share
    and then the company went bankrupt.

    I had plenty of insider knowledge as a journalist
    covering Amiga products and related issues for several
    Amiga magazines. It was clear that the Amiga was
    miles ahead of the competition in virtually every
    respect, and about 10 million Amigas were ultimately
    sold, so it certainly wasn't a market size problem,
    and Amiga owners tended to be even more fanatically
    loyal than Mac adicts. From every technical
    perspective, the Amiga was the horse to bet on.

    Except, the company was run by people who knew NOTHING
    about computers or the computer market, and the CEO (a
    banker) at one point expressed puzzlement over why
    people would get so excited about a machine. After
    Commodore finally collapsed, various people from the
    engineering dept. made retrospective comments about
    how many times Commodore Mgt. had "snatched defeat
    from the jaws of victory."

    Commodore is the example that I know most intimately
    and best, having spent a sizeable portion of 15 years
    covering the Amiga, and 5 years prior as a VIC20/C64
    user. However, the same sort of analysis applies to a
    host of other tech companies, including Apple, Atari,
    AutoDesk, ....

    In each case, the bankers basically bought control and
    then installed their people to run things - meaning
    CEO's whose job it was to be the bankers' agents,
    report back to them, and not rock the boat. These
    people were controllable in that they could not
    possibly have achieved such a position on their
    merits; i.e., it was their very incompetence and
    consequent controllability (where else would they get
    a job?) that were their desireable characteristics.

    Terrified of making a mistake, but also terrified of
    losing control, these flunkies predictably slotted
    other incompetent jerks into positions to spy for them
    and support their decisions, and those people did
    likewise, leaving only engineering relatively
    unscathed (only relatively, however, as when Commodore
    put the same character who was responsible years
    earlier for the C64 power supply that ALWAYS died in
    charge of new products for the Amiga line, and he -
    predictably - came up with the Amiga 600, which every
    single reviewer noted immediately (and correctly)
    would be a total failure, filling no concievable
    market niche.

    Bottom line: whenever a market area - personal
    computers, internet companies, biotech? - attracts the
    attention of the banking/investment community, it is
    the kiss of death. They will finagle control away
    from the dangerous innovators who made the company
    profitable and then milk it all the way down, trading
    their insider knowledge to their buddies to keep
    making money even as the core value is diluted to
    zero. That's why I've been sticking mainly with
    smaller companies still run by the original

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