Revolutionomics – Empower or die (Or 1984 is for losers)
In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia. – George Orwell
A few years ago before I took the job as an anchor on Fox, I was running a hedge fund and creating companies in my RevolutioNetwork. One of the companies we created was focused 100% on making the network completely encrypted and secure from any governmental or other monitoring. In other words, the idea was to create a truly PRIVATE NETWORK within the broader public Internet.
I figured back then that despite all the promises of “Privacy” from the big social networks and email/chat service companies like Google, Hotmail, Facebook, AOL, MySpace and so on, that these giant corporations were never going to stand up for consumer privacy as the governments around the world developed their tracking technologies. I hired a handful of brilliant young professionals who had been reading my published analysis and reports and they managed a team from India I’d hired to do the programming. We were focused on developing a completely secure and private chat and email social network around a YouTube-like and YouTube-compatible network. In the powerpoint presentation I used to raise angel and venture capital for the company and in the marketing materials we’d written, we promised total privacy and encryption of all your content.
Soon thereafter, as I had absolutely no training or experience in entertainment or news but found my TV career taking off, I struggled to keep focus on being both an entrepreneur as well as a TV anchor at the same time. I finally hired a CEO and CTO to run the companies, but they ran through the cash we’d raised instead. And when I came down with Lyme Disease and had to spend one month treating it with daily antibiotic injections, I had no choice but to close the companies down.
With the recent revelations about just how highly monitored and tracked everybody’s conversations are these days, I have been struck by just how important the concepts of that RevolutioNetwork privacy and security really was and remains today. In fact, it’s clearly much more important now than ever before to make your customers feel that you are on their side. I have seen Pew polls stating that 53% of Americans think the reported NSA surveillance is ok vs 45% who don’t. I don’t believe those numbers, as I think most everybody who has actually read these articles is appalled at the scale of the program and the extent of the privacy invasion by our government. But even at the reported rate, that means that they are at least 100 million Americans who are angry about the ability of the government to monitor Facebook, Google, Apple, Microsoft and the other mainstream American Internet companies. And that means there are literally billions of people around the world who are upset at the service providers of their main Internet services. That creates both opportunity and risk for our Internet holdings.
In an article I wrote back in 2007 for the Financial Times I wrote, “Those who empower, win. Those who protect, lose. Believe it or not, that simple principle is all you need to know when it comes to investing in the trend to distribute the world’s information and entertainment content on the internet. The key is to buy internet companies when they are working to empower their user base and to sell them soon after they shift to protecting their own interests.”
That same principle holds true today and I can say for certain that whichever major Internet company figures out how to become a “defender” of privacy and focuses on empowering their user base rather than exploiting their user base will be the biggest winner over the next five years. Knowing that Google’s Chairman has been a big part of the Obama Administration and knowing Microsoft’s history of run-ins with the government and its aversion to having any further run-ins with the government makes those two companies awfully suspect. Amazon and Facebook seem like they are in a great position to take the lead on this user-empowerment concept. Apple’s somewhere in the middle of that spectrum.
Perhaps the best trade on this NSA privacy invasion controversy is Booz Allan, which is the government contractor where the whistleblower, Edward Snowden, worked and which gets nearly 100% of its revenues from the government. The stock was up 50% in a straight line before the recent news about this caused a 5-10% pullback. I’d expect BAH is headed into the single digits in the next couple years.
Finally, it’s important to remember that this could lead us into a new phase in this economy/society/government. There are Revolutions– economic, social, technological and political– going on around the world all the time, constantly. I call all of what I’m talking about here “Revolutionomics.” One of the keys to being a successful investor and protecting/growing your capital is to recognize the Revolutions as they’re happening and getting ahead of their curve. Stay tuned because Revolution Investing just got a whole lot more important than ever before.
