3 ms·

As the author points out, by the same logic Apple and Google have approximately 10 years left, which seems about as dubious as... well, Microsoft having 4 years

by kgrin 16y ago

As the author points out, by the same logic Apple and Google have approximately 10 years left, which seems about as dubious as... well, Microsoft having 4 years left.

btilly 16y ago
I also point out that the market tends to take its projections of near term events much more seriously than more distant ones. Nobody really thinks that Microsoft will disappear quickly. But they are going to be losing major revenue streams in the fairly near future. Google's going after the Office cash cow right now. For low end users they have a compelling argument. High end users won't switch, but to threaten the revenue you just have to lose most people. For another threat, the first video at http://37signals.com/svn/posts/2380-you-couldnt-pay-me-to-work-for-ballmer http://37signals.com/svn/posts/2380-you-couldnt-pay-me-to-wo... points out that Steve Jobs thinks that the PC in its current form has a fairly limited time horizon until people switch away from it in large numbers. That would kill Microsoft's operating system margins. Watch the video to see how unprepared Steve Ballmer is to deal with this threat.
arthurdent 16y ago
I understood the author to be saying that the market doesn't have the ability to predict out beyond 10 years. The ~10 year prediction for AAPL and GOOG is less of an indication that those 2 companies will fall off a cliff in 10 and more of an indication that in that timeframe the businesses/economic environment could change, or maybe that they're discounting future cashflows very heavily in an uncertain rate environment. On the contrary, < 4 years for MSFT is potentially within the ability of the market to predict and more likely an indication that the market actually believes that MSFT on its current trajectory won't hack it. A lot of people might agree that trends in open source software, distributing computing away from home PCs to cloud applications, and their inability to compete effectively for search or hardware makes their CURRENT business a dying one. On the other hand, MSFT has smart people and money and I wouldn't doubt their ability to reinvent themselves and start competing in new markets.
- kgrin 16y ago
  There's really nothing magical about 10 years vs. 4 - the further out you go, the more you have to discount the predictive value. Is there some evidence that, in general, there's market skepticism about MS' long-term future? Sure. But this "4-year" business is just absurd.
jerf 16y ago
If the market thought Apple would make 50B a year every year until the heat death of the universe, it would still discount that future revenue to a finite and small value. In fact saying they'll make 50B a year forever and ever amen, combined with exponential depreciation, still means it gets discounted to a finite and relatively small value. Don't literally read the 10 years; it basically translates into "The market thinks Google and Apple have extremely bright, shining futures." 4 years is also not necessarily literal; for one thing I doubt either individually or collectively people are saying that Microsoft won't exist in literally four years. What it means is that the market thinks they are OK now but are in for decline; combine decline with future discounting and they get a smaller future-earnings value. You have to consider everything here through the prism of future discounting. Future discounting is pretty fundamental. This is an interesting way to look at things when understood properly; there's nothing intrinsically wrong with collapsing statistics like this because it's the only way for human brains to get a grip on stuff like this. The full totality of detail is too much.

by kgrin 16y ago

As the author points out, by the same logic Apple and Google have approximately 10 years left, which seems about as dubious as... well, Microsoft having 4 years left.

btilly 16y ago

I also point out that the market tends to take its projections of near term events much more seriously than more distant ones. Nobody really thinks that Microsoft will disappear quickly. But they are going to be losing major revenue streams in the fairly near future. Google's going after the Office cash cow right now. For low end users they have a compelling argument. High end users won't switch, but to threaten the revenue you just have to lose most people. For another threat, the first video at http://37signals.com/svn/posts/2380-you-couldnt-pay-me-to-work-for-ballmer http://37signals.com/svn/posts/2380-you-couldnt-pay-me-to-wo... points out that Steve Jobs thinks that the PC in its current form has a fairly limited time horizon until people switch away from it in large numbers. That would kill Microsoft's operating system margins. Watch the video to see how unprepared Steve Ballmer is to deal with this threat.

arthurdent 16y ago

I understood the author to be saying that the market doesn't have the ability to predict out beyond 10 years. The ~10 year prediction for AAPL and GOOG is less of an indication that those 2 companies will fall off a cliff in 10 and more of an indication that in that timeframe the businesses/economic environment could change, or maybe that they're discounting future cashflows very heavily in an uncertain rate environment. On the contrary, < 4 years for MSFT is potentially within the ability of the market to predict and more likely an indication that the market actually believes that MSFT on its current trajectory won't hack it. A lot of people might agree that trends in open source software, distributing computing away from home PCs to cloud applications, and their inability to compete effectively for search or hardware makes their CURRENT business a dying one. On the other hand, MSFT has smart people and money and I wouldn't doubt their ability to reinvent themselves and start competing in new markets.

kgrin 16y ago
There's really nothing magical about 10 years vs. 4 - the further out you go, the more you have to discount the predictive value. Is there some evidence that, in general, there's market skepticism about MS' long-term future? Sure. But this "4-year" business is just absurd.

jerf 16y ago

If the market thought Apple would make 50B a year every year until the heat death of the universe, it would still discount that future revenue to a finite and small value. In fact saying they'll make 50B a year forever and ever amen, combined with exponential depreciation, still means it gets discounted to a finite and relatively small value. Don't literally read the 10 years; it basically translates into "The market thinks Google and Apple have extremely bright, shining futures." 4 years is also not necessarily literal; for one thing I doubt either individually or collectively people are saying that Microsoft won't exist in literally four years. What it means is that the market thinks they are OK now but are in for decline; combine decline with future discounting and they get a smaller future-earnings value. You have to consider everything here through the prism of future discounting. Future discounting is pretty fundamental. This is an interesting way to look at things when understood properly; there's nothing intrinsically wrong with collapsing statistics like this because it's the only way for human brains to get a grip on stuff like this. The full totality of detail is too much.