Yuri Milner’s Wishful Thinking? Facebook, Google and Wikipedia Will Stay Dominant For Only 10 Years

Posted on March 10, 2013. Filed under: Companies, Economy, Private Equity, Technology, Venture Capital | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Yuri Milner, co-founder and chief executive officer of DST

Yuri Milner, co-founder and chief executive officer of DST (Photo: Forbes)

In an interview at the South by Southwest Interactive conference in Austin, Texas, Yuri Milner, the Russian investor whose early bet on Mark Zuckerberg’s firm made him a billionaire, said companies like Facebook, Google and Wikipedia will still exist a century from now because their services gain momentum the more people use them. “All three have amazing network effects,” said Milner, the co-founder and chief executive officer of DST. “Chances are that those are long survivors.”

Milner has long believed that the internet would develop into a “global brain”, which is often described as an intelligent network of individuals and machines, functioning as a nervous system for the planet Earth. He also has envisaged that the advent of the Internet of things and ever increasing use of social media and participatory systems such as Twitter, Facebook, and Wikipedia would increase our collective intelligence.

Richard Foster, the Creative Destruction author referred by Forbes as The Wizard of Innovation and speaker at China Leaders Forum, was in the 80s in a search for “the excellent company”, the all-seeing, all-knowing, all-wise company that made all the right moves in advance, and that made more money for its shareholders than any of its competitors. This was the permanent outperformer stock, the really good deal, he said. Foster looked at 4,000 companies over 40 years; he concluded there was no such company, and there never had been such a company! No company had been able to outperform the market for any substantial length of time. (GE once came as close as any, but didn’t do any better than the overall market index, Foster reflects). Somehow the market, managed by nobody in particular, was performing better than all the brains on the planet.

Why is it that no company can outperform the markets for a long time? Foster thinks there are several reasons, but the most important is something called legacy cost. All companies have legacy costs, which are created the moment a company makes a commitment of time or resources to a particular course of action. And when a company is challenged to do something new, to take a new course of action, it has a hard time abandoning its legacy costs. Companies argue that the incremental cost of making a slight improvement to an existing product or service is much better than the full cost of developing something new from scratch. In doing so, the company attempts to optimize between the old and the new. This takes the decision making power away from the customer, and it’s a bad direction to go in. Markets, however, just charge on ahead with the new, because new entrants don’t have any legacy costs to deal with.

Just last week, Facebook’s new News Feed made some welcome cosmetic changes. But it didn’t go very far in addressing the social network’s deeper issues. Fortune’s Kevin Kelleher talks about the vulnerabilities Facebook is facing since it went public. Facebook is facing more powerful competitors and two important yet sometimes contradictory mandates, to create a service that will engage its users, and to make money that will satisfy investors; Facebook’s presentation played down those facts. How intrusive these ads strike users will depends on the algorithms Facebook designs to insert them in feeds.

So while Facebook’s new news feed makes some cosmetic fixes that users are likely to welcome in time, they don’t go very far in addressing rising competition from newer social networks and the uneasy balancing act between users and advertisers. Those are the legacy costs Foster refers too, which new entrants that will grow into becoming new leaders never face. Legacy costs never stopped Wikipedia and Google from dethroning leading institutions called Britannic Encyclopedia and Yahoo!

To think that new companies will take a century to remove Facebook, Wikipedia or Google from their leadership positions is no more than wishful thinking; these firms have at most 10 years to milk their cows and make the big decision: change or die. While Milner appears not to have a vested interest in Wikipedia or Google, he might as well start cashing in on his already wildly profitable Facebook bet. Somebody in some garage is already building a better mousetrap.

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Edgar Perez, The Speed Traders Workshop 2012 Sao Paulo, Quoted by CNBC on Can ‘Trading on Tweets’ Really Make Money?

Posted on January 24, 2012. Filed under: Exchanges, Flash Crash, Practitioners, Strategies, Technology | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Edgar Perez, Adjunct Professor at the Polytechnic Institute of New York University and presenter at The Speed Traders Workshop 2012 Sao Paulo: How High Frequency Traders Leverage Profitable Strategies to Find Alpha in Equities, Options, Futures and FX

Edgar Perez, Adjunct Professor at the Polytechnic Institute of New York University

Edgar Perez, Adjunct Professor at the Polytechnic Institute of New York University and presenter at The Speed Traders Workshop 2012 Sao Paulo: How High Frequency Traders Leverage Profitable Strategies to Find Alpha in Equities, Options, Futures and FX, February 8th, BM&FBovespa, was quoted by CNBC.com on the note “Can ‘Trading on Tweets’ Really Make Money?“.

CNBC’s Antonya Allen pointed out that social media websites like Twitter and Facebook have become increasingly important to high frequency traders looking to anticipate market moves before they happen; however, she asked, could they eventually become as significant as traditional business news providers in the world of high speed trading?

Edgar Perez, author of The Speed Traders: An Insider’s Look at the New High-Frequency Trading Phenomenon That Is Transforming the Investing World, said he has not come across a trader who had made money from information supplied on social networking sites. In his book, Edgar Perez follows six high speed traders and examines how ultra fast trading could develop in the future.

“I would be very interested in seeing cases where people actually made money using information from Twitter. Remember there’s a lag there of time and with high frequency trading you want to make sure you connect directly and don’t have any third party providers for information,” Perez explained.

Mr. Perez is widely regarded as the preeminent speaker and networker in the specialized area of high-frequency trading. He has been featured on CNBC Cash Flow (with Oriel Morrison), CNBC Squawk Box (with Geoff Cutmore), BNN Business Day (with Kim Parlee), TheStreet.com (with Gregg Greenberg), Channel NewsAsia Asia Business Tonight and Cents & Sensibilities (with Lin Xue Ling), NHK World, iMoney Hong Kong, Hedge Fund Brief, The Wall Street Journal, The New York Times, Dallas Morning News, Los Angeles Times, TODAY Online, Oriental Daily News and Business Times. He has been engaged as speaker at Harvard Business School’s 17th Annual Venture Capital & Private Equity Conference, High-Frequency Trading Leaders Forum 2011 (New York, Chicago, Hong Kong, Sao Paulo, Singapore), CFA Singapore, Hong Kong Securities Institute, Courant Institute of Mathematical Sciences at New York University (New York), Global Growth Markets Forum (London), Technical Analysis Society (Singapore), TradeTech Asia (Singapore), FIXGlobal Face2Face (Seoul), and 2nd Private Equity Convention Russia, CIS & Eurasia (London), among other global forums.

The Speed Traders Workshop 2012 Sao Paulo will reveal how high-frequency trading players are succeeding in the global markets and driving the development of algorithmic trading at breakneck speeds from the U.S. and Europe to India, Singapore and Brazil. The Speed Traders Workshop 2012 Sao Paulo kicks off a series of presentations in the world’s most important financial centers: Dubai, January 25; Seoul, South Korea, March 28; Kuala Lumpur, Malaysia, April 11; Warsaw, Poland, May 11; Kiev, Ukraine, May 18; Singapore, May 26; Shanghai, China, June 6; Jakarta, Indonesia, June 13; Mexico City, Mexico, July 27; Hong Kong, August 4, and Moscow, Russia, August 10.

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