Ceilings and Floors, high growth, high value businesses

Twitter

The question about all these high growth, high value businesses (paper value) is what happens when the tide changes.Twitter
One of the features of a pyramid scheme is when there is more money made from on boarding new customers than selling the product. There is a parallel to the capitalisation of these businesses. The *promise* of new customers is a major factor of the valuation rather than the ability to *do* business; transact value.
If you’re a smart investor you can ride this bubble of value; the hype of growth, and get out before it turns. But the money made is *not* out of any substantive value created. …and it comes from somewhere (the unsophisticated investors).
Twitter just had 3bn wiped off its valuation (that was inflated to begin with). What there is to think of is who’s is winning and who is losing here.
Understanding systems, the knowledge to grok (really understand and ‘get’) what is going on is a huge asset in these times.
As Robert Kiyosaki puts it “knowledge is the new money”. At least when you have an integral understanding of the forces in the market, not just interact with the ‘product’ you have a chance of either using these forces to develop your position or avoid the shell game.

 

Twitter’s shares plunge more than 13% after the firm warns it will take time to attract new users.

Alan Froggatt

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