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I've spent more than 35 years in global markets, and if there's one thing I've learned, it's that you never, ever, "dare" an innovator.
Lots of people have tried, and it usually backfires… spectacularly.
Profits, of course, flow in the aftermath, which is why you want to think very carefully before you dismiss the "underdog," as many investors are prone to do.
British Airways (BA), for example, famously tried to put Richard Branson's fledgling airline, Virgin Atlantic, out of business; they even went so far as illegally accessing Virgin's computer records and making pretext calls to confirmed passengers telling them that Virgin flights were canceled and that they should switch to BA.
Branson was, and is, an anti-establishment, stick-it-in-your face underdog who fought back with better service, better pricing, and a better customer experience. I asked him about that over dinner at Nobu in London years ago, and he said fighting back was only logical. Ultimately, BA admitted its improper attempts to prevent competition and paid $945,000 in damages, plus all court costs, to Virgin, which Branson then promptly distributed to Virgin employees.
Today, Virgin Atlantic is a multibillion-dollar operation with global relationships that continues to take market share from British Airways at every opportunity.
International Business Machines Corp. (NYSE: IBM) entered the personal microcomputer business in 1981 with the express intent of using an "open architecture" model – meaning other manufacturers could produce and sell related software and components without a license. The move was intended to bury arch-rival Apple Inc. (Nasdaq: AAPL) which was, at that point, a $200 million-a-year company.
The late Steve Jobs didn't think very much of the challenge, as you can see in this iconic picture from 1983. It was taken by French businessman, art collector, and photographer Jean Pigozzi, during a quick, Mac computer pre-launch trip to New York City… despite the fact that IBM was still making Apple CPUs at the time.
Jobs would go on to redefine entire industries by making a series of moves that only he could make. Phones, music, publishing… they're all visions emerging from the legacy of a man scorned for daring to think differently.
Apple reported annual revenues of $229.23 billion last year and, as I write, is within $10 a share of being the world's first trillion-dollar company.
Musk ripped into one of billionaire investor Warren Buffett's key investing tenets a week ago during an especially acerbic analyst call by calling investing in businesses with protective moats "lame."
Buffett, no slouch himself, responded that he still thinks "moats" – meaning deeply ingrained competitive advantages – are still crucially important.
Then, he stepped in it.
Buffett told Berkshire Hathaway shareholders during that company's annual meeting over the weekend that "Elon may turn things upside down" but that he didn't think Musk would "want to take us on in candy" – an ode to See's Candies, which he frequently cites as having deep protective moats based on customer loyalty and which Berkshire acquired in 1972.
Wall Street laughed, as did the mainstream press, but I've seen this playbook too many times to dismiss it.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.