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Success in the Technology Business: Stocks or Entrepreneurship?

The technology business can involve different paths to success, but most of those paths rarely lead anywhere except to bankruptcy and discouragement.  These businesses are so complex and difficult for many of us to comprehend that we often simply give in to the hype that permeates the industry.  We are exposed to ideas in the media about where technology is headed and what we must do to profit off of it.

True entrepreneurs know that hype and traditional wisdom are rarely worth listening to.  A recent article claims that people should consider buying stocks in businesses such as Apple and Google as a strategy for getting rich.  They claim that Apple and Google are going to make a lot of money in the future and therefore will be big winners in any investor’s portfolio.  There are a few flaws with this idea that limit the success of these investments.

A Business’s Financial Success Has No Bearing on its Viability as an Investment
I understand this may be counterintuitive.  The truth of the matter is that if you want to be successful in the stock market, you must find discrepancies in a company’s actual (or intrinsic value) and the perceived value of the stock at the time.  You must also bank on the fact that that discrepancy will be eventually corrected, which doesn’t always happen.

The problem with popular, publicly traded technology companies such as Google and Apple is that everyone already thinks they are worth a lot of money.  When business improves, the stock price often increases beyond its intrinsic value.  This often means that companies are often worse investments after they are more successful, only because their success creates hype that leads to unrealistic expectations for investors.  Buying inflated stocks is always a foolish investment strategy.

Never Follow a Pack of Fools on Their Quest for Easy Riches
We have all heard the idiom “A fool and his money are soon parted.”  It couldn’t be truer.  Perhaps the biggest fools of all are the ones who give into the conjecture of others who clearly don’t understand what they are talking about.  Others often listen to the business suggestions of a broker or advisor who clearly has a biased interest.

Ever since the dawn of Microsoft’s era over twenty years ago, investors have considered the technology industry to be built on a foundation of gold.  They believe that if they read the news to identify the biggest technology company they have identified the most profitable opportunity anyone could consider.  Everyone who buys stock in Google thinks they are a genius.  Of course, probably 50% of investors hold stock in Google, so the chances of them all becoming millionaires only exist in the minds of the na├»ve.

How is Money Really Made in the Technology Business?
The most successful companies are the most innovative.  I doubt we would find anyone in the world who would disagree.  When it comes to making money, the next piece of the puzzle is recognizing innovation.  If you want to profit from technology you must begin by understanding the nature of the business, rather than giving into conjecture.

Whether you choose to start your own business or invest in someone else’s, you must identify an idea that no one else has appreciated.  Companies such as Google and Apple are no longer untapped opportunities to be superior investments.  My suggestion is to use social networking groups to identify new technology businesses that are starting to catch on but have not yet created the hype that will create exponential growth in a few years.

However, you must always be realistic about how long it will take for your investment to pay off.

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