Fribble Wednesday, January 12, 2000

The Highlander Myth

By emferguson

One of the premises of the Highlander movies was that when all the immortals were done fighting, there could "be only one." I might have thought they were talking about the stock market when I started studying it last spring, because much of the talk seemed to be which company would survive. Barnes & Noble or Borders? Digital River or Microsoft or AOL? or CDNow? And so on.

As this list makes evident, these comparisons are mostly for new, Internet-related companies. Since I was working in the Internet and wanted to invest in what I knew, I thought it vital I pick the "one" that could survive. Much of what I read made me fear the wrong "immortal" would leave me with a headless portfolio.

Fortunately, I worked many years at a historic site before I worked in the Internet, so in one of my lucid moments I thought about how the same question of immortality must have been asked of the "old" economy when it was new. Which would survive, Coke or Pepsi? Interestingly, both seem to be going strong. How about Burlington Northern or Union Pacific? Again, both trains are rolling. Ford, GM, and Chrysler are all still there. Who survived the vicious struggle between Westinghouse and GE? Both. Pillsbury and General Mills. Amoco and Exxon. Goodyear and Firestone. There's a pattern here.

In what was my first financial insight, I realized how badly I could be led astray by the wrong question. Okay, not all the "new" economy high-tech Internet-related companies are going to survive, but the idea that there will be just one immortal bookstore, portal, etc., this idea that fills many stock market message boards, is probably as wrong as assuming there can be only one railroad, car maker, or miller. I like my odds of picking good stocks a lot better now.