We say it here often, but it's a mantra worth repeating: If you invest in stocks, you'll be wrong. If you invest in Rule Breakers -- disruptive yet frequently misunderstood enterprises -- you'll be spectacularly wrong, perhaps even to the point of losing 90% or more of your investment.
Scared yet? You should be. Rule Breaker investing isn't for the faint of heart, and it's too often easy to be small-"f" fooled just as I was when I waxed bullish on Zynga (Nasdaq: ZNGA ) in July.
I've since become convinced the social game developer that's transformed Facebook into a playground for more than 200 million is a Faker Breaker, the nickname we use at Motley Fool Rule Breakers for a business that displays outrageous but unsustainable, indefensible growth.
Several things bother me:
- Zynga treated its IPO as a PR event rather than an opportunity to fund growth initiatives.
- Electronic Arts (Nasdaq: ERTS ) is performing as well or better than Zynga with the Sims Social, a Facebook version of the popular PC game.
- A move to bring more games to portable devices and Google's (Nasdaq: GOOG ) Google+ social network has done little to boost usage.
Contextually, I'll add that my own experience with Zynga games bordered on the obsessive. After punishing my wrists from dozens of wasted hours clicking through Empires & Allies, I determined my only choice was to go cold turkey.
Once I did, I recognized how annoying social gaming can be; endless streams of requests revealed the digital "Kramers" in my Facebook circle. They'd pop in demanding time and attention in a decidedly un-funny fashion, unlike Michael Richards' obtuse character from 90's hit sitcom Seinfeld.
Yet none of this bothers me so much as this tweet from Ian Marsh of game developer Nimblebit. Click through to see the graphic for its blatant ripoffedness. (Yeah, I know. Not a word. Sue me -- I like portmanteaus for making a point.)
To his credit, fellow Fool Patrick Martin long ago pointed out troubling patterns in Zynga's game designs. Now it seems the company is using shamelessness as a competitive weapon. It's pitiable, borderline absurd, and possibly the clearest sign yet that Zynga is anything but a Rule Breaker. I'm backing up my view with an "underperform" CAPScall made earlier today.
What makes for a true Rule Breaker? The Motley Fool dug into precisely this topic in a new report entitled "Discovering the Next Rule-Breaking Multibagger," which profiles a healthcare innovator preparing to break out. Click here to get full access now -- the research is 100% free for a limited time.
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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.