By Bill Mann (TMF Otter)

ALEXANDRIA, VA (December 27, 1999) -- It's funny, but the closer we get to the Millennium Eve (and like Dick Clark, I'm celebrating it THIS new year, historians and their technicalities be damned) the smaller an event it seems. It'll be just another night -- we're not going to get some deeper insight, wisdom, or feeling. And unless the computer bugs or cranky people out there get their way, it will be special only in its ordinariness. And as the day is nigh, many of the big-money, big-name events are finding no takers. People are choosing not to blow $500 on a ticket to mingle amongst a bunch of strangers and see Tony Orlando perform. Instead, many are deciding that the place they want to be that night is with their loved ones in nice, cozy places like home, or Times Square.

A new millennium. How big is that? Can you fathom the change in life that has taken place in the last millennium? No, it's probably too much -- too great a span of time. None of the companies that we now designate as Rule Makers existed at the beginning of this millennium, but more notably, with the possible exception of more primitive pharmaceuticals, none of the technologies or services they provide were even conceived of at that time. We are exiting a thousand year frame when things we would not even consider technology anymore were developed; a time frame in which mankind started with fire and closed with nuclear power, started with horses and ended with space flight, started with barter and ended with electronic commerce. It's probably asking too much to conceive of commerce in this length of time as it relates to Rule Makers.

So let's try a century instead. And we'll look at it from a Rule Maker perspective, because we hold as self-evident that we have found the companies that will remain important for the foreseeable future.

But is the future foreseeable at all? I've been struggling recently with my own roots as a fundamental stock analyst (as compared to a technical one) for the sole reason that there are simply too many external factors that make determining intrinsic value an exercise in educated guesswork. That's OK, but I've also found that the current economic condition has a great deal to do with the brightness or glumness of one's forecast. It's easy to forecast continued 15% compound annual growth during boom times and much more difficult to do so when we are in an economic downturn. But we all know that there are times when the economy is good, and times when it is bad. We can point to these fluctuations in the past, but have no idea where they will happen in the future, to what segments, and why.

The Rule Maker Portfolio is made up of a series of companies that comprise a central component of the modern economy. They are big enough to seem inevitable. But the majority of these companies did not exist at the beginning of this century, and several have not reached what would be considered "middle-age" by human standards.

Rule Maker (founding date):
Pfizer (1849)
Schering-Plough (1850)
American Express (1850)
Coca-Cola (1886)
T. Rowe Price (1937)
Gap Stores (1969)
Intel (1969)
Microsoft (1975)
Cisco (1986)
Yahoo! (1994)

Foolish Four (founding date):
Eastman Kodak (1880)
Delphi (1888, purchased by GM, spun off in 1999)
General Motors (1908)
Chevron (1911, part of Standard Oil)
ExxonMobil (1911, part of Standard Oil)

At the beginning of this century, nine of our fifteen companies did not exist. Of the others, perhaps only Pfizer (NYSE: PFE), American Express (NYSE: AXP), and Kodak (NYSE: EK) had anything approaching a sizable market. One hundred years, not a very long period of time. At the outset of this time frame we had no airplanes, no cars, no television, no commercial radio, no computers, no air-conditioning, no mutual funds, no credit cards, no camera technology cheap enough for the public to own.

If we break down the century into ten 10-year segments, we can begin to see just how fast things have changed since 1900. Ten years ago, the Internet did not exist in a commercially usable fashion. In fact, modems were themselves quite revolutionary. Microsoft (Nasdaq: MSFT) was still a bit player in a small growth segment. Even American Express was still largely perceived as the charge card of the wealthy. Kodak still made those 110mm click and pray cameras. The Gap (NYSE: GPS), the least technological of the Rule Makers, still had those funky "Fall into the Gap" commercials, but no Banana Republic (which was a separate company), Old Navy, or GapKids & BabyGap.

And now we're on Internet time. Heck, by Internet standards, eBay (Nasdaq: EBAY), which had its IPO in 1998, seems ancient. And we're trying to project what the economy will look like and what companies' products will be used 10 years from now. Quite a project. Could anyone among us have predicted in 1992, when every suburban corner seemed to be getting a new book superstore of the Barnes & Noble (NYSE: BN) or Borders (NYSE: BGP) flavor, that a little upstart with no outlets anywhere but cyberspace would be whipping them up and down only seven short years later. Given the rate of growth by Amazon (Nasdaq: AMZN), those superstores and their tremendous operating overhead seem a little bit like albatrosses now, don't they?

Companies that gain market supremacy tend to stay there, but we really have no idea what commerce is going to look like in the future, do we?

So what is the point of projecting revenues. And why shouldn't we then just buy the trendy companies and sell them when they go up high? Well, because there are degrees of certainty. We are pretty certain that Coke is not going to disappear. Nor is Pfizer. But how about Priceline.com (Nasdaq: PCLN) or JDS Uniphase (Nasdaq: JDSU)? Do they have business models that not only make sense now but also will withstand the changes in the economy? And without knowing what those changes are, how do you estimate their growth?

The answer is that you cannot, but you can guess. This comes down to the core rationale for Rule Maker companies -- that they show a sustained history of being the best at what they do (we're putting Yahoo! on Internet time here, since a year is an eternity on the Web).

There's a saying that there is no share price too low for a bear, and none that is too high for a bull. The reason this is true is that a bear believes a business will fail, a bull that it will grow. Over an infinite amount of time, both are likely to be correct. But our concern is shorter than infinity, shorter than a millennium, even shorter than a century. It is the next decade, and if we look at the changes from this previous decade, we see that this amount of time is tough enough to predict.

A couple of announcements...

Still no December $500 investment. We're waiting for our most recent $500 deposit to be credited to our new American Express Brokerage account. Stay tuned.

And for Fools who have access to a television at mid-day tomorrow, tune in to watch Motley Fool co-founders David and Tom Gardner on CNN's In the Money. The show runs from 11:00 a.m. until noon (EST), and David and Tom go on-air some time after 11:30. They'll be sharing their Foolish perspective on investing and answering questions from around the country. If you want to ask a question or share a Foolish tale, give us a call at (800) 304-3638.

Finally, this is the last week of the Fool's 1999 Charity Drive, so you don't have much time left to donate. Click on over to our Foolanthropy home page and check out the charities involved in this year's drive. You'll undoubtedly find at least one that is of interest to you.

-Bill Mann, December 27, 1999 (TMFOtter on the boards)