Is LinkedIn our Decade’s Pets.com? Today, Obama visits the Company Headquarters
Several years ago, when I taught at a business school, some colleagues and I hit upon an investment strategy: Figure out the hot and trendy industry among MBA’s, wait a year, then sell those companies short.
If you would have followed this strategy, here are the companies and industries you would have sold short and when: (i) e-commerce in 1999, (ii) business-to-business e-commerce in 2001, (iii) the Segway (motor scooter) in 2002 (yes, for a time many MBAs thought that this was the new new thing – the product that would “transformationally change” the way we live and work), (iv) real estate in 2006, and (v) solar companies in 2007. Although I haven’t researched it, I’m pretty sure that the same strategy would tell you to sell “plastics” short in the late 1960s.
Meanwhile, in picking hot, new industries government seems to be about two or three years behind MBAs. For instance, Solyndra received its loan guarantees in 2009, and in May, 2010, President Obama made his famous visit to the company.
Although I no longer teach MBAs, I have several friends who still do. So what’s the current hot, new industry among MBAs? Without question, “social networking.” However, even this industry is starting to lose cachet. In terms of trendiness among MBAs, it probably hit its peak about a year or two ago.
Two weeks ago, the CEO of LinkedIn published an essay in Fortune Magazine. I couldn’t help but notice how much he sounds like the MBAs I taught in 1999 – and how much the promises of social networking sound like the promises that were made about e-commerce in 1999. Here are some passages:
The technology revolution has upended industries and career paths at an unprecedented pace. Economic transitions that once took centuries (think agrarian to industrial) or decades (think industrial to information), are now taking place over only a handful of years. Classic economic theory would suggest that when Amazon overturns Borders or Netflix sinks Blockbuster, productivity gains manifested by these next generation companies should enable the displaced employees to find work elsewhere and add incremental economic value to the system. That’s clearly not happening.
We need to make the pace of technological change work to fix the same problem that it helped create. This will come through the development of an economic graph.
Most of us are by now familiar with the value generated by the social graph concept popularized by Facebook, the professional graph developed by LinkedIn, and the interest graph implicitly manifested by Twitter. What if we were able to extend that thinking to the economy itself and developed an economic graph?
Today, President Obama will visit the headquarters of LinkedIn. He might want to be careful about overselling the promise of the social-networking industry. He might want to temper any claims about the future success of LinkedIn.