When I started my career on Wall Street in the 80′s, I remember reading everything I could about Peter Lynch and his “invest in what you know” strategy. Peter managed the Fidelity Magellan Fund from 1977 to 1990, during which time the fund’s assets grew from $20 million to $14 billion. More importantly, Lynch beat the S&P Index in 11 of those 13 years, achieving an annual average return of 29%.
Two of his most successful investments of all time were Hanes (yes, the same one Michael Jordan pitches) and Dunkin’ Donuts. Lynch invested in Hanes in the 1970s because his wife bought and loved its new L’Eggs pantyhose line — the first department-store-quality pantyhose sold to American women via supermarkets. According to Lynch, “I did a little bit of research. I found out the average woman goes to the supermarket or a drugstore once a week. And they go to a woman’s specialty store or department store once every six weeks. And all the good hosiery, all the good pantyhose is being sold in department stores. They were selling junk in the supermarkets. They were selling junk in the drugstores.” Lynch knew Hanes had a winner. L’Eggs became a huge success, and Hanes became Magellan’s biggest position. He did the same with Dunkin’ Donuts, “I loved their coffee and so did all my friends, the lines were out the door.”
So what does all this have to do with Google+? If you’re reading this, you’re probably a user of social media and if you are, you’ve undoubtedly seen a good deal of negative sentiment surrounding G+.
Let me share a story with you. I’ve got a 13-year old daughter who’s in 7th grade. Six months ago she didn’t text, didn’t IM, and didn’t really spend any significant time in front of a computer or phone. Then she entered junior high school. Fast forward to today: She’s got the outline of her phone permanently etched into the back right pocket of her jeans and she spends a great deal of time at night with her friends on group IM chats. To those with younger (or no) kids who believe “that won’t be my child,” I’ve got one thing to say to you – good luck with that and let me know how it turns out.
Last week, I was lying on the floor of her room doing math homework with her with Rihanna blaring in the background (see my quote above young parents, it’s a new world – she’s a straight A student, who am I to argue with those results?) when I said to her “So you’re 13 now. I’m surprised you haven’t asked me for a Facebook page yet, how come?”
“Facebook? That’s for adults. We use Google +.”
My mind was fully blown. As a VC who is supposed to be spun up on trends in technology, this one caught me as off-guard as Jeremy Lin. I tried as best I could to hide my incredulity and asked her to show me her Google+ page. Sure enough, she and dozens of her friends had the whole thing dialed. Different circles for different classes of friends, the whole shebang.
Try wrapping your head around that. Just a few years ago, Facebook didn’t exist. Now nearly 15% of the people on this planet use it, except that is for my 13 year-old daughter and her group of friends. Frank Sinatra begat Elvis Presley who begat the Beatles. Teenagers eschewing their parents’ ways is as certain as the sun rising tomorrow. A year ago my kids bought all their music through iTunes. Now they both have Rdio accounts and unused iTunes gift cards from the holidays lie untouched on their desks.
Peter Lynch became one of the greatest investors in history in spotting trends before others. Are my daughter and her friends a blip or a trend? And if it’s a trend, what are the implications for Facebook and Google in the next year or two? What other social platform exists in a dorm room today that will displace these giants? One thing is for certain. Innovation is happening faster than ever and I’ll be watching my kids behavior closely to try and keep up with it.