The Next Big Thing

The tech workers that started at YHOO, EBAY, AMZN, AAPL and GOOG in the fall of 2002 timed the tech market superbly. The probably got a decent amount of stock options and a slightly below average salary. These companies were lean, reorgnized and focused after the 2000-2001 tech massacre. The fortune seekers were long gone, back to the bigger industrial corporations, famous consultancies or back to school for their MBAs.

All these companies saw their stock prices hit new lows in October of 2002. In March 2003 the new bull market took off and over the past - almost 3+ years - we have seen stock appreciations of 3-10x (GOOG probably 50x). The folks that exited in January 2006 nailed the high of all these companies.

This fall we'll see the 4-year anniversary of the 2002 October bottom and since most stock option plans run for 4-years I'm forseeing a tech worker exodus in the fall. One reason why the Yahoo! board approved 8MM new stock options to Semel and another 6MM to four key executives. But will the regular techie get the same kind of wind fall? I doubt it. These days stock options needs to be expensed with a clear impact on earnings. One of the reasons why tech has been down since January and will keep going down.

Big companies don't need to be generous with stock options since the market is flushed with MBAs that care more about salary and career paths than taking risks. Anyone that got onboard AMZN, EBAY and YHOO over the past 2-3 years have seen their stock options move nowhere. Sure, they have been able to offload some of these (if they were smart) during the bull run until January 2006. But in essence, most of these guys are forced to stay and experienceing the darker side of being paid in options.

This creates a great opportunity and market for start-ups that can pick the most experience tech workers. Either lure them away from the bigger companies or grabbing the already exited.

But the real winner is the tech worker that is one the sidelines. A position that is not really thought so much of in the job market but is a sound strategy in the financial markets during times of lackluster trading. The bigger firms will have to pay more to retain their stars while the start-ups are in dire need of smart entreprenurial experience. The compensation is going up.

The key is to figure out where the big money is going and stay ahead of that stream to benefit from it once it starts moving in your direction. Big tech is still in a downtrend and I think we can expect another drop since the Fed is clearly going to push the inflation down and take consumption with it. That's a great envirtment for innovative start-ups to stay focused, worker hard and build value.

People tend to forget that all the innovative work that we have seen from these companies started as ideas back in the beginning of this century. The bet on search, pay-for online music and movies, VoIP, messaging, webmail et cetera happened back in 2002. The next big thing was the social networking sites but they happened outside of big tech and where later aquired by the likes of YHOO, GOOG, Ask, News Corp, MSFT et cetera.

So what is the next big game-changing innovation? That is not clear. There are a few emerging trends but nothing that is monitizable as of yet which supports my hypothesis that we'll see big tech down for the summer until something tangible matrializes.