However, over the last few years Spotify has been making moves that could threaten this open ecosystem. If a consumer wants to switch podcast players they can also do so while taking their subscriptions with them. It is equally beneficial to consumers who get to choose among hundreds of independently developed podcast apps to find the one with the best features for them.
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This arrangement is beneficial to creators because it gives them full freedom of expression without having to worry about the censors on platforms like YouTube, and it gives them complete freedom of choice on how to monetize their work. Once published listeners can consume their favorite podcasts from any RSS reader, including many specially made for podcasts like PocketCasts and Overcast. Anyone can start a podcast by publishing an RSS feed on their website without having to rely on a central platform (thus nobody can “ban” your podcast).
Not only do they provide great entertainment value as an alternative to audiobooks, but they are also one of the last open ecosystems on the web. This is a well known phenomenon called the value premium and is the basis for value investing. In other words, values stocks (those with low multiples) outperform growth stocks (those with high multiples). So counterintuitively, it seems like you’re better off investing in cheap dying stocks over expensive growth stocks. Most likely investors are overestimating how quickly renewable energy will make oil obsolete leading to oil stocks being undervalued and having higher returns. Ben Felix, 2020Ī second example is that you would have made more money holding oil stocks instead of technology stocks over the time period between 19.
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Over this period, a dollar invested in the oil index grew to $134, while a dollar invested in the software index grew to $76. The oil industry on the other hand has seen a massive decline in market capitalization, from nearly 15% of the US market in 1971, to about 3% at the end of 2019. Since the approximate start of the age of information in 1971, the software industry has grown more than any other, from basically non-existent in 1971, to the largest industry by market capitalization at the end of 2019 at nearly 15% of the US stock market. Additionally, bad companies could be good investments if you can get them cheap enough. The moral of the story is that great companies are not necessarily great investments if you pay too much for them, and when new technologies come out investors get excited and do just that. Similarly, they overestimated how well car and airplane companies would do causing those stocks to become overvalued and have lower returns. Investors had overestimated how quickly the railway companies would become obsolete leading them to value those stocks too low. Despite going from a 63% to 1% share of the stock market capitalization between 19, it still managed to outperform innovative new transportation technologies like cars and airplanes during the same time period. To illustrate the point, Ben uses the example of the declining rail industry. Over that time period, rail stocks beat the US market, road transportation stocks, and air transportation stocks. It is the ultimate example of a declining industry. Historically investors have overestimated the future growth of new innovative firms and underestimated how long it would take for dying industries to become irrelevant.įrom 1900 through 2019, rail companies declined from a 63% share of the US stock market to a less than 1% share. In the video he argues that based on the historical data it is a bad idea to invest into exciting new technologies, and the companies that create them.
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