Someone sincerely asked about Dendreon and DNDN the other day. Their response to my synopsis was; “Duh. You should’ve seen that one coming.” Isn’t retrospection wonderful? It is 100% accurate, at least for a moment. History is a series of best guesses continually re-evaluated by proclaimed experts. Surprises happen. Unpleasant ones are greeted with “Huh?“. Pleasant ones are greeted with “Yay!“.
Christopher Columbus was a hero. Columbus was a villain. Columbus was lucky. Columbus was clueless. At the start he seemed foolish and yet people funded him because they were desperate. He almost didn’t make it and was lucky to find land when he did. He discovered America, but he was looking for India. He opened the New World, which he thought was the other side of the Old World, to his side of the Old World. That was great for the Europeans and lousy for the Americans and Africans. At the end of his life his accomplishments were challenged and uncompensated (though asking for 10% of the wealth of the Americas might be considered a bit much even if that was the agreement.)
During my life his story has changed dramatically. When I was a kid we celebrated his success. Yay! Then came the realization of the implications from the original American’s point of view. Huh? (When did we first realize how many died from smallpox?) And of course now some people dismiss him because, “Duh. Of course if he sailed far enough west he was bound to run into something.” No one could guess the outcome at the start. We’re not done revising his story yet.
Columbus had investors. They were willing to take massive risks because they needed massive profits. Wars were expensive then too. Investing may look much more refined and civilized today, even amidst the current turmoil, but investing has always embodied risks. Investments may begin with hope and enthusiasm, but there is no way to know if they will end up as a “Duh.“, a “Huh?“, or a “Yay!”
American Superconductor, now known as AMSC, was building a business based on superconducting cable and its applications in powerlines, motors, and power regulators. It seemed like a good, long-term, power infrastructure investment. An auspicious opportunity arose and they bought a wind turbine company, that was in the right place at the right time to profit from the Chinese market. They started making hundreds of millions of dollars, “Yay!” from a non-mainstream division. Then the Chinese customer backed out “Huh?“, and the stock dropped 80%. During a chance inspection some AMSC technicians found some possibly pirated software running one of their customer’s machines. It turns out that there was a spy within AMSC who probably sold the technology to the Chinese, which meant the Chinese no longer needed AMSC and could actually compete with AMSC. Intellectual property theft in China makes many people say, “Duh. Didn’t you see that one coming?” This small company is now a prominent case in the Chinese courts over international patent protections. How did my little investment end up in the middle of such a large news item? I can’t guess which way it will go. AMSC is asking for over $1,000,000,000. In the meantime, the Chinese competitor can’t effectively sell outside China. Stay tuned.
Dendreon continues to make more money every quarter. They too are making hundreds of millions from a cancer vaccine, a technology that is so disruptive that it challenges the chemo and radiation industries. It appears to be more effective, cheaper, has far fewer side effects, and can possibly treat many more cancers. “Yay!” So, the stock, DNDN, should be trading high and at a premium, but it is not. It is barely trading above where it was before the FDA approved the treatment. “Huh?” The barrage of negative press is astonishing. Instead of celebrating a victory on the War on Cancer, the data are challenged. An earnings miss dropped the stock 80%. As I described it to my friend, some speculate that the negative press exists because solitary upstart Dendreon is challenging a crowd of multi-billion dollar corporations. My friend’s was response was, “Duh. Of course they’ll use every tool, ethical or not, against Dendreon. You should’ve seen that coming.” DNDN has become a story stock. In the meantime, I’m selling depressed stock to pay bills as the company grows.
MicroVision’s story is a long series of anticipated “Yay!” followed by”Huh?” followed by “Duh.” and repeated. The story looks good (the prototypes are awesome), and better news is about to be announced (memoranda of understanding are released with major companies), which fall through for some reason (poor assembly techniques, exclusive contracts are made and then reneged, technologies are lacking and are found to be too expensive). In retrospect, the various products and projects begin with enthusiasm, stumble into some unexpected pothole, and a chorus of “Duh.” arises. In retrospect I should’ve paid more attention during that tour of the Nomad assembly line. I should’ve asked more about the cables tethering the mobile devices during the demos. The company announces earnings on Monday. Maybe they’ll finally have some news that’s good enough to move the stock. Forget being down 80%. MVIS has dropped much more than that over the years. Despite that, demand may be high. I’ve seen plenty of evidence that there are crowds of possible investors waiting for that right bit of news.
It is easy to get demoralized when surrounded by a chorus of “Duh“s. Sometimes the chorus is right. Was the chorus from any Greek tragedy ever written to be wrong? In the real world though, anything can happen. We are each presented with choices. We choose. We take our chances, and then we have to live with them. We hope for “Yay“s and shouldn’t be surprised by a few “Huh“s. The “Duh“s are frequent. “I told you so” is a common theme, especially during troubled times.
The stories of AMSC, Dendreon, and MicroVision directly affect my life. My investing life is very public, and a choice I made when I decided to write my book, Dream. Invest. Live. I lay out the stories here because much of what is written about investing is abstract and theoretical. Specifics are always about the past. The future is described in ambiguous generalities. My portfolio has become a real world example. The stories of those three companies are only part of my story. I’ve maintained a diversified portfolio, as conventional wisdom recommends. And yet it has hit a poorly timed decline. Diversification is an acknowledgement that it is impossible to always pick winners, “Duh!“, and investing is an expectation that at least some choices will be winners, “Yay!“. It is easy to get agreement that the odds of everything succeeding is very small “Duh.“, but so are the odds of everything failing – though there are days when it feels like I may be in the midst of that.
Earlier this month I consulted with myself. My list of projects is long. Each may be able to provide me with a sustainable and thriving lifestyle, but it is impossible to predict which will be successes. The odds that everything will fail is very small. The odds that everything will succeed is very small. What is most likely is that something good will happen. There will be “Huh“s and “Duh“s, but with this much going for me, there will also be enough “Yay“s to make it worth all of that effort.
Stay tuned for that story.