The 2004 prediction that made $320m

While the rest of the technology world was focused on Google’s search bar, one person was thinking about how networks were going to change the internet.

I’m excited this week to finally reveal my latest research, which is based on a big prediction by a cult technology visionary.

I don’t want to reveal too much detail right here. You can read all that in the report itself.

But as I wrote yesterday, this guy has made five huge predictions about the future of technology and society. Then, he’s built companies based on those predictions, and sold them for hundreds of millions of dollars.

Yesterday I wrote about his third prediction, from 1999, where he foresaw the emergence of cloud computing (and coined the phrase while he was at it).

Today I want to talk about his fourth big call, which added another couple hundred million to his net worth.

Human networks

His next big prediction came in 2004. Before I get to the prediction itself, allow me to set the scene: after the dotcom bust, Silicon Valley went into a slump for five years. Venture capitalists were refusing to fund consumer-facing internet companies.

The one bright spot was Google, which had figured out a genius new way to rank search results based on shared links between websites. People thought Google had cracked the problem of how to organise information online, and it was destined to become the dominant company on the internet.

At this time, our guru was obsessing over two obscure mathematical properties: Metcalfe’s Law, which says that a network gets exponentially more valuable as new nodes are added to it; and Reed’s Law, which says that for any group of size n, the number of smaller groups than be assembled is 2n. These laws predicted that 1. social networks would become very valuable over time, and 2. that there would be many different varieties of online social networks.

So while the rest of the technology world was focused on Google’s search bar, our guru was thinking about how networks were going to change the internet.

So he started building networks. In 2004 – when Facebook was still a glimmer in Mark Zuckerberg’s eye – he started Ning, a company which allowed groups to get together to build social marketplaces. (He later sold it on for $150m.)

Our man was on the lookout for other ways to build networks online. He was one of the earliest investors in Facebook – where he still serves on the board. He’s also backed, and served on the board, of big social network business Instagram and Groupon.

I know in 2016, it’s obvious that social networks are important. But 2004 is a long time ago. Back then, social networks must have seemed like a quirky idea. Even Google didn’t spot how important they would be until it was too late. By the time Google got its act together it was 2012, and they had missed the boat.

Our guru cashed in most of his early investment in Facebook last year, by the way. It made him around $160m.

The rise of social networking was the fourth of his big predictions. But the reason I’ve spent the last month researching and writing about him is his fifth and latest prediction.

He’s predicting that certain companies, with very specific characteristics, are going to “eat the world”. They’re going to colonise industries and make their early backers rich.

I’ve been strongly influenced by this idea – and I’ve found three tiny companies which fit the bill. To learn about the three companies whose share price could be set to grow by as much as 500% from his latest prediction, click here.

The Penny Share Letter is a regulated product issued by Fleet Street Publications Ltd. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Seek independent financial advice if necessary. Fleet Street Publications Ltd is authorised and regulated by the Financial Conduct Authority. FCA No 115234

Registered office 8th Floor, Friars Bridge Court, 41-45, Blackfriars Road, London, SE1 8NZ. Fleet Street Publications Ltd is registered in England and Wales No 1937374. VATNo GB629 7287 94.

[cfsp key=”footer-ps”]

You may like

In the news
Load More