In continuing my short sell of social media, I’ve been imagining Twitter and Facebook as holdings in a hedge fund manager’s portfolio.
In my amateur understanding of hedge funds: the goal is to reduce risk and maximize returns by investing in assets that move in the opposite direction. The magic is in finding the complimentary assets.
A very simple example: if you see long term growth in the US stock market – a hedge would have 50% of your investment in the bond market, for stock and bonds prices often move in the opposite direction.
How does this metaphor extend to social media?
I’ve got a couple projects that would be interesting within a service like Twitter and I’d like to hedge my investment (development time). The question is – where are the complimentary assets?
Or, who wins when Twitter stumbles?
If people stop sending messages via Twitter – where does that communication flow?
Facebook? WordPress.com? Movabletype? Tumblr? Posterous ?
Maybe. While they all offer a similar capability – they fell to similar (private, hosted, silos) to be complimentary.
WordPress.org – feels closer (free, open source, well documented, mature API). But, I have a hard time imagining people mass-installing WordPress in their own web space after having everything taken care of for them.
My favorite answer so far: Email.
What would your Social Media Hedge Fund portfolio be made of?
I’m not sure I’m fully on board with your hedging analogy, but just playing along I’m thinking my hedge would be something off line. To me it feels like the next “correction” in the online social space will be a migration out, not a lateral shift to something new. You should spend your 50% time building [yet another] a bike shop that serves beer or a whatever. Or maybe just hanging out at one? I’d join you. Either way, something socially transient. I don’t need to be hardwired to all you people all the time, right? Right. It’s totally due.
Full disclosure: I’m way too old to be right about this stuff. Consult your investment adviser before making any real hedging decisions.
Dave, hmmm, you might be onto something – here’s a t-shirt of the FailWhale being hoisted by bicycles