WORLDVIEW: Amazon, AliBaba going head-to-head; the world’s gorilla war has begun

Market veterans love telling us the four most dangerous words for investors are "this time it's different". They have mostly been right. In every market bubble since 1929, optimists have invented justifications for eye-popping share prices – with disastrous consequences..But that well used saying has never before had to contend with the dangerous trifecta of the Internet, Big Data and the Fourth Industrial Revolution. These irresistible forces are turning the business world on its head – disrupting entire industries, providing outsized rewards to the early movers and punishing laggards and those slow to adjust..My own background provided a privileged vantage point from which to view the forces shaping these seismic shifts..___STEADY_PAYWALL___.In 1997 when I poured my savings into creating a site called Moneyweb from a room above my garage, media compatriots thought me mad. As it turned out, the timing was opportune; within a couple years this tiny business was valued by a dot-com obsessed market at a pre-IPO valuation of R75m – and more than double that on the first day of listing..Looking back, most of what we believed during the heady dot.com era has come true. The Internet really has changed everything. What we didn't appreciate then was the potency of a developing "Gorilla Game" where outsized benefits accrued to market leaders..This concept is better understood today. Exponential growth in the revenue growth of the gorillas, together with their slavish belief in continuous reinvestment, has slowly convinced investors to discard traditional profit-based analysis matrixes..The power of bulldozing exponential growth is their ability to use their scale to trim margins in a way that established competitors find impossible to follow. Investors get this. A recent example was how the price of food distribution stocks tanked when new age retailing gorilla Amazon.com acquired WholeFoods..It is still relatively early days for the gorillas. Thus far they have merely dabbled in areas where others of their species play. Or challenged each other only through investments via proxies. Geography has also helped with the US giants (Amazon, Alphabet, Apple, Facebook, eBay) operating away from their Chinese counterparts (TenCent, Baidu, AliBaba)..But we got a reminder that the world is a finite place when the first heavyweight battle started in South East Asia this week. With their regional headquarters in Singapore, Amazon and AliBaba (through 83% owned Lazada) are going head-to-head in a market of 600m people who currently buy very little online..Amazon's efforts in Asia had previously been focused on India where it is number two in the potentially massive market behind the local operation Flipkart whose recently acquired shareholders include TenCent, SA's own Naspers, eBay and Microsoft..Africans understand that when elephants fight, it is the grass that suffers. The saying applies just as well to the world's exponentially growing corporate gorillas. In this case, it is the gorillas' old world competitors who will be hurt most. And from the newspaper industry's experience, for many sectors of the economy the pain has hardly started.

WORLDVIEW: Amazon, AliBaba going head-to-head; the world’s gorilla war has begun

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