Tail Win(d)s!

Both iphone and Amazon Prime which drive bulk of the revenue and success of the two companies are among the 100s of products tried. While its common for venture capital to find one of 10 investments succeed, even in public markets, the index is carried by less than 10 companies and many others are either status quo or laggards. Ignore tail at your own peril!

Consider a business that is doing fine in terms of revenue, profits etc. Its world is not static. New competition emerges every day to take that margin, beat prices down and commoditise the business. Customers move on to something better or new, regulations change, technology alters the business landscape and so on... It is critical for any business to have a tail that may come to the rescue once the head is down. When iphone or Amazon prime were launched, they were not expected to be the blockbusters they are today. The number of times Nvidia bet its life on something new is quite a story. It did not work always but Nvidia did not stop or cut the tail. Many of the stalwarts of the index no longer exist. This is after a great amount of screening and consistent performance that was mandatory for a company to get into the index.

'Jack of all and Master of none' is the saying. What you are master of , may no longer be relevant or in demand forever. Human ingenuity keeps striving to find the unknown which in many cases is opposite of what you know or believe. Inflexibility or hubris that cause one to not be open to the new, may cause the fall that happened to many index constituent companies.

It is human nature to ignore the tail as its seen as an appendage and is not immediately useful. When you fall into a ditch, that may be what pulls you up!