When I left school and started a double degree in Science and Engineering, the first thing my professor did was give the class some hard truths:
"Only 20% of you will pass your degrees"
Source: NBC News
He was right, of course. I dropped out.
But that wasn't the shocking part.
He went on to say that, "America is 10 years ahead of Australia with their technology."
That's a pretty shocking statement but frankly, he was probably right about that one, too — for the most part anyhow.
The dream
In good ol' Straya, there is a culture that tells young Australians not to stick their head above the pack. Don't go for broke, don't risk it all, they say.
Instead, we get: go to school, dream for a little bit, buy an extraordinarily expensive house, have kids. Behold, you are now living 'the dream'.
Now, I'm not saying every kid should drop the crayons, walk out of school and open a start-up. But it is important to fail, especially in business.
"It's fine to celebrate success but it is more important to heed the lessons of failure" — Bill Gates (Harvard dropout)
"If you want to increase your success rate, double your rate of failure" — Thomas J Watson, CEO of IBM from 1914 to 1956
2 ASX technology stocks to avoid and 2 to buy
Now, you are probably thinking: What did all that have to do with my investing?
I think my professor was generally right but specifically wrong. That's the easiest way to make yourself look informed (I'm writing for a living, trust me, it works).
Indeed, there are pockets of innovation throughout Australia. Just look at Carsales.Com Ltd (ASX: CAR) as one example. It's the leader of online classifieds for car and some automotive accessories. It's also growing in Asia.
But having grown to become a $2.7 billion company, it's not a horse I am backing at today's prices. Nor am I backing SEEK Limited (ASX: SEK) at today's prices. The risks are too great and their valuations too stretched.
However, buried a little deeper in the ASX there are two tech companies I think could have what it takes to be good investments over time. The first is Praemium Ltd (ASX: PPS), a $220 million wealth management business which offers investors access to a growing method of investing through online accounts. Separately Managed Accounts (SMAs), as they are called, are more tax effective and flexible than traditional managed funds. Praemium provides the software for advisors and fund managers to run their strategies in SMA form.
The other company is Class Ltd (ASX: CL1). It is a little expensive at today's prices but it could be good value for those investing for the long-term (five years plus). The $310 million company offers software for self managed super funds (SMSFs), which is used by accountants and advisors.
Foolish Takeaway
I dropped out of my double degree and that university to pursue a passion. It took me a while, I bounced to and from a number of universities, but I eventually found something I was truly happy to do. And sure, there were a few tribulations. But I had far more triumphs — and many more lay ahead I'm sure.
We should all be encouraging everyone to back what they are passionate about — otherwise we'll always be 10 years behind.
"I think a simple rule of business is, if you do the things that are easier first, then you can actually make a lot of progress" — Mark Zuckerberg
(also a Harvard dropout)
