So I write this asking for a bit of largess. I am aware this is only indirectly about growth stock investing. But the board has found my posts useful in the past, and PoleekoCowboy’s recent post/thread ( https://discussion.fool.com/mongodb-the-digital-tranformation-34… ) on digital transformation led me to believe that my thoughts on this subject might be worth a thread.
“Digital Transformation” is a term that is has taken me years to absorb. I confess that for many years all the term “digital transformation” did for me was trip my b*hit detector. 99% of the time when I heard that term it came from someone selling trying to sell me something (sometimes an internal initiative, sometimes actual money). But when pushed to explain what “digital transformation” really was, no one could ever give me anything but pithy platitudes that were as true in 1990 as there are in 2020. When I was learning computer science we were transforming processes built on paper forms into digital applications. Maybe that fact blinded me a bit. Because that was a true digital transformation. And what we are going through now is a indeed transformation, but we are already digital and the term digital transformation bothers me because the term is inherently inaccurate.
I am of the belief that anytime you hear the word “digital transformation” you should substitute it with “cloud transformation”. The world was already digital. But what we are being forced to transform into is a digital world that is operating at a scale previously unimagined and with a “pay as you go” business model. Where IT isn’t just an enabling technology, but the core of our businesses. Where we have new business models that are based on elasticity and “on demand” and “vendor supported” business models. “Digital” is old hat. I’ve been building tranformational digital projects since the mid nineties. What is new is that fact that the systems I built in the 90s were based on hundreds of thousands of records. The systems I build now are based on hundreds of thousands of records per second.
So, how can I tie this back to investing?
Well, first I propose that any company that builds its value proposition on “digital transformation” should be subjected to the test of how “how does this enable a cloud based business model?”.
But, mostly I just want to reaffirm this board’s core principles. “Digital Transformation” is more about the SaaS business model that any specific technology. Red Violet may or may not be a good stock pick, and it may or may not be adversely affected by COVID, but I would argue that it as much as a “digital transformation” pick as anything else. Similarly, I think evaluating Mongo on it’s technical merits is moot. In fact, I’ve argued here that it’s technical merits are questionable. The core investing value of Mongo is Atlas. Which was ridiculously far ahead of its time, and a sign of how sharp the business-value side of Mongo is. (I’ve argued previously, and still maintain, that DataStax/Cassandra is the better technical product, but that Mongo has repeatedly demonstrated a better capacity for delivering business value.)