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Why Warren Buffet and the world’s smartest investors invest in Crowdsourcing Business Models?

Why Warren Buffet and the world’s smartest investors invest in Crowdsourcing Business Models?

I just presented at a coffee session on Crowdsourcing as a business model. Quick summary of what to invest into, what to start and what to leverage. Just the principles below, rest was for a closed door audience.

Crowdsourcing as a business model has been around for time immemorial and extremely profitable. Look at the core industries of our society. Banking, Insurance, Healthcare, etc. or why do companies go IPO? All crowdsourced? Er how?

What is the crowdsource business model.

Any market where demand-supply is fragmented and centralization is not possible due to inherent infinite costs of factors of time, distance, population, etc. then crowdsourcing creates the economies of scale and scope, via an intermediation marketplace model.

Search
Every time you and I search on Google, the marketplace connects MSMEs to consumers and that creates a $60B+ company and growing.

Issue 100m shares at $10 per share is $1B. Crowdsourced. That is why a stock exchange.
http://www.nasdaq.com/markets/ipos/activity.aspx?tab=upcoming
http://www.nyse.com/about/listed/IPO_Index.html

Securities
Issue 100m shares at $10 per share is $1B. Crowdsourced. That is why a stock exchange.
http://www.nasdaq.com/markets/ipos/activity.aspx?tab=upcoming
http://www.nyse.com/about/listed/IPO_Index.html

Banking
Simple. As an example. 100m households in the United States as an example, $50,000 per annum which is a $5T crowdsourced capital with one difference, $50,000 can buy you that much, % of 5T can buy you that much more as a sum, even though it may have a few large and tens of smaller banks. This is the value of “Aggregated Economics”.

$5T then lent with a % spread on top of committed interest rate as a spread due to the power of aggregation has then a greater value than %50,000 lent at a higher spread, power of scale. Lend 90% to B2B and 10% B2C or whatever makes sense.

http://blogs.esri.com/esri/esri-insider/2013/09/18/are-we-there-yet-median-us-household-income-recovering-in-2013/

http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway

http://www.telegraph.co.uk/finance/personalfinance/investing/10245127/Warren-Buffett-makes-3bn-bet-on-banks.html

The same for Insurance, Healthcare, etc.  That is the power of Crowdsourcing as a business model, Aggregated Economies of Scale that create power of leverage.

Now apply the crowdsourcing business model to a company such as a marketplace and you know why  IP is embedded into the business has intrinsic value. Look at companies such as a Walmart, Apple or Dell and others have great value. Aggregated economies of scale from crowdsourcing consumers and the supplychain efficiencies kick in with a network effect.

Amazon’s 1,263 Patents Reveal Retailing’s High-Tech Future
http://www.forbes.com/sites/georgeanders/2013/11/14/amazons-1263-patents-reveal-retailings-high-tech-future/

Now you understand the value of crowdsourcing as a business model. However when you crowdsource at “$0” x 100m consumers, that is still $0. The rest are searching for value and business models.   If you start a company, buy a stock or develop new IP, look at the market demand and supply, if it’s fragmented you know what to do.

Now you can decide does this headline make sense.

Snapchat’s $3 Billion Rejection and the Great Facebook Unbundling
By Joshua Brustein November 13, 2013
http://www.businessweek.com/articles/2013-11-13/snapchats-3-billion-rejection-and-the-great-facebook-unbundling#r=hp-ls

STATE OF THE UNION OF INVESTING. IRRATIONAL EXUBERANCE. WHAT NEXT? VALUE
https://gerardjrego.com/2013/11/12/state-of-the-union-of-investing-irrational-exuberance-what-next-value/

“Only when the tide goes out do you discover who’s been swimming naked.” Warren Buffet

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