STRATEGIC INVESTMENT, January 2003

One hundred and sixty years ago, in 1843, the Commissioner of the US Patent Office, Henry Ellsworth, reported to Congress:  “The advancement of the arts, from year to year, taxes our credulity and seems to presage the arrival of that period when human improvement must end.”  (This is the source of the spurious quote attributed in 1899 to Ellsworth’s successor, Charles Duell, who never said “Everything that can be invented has been invented”).

Human improvement did not come to an end in 1843, nor will it in 2003.  In fact, I think 2003 is going to be a great year for the US economy.  Not spectacular.  But I’m willing to bet a glass of Guinness at the Irish Times bar on Capitol Hill that the Dow, S&P 500, and NASDAQ will all be higher at the end of 2003 than they were at the start.

There are two basic reasons for this, and they are both named George W. Bush.  GW is determined not to make his Dad’s mistake, and knows voters must perceive the economy has been going well for many months, up to a year, before he runs for reelection.  Further — and here’s the key — his strategy for accomplishing this is to get the government out of the way, stimulating the economy by decreasing tax and regulatory burdens on businesses and investors, and not through socialist subsidies.

In other words, GW’s economic policy is to give the real engines of growth — entrepreneurs and small businesses — more freedom to prosper.  The timing couldn’t be better.  The bubble — and its bursting — has come and gone.  Both are over.  The entrepreneurs who are stepping up now aren’t the flashy, arrogant kids of the Dot-com Age.  They are more sober and experienced, i.e., grown-up.  They are coming up with solid technology and business plans that make sense and will make a lot of money. 

A good example is Wayne Pierzga.  He and his partners are level-headed engineers who’ve been around the entrepreneurial block, and know the electro-magnetic spectrum inside and out.  They’ve got a proprietary technology to capitalize big-time on a niche of the wireless communications market no one else has.

Instead of launching billion-dollar satellites or erecting gazillions of ground-based repeater towers, they’re going to put low-cost, lightweight radio repeaters on existing aircraft flying normal flight routes.  Such repeaters on only 14 aircraft at any given time (with 2 ground stations) will give full coverage for the entire US east of the Mississippi, providing a high-speed (240+kbs DSL equivalent) Internet and voice connection for business jet and commercial airline passengers, and for the entire shipping industry (cargo planes, trains, trucks, and ships).

In talking to Wayne, what struck me immediately was not just the enormous financial potential of his technology but its national security implications.  Every one of the countless shipping containers that enters the US daily is a possible security threat, containing, say, a “dirty bomb” capable of ruining a city.  A small tracking device placed on a container signaling Wayne’s system will tell the shipper where it is in real time and if it’s being opened after Customs inspection.  Warren Buffet (who owns NetJet), and Fred Smith (who runs FedEx) may have to get in line behind Tom Ridge (who runs the new Homeland Security Agency) to see Wayne.

I found out about Wayne through a VC firm that specializes in discovering start-ups with both proven business savvy and proprietary technology with a fabulous upside — the Artemis Strategy Fund in Bethesda, Maryland.  The Artemis team knows what it’s doing more than any other VC outfit I’m aware of.  Amidst the myriad of VC flame-outs and retrenching, Artemis developed a smarter strategy that wasn’t impacted like so many recent VC debacles.  Give Jim DeMocker a call at Artemis — 301-657-6222 — if you’d like to learn more about Wayne Pierzga’s Aegeus company or get a report on the Artemis investment strategy.

With GW now running the whole Washington show, he is going to make it far easier for folks like Wayne and at Artemis to revitalize the US economy.  The latent ingenuity, creativity, and sheer raw ability of so many Americans is staggering.  All they need is for the government to take away the regulatory and tax obstacles it sets on the road.  You watch.  A lot of these ingenious entrepreneurs are going to be unleashed in 2003, and a lot of investors are going to make money with them.  It’s our job here at SI to help you be one of them.  This is the start of my 17th year for SI, with my first article appearing in the January 1987 issue.  I wish you a free, healthy, and prosperous 2003 — and come January 2004, we can talk about it over a Guinness at the Irish Times.