What he found is something every investor should know. Volatility probably drives investors out of the market more than anything else. Most investors don't understand technology, so they bid tech stocks to irrational peaks when times are good, giving the stocks much more room to fall when the economy sours. But the underperformance of the Nifty Fifty tech stocks also says something about the nature of technology companies in general. There is no other explanation for why stocks such as Xerox and Polaroid, which held such commanding market presence in the early 1970s, have produced flat to negative returns since then.
Most technology companies become slaves to their own technology or standards.
They build products at least in part so they are compatible with the previous generation of their products. Cisco's need to build routers that were compatible with previous models left the door open for Juniper Networks to start with a clean slate and no preconceptions. Rare is the technology company that can reinvent itself to stay on top for more than a few years at a time. IBM has successfully reinvented itself several times, but has produced some mighty lean years in between. It also helps explain why major bear markets tend to be seminal events, leading to significant changes in market leadership.