Wednesday, 3 October 2007

The beer syndrome

Had a very interesting debate yesterday with one of the world's leading tech fund managers on the subject of my earlier post musing about whether consumers would stop spending on 'gadgets' as mortgage rates ate into disposable income and consumer confidence fell.

He mentioned the 'beer syndrome'. In 'recessions' not everyone suffers. Indeed some sectors gain. The 'beer syndrome' occurs because consumers are forced to stay at home and watch the TV rather than go out to restaurants, the cinema, clubs etc. So they buy more take-away beer.

This respected fund manager argued that home entertainment 'gadgets' and services would be the 'new beer'. "Let's stay at home tonight and download a video over the internet 'for free'". I.e. the home entertainment service providers and the companies that made the equipment which facilitated this, would continue to do well. He argued that the $299 on a new iPhone was not life threatening - indeed it's the kind of level of purchase that many people make to cheer themselves up. The same applied to much of the low cost home consumer tech stuff. Home PCs are in the sub $500 range now we should remember. He did concede that HD-DVDs etc might suffer. I.e. any consumer tech higher up the spending curve would be adversely affected.

By the way, we both agreed that 'enterprise' tech spend - almost across the board - was in for a tough time...

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