Why would Warren Buffett short the OSS industry?

Now if at the start of the 20th century you had seen what the auto [industry] was going to do to this country, the impact it would have on the lives of then your children and grandchildren and so on. It just, it transformed the American landscape. But of those 2000 companies, three basically survive. And they haven’t done that well, many times.

So how do you pick three winners out of 2000? I mean it’s not so easy to do. It’s easy when you look back, but it’s not so easy looking forward. So you could have been dead right on the fact that the auto industry— in fact, you probably couldn’t have predicted how big of an impact it would have. But you wouldn’t have— if you’d bought companies across the board you wouldn’t have made any money, because the economic characteristics of that business were not easy to define.

I’ve always said the easier thing to do is figure out who loses. And what you really should have done in 1905 or so, when you saw what was going to happen with the auto is you should have gone short horses. There were 20 million horses in 1900 and there’s about 4 million horses now. So it’s easy to figure out the losers, you know the loser is the horse*. But the winner was the auto overall.
Warren Buffett in a speech at University of Georgia in 2001.

We’re currently in the middle of a maelstrom of change, as described in my market research report, “The changing landscape of OSS.” In addition to the hundreds / thousands of existing OSS vendors, there are hundreds of other tools either under development, or set to be developed in the near future, many that probably won’t even associate with the term OSS.

Even for someone like me who spends countless hours investigating OSS vendors, products, trends and techniques, it’s daunting to try to pick which ones to invest the most attention in. Like the auto industry, it’s probably impossible to predict the “3 out of 2,000” that will win out in our industry over time.

In my version of “shorting horses,” I feel comfortable in predicting the demise of current OSS technologies / concepts and that they’ll be replaced by newer models… so much of my (and your?) current knowledge base will need to be discarded and refreshed with new ideas.

Whether you choose to actually short the stocks of current OSS vendors is another discussion entirely, one that I’m not qualified or informed enough to comment on.

* As an aside, I actually suspect the even bigger loser is the horse-drawn carriage industry. There are still lots of horses out there, but I doubt there are many carriage builders left (am I jumping to a big conclusion by not actually researching this?).

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