The two hidden forces behind successful tech – Spot them and profit!

They are the forces behind nearly all the mega-successful technology winners of the past 20 years… They explain why some companies are growing so quickly, gobbling up market share, and making more money faster than ever before… And why others are getting utterly demolished – going out of business – at the same incredible rate.

So, if you want to generate life-changing returns investing in disruptive tech stocks, then you need to know how to spot them…

#1: The secret behind tech company’s rapid growth

It’s a word that’s repeated over and over in Silicon Valley…

And for good reason.

It’s key for businesses to expand rapidly, capture market share and make tons of money.

It’s called Scalability,

It’s the ability of a business to massively grow revenues, profits and cashflows, without compromising performance or efficiency. And costs associated with producing those revenues and profits are kept low.

Good examples of hyper-scalable businesses include Amazon, Facebook, and Microsoft.

Take Microsoft, initially it invested a great deal of money developing Office. But once created, it now simply reproduces copies at low cost and sells at a high price.

The same for Facebook. A great deal of investment went into developing its platform. But now it can add new users and increase advertising revenues much faster than costs increase.

The result?

Revenues rocketed, profits soared, their market values exploded, and investors were rewarded with life-changing returns. So, finding companies that have scalability is key to their and your future profits.

#2: The most POWERFUL wealth-creation force in tech

In 1908, Theodore Vail – chairman of telecoms giant AT&T – recognised that the company’s value wasn’t telephone technology…Rather, it was the network of people that telephones could reach.

Vail wrote, “A telephone, without a connection at the other end of the line, is not even a toy or a scientific instrument. It is one of the most useless things in the world.”

What Theodore Vail had described here was one of the earliest and most potent examples of the second hidden force.

It’s called the Network Effect.

It’s arguably the most POWERFUL wealth-creation force!

It happens when each new user of a service or product increases the value of that service or product.

So, let’s look at the telephone…

In the very early stages, the telephone didn’t really have value. That’s because only a few people had telephones. However, once more people saw the value in telephones, they started buying more of them.

What followed was a positive, self-reinforcing cycle. The more people who had telephones, the more valuable the telephone network became. The more valuable the telephone network became, the more people bought telephones. And so on.

It even got to a point where people had two, even three telephones in their homes.

Now, here’s an example of how the network effect helped turn Google into one of the biggest business success stories.

In 1996, two PhD students at Stanford University – Larry Page and Sergey Brin – with the help of a programmer built a “research project” dubbed BackRub.

Now if you don’t know, BackRub was the first version of Google.

It became the most efficient way of searching the internet. As a result, lots of people wanted to use Google’s search engine.

The more users Google attracted the more people wanted to ensure their website was listed with Google. And the more people that had their website listed on Google the better Google’s search results got. The better Google’s search results got the more users Google attracted.

But Google didn’t stop there…

The company also developed a way to deliver targeted advertising. The more people visited Google, the more advertisers wanted to advertise on Google. The more advertisers Google had, the more targeted the advertisements became – which attracted even more users.

It was this this network effect that helped transform Google into a +$2.2 trillion giant today. And as you know, those who invested in Google were handsomely rewarded with a +6,000% return in 20 years.

Or take Facebook. With every new user, Facebook became more valuable as a business. As its social network’s value increased, its new sign-ups increased. Today, Facebook has over 3 billion users. And it’s share price is up over 2,361% since the company listed back in 2012.

Simply put, understanding and owning scalable technology businesses that leverage the network effect can make you wealthy! For opportunities like these, make sure you join the South African Investor community.