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Great discussion, folks. This is something I've been thinking about for a while now.

First a note for BruceBrown since I've learned more from him than from the book itself: I agree with and understand your reasons for exclusion of industries outside of high tech. The book is very specific and the theories rely on very distinct competitive dynamics. It's hard to apply the theories literally outside of this arena. However, I believe that the Gorilla Game has value beyond the strict interpretation of the rules and can help us in understanding any industry where a limited number of players seem to dominate and hold their position.

One of the first problems with analyzing the biotech industry is the fact that it is considered one industry. I'm sure many of you feel the same way when some "expert" on CNBC refers to the "Tech" industry as one unified creature. Biotech, like "high-tech", is a tapestry of industries that have fundamentally different dynamics. Like high-tech, most of these industries are not Gorilla Game jungles. But I believe some may be.

The first mistake is to consider the traditional biotechs. Despite it's success, AMGN is not a gorilla (even though many toss the term around simply because it has executed so well). No vertically integrated biotech can be a gorilla because they operate, for the most part, in isolated spaces. Just because AMGN has mastered one technique for developing a drug doesn't mean that DNA or BGEN has to capitulate and use that technology. In fact, the traditional biotech industry is no different in structure that the pharmaceutical industry that, as is obvious, does not exhibit Gorilla Game characteristics.

Despite this, there are other new and evolving industries that have, for one reason or another, been lumped together with these vertical drug developers. Because they are technology developers whose products are applied horizontally across the drug development space, they tend to develop competitive dynamics very different from the typical biotechs. Some of these industries have the ability to (in some cases this has already happened) develop extensive value chains around their enabling technologies.

One example is genomics. Without bogging everyone down with details, genomics is the gathering, organization, and presentation of genetic data to advance drug development. Currently, all major drug companies are beginning to integrate genomic data into their development effort and it's believed that most of the important drug discoveries in the next few decades will be based on genomic information. Currently, many players, including a publicly funded effort, are competing to provide this information. As we move forward, the pure sequence information will begin (and already has) to acquire more detailed annotation and proprietary added value. It is my belief that one company will end up defining the standard for genomic information and become the dominant force in the value chain that condenses around it. Whether or not this develops into a Gorilla Game will depend on the degree of value that a company can add to the sequence to differentiate it from the offerings of competitors.

There are other biotech industries, proteomics, directed evolution, etc., which exhibit similar dynamics. Sure, this isn't exactly high-tech, but I think the Gorilla Game can investors a lot about how to view these industries and pick good companies while they develop. BruceBrown is right: forget strict Gorilla Game analysis. But let's see if we can use the book to make us better investors in these new and exciting industries.

-S
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