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TheStreet Open House

Red Hat Shows Long-Term Thinking in a Short-Term World

Stocks in this article: GOOG RHT RAX VMW

NEW YORK ( TheStreet) -- Investors buy or sell stocks based on short-term time horizons. We measure earnings against expectations. We turn thumbs up-or-down on acquisitions and management changes. We follow the drama of the action like spectators at a sporting event.

The best investments don't work that way. While there are swashbuckling CEOs who become their companies, so you bet the jockey and not the horse, the best long-term investments define their businesses simply, sometimes in just one word, then turn every energy into making that word manifest.

For Google (GOOG) the word is search. Everything CEO Larry Page and his team do is focused on doing the best search possible, at the lowest possible cost.

It was the search for low costs that made Google the first leader in cloud computing. But Page was less interested in the technology than what it enabled, lower costs. Costs are why he built, not a data center, but a network of them. Costs led him to renewable energy, starting with the cheapest form of that energy, which is efficiency.

On the other side, search led Google in the direction of devices. Android smartphones and tablets bring with them more searches, on more topics. Just as social networking does. Thus one simple word drove Google into the cloud, into devices, and into a host of other businesses built around the end-result of a search, which is finding something, and getting it.

That story is easy to understand. Here is another one.

It's Red Hat (RHT - Get Report). The word in this case is collaboration. I talked about it last month at SeekingAlpha and have been thinking about it more since.

Collaboration has driven Red Hat since its founding. Collaboration is a key value in open source, a natural consequence of letting customers see code and contribute to it.

Red Hat Enterprise Linux created a template. You could get the bulk of the code free, under the name Fedora. Buying a license brought you fully inside the tent. The more you contributed beyond the license -- the more you let your own people collaborate with others on improving the code -- the greater your return on investment became.

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