NEW YORK (
) -- 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.
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.
. The word in this case is collaboration. I talked about it last month
at SeekingAlphaand 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.
In collaboration, credibility is the coin of the realm. You have to scale intimacy. You have to be transparent on things like fixing bugs and handling contributions. You must manage relationships among companies that, in all other areas, may be direct competitors.
It took Red Hat years to get JBOSS functioning in this way, after buying the middleware company for $350 million in 2006, as
. It's still one of the biggest deals on an open source code base. It took some courage to commit to OpenStack, first sponsored by
, as its cloud infrastructure solution,
reported in August. Red Hat programmers are now among the biggest contributors to that code base,
as a recent analysis at
I saw some of this in person, this summer, at the Red Hat Summit in Boston. There is not a lot of "I" there. There is a whole lot of "we" there.
Now there are problems with Red Hat's story.
still outsells it in virtualization, an important cloud ingredient, by a wide margin. Red Hat is investing well ahead of the "private cloud" boom, so some earnings weakness is to be expected, and the future of its own cloud offerings, like "OpenShift," a cloud platform, remain unknowns.
But, like Google, and like other quality companies, Red Hat knows what it's about. It has a clear vision, one that its employees understand, one that is easy to communicate. It has a lot of opportunity, within that vision, to grow further.
That's what I look for in a tech investment. Stocks will rise and stocks will fall, but companies that grow know their way.
At the time of publication, the author had positions in GOOG and RHT.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.