This column was originally published on RealMoney on Feb. 3 at 4:08 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
Business models don't get enough scrutiny. This morning when I interviewed Vernon Hill, the CEO of
, on RealMoney Radio, I was struck by his ability to measure a company by its model,
of who runs it. He was openly critical of
Bank of America
-- his largest source of new business, and skeptical of
because, alas, their models don't stress same-store growth. Instead, they either pile on the branches regardless of how they do or try to cut corners and cut out branches entirely. And boy, does he hate it if you call his stores "branches."
I know that I emphasize growth endlessly, but I, too, don't think enough about business models, and I did much more of that thinking when I was back at my hedge fund.
Simply put, as I watch the Internet sell off, I am thinking about what Vernon said. These Internet companies all have a fantastic viral model that would make any retailer just plain jealous. They have no inventory and no branches, and their biggest cost is electricity (which
is taking care of).
I believe that the selling in these Internet companies can last another day or two, but not more. The business models just generate too much money and are too capable of expansion endlessly before they run out of room.
You've got to
listen to the interview with Vernon, which we did from one of his locations right down the block from my office here in New York City. You'll get the skinny on Rackable. ... If you're not reading James Altucher's new service, TheStreet.com Internet Review, you're missing out on some of the best Net ideas. Look, James is one of the smartest guys I know. You can get his top-down analysis on a free trial. Just
click here to get his email and weekly newsletters.
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At the time of publication, Cramer was long Commerce Bancorp.
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