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Weekend Coverage: Q&A With Ironfire Capital's Eric Jackson


Jackson talks about China, Apple, Yahoo, Microsoft, and more.

MINYANVILLE ORIGINAL This week's Q&A is with Eric Jackson. Eric is Founder and Managing Member of Ironfire Capital LLC. He completed his Ph.D. in the Management Department at Columbia University Graduate School of Business in New York, with a specialization in Strategic Management. Eric is a regular contributor to Forbes, Bloomberg, CNBC, and The Street. You can follow him on Twitter @ericjackson, subscribe to him on Facebook, follow him on Sina Weibo, or Circle him on Google+.

If there's a Web 2.0 stock or anything China related in the news, flip on Bloomberg TV and you'll find them speaking with Eric. And if he's wrong, Blame Canada -- it's his homeland.

Adam Warner for Minyanville: You're one of the leading authorities on all things China... at least you're my leading authority. How did you get started on that?

Eric Jackson: Well, it's not like I wrote a book about options or anything, so I don't consider myself an authority. However, my partner in the fund I co-manage is based in Hong Kong. When we started working together in 2009, he already had a team of analysts working with him in Hong Kong and Shenzhen. My focus has always been on tech, but it seemed like a natural fit to get the team there involved in what forces were shaping tech in China (or how China was shaping the broader world of tech). I've made several trips over there and I write a regular column for the Chinese Wall Street Journal, so I try to stay close to what's going on there.

One of the reasons I became so bullish on Apple (AAPL) (and Yahoo (YHOO)) a couple of years ago was from my visits to China.

MV: Between Europe and the jobs report, it feels like relations with China have moved to the background a bit, relative to recent years. On the flip side, [Mitt] Romney seems to want to make it a campaign issue in some form. I gotta be honest, I have no clue where there's a party distinction on this, but is there something on the horizon that I'm missing?

EJ: I think every American politician -- no matter party affiliation -- likes to talk tough on China. It makes for a good stump speech to rail about them taking our manufacturing jobs. Even the guys in the Treasury like to give stern warnings publicly to China about them needing to strengthen the yuan (to make American manufacturing jobs more viable).

Yet, behind the scenes, not much happens. Americans like all that cheap stuff at Wal-Mart (WMT) and aren't willing to give that up. I think the Chinese are also very worried at the global economy these days. They fear that strengthening the yuan would put a lot of their manufacturers out of business and drive jobs to Vietnam and Indonesia. America needs a strong China and vice versa. If one goes in the tank, it will drag the other.

MV: Totally agree; no one's willing to pay up for socks at Wal-Mart as a trade-off. I would pay retail for the Costco (COST) chocolate chip cookies, though, wherever they come from.

Anyway, I was reading your Forbes post "Here's Why Google and Facebook Might Disappear in 5 Years." It's a real interesting take. We always tend to forget that about 99% of today's tech dinosaurs were "it" companies and stocks at one time or another. Any chance they morph into a Microsoft (MSFT)-like existence where they basically come up with every new idea second? If so, I'm thinking I should sell long-term strangles in both and beat the rush.

EJ: I think Microsoft's a lot more entrenched with their customers than Facebook (FB) is with its users. If Microsoft brings out Windows 8, 9, or 10, most people will upgrade. They're also very diversified. I think Facebook (and even Google (GOOG)) are really vulnerable if some new social/mobile application comes along that's much more compelling.

People who are bullish on Facebook tell me that they have 900 million users and are much more embedded into our daily lives than MySpace ever was. That's true, but I think there's going to be some mobile-focused app that comes along (it probably doesn't even exist today) that will be much more compelling and draw people away. Plus, even at $75 billion, Facebook has priced itself to perfection that it's going to take years to grow into that. So your strangles might not be a bad idea. This isn't like Google IPOing in 2004 at a $25 billion valuation and growing into a $200 billion valuation.

MV: I'm entrenched to the extent that I have a Facebook account, but I rarely log on. If there's some future social/mobile app that fits me better, I'm there.

You're bullish on Siri in general, but I know we both agree that they missed the boat on that Samuel Jackson ad. I mean, come on -- they'd double the impact if he asked Siri where he can get a Royale with cheese. How do you see Siri making the next step from kind of novelty to yet another Apple offering that we wonder how we lived without?

EJ: I actually think Siri is going to be the next natural successor to Google. We want to know stuff. We've been trained to "Google it" by going to the little blue boxes on our PCs. It's not as convenient on a mobile device but we still do it. But being able to ask someone and get it is even easier. That's Siri.

One of the things that I think people love about Siri is her personality. Nobody wants to talk to a bland robot. When Siri has personality and knows you, it's like having a sassy personal assistant. Who doesn't want that? I think we're may be three years away from that. But to solve the "personality" and "personalization" problem, you need artificial intelligence horsepower and data. Apple has the AI smarts and they've got the data centers to crunch the numbers. They just need lots and lots of user data and that's what Sam Jackson, Zooey, and John Malkovich are helping to drive.

Three years from now, Siri will be telling me to lay off that Boston cream donut, start jogging again, and DVR-ing some new HBO series that I've never seen but she knows I'll love. That will be very cool.

MV: And maybe it can tell me where I can get tomato soup for Zooey next time it rains; I could always tell my wife Siri recommended it...

I think we're similar age, and I can tell you, Rush was just huge when I was in my teens. And that's just America. Were they like Beatles-sized in Canada? I'm picturing every Junior League hockey game starts with "O Canada" and segues into "Spirit of the Radio," ice sculptures of Geddy Lee in every town square, stuff like that. Please tell me I'm understating it.

EJ: Yes, I grew up in the sticks in Canada, where the winter nights were long, and all the boys had hockey mullets -- and were very proud of them! Geddy was "The Man"! Every guy had tight jeans and long hair, and would try to imitate him with matching air guitar moves in the playground at school. It didn't seem humanly possible to sing like Geddy, but it was still damn cool. At my school, you could not speak badly of Rush, Neil Young, Pink Floyd, and Led Zeppelin. All those guys were consider "rock royalty."

My favorite radio station growing up actually called themselves "The Spirit of Radio." They didn't even bother with the call letters.

Someone told me recently all the Rush guys had moved to Naples, FL. Somehow that doesn't seem to fit for me. I picture them either on tour or snowmobiling and ice fishing up in Sudbury, Ontario.

MV: Totally agree. Geddy Lee at an early bird special doesn't work for me. At least his mullet has lived on; Bono's apparently doesn't fly at Elevation Partners board meetings.

Many thanks to Eric!

Twitter: @agwarner
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