time, believing that productivity would always surprise us on the upside, backed up by lower interest rates than we expect. [This has brought about] the surprises in earnings numbers. The Fed’s job is to control the money supply, to keep things from getting out of control, and I think people are looking at the value era believing that we’re about to move into an inflation era. I just think that’s all hogwash. It’s not something that is going to happen for at least seven years. The Fed is really in front of a curve. [They're] thinking about how the markets are going to react. The markets have become more and more sort of what I call self-regulating.
Pearson: Craig, you brought up just the point I want to touch on: productivity. Namely, I want to talk about the Internet. This has been incredible. Global e-commerce totaled nearly $50 billion in 1998. It’s expected to surpass $1 trillion over the next couple of years. IBM purchased $12 billion in goods and services over the Web in 1998, saving $240 million in the process. I think all of us have probably, over the last several years, underestimated just how powerful productivity has been, and there is no question that the United States is at the forefront of the world when it comes to technology and productivity.
Lew: It’s also important to keep in mind the fact that we haven’t really yet begun to capitalize on things like the Internet because we’re still doing business the old way. There is going to be a fundamental shift in the way business is done that will increase productivity even more.
B.E.: So, as an investor, do I look at the Internet as a pure play or do I look at those companies that are re-crafting their strategy to include the Internet?
Lew: It depends on how much of a risk taker you are.
Paige: As a value manager, the way that we try to tap into the new economy is to do a backdoor play. In this economy, everyone is going to use a credit card. We go with the transaction processors. Nova Corp. (NYSE: NIS) is a company that we recently purchased that is extremely cheap. Their core competence is basically acquiring merchant portfolios, integ
rating them and squeezing out incremental earnings from that. I also own [jewelry retailer] Zale Corp. (NYSE ZLC) Like a Zale, you’ve got to have certain products that are conducive to the Internet, you’ve got to be first and you’ve got to have a franchise behind you.
Thomason: I’m in Silicon Valley. I equate what’s happening now with the San Francisco Gold Rush of a hundred years ago. Only a few of those guys who dug for gold got real rich. The people that made the real money were the guys selling the picks and axes. I’m trying to find the guy that’s selling the picks, buckets and the axes.
Simmons: I know what [the picks and axes] are: marketing and distribution. I think that is