The Next Netflix: Netflix

As the Dow sagged and Netflix surged to a new all-time high this morning, we were thinking about Netflix itself, and the "next Netflix" -- the search for companies that are doing new things, breaking down old... in short, doing what looked, until they did it, practically impossible.

(In the afternoon, Netflix -- stock symbol NFLX -- closed down 1.3 percent.  But the Nasdaq and Dow were down more than 2 percent. Still an impressive story.)

Here at Damon Vickers & Co., we take a real fascination in successful companies -- or to be more precise, in companies that are creating: Creating new wealth out of an idea; opportunity out of change; microchips out of sand.

In the case of Netflix, there are a number of broad trends the company benefits from. It's way out in front in the technology and delivery of online movies, and in the broader transformation of television and computer -- a sort of unhappily married couple for many years -- into one thing: Your home TV computer, or your home computer, on the TV.

But what's even more striking to me is that Netflix didn't start off doing this. It started off delivering videos by the mail. (It still does that, though as time goes on, this will probably be a shrinking share of its business.)

Josef Schumpeter called the process of new supplanting old, of better supplanting obsolete, as "creative capital destruction." For Netflix and its founder, Reed Hastings, they've taken the phrase one better and are now engaged in what you might call creative capital self-destruction.

Out with the old (Netflix videos by mail) and in with the new (Neflix vidoes by download.)

The "next" Netflix? Given the firm's capacity for fearless reinvention, it just might be.... Netflix. 

Ownership disclosure: At the time this product was published or posted, Damon Vickers & Co. and Nine Points Capital Partners owned shares of Netflix (NFLX).

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