Answered raw tape
D 5 · C 5 · P 4 · Cm 4 4.60
Q So here's a question then. Should companies be worth less? Because if the future is more uncertain, and it's more likely that things get disrupted, and moats are less permanent than they've ever been, Shouldn't we consider less future years of cash flows?
A Well, like everything, it's a double-edged sword. I mean, on the one hand, you just made the point that without mining the ship, companies are much more potentially disruptable. But on the other hand, that means if you have competitive advantages and you continue to mine those advantages and you use them to enter adjacent markets or launch new products or going after other markets geographically or whatever, There's much more value creation to be had, and I think the ability to leverage your advantages and build more for the companies that are really doing so has probably never been higher. And by the way, with the internet, you can address global markets. We just talked about newspapers where you couldn't address the town next door. One of my favorite writings on investing, it's not actually about investing, but it's this guy, Brian Arthur, and he wrote something called Increasing Returns in the New World of Business. And that was in the mid nineties. And he made the observation that with the new world, with the new distribution models of things like the internet and whatever, the best companies could continue to get bigger and bigger, whereas you were sort of capped out more in the old world. And so you would have diminishing returns to scale over time. And by the way, that couldn't have been more right. You look at markets over the subsequent couple decades, And you have com…
AI assessment note: “Well, like everything, it's a double-edged sword.”
Answered raw tape
D 4 · C 5 · P 5 · Cm 4 4.55
Q And Andrew, do you recall in your journey over the course of your life the first time where you saw what you felt was a really attractive investment opportunity in what people would consider growth investing or high growth investing or tech investing that felt counter to some principles that you had internalized from your dad, from reading the Buffett letters, from your style of investing earlier in life?
A You know, I can't remember a specific one, but I think The sort of evolution happened a little bit gradually. So a value investor, you would sort of look at what the current cash flows of the business are and kind of valuing it on that and not making much assumption for growth. And then there's a cohort of growth companies that weren't exactly tech companies in the way that tech companies look today. But, you know, you could look at things like where rolling out stores is a big thing. Starbucks or the auto parts companies or Walmart or Costco, all that type of stuff. And then also things where really attractive acquisitions and synergies were attractive or were a huge part of the story, you know, John Malone's cable roll ups and things like that. And what's interesting is you sort of learn that instead of looking at cash flows, there's this concept of sort of maintenance cash flow. And then You could think about where to reinvest that, and if you can reinvest that at really high rates, really attractive rates, that's a better thing to do than just sort of hoarding the cash or whatever. And by the way, and Buffett talks about this when he talks about the concept of owner earnings and things like that. And then it's not too far to then say, well, those same sorts of investments, you can make them out of the cash flow statement, but you can also make them out of the income stateme…
AI assessment note: “I can't remember a specific one, but I think The sort of evolution happened”
