The Wisdom Wall

“some people think, oh, you want positive free cashflow. Well, the answer is not really. I mean, what you want is you, if you can invest at a high return, you want to invest as much as you humanly possibly can, right? That you have access to.”

“the paradox of Gil says, and activities were both skill and luck contribute to outcomes, which is most stuff as skill increases, luck becomes more important.”

“your stock price reflects a set of expectations about the future financial performance of your company. And it behooves you to understand what's priced in. And if you want to do really well from the point of view of the stock market, you have to not only meet, but exceed those expectations.”

“And so we argue that a competitive advantage should have two features. One is an absolute one. One is a relative one. The absolute one is you should have returns today or returns that are promised to be above your cost of capital, right?”

“when it rolls over, you know, so in other words, the number of companies is declining. It's actually really interesting time to invest because usually the industry itself is continuing to grow and it's a fewer number of companies that are capturing the spoils, right?”

“whether the thing's worth fifty million or a hundred million, if it's going to be worth ten billion in 10 years or three years, like it doesn't really matter that much what you pay for it today.”

“what we've seen in domain after domain is relative skill gaps have narrowed. The difference between the very best and the average is less today than it was in the past.”

“it's not about earnings that, that matters. It's really about cashflow. So the ultimate driver value of business is cash. Not accounting earnings.”

“you have to combine these two things to understand a business and to do evaluation properly. So in other words, the litmus test of a strategy is that it creates value. And you really can't understand or value a business until you understand the competitive situation, the competitor set, the growth of the market, and so…”

“So the idea is to say a stock price, or it could really be any asset price, a price of an asset, but let's say a stock price reflects a set of expectations about future financial performance. So the first step is to say, what do I have to believe for this to make sense? And you can apply that broadly. The second thing…”

“expectations investing, I should have been more explicit about it, is very probabilistic, right? So what we're really trying to do is think through scenarios. So The if-then kind of scenario. So we're getting knowledge that the price today is just one of many potential outcomes. It's actually a price reflecting a…”

“So if you think about, you know, sort of the tails pushing out the tails relative to traditional businesses, that's the way I think the way I think about it, there, there are more extreme good things and more extreme bad things than, than what we had witnessed in the past.”

“what differentiates good to great investors has little to do with their sort of technical skills, like their ability to build spreadsheets or whatever, and much more about their temperament. And in particular, their ability to make decisions under some sort of stress or tension.”

“So in an option, what you want is lots of volatility. You want lots of volatility, right? Which is sort of counter. So the more volatile the world is, the more valuable the option is.”

“often where the gig ends up is that they have to do deals that are so large to perpetuate their growth rate, to perpetuate, to fulfill the expectations that it just becomes like essentially An insurmountable task.”

“if you asked me to, if I could go back to my twenty-year-old self and say, whisper in the ear and say, there's one mental model to, to sort of put into your life, I would, I would say base rates.”

“if it's investing, the answer is try to find a game where you think you can be the smartest person, have the opportunity to be the smartest person in the room.”

“low cost producers tend to have low margins and high capital velocity.”

“Probabilistically, if you can write down, I think there's an X percent probability. This is going to happen by Y date. It gives you the apparatus for a scoring system that can be super helpful.”

“So you can actually figure out not just, we all know that regression toward the mean happens, but you can actually figure out the rate at which it happens by understanding sort of where you fall in this continuum, which is super cool. It's a very powerful mental model.”