Bakshi: Costco Generates 20% ROE and High Turns on Sub-2% Margins
Sanjay Bakshi · #3 Sanjay Bakshi: Why Mental Models · Sep 18, 2015 · at 35:48
Investor and professor Sanjay Bakshi discusses the mechanics of Costco's low-margin, high-turnover business model with host Shane Parrish.
0:00 / 0:21exact quote · 22.0s
720p mp4 · rendered on demand · StarZero watermark
“Costco, I think, makes about 20% return on equity, which is actually quite healthy if you look at, ah, interest rates over this part of the world, and it has, ah, a pat margin of less than two percent, so it has very high capital turns, ah, and it can do that only because it has scale, and it can get scale only because it has fewer SKUs, ah, so I think it's a nice virtuous circle”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Sanjay Bakshi
Bakshi: Amazon's True Economic Earnings Vastly Exceed Its Reported Accounting Earnings
“You can't just go by reported earnings. The true economic earnings of Amazon are significantly higher than reported earnings.”
Bakshi: India's E-Commerce Sector is a Cash-Burning, Venture-Funded Bubble
“And we're seeing that in India. We have an e-commerce bubble going on. There are three or four players, and they are essentially giving huge discounts to consumers, to purchase their products, and to not go to bricks and mortar stores, and people are doing tha…”
Bakshi: True Long-Term Thinking Is Impossible Without Financial Independence
“I think it's important to think really long term, and you can't do that unless you're financially independent. That's one of the big lessons that I have for my students. Is that the first thing that they need to get is financial independence. Once they have th…”
Bakshi: Low-Cost Business Models Provide Sustainable Economic Moats Over Brand Differentiation
“I think the low cost model is a far more sustainable model.”
Bakshi: Intuitive, Design-Driven Founders Require a Proven Track Record to Spot
“You can't spot these people at the beginning of their careers. You can spot them maybe in the middle of their careers. So there has to be past track record of somebody who's intuitive and right over and over again. Once you found that, that's based, based on a…”
Bakshi: Opportunity Costs Dictate Shutting Down Underperforming Businesses Earlier Than Expected
“Ah, but if you study Charlie, and if you study Warren Buffett's life, you'll find out that actually you should shut it down well before when it makes sense for you to shut it down, because you have to think about opportunity costs.”