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Private Investment Brief @ThePIBnyc
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Time for a speculative hypothesis......I wrestle with my background as a Buffett-worshipping value investor on the one hand, and the seductions of the "neo-value investing" movement on the other. By "neo-value investing" I mean the attempt to invest in modern tech companies...
...using the theology and logic of Buffett value investing. "2004-vintage Amazon is very young, and not profitable on a GAAP basis, but it's growing like crazy and building an enormous moat so it's actually a value investment" is probably the iconic neo-value investing example.
Some days I wake up thinking it's impossible (even for Buffett himself) to be a true Buffett acolyte and a tech investor at the same time—the sector is just too uncertain and if value investing is about anything, it's about certainty. But then some days I wake up thinking it...
...may just be possible to somehow split the baby. One potential way to do so is to find instances of "there's nothing new under the sun," i.e. to find business models that may look novel and disruptive, but that are actually just new applications of time-honored business themes.
(For example, Amazon is arguably just the latest in a long line of scale players in general-merchandise retail, all of which (Walmart, Sears Roebuck, JC Penney) made fortunes for their founders). This is the angle I usually try to take when I wade into neo-value waters....
Now then, here comes the speculative hypothesis: I think there's another way to split the value/tech baby, and that is to focus on the psychology of the founder. It seems to me—remember, speculatively!—that there exists a type I'll call the "old-world tech founder." It's...
...difficult to describe with precision, but the old-world tech founder possesses qualities that would place him/her right at home in the early pantheon of Buffett operating CEOs—people like Rose Blumkin, Eugene Abegg, and Ben Rosner. That is to say, the old-world tech founder...
...possesses a combination of financial conservatism, social conservatism, old-world values, impatience with management fads, and a dislike of techno-optimism for its own sake and pandering to consumers—while at the same time being an innovative technology entrepreneur.
[Importantly, the old-world tech founder is not a techno-libertarian of the Ayn Rand stripe. They are emphatically not old-world at all.]
Maybe it's more of a "you know it when you see it" thing, so here are some examples of what I mean: Sir James Dyson, the star of yesterday's tweets, is basically a classic English eccentric rural inventor/tinkerer from the Age of Empire who somehow traveled two centuries ahead... time. Watch him here spend nearly half an hour not quite vibing with a room full of TED-Talk types:
Another example: Thomas Peterffy, a horse-riding descendant of one of the best old Hungarian families (real Hungarian aristocrats, not John von Neumann aristocrats if you know what I mean). If you've ever listened to him try to endure a conference call with the sell-side,... know he's had a very old-world way of running Interactive Brokers for 40+ years. I'd even put Bill Gates in this category. He's from Seattle, but is very much cut from the New England WASP mould: Two parents who were both pillars of the community, the spartan summer..., private school then Harvard, and of course he famously maintained a huge cash buffer during Microsoft's early days.
Your mileage may vary, but I feel that if I'm going to have any success as a neo-value investor, it may have to come from partnering with old-world tech founders. I just feel better able to understand them, and have a hunch that their personalities can mitigate some of the...
...inherent risks of the sector. What do you think, Fam?! Any other old-world tech founders you can think of...?
What about Henry Singleton? He was an old-fashioned Texan rancher, kind of a right-wing military guy, very focused on cash flow.
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