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I'm an old-school value investor, by temperament more comfortable among stable and certain industries. So when I wade into the waters of "neo-value" investing—the attempt to apply old-school value concepts to new-wave disruptive technology companies—I usually feel disoriented...
...at first, and need awhile to get my analytical bearings. One simplifying assumption that helps me do so is to assume that no matter how much disruption occurs in a particular industry, it won't change the total amount spent by end-consumers on that industry—it will just...
reshuffle it into different pockets. For example, I posited circa 2010 that no matter what damage music streaming did to terrestrial radio and compact discs, consumers would somehow find a way to spend the same amount on the music industry as a whole, because that amount...
...reflected the (pretty stable over time) place music held in their lives and household budgets. By arithmetic identity, this simplifying assumption led me to infer that one pocket's loss to disruption had to mean another pocket's gain on a more or less one-for-one basis. ...
Anyway, very long tweet-storm short, this simplifying assumption has proved useful to me, but I still think of it as a useful fiction. But it turns out that in certain cases, this assumption may actually be true in real life: wsj.com/articles/cord-…
