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, 3 tweets, 1 min read
A Costco rotisserie chicken is the equivalent of "free" trading at a broker. Like the hot dog/soda combo at the Costco food court, it's a substitute for marketing.

Bezos: Once upon a time businesses devoted 30% to great service and 70% to shouting about it. That's now inverted.
Costco sells memberships. Members get a great deal on a chicken and as a result Costco spends less on advertising. Jeff Brotman, Costco’s co-founder once said Bezos doesn’t have to make a profit or break even on services like Prime. “He’s building great loyalty with that."
Charlie Munger said at the 2014 Berkshire meeting: “Costco is unbelievable. It is against the human nature of many entrepreneurial people to get price down and service up…” Costco members getting access to great prices is, well, fantastic. google.com/amp/s/25iq.com…
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More from @trengriffin see all

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Tren Griffin
@trengriffin
1/ "A textile company that allocates capital brilliantly within its industry is a remarkable textile company — but not a remarkable business.” Warren Buffett (1985).

You can't understand why he is such a great capital allocator if you don't understand the previous sentence.
2/ "Successful capital allocation means converting inputs, including money, things, ideas, and people, into something more valuable than they would be otherwise.” “The goal of capital allocation is to build long-term value per share.” Michael Mauboussin research-doc.credit-suisse.com/docView?langua…
3/ Warren Buffett: "It’s the ability to distribute cash that gives Berkshire its value." buffett.cnbc.com/video/2007/05/…

"The economic value of any asset is the present value… of all the future streams of cash going in or out of the business." buffett.cnbc.com/video/1994/04/…
Read 16 tweets
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Tren Griffin
@trengriffin
1/ I promised to write more on what I learned from John Malone and Craig McCaw. This letter was sent by McCaw Cellular in July 1994 to inform employees about the first accounting profit in its six year history. The business was sold to to AT&T for $11.5 billion two months later.
2/ McCaw Cellular's result was achieved by focusing on growing the value of the business (which is driven by discounted value of cash flows over the long term) instead of trying to maximize short-term GAAP profit. Cable television was grown in the same way by Malone and McCaw.
3/ If McCaw Cellular purchased equipment that asset's cost was recognized throughout its useful life. But when McCaw invested cash to acquire customers that expense was incurred immediately. Investors who knew that customer lifetime value was being created financed the business.
Read 13 tweets
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Tren Griffin
@trengriffin
1/ Somerville Brewing filed for Chapter 11 bankruptcy on September 27. The microbrewery, which was founded in 2011, owes more than $1.2M to six lien-holding creditors. Somerville cited “cash flow shortages” and “debt service”.
brewbound.com/news/small-mas…
2/ "Using the DCF framework, you cannot generate much cash from a revenue stream that is saddled with large, variable costs."

Quality of life is improved if your business has high gross margins. Volume can help if gross margins are lower, but it's hard.
google.com/amp/s/25iq.com…
3/ Wilson: "If the product is software and thus can produce software gross margins (75% or greater), then it should be valued as a software company."avc.com/2019/09/the-gr…

A business that can't generate free cash flow with software gross margins doesn't have product market fit.
Read 3 tweets

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Gon, Killua, Leorio and Kurapika go to Costco, a thread that will update slowly but surely:
After rescuing Killua from the Zoldyck family, Gon and his friends found themselves without anything to do for a bit. Walking around one of the quaint cities near Kukuroo Mountain, Leorio spotted a large market that said "COSTCO WHOLESALE" on it. "Guys!" Leorio shouted excitedly.
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