1/ There are lots of quality companies, but few are what @nntaleb calls antifragile.
Imagine a box. When shaken the contents are not only protected but grow stronger. Antifragile businesses benefit from volatility.
I want to own these.
Imagine a box. When shaken the contents are not only protected but grow stronger. Antifragile businesses benefit from volatility.
I want to own these.
2/ What are the characteristics of an anti-fragile business?
3/ It is appropriately financed. It can be levered but debt must be structured in a way that it can’t be called at inopportune times.
Long maturities and non-recourse debt create layers of protection.
Long maturities and non-recourse debt create layers of protection.
4/ It has many options for investing capital.
$LUK through the 80’s and 90’s is an excellent example - Cumming & Steinberg were vultures, purchasing distressed assets in a variety of industries. A larger playing field increases the odds of success.
$BAM is a modern example.
$LUK through the 80’s and 90’s is an excellent example - Cumming & Steinberg were vultures, purchasing distressed assets in a variety of industries. A larger playing field increases the odds of success.
$BAM is a modern example.
5/ It gets stronger as it gets bigger. Many traditionally-run businesses are too centralized and do the opposite, collapsing under their own weight.
During stressful periods, scale advantages, regulatory capture and network effects widen the gap with competitors.
During stressful periods, scale advantages, regulatory capture and network effects widen the gap with competitors.
6/ Shareholders are long-term oriented. Their actions help determine the cost of capital which is critically important during a crisis when cheap capital is scarce and immensely valuable.
7/ Perhaps most important - management is unusually skilled at allocating capital and can move quickly.
High return opportunities don’t last long.
Ex) Malone & $SIRI, Buffett / $BRK buying $BNI or Flatt / $BAM investing in $GGP. Once the dust settles the opportunity is gone.
High return opportunities don’t last long.
Ex) Malone & $SIRI, Buffett / $BRK buying $BNI or Flatt / $BAM investing in $GGP. Once the dust settles the opportunity is gone.
8/ end
• • •
Missing some Tweet in this thread? You can try to
force a refresh
