The last decade hasn't been the same as Graham points out in his book.
It hasn't been better to "buy a group of large companies that are relatively unpopular."
In fact, it's been better to buy "glamorous and dangers fields of anticipated growth"
2/ Using Microsoft as An Example
When you stop and think about $MSFT, it'll blow your mind. Anderson notes:
"In its last year as a private company, $MSFT made $24 million net profit. In 2018 it earned $30.27 billion. That’s at a 24& CAGR over 33 years w/ 30% EBIT margins."
3/ Its Complexity, My Dear
Our world/markets are giant, complex, and unpredictable systems, whose complexity grows w/ time.
"Value-driven dictums of Graham and the extremes of Microsoft may be the near-random outcome of an almost infinite set of possibilities in each period
4/ Thinking About Future States
What we saw with newspapers and Blockbuster may be the start of a more dramatic transformation. Anderson notes that:
- Investors are questions terminal value of O&G
- Significance of mean reversion
- Importance of mass creative destruction
5/ A Transformed World
We could be on the verge of a change that rivals the Industrial Revolution.
If that's the case, Anderson says that "it's not just that the rules of the game will be unknown, but that the nature of the economy and corporate life will be mysterious."
6/ Stocks: From Biology To Cities?
The long-held microeconomic theory of declining returns to scale may not be the right framework going forward.
Future co's might look like cities: organisms that get stronger + more resilient the more they grow.
Recurring revenue is great. Recurring mistakes, not so great. Here were our biggest mistakes:
1) Too slow to act on a high conviction thesis 2) Overly constrictive trade management 3) Not sizing up (within limits) on higher conviction opportunities
2/ Error 1: Slow To Act on High Convictions
We come across a fantastic setup that has a Trifecta of tailwinds (sentiment, fundamental, technical) behind it.
We pitch it, write it up for the group.
And then don’t take the first entry and watch as our thesis plays out to the T