If you can get pasted the shameless plug at 0.20 and an almost comical sprinkling of unnecessary arrogance, there are some useful insights here.

In my view, software (w exceptions) is going to become increasingly commoditized & deflationary this decade.

People are always paddling towards waves that are already breaking. They are too late, and the marketplace is crowded. Money is actually made by developing real competencies, being fortunate enough to be in the right place at the right time, and having a wave catch you.
The commoditization of software development skillsets also implies the commoditization of the value of software. Software gets easier to write every day, and thus easier to replicate and displace, while competing sources for our attention & entertainment will keep mushrooming.
The market is pricing software stocks like we are still at an early stage of growth curve. We aren't. We are late. Covid hastened digital adoption everywhere, of virtually everything. Many areas of software are probably already at the inflection point of supply beating out demand
Roblox for instance already has some 200m users, amongst a target demographic of <16yos, whose level of engagement is already inflated by covid. There just aren't that many people in the world and hours in the day for these companies to sustain high growth from here.
If I was a Roblox investor, I would be more worried about demand being faddishly inflated than growth opps. It's all the rage with <16yos at the moment, but what if they get bored and move on to something newer/cooler in a few year's time? & such options endlessly proliferate.
We are going to see some bone-jarring de-ratings in coming years as the market transitions from one where everyone grew into open whitespace, into one where there is endless cannibalization of engagement from the new & where pricing overall is deflationary. Ain't gonna be pretty.

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More from @LT3000Lyall

20 Apr
More than a little amusing - and perhaps an interesting cultural marker - to see side-by-side headlines about regulators continuing to roll out red carpet for a stupefying drug, while simultaneously pushing toward prohibition for a productivity-enhancing one/cognitive stimulant.
Disclosure - I am a smoker, though I of course often try not to be. Bad for my health, yes. But some of my best blog articles have also been written high on nicotine. With it I can write for 10 hours+ straight without breaks, as well work 16-18hr days with absolute focus.
I have "successfully" quit several times and can, of course, function perfectly adequately without it, but I have found that without it I lose some of my creative edge and have to settle for a lower level of productivity & creativity - well past the point withdrawal ends.
Read 5 tweets
20 Apr
Next time someone argues that something must be true because its published in a "peer reviewed academic journal", bear in mind the substantial academic fraud that has been uncovered in the social sciences where many famed studies have comprehensively failed to replicate.
Academic peer review is not thesis confirming, nor does it prove the presence of rigor or a lack of bias. It does not prevent academics from inventing/embellishing conclusions for fame/recognition, succumbing to confirmation bias, or targeting politically convenient conclusions.
The way peer review often functions in practice is to entrench an elite clique who get to define what is true in a way that suits their own interests, & prevent outside scrutiny from other disciplines. A good analogy would be Catholic priests being such guardians in prior eras.
Read 11 tweets
16 Apr
There is a common tendency for pharma companies to back out amortization of acquired intangibles from "adjusted earnings", and investors/analysts to quote the lower P/E multiples resulting therefrom, but this is a highly questionable practice (thread).
Unlike staples companies (like KO & PG), pharma companies' earnings lack very long term earnings duration. After LOE patent expiries, their earnings typically drop precipitously, and so they need to continuously replenish the pipeline & launch new drugs to offset the impact.
Ideally, they would do this purely through internal R&D, and some companies succeed at that. But in many cases, internal efforts are insufficient, as it is getting harder and harder to discover new novel & genuinely differentiated/innovative therapies.
Read 9 tweets
13 Apr
I've shared this old Buffett interview before (from 1985 I believe, and one of Buffett's first), but it recently turned up again in my YouTube feed, and it's such a great interview I thought it worth sharing again & offering a few quick thoughts (below).

One of the first things Buffett says is rule #1, don't lose, and rule #2, don't forget rule #1. This is a quote I've heard many times over the decades, but only fairly recently have I begun to really fully appreciate how fundamentally important this dictum is.
Every cycle, Buffett is widely criticized for "missing winners". This cycle, it's for "missing Amazon" etc. But that misses an important point: Buffett's approach/value investing is fundamentally about *avoiding the risk of overpaying* at all costs.
Read 12 tweets
26 Mar
Owning high quality but expensive stocks is great when multiples are rising. High returns & low biz risk - what's not to like? The Q is, how will investors react/behave if multiples start to decline and stocks go sideways/down for years. How long before ppl get tired of owing em?
Patience is in short supply in markets - due to both investor temperament and performance pressure. Most are unwilling/unable to hold stocks going nowhere/underperforming for years. People's perceptions & attitudes towards these stocks will change when multiples stop rising.
2-3yrs in, after years of stagnation, investors will start to see these stocks as dull/dead money, and start looking for cheaper stocks that have the opportunity for larger gains. Trends like this are self-reinforcing. This is how 10yr+ multiple derate cycles in quality happen.
Read 4 tweets
24 Mar
It's amazing what absurd things ppl will believe/argue when they emotionally want to be bullish. On Kuaishou below:
*User coverage is 90% but there is "room for platforms to increase user base". Infants perhaps? To not see saturation here is glass is half full in extreme.
(1/2) Image
*Average time spent is 67min per DAU, but this "could rise to 110min by 2025". It could also fall. There are only 24 hours in a day, and there will be more not less competition for our entertainment time in the future.

Really nutty stuff.

PS (3/3)
*Tiktok & Kuaishou have formed a duopoly, "although WeChat may muscle in". Just a casual remark in passing that "oh, and by the way it might not remain a duopoly, and might get a lot more competitive". But no need to worry, because there is no need to worry.
Read 5 tweets

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