One of the questions most investors ask themselves at least at some point is whether they are indeed good investors, or all their past success are just random luck which by definition may not persist.
2/ My basic assumption is I am probably not a great investor. Even to be average, it will require a lot of work for me.
A common retort is why bother investing then? If I am so unsure of myself as an investor, shouldn’t I just index?
3/ This feels like equivalent of telling kids there’s no point in playing basketball because they’re never gonna make it to NBA.
I doubt most NBA players knew before touching the basketball that they are probably very good at it and it might be possible to make it a profession.
4/ What about all the kids who don’t end up in NBA?
Well, many of them still love the game just as much and follow the sport anyway because it’s so much fun even though they aren’t quite good at it.
5/ It may feel like a cavalier comparison, especially since investing is not a “game”.
There is a real cost to failure in this endeavor vs turning out to be a bad basketball player.
6/ I think about how I would feel if after 30-40 years I find myself underperforming index by 100-200 bps. Would I think I just wasted my life in investing?
It’s hard to know how you would *feel* beforehand, but I have at least convinced myself I wouldn’t consider it a waste.
7/ Investing is truly my lens to understanding the world.
Because of investing, I do feel more connected to the world around me. We interact with businesses everyday in our lives, and...
8/ ...understanding how they make money, their incentives, and who can survive and why are the kind of intellectual exercises that provide me an inherent utility that will be missing from index investing.
9/ I do believe if you don’t think such an exercise itself has value, individual investors should strongly consider indexing than actively managing investments.
10/ We can “democratize” investing as much as we want, but I don’t think alpha will ever be democratized. Margin Call got it right:
11/ “And there have always been and there always will be the same percentage of winners and losers. Happy foxes and sad sacks. Fat cats and starving dogs in this world. Yeah, there may be more of us today than there's ever been. But the percentages-they stay exactly the same.”
12/ In the long run, just like most professional investors, supermajority of individual investors will also turn out to be bad (or very bad) investors.
13/ What most individual active investors should attempt is increasing income and their savings rate so that they become somewhat immune from underperforming the index.
14/ People grossly underestimate how their lifestyle doesn’t change much when they generate 7% CAGR vs 15% CAGR return over 30-40 years although the difference can appear significant in absolute dollar terms.
Just make sure you don’t blow up.
End/ Of course, none of this applies to professional active investors. They made it to the “NBA” and they should all be playing for the championship.
If they underperform their *benchmark* over their career, it's only inevitable that they will feel deeply disappointed.
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another great interview of @danielgross and @natfriedman by @benthompson
Some notes from the interview:
on Japan:
"...We’ve been puzzled by why TSMC’s margins aren’t better for a little while. Why are they not taking more of the margin? And I think you just said it, they’ve been through so many rounds of boom and bust and they’ve outlived a lot of people who made the wrong moves."
...I find a really interesting mispriced thing in the world might be Japan, the entire country.
...if you’re trying to consolidate all your bets on semiconductors, Japan’s a pretty interesting geography, because I think they’re going to have all these components at the end of the day, in basically one single country.
...What I sort of wonder is in a world where, if AI really happens, maybe the 2030s are the decade of Japan, if they really are able to manufacture all of these components that have to get offshore from Taiwan for various reasons."
"Don't bet against Zuck"
On Gemini:
"...not only did they deliver a good model, but they delivered innovation along an axis, a couple orders of magnitude out from what anyone else had delivered so far
...it’s clear that Google has figured something out here, and they have a bit of a secret and we’ve all been looking for clues and poring over the literature to figure out what it is. But this is a real axis of differentiation."
Imagine opening Amazon’s earnings report 5 years from now and what do you think you might hope you paid more attention to? It’s very unlikely to be AWS topline growth rate this (or any) quarter.
If I have to guess, it’s the shipping+ fulfillment costs related developments that you would find more consequential 5 years from now.
I’ll explain why but let’s first take a look at some numbers quickly before going back to that discussion.
3P revenue grew by almost +20%, ads +25%, subscription mid-teen, and 1P MSD+.
AWS, which was the key focus for many, grew by ~12%. More on AWS later; let’s start more segment level discussion with Amazon, ex AWS.
Thread on $META follow-up call and some more thoughts on the quarter
Meta's DAU/MAU is at all-time high. Consumers vote with their time whereas "Intellectual Yet Idiot" class remains busy dissecting "surveillance capitalism"
chart h/t @east_cap
it seems the impact from the war so far has been minimal, and the wider 4Q revenue guide was likely just out of caution.
Meta had a terrific third quarter which makes the after-hours reaction (down ~3%) tad bit surprising, but perhaps understandable given the wider range of scenarios for advertising going forward.
Here are my highlights from tonight’s call.
Since 4Q’19, Meta added 880 Mn Daily Active Users/People (DAU/DAP) to its Family of Apps (FOA) properties.
Given Snap currently has 406 mn DAU, this means Meta added two “Snap” (and then some) in less than four years!!
DAU/MAU engagement looks steady across all regions. Overall DAU/MAU ratio has been inching up for the last seven consecutive quarters.
While Google Service segment did just fine, Google Cloud’s pace of deceleration in topline was a bit disappointing.
Here are my highlights from the call tonight.
After four consecutive quarters of single digit growth, Google returned to double digit growth this quarter.
Both Search and YouTube grew by double digit, but Google cloud’s topline growth came down from ~28% last quarter to 22.5% this quarter.
Google Services maintained mid-30s EBIT margin, but after posting QoQ margin expansion for the last 6 quarters, Google Cloud’s margin declined from 4.9% in 2Q’23 to 3.2% in 3Q’23.