Max Koh Profile picture
20 Sep, 19 tweets, 5 min read
Best of Josh Tarasoff

@joshtarasoff is an investor who looks at businesses with a different coloured lens.

Knowing he wants to stay low key, I'm grateful he gave me the green light to write about him.

Here's my top 5 mental models from his interviews & letters over the years: Image
1. Bet on change instead of consistency

Classic Buffet: are people going to buy this product 50 years from now? Are people still gonna drink coke?

However, what I learnt from Josh is some types of changes can be predicted with more certainty.

a) Win win win

b) Dual value prop
Win Win Win

When there's a new way of doing things that benefits multiple parties, that change is more certain to endure.

Josh gives the example of Pet insurance benefiting:

• Pet owners (pay less $$)
• The vet (makes more $$)
• The pet itself

The ecosystem fluorishes.
Dual Value Proposition

A company should offer a new solution that's BOTH:

• Superior in function
• Much cheaper than traditional alternatives

Having just one ain't enough. Old habits die hard.

But when both occur simultaneously, the value prop becomes attractive.
2. Permanent Portfolio

Josh approaches his investments with a permanent attitude.

He seeks to have an infinite time frame, hoping the company will shoulder the work of compounding itself. Much like a self driving car cruising on its own.

This allows him to own it "forever".
Reminds me of an interview withMunger at the 2019 DJCO meeting:

"I don’t like looking for exits. I’m looking for holds.

Think of the pleasure I’ve got from watching Costco march ahead. Such an utter meritocracy and it does so well..." Image
"So I say find Costco’s, not good exits.

Why would I trade that experience for a series of transactions that make me a little...

In the first place, I’d be less rich after taxes. Secondly, it’s also a much less satisfactory life than rooting for people I like and admire."

- CM
This permanent attitude leads to virtuous cycles for Josh.

When everything is designed to be ultra long term, it reduces pressure for new investments...

• Which makes the ideas better
• Thus portfolio performance improves
• Further lowers pressure

The advantage accumulates.
3. Circle of competence = Business Models

Josh does NOT define his CoC based on industries.

Instead, it's all about the business models that he understands well. He names two:

• Network effects

• Volume price virtuous circle (similar to Nick Sleep's Scale Economies shared)
His understanding of Business Models helped him spot Amazon in 2012.

In a presentation he did with VALUEx that year, he mentioned:

a) Amazon's profitability is misunderstood

b) If its EBIT were normalized by adding back T&C + marketing expenses, they would be fairly valued. Image
4. Create distance on purpose

"I built into my process a phase where after I finish my work, I don’t make a decision. I don’t think about the company for a certain amount of time."

This allows Josh to:

• Avoid impulse buys

• Come up with new ways of looking at the business
5. Untapped pricing power

I used to get happy seeing businesses constantly raise their prices.

But Josh taught me to think differently.

If a company delivers great value but doesn't raise prices, or even chooses to lowers it...

It results in a severely undervalued product.
Similar to an undervalued stock, this means that customers are getting a bargain.

The business can:

• Raise prices in future without affecting sales, thus creating huge value for shareholders.

• Or if they continue to keep prices low, it makes them hard to compete with.
6. Quality companies = Understand their role in the ecosystem, Mission driven

In his recent 2021 letter, Josh mentions that quality should not be mixed up with structural advantages.

Stuff like a strong brand, switching cost etc

But these traits don't always result in quality.
Instead, here's how Josh defines a quality business:

• Understands its role in the ecosystem, strives to benefit all parties (suppliers, partners, employees. Not just their customers)

• Has a mission driven culture

These traits allow the business to endure for long periods.
7. Long termism is WHO you are, not just something you DO

"True long termism should be automatic. Not something you do but something you are.

Making an idea so much a part of yourself that applying it is no longer a conscious effort but instead happens automatically."
This is similar to James Clear's Identity Based Habits

To get the results we want, it's about becoming the type of person who deserves it.

In that case, long termism should not be a behaviour we only practice in the stock market.

We should act long term in all parts of life. Image
Those are my biggest lessons learnt from Josh Tarasoff, among many others.

After deep diving him for a few weeks, I find Josh to be an investor who thinks differently from the herd.

The amazing thing for me?

His philosophies can be applied to other areas beyond investing.
A recap of my key lessons from Josh:

1. Bet on change
2. Permanent Portfolio
3. Circle of competence = Business Models
4. Create distance
5. Untapped pricing power
6. Quality companies = Ecosystem-centric, Mission driven
7. Long termism is WHO you are

Thank you @joshtarasoff

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You don’t need to be the best. You just need to be different.

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Here’s why:
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Everytime I see an interview with Fred Liu of @HaydenCapital, I grab my notepad.

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I took time to transcribe it personally so I wouldn't miss anything. Here's a few lessons:
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