1/ In the new Infinite Loops podcast I explain why Gates and Allen saw more in the microprocessor than Intel. They wanted to solve a personal problem. Paying for computer access via a timeshare was $40 an hour in 1970s dollars. They wanted to own a computer at a low fixed price.
2/ Bill Gates told a Financial Times writer in 1988: "Intel themselves did not understand the importance of the advance they had made in building the microprocessor. Paul Allen and I wrote to Intel to tell them what an unbelievable device they had created. That was in 1974."
3/ "The last time Jim Manzi and I really talked at length was at the PS/2 introduction in April 1987. Jim was saying to me, 'Bill your company is fully valued. And I said to him, 'Jim, you’re right.' You know it is fully valued!” Forbes, December 7, 1992
Prediction is hard.
4/ “Eventually the price of a desk top work station won’t be much greater than the desk it sits on. And we’ll provide the software.” Electronics, September 30, 1985
“The semiconductor people are still providing us with the magic.” U S WEST magazine, Winter, 1990
5/ "Being a visionary is trivial. Being a CEO is hard. All you have to do to be a visionary is to give the old ‘MIPS to the moon’ speech — everything will be everywhere, everything will be converged. That's different from being the CEO and seeing where the profits are.” BG
6/ "When your sales slow down, its probably because of some horrible mistake you made a couple of years ago. By the time your sales go down, you’re dead, because it’s too late to do anything about it.”
"There's a few key wins that if you don’t win you’re dead — just dead!" BG
7/ In the podcast I explain why I have these quotes: "Nobody has a guaranteed position in this business. We’ve done some good work, but all of these products become obsolete so fast and the structure of the business as it broadens out is going to be different.” Forbes, Dec. 1992
8/ Positive feedback applies to people's success not just products.
"Once one thing gets ahead, then everybody works on stuff for that and because people do that, then it gets ahead more.” New York Times, August 25, 1991
Success feeds back on itself, particularly early success
I have thousands of stories to tell and at least one hundred of them are worth hearing. Maybe more. I enjoy it at least. So I've got that going for me, which is nice.
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1/ Understanding why SpaceX's Starlink constellation currently has ~1,800 active and soon to be active satellites and the OneWeb constellation currently has fewer requires that you examine the inherent trade offs given the physics of wireless and how that impacts unit economics.
2/ OneWeb's higher orbit means fewer satellites and gateways are required to cover the Earth and this reduces system costs, but higher orbit translates to a worse link budget which means the signal isn't as strong as in lower orbit. To learn more: itu.int/en/ITU-R/space…
3/ "I don't care" you say. "When do I get the Starlink terminal I ordered?" The issue usually for people in the northern US now is capacity not coverage. There's only so much capacity in a cell and it is shared. Will capacity increase over time? Yes, but it is not unlimited.
1/ Seeing this chart of NASDAQ 100 from 2000-02 made me think about a time in my life when we were in triage mode trying to keep businesses from dying. Some people were trading then, but our focus was on actual businesses running short of runway (eg cash).ritholtz.com/2022/01/living…
2/ The funding environment from 2000 to 2002 was in a state where assets of a business would sometimes not produce the ability to generate enough cash to get though a valley of death. Just one example was Nextel as this chart illustrates. I hope you never see a time like this.
3/ Control of XO Communications was up for grabs (if you had cash, which was rare at that time, you could gain control of companies in Chapter 11). We had to decide whether to try to gain control of XO or double down on Nextel. We correctly chose Nextel and avoided that battle.
1/ Me: "My worst nightmare is somebody I love is in trouble and I can’t help them. That’s the point of having money. That’s the point of having strength. That’s the point of preparing yourself. I’m always ready to do that, because I couldn’t live with him myself if I couldn't."
2/ "Start a company, you've got to be brave. Write a book, you've got to be brave. Paint that painting behind you, you've got to be brave. You must be willing to say: 'This is my painting.'"
3/ "If you give children opportunities to make mistakes and do things, they will be independent. When they go to college and through life, they're going to make great decisions. If you truly love them, do that. The downside is they're not going to call you often. Do it anyway."
1/ Most fun for me is an operating business. In a business you don't have the luxury of no cash flow planning or not understanding return on capital in addition to growth of NTM sales. Pretend proxies for that can only be ignored until they can't. Only unforgivable sin = no cash.
2/ Charlie Munger: “We have the same problem as everyone else: It’s very hard to predict the future."
Seth Klarman: "An unresolvable contradiction exists: to perform present value analysis, you must predict the future, yet the future is not reliably predictable."
3/ When I hear: "We can't do a DCF because the results can vary," I know that the person: 1) has not run a real business; 2) doesn't know how to run a business; or 3) knows but is pretending it doesn't matter.
If running a real business was easy, everyone would be wealthy.
2/ One of my 25iQ blog posts is about a meal service provided by Rovco which enables its customers to have fresh bass delivered to them twice a week. A Bass-o-Matic subscription service creates an obligation to purchase delicious bass, not just a discount. 25iq.com/2018/01/20/sup…
3/ A subscription is at its core an arrangement with a customer that creates a periodic contractual commitment. 25iq.com/2018/08/11/how…
If a consumer uses a loyalty card or a mobile app to pay is that a subscription?
Is paying for time limited discount card a subscription?
1/ In 1994 I said to Bill Gates that while network effects can be beneficial, the phenomenon can easily disappear because the factors that sustain them are brittle. We were talking about AT&T losing network effects.
Bill responded to me by saying "That's why I worry so much."
2/ At the time (1994) our friend Craig was selling McCaw Cellular to AT&T, which was buying mobile assets since it believed it could save the long distance business. AT&T (the long distance co. now gone) not understanding network effects was ironic given who first described them.
3/ Each question is different
a. Do you have a moat? (The test is based on math)
b. What created the moat (eg, supply or demand side scale economies)?
c. What value does the moat protect? (Google a lot vs Twitter not so much)
D. How long will the moat last (CAP)?