You don’t have to be a Rule Breakers subscriber to listen to David Gardner’s Rule Breakers Podcast. I’m grateful for that, because I’m not. But I did listen to the podcast today and thought it was extraordinarily good. Basically he says that you should be able to give your thesis for your greatest investments in one sentence or even one phrase. Here’s a link: https://www.fool.com/podcasts/rule-breaker-investing
Let me give it a whirl for a few of my favorites:
SHOP - “the only platform you need to build your [small or medium sized business] empire [online].”
PAYC - the way to make payroll and HR simple for your mid-sized company
LGIH - modern entry level homes in great areas
YELP - customer ratings for local businesses
AMZN - never go to any store again
This strikes me as the opposite of trying to come up with fancy models and figuring out if the technicals are right and whether something is going to turn around or not. Just buy the companies that are winning. If they stop winning, sell them and buy whatever is.
This strikes me as the opposite of trying to come up with fancy models and figuring out if the technicals are right and whether something is going to turn around or not.
I haven’t listened to the podcast. To me ones ability to distill an investment into one sentence comes from the accumulated knowledge. It is like your ability to make an elevator pitch about your project. That comes with deep understanding and a clarity of what is important and what is not and the awareness of the audience and what matters to them.
If you haven’t done all the work, and not at the top of the details, your elevator pitch is not going to click. But ability to make an elevator pitch doesn’t make you a great manager but a great manager should be able to make great elevator pitch.
If you haven’t done all the work, and not at the top of the details, your elevator pitch is not going to click.
That’s a really good point CM001.
As a sales professional for 16 years, I can say my elevator pitch has become far better. And your post pointed out several reasons why. It is all about being an expert in your field. I hope to get closer to that point with investing.
To me ones ability to distill an investment into one sentence comes from the accumulated knowledge.
Yes!
The aphorism “everything should be made as simple as possible, but no simpler” is normally taken to be a warning against too much simplicity and emphasizes that one cannot simplify things to a point where the hypothesis is no more compatible with all observations. The aphorism does not contradict or extend Occam’s razor, but rather stresses that both elements of the razor, simplicity and compatibility with the observations, are essential.
A pithy statement is not enough, it has to be “simple and compatible with the observations.” It has to include the vital elements and eliminate the distractions. TMF’s 3D printing pitch was pithy: “a trillion dollar industry” (or words to the effect) but where it failed was considering how some of that money would filter back to the investor. Currently I see the same kind of failure in SolarCity, some investors are ignoring the house of cards financing. It might work but the likelihood of blowing up makes it a terrible risk. In SolarCity you see investors concentrating on the cost of panels, rates and so on, but ignoring the financing which, to my mind, is the foundation stone of the business. To bring in the financial aspect it is convenient to know similar precedents, the risk of financing long term projects with short term loans. This is not covered in “green” investing yet it is at the core of SolarCity.
We have a saying in Spanish: “Mas sabe el diablo por viejo que por diablo” which translates to “Experience is what makes the devil so wily.” In political economics Frederic Bastiat put it this way:
Actually MF 3D pitch failed because they did not see the difference between plastics and specialty metals, especially titanium.
3D printing with titanium will radically alter the way jet engines and other high value low production items are made.
Yes, GE has cornered that market in some respects, um hum, Arcam.
But of all the 3D options we got in and out with profits and held on only to Arcam, for profit At least Mauser and I and a few others. So that was a good distinction we made.
The real issue, as I have generalized in the past and it applies here, is CAP. Competitive Advantage Period, combined w TAM Total Addressable Market.
Arcam has a strong CAP and still a large unaddressed TAM relative to its valuation. The plastic companies much less so.
Very good example of the difference between a market and companies and how when you buy and sell (when it is time to sell) does matter.
“everything should be made as simple as possible, but no simpler”
Great quote. I’ll give you one back: “He can compress the most words into the smallest ideas of any man I ever met.” - Attributed to Lincoln by Hill in 1906
Simplicity can of course be either naive or elegant. Just depends how much thought you pack into your words.
