YouTube made an important announcement two weeks ago regarding how they are changing recommendations. In summary, YouTube is trying to protect us from our own cognitive biases. Unfortunately, humans are more likely to click on things that are sensational, negative, or fear-inducing.
To be fair, this didn’t start with the internet. For many years, the adage of news programs has been “if it bleeds, it leads.” Basically, news stories get better ratings talking about murder than about decreased childhood mortality.
Continue reading “YouTube Joins Facebook in Fight Against Human Biases”
Though not on purpose, Tesla has been on my mind a lot lately. Professionally, I’ve been researching self-driving cars and that involves reading up on Tesla (and Waymo and several others). The new book Autonomy is great by the way. And then personally, I just got a new car and thus spent the past several weeks going through the car buying process.
I hate everything about the car buying process and I don’t think I’m alone in that. Every friend I’ve talked to recently about buying cars has said the same thing. I started by entering my information into a few automaker websites to learn more. I immediately regretted that decision. The next few days I was bombarded by calls, texts and emails from salespeople at nearby dealerships.
Continue reading “Tesla and Product-Market Fit”
Most companies I’ve invested in have been ones that I wasn’t previously familiar with. I only became familiar with the product and industry after many hours of research. This isn’t on purpose—just a result of me not being a user of most public company’s products. The advantage of this is that I approach learning about these new products from a clean slate with few biases. The drawback is that I will probably never understand the product as well as I would if I was a regular user.
The opposite of this is Peter Lynch’s investing style: “Invest in what you know.” Lynch advised people to invest in companies they know and love. Logically, this makes a lot of sense, but I’m not convinced this method is any better (or worse). The advantage of Lynch’s approach is that a user might have a unique insight into the value of a company that other investors may not have or appreciate. The drawback is the user will almost certainly overemphasize their own experience with the company and may discount what the greater population thinks (i.e. the base rate).
Continue reading “Invest in what you know or what you don’t know?”
I generate new investing ideas mostly through reading investment write-ups online, talking to other investors, occasionally going through screens of companies that meet some high-level criteria I look for, and general learning (like reading books and news) that sometimes leads to an idea. I like getting ideas from others (via investing websites, blogs, and friends of mine) because it’s a quick way to get an overview of the business and industry. Thus, my research doesn’t have to start from scratch. Between investing websites and blogs that I follow, I look at several hundred investment write-ups per year.
Depending on how well I know the industry, my research for a new company generally takes anywhere from a few weeks to several months. Thus, in an entire year I only have time to get to know a handful of companies really well. This forces me to be very picky on what companies I spend time researching. I want to know a small number of high-quality companies very well, as opposed to knowing less about hundreds or thousands of companies.
Continue reading “My investment process”
In the 1950s, the average holding period for stocks was over seven years. Not surprisingly, that number has been falling ever since—current estimates put the holding period at around 4-8 months.
The vast majority of investors are focused on the next quarter or the next year, which is mostly just noise in terms of what really matters to a company’s value. It’s not uncommon that a company’s terminal value is 70-80% of what it’s worth today. If how a company will perform 10-20+ years from now makes up most of its value, then the most important factor when choosing companies to invest in is how durable their competitive position is over the long-term, which often has very little to do with near-term results. Even so, it’s not a surprise that so much of Wall Street focuses on the short-term.
Continue reading “Time Arbitrage as a Competitive Advantage”
I went back on The Intelligent Investing Podcast this week to discuss a few companies Wiedower Capital owns, mainly Calloway’s Nursery, Franklin Covey, and Issuer Direct. Click below to listen.
The Intelligent Investing Podcast
Reading through all of Jeff Bezos’ annual letters inspired me to read through other letters from very smart people—and Larry Page and Sergey Brin from Google were the first choice. Besides using a bunch of Google services on a daily basis, I’ve never followed them as a public company so I learned a lot reading the letters. The main thing I came away with is an appreciation of how Google has evolved from just a search engine to a smorgasbord of many products and services that all ultimately feed into the search funnel.
If you invested in Google in 1998 (as a private company), you almost certainly would have been betting on their ability to build a search engine. In fact, you can read Larry and Sergey’s original paper from 1998 describing their Google prototype and, not surprisingly, there is no mention of Gmail, Analytics, Chrome, YouTube, Maps, or Android. It’s interesting that, in my opinion, Google’s expansion into so many products would have been impossible to predict, but looking back from today it all seems rather obvious.
Continue reading “Lessons from Larry Page and Sergey Brin”