Patrick O'Shaughnessy's Blog, page 20
April 18, 2017
REALLY Private Equity, with Royce Yudkoff and Rick Ruback – [Invest Like the Best, EP.33]
In this episode, I continue to pull on one of the most interesting threads that I have uncovered in the course of producing this podcast: the world of permanent equity.
My guests today are Royce Yudkoff and Rick Ruback, two Harvard Business School professors who have partnered to create a popular class that teaches students how to search for, acquire, and run a small business directly after graduation. The course is aimed at students who want hands-on, management experience as soon as possible. After purchase, there is no timetable for selling the business. Indeed, if done well, there is never any reason to sell because the free cash flow yields to owners are higher than most alternatives.
I approach this conversation from an investors standpoint. LP investors usually partner with these searchers to form what is called a search fund. A search fund allows recent MBA grads to spend time looking for a business and ultimately acquire it. The result is a small-scale but often high return proposition for investors.
I loved our discussion of what to look for in a business and what to avoid. The principles we list are useful for investors of any kind, and will particularly appeal to those from the buy and hold, value investing, and quality investing camps.
One point of note which wasn’t captured during the recording. One of the reasons this style of investing isn’t more well known that it is extremely costly upfront. It can take years to find a company, and once found, the transaction costs can be 20% of the total purchase price. Rick calls this category “REALLY private equity”
If you enjoy this conversation, be sure to check our Royce and Rick’s book. HBR Guide to Buying a Small Business, which goes into many of the topics we cover in even greater detail.
Show Notes
3:11 – (first question) – Explain the idea of a search fund and why recent MBA grads and LP investors would be interested.
5:26 – A look at the folks that tend to be most active in this space
7:53 – What is the scale of people involved in this
9:55 – Why it tends to remain among smaller investors and not attract larger hedge funds
10:57 – Is there any collectivization happening that are trying to muscle in
12:31 – With a good example, they walk through the process of going through this
15:40 – Exploring the time horizon in these deals
17:41 – Getting into the idea of risk to these businesses
22:36 – The characteristics that people should screen for in these businesses
23:51 – Recurring customer bases
28:36 – Low cyclicality
30:04 – Low customer concentration (supplier concentration as well)
31:46 – Good free cash flow characteristics
32:05 – One that can be transferred away from the selling owner
34:04 – Recurring revenues vs repeating revenues
35:18 – What percentages of business hit these marks and qualify as good enough to be invested in
37:52 – The Castronics example and why you don’t want to be the most important provider to a large customer
42:15 – Looking at the entrepreneurs who get excited about this
44:15 – What are some red flags that you don’t like to see in these types of businesses
45:14 – Technology companies
45:55 – Companies that have stroke of pen risk
47:05 – Lifestyle businesses
48:23 – Why growth is not a massive priority in this arena
51:27 – What financing for these types of businesses is like
54:03 – SBA 7A financing
54:48 – How do you get involved in this if you have a check you want to write
58:58 – What is the incentive structure for someone running a searcher firm
1:01:22 – What was right and wrong about the traditional private equity world?
1:02:38 – What business would they want to own in perpetuity
1:09:05 – A quick look at margins in this space
1:09:34 – Looking at the most memorable individual day for each guest
1:12:36 – Kindest thing anyone has ever done for you
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
April 13, 2017
SPECIAL EPISODE: Introducting the Capital Allocators Podcast, with Ted Seides
Asset managers spend considerable time and effort trying to get to know capital allocators. Luckily, there is now a bit of a shortcut–at least to understanding what drives their investing decisions and their world views. Today, my good friend Ted Seides is launching his podcast, Capital Allocators. I’ve published the first episode below: Ted’s great conversation with Steve Galbraith.
I have also listened to the next several episodes, and most of Ted’s guests have never done anything like this before. Given the high quality and uniqueness of the guests, I encourage you to subscribe to the show wherever you get your podcasts. I can’t wait to see how it progresses. You can subscribe here:
Here is the first episode, I hope you enjoy!
April 11, 2017
The Art of Tracking, with Boyd Varty – [Invest Like the Best, EP.32]
This week’s episode is the most unique to date. My guest is Boyd Varty, who grew up in the South African Bush, living among and tracking wild leopards. The main theme of our conversation is tracking, and how the same strategy for pursuing animals in the wild can be applied to all aspects of our lives. Boyd’s family has been tracking animals for four generations, and he is bringing what they have learned to a larger audience around the world.
The episode includes the best answer I’ve ever heard (which comes when I ask Boyd to describe his most memorable experience). We also discuss the dangers of an achievement or goal-oriented mindset, and what he learned from spending time with Nelson Mandela as a boy.
This episode is one I hope you share with those you love because I think Boyd’s ideas will have a profound impact on many who are thinking about what to do with their lives—whether they are young or old.
Please enjoy.
Links Referenced
Books Referenced
Cathedral of the Wild: An African Journey Home by Boyd Varty
Finding Your Way in a Wild New World: Reclaim Your True Nature to Create the Life You Want
Show Notes
(First Question) 1:52 – Exploring Boyd’s childhood through a story about a black mamba
5:05 – Looking at the early history of Boyd’s family and their foundation in the bush of South Africa
8:52 – The launch of their safari business
9:58 – How they connected with an ecologist that encouraged them to “partner” with the land and how that led to the leopards of Londolozi
16:17 – Expanding their model to other areas and creating an economy of wildlife.
17:04 – How Boyd discovered what he wanted to do with his life in healing
17:12– Cathedral of the Wild: An African Journey Home by Boyd Varty
22:41 – The concept of Ubuntu, the African value “I am, because of you.”
27:10 – How Patrick got to meet Boyd
28:07 – Exploring the idea of building your villages and some of the forces that combat that in our daily lives.
33:15 – The difficulty in following your inner compass
33:58 – Mr. Money Mustache
38:47 – Looking at Boyd’s early experiences in tracking and how he applies those principles in his current life.
44:15 – Exploring the two different types of confidence and why there’s a benefit to throwing yourself into difficult situations, especially as a tracker.
49:05 – Identifying the places where you can be relentless in life
50:58 – The single most memorable tracking experience for Boyd, which is an incredible tale of tracking lions. (Also one of the best answers to a question yet)
1:03:41 – What can people do to get the holistic experience of the African bush
1:04:12 – The Presencing Institute
1:06:07 – Ways that people can learn more about Boyd.
1:06:23 – Ted Talk
1:06:35 – The book
1:06:40 – Workshops/Tracking Retreats
1:06:58 – Seminar in Deer Valley
1:07:05 – Martha Beck’s work
1:07:07 – Finding Your Way in a Wild New World: Reclaim Your True Nature to Create the Life You Want
1:07:28 – Website
1:08:48– When Nelson Mandela stayed with his family after getting out of prison
1:15:28 – Kindest thing anyone has ever done for Boyd
1:17:07 – A story of how his friend Sully saved his life from a crocodile
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
April 4, 2017
Quant Hedge Funds and the Fear of Death, with Khe Hy – [Invest Like the Best, EP.31]
My guest this week is Khe Hy. Khe has a very interesting, two-part story. We start with Khe’s career at Blackrock, where he rose to be one of the youngest MDs at the firm, specializing in quantitative hedge funds. Khe shares his perspective on how the hedge fund landscape has changed and what investors should look for in hedge fund managers in the future.
The second part of the story is about Khe’s attempt to understand himself. We get into fear, joy, and all that he has learned across several years of introspection and exploration. His lessons coalesce around four key pillars–compassion, stillness, uncomfortable introspection, and finding truth. We explore what he means by each of these ideas in detail. I don’t think that Khe is capable of lying. He is one of the most honest people I’ve met, for better or worse, and was kind to share both his struggles and moments of clarity on investing and life.
With Deep questions about purpose and deep questions about how to evaluate a quant hedge fund, This was my kind of conversation. Please enjoy!
Links Referenced
Books Referenced
Show Notes
0:00 – (first question) – A quick summary of Khe’s career in finance
1:27 – How the flow of capital works for the hedge fund business
7:09 – The process of evaluating hedge funds
11:02 – What do you look for when picking pickers of stocks or managers of these funds
14:24 – Exploring the quant funds and what Khe looked for when deciding to invest in them
18:42 – What firm or strategies intrigued Khe the most at first glance and what negative screen did he use when picking managers
21:10 – The need for repeatability in this process
22:40 – At what stage of this run at Black Rock did he feel most alive
24:51 – What was right things and what was wrong during this period
28:45 – Khe left this world when he was 30, but we’re looking to explore the catalyst for getting out
32:13 – Breaking down the difference between I vs T-shaped people
36:38 – Khe’s last day at BlackRock
39:36 – The family packs up and takes off for their own version of eat, pray, love, starting in Bali.
42:25 – What lessons were learned on that trip
46:25 – Looking at what Khe has done since this trip stemming from his newsletter
48:10 – Rad Reads and why skate culture was such an influence
50:40 – The power of consistency
52:03 – Permission to try whatever Khe wanted
1:00:02 – The mutually beneficial introductions (MBI’s)
1:04:20 – Patrick shares his experience with an MBI set up by Khe
1:05:20 – Lolita
1:06:12 – Looking at the four pillars that Khe lives by, starting with compassion
1:10:52 – Next up, stillness
1:15:53 – A look at uncomfortable introspection
1:24:22 – The last pillar “finding your bliss” or “live your truth” and how Khe figures out the right direction to follow in life
1:29:25 – What tops the joy ranking right now for Khe
1:32:39 – Patrick questions we should look for a return on our time investment in life
1:37:33 – Most memorable day in Khe’s life
1:40:00 – Kindest thing anyone has ever done for Khe
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
March 28, 2017
The Future of Asset Management, with Ted Seides and Brent Beshore [Invest Like the Best, EP.30]
This week, my good friends Ted Seides and Brent Beshore join me to discuss the future of asset management and a ton of fun side topics. While we are all passionate about investing, we’ve had very different careers: Ted in alternatives, hedge funds and fund of funds, Brent in lower middle market private equity, and my own in quantitative equities. What we share is a passion for investing in general, and a deep interest in where the asset management business and profession is going.
This conversation starts like most episodes—a somewhat structured exploration of the investing business –but morphs to be a bit more fun and informal as we work our way through a bottle or two of wine. In the later half, we talk about how to dissect an industry, common features of good businesses within a given industry, books we’d like to write, books we wish existed, and things we’ve learned in our careers.
Links Referenced
The Base Rate Book (Michael Mauboussin)
Books Referenced
The Four Agreements: A Practical Guide to Personal Freedom
How to Double Your Profits in 6 Months or Less
Drive: The Surprising Truth About What Motivates Us
The Book of Joy: Lasting Happiness in a Changing World
The Systems Bible: The Beginner’s Guide to Systems Large and Small
Making Sense of God: An Invitation to the Skeptical
Show Notes
0:00 – (first question) – Ted describes structural headwinds that hedge funds face today
1:20 – The future of asset management, the fee structures and where it might be heading
5:45 – What would lead to a natural tendency towards capital deployment
11:22 – Is it possible to pick the best pickers
12:47 – How much was size a factor in identifying good stock pickers
15:19 – Looking at edge and how the fight for informational edge has changed over the last few decades
19:09 – The signals that are starting to pop up today that will have some staying power
20:09 – The future of the corporation and what impact that will have on how valuation is determined
23:29 – What role industry dynamics play when making an investment decision, and why components of a core business can be attractive
27:42 – Looking at the disruption in the media business
29:43 – The way in which change impacts investing decisions
31:51 – What are the setups that would be conducive to a true long term investing strategy
36:49 – What long held beliefs have changed for everyone over the last few years that was a surprise
39:44 – The Four Agreements: A Practical Guide to Personal Freedom
43:19 – Topics for books that they would explore
47:00 – Exploring the idea of business hygiene
47:10 – How to Double Your Profits in 6 Months or Less
50:21 – What book topic do you want to produce that doesn’t exist yet
50:48 – Drive: The Surprising Truth About What Motivates Us
59:26 – The Base Rate Book (Michael Mauboussin)
1:01:17 – Will businesses be purged by rising interest rates squeezing their margins
1:07:26 – Exploring the role of intuition
1:10:26 – Who would you trust your money with
1:15:59 – What does retirement look like for this crew
1:21:20 – If you had to share a book, article, or person with unique ideas, what would you share
1:23:10 – The Book of Joy: Lasting Happiness in a Changing World
1:24:05 – The Systems Bible: The Beginner’s Guide to Systems Large and Small 1:26:06 – Making Sense of God: An Invitation to the Skeptical
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
March 21, 2017
Premeditated Success, with Jim O’Shaughnessy – [Invest Like the Best, EP.29]
My guest this week is my father, Jim O’Shaughnessy. He was a pioneer in quantitative equity research, part of an early group of explorers who combed through data to find factors which predicted future stock returns. While we’ve both written extensively on factor investing, we chose to mostly avoid that topic for this conversation. Instead, we discuss what has been a fascinating and colorful career on Wall Street. We talk about the power of premeditation, formative books, and his crazy experience during the dot-com boom when he ran a robo-advisor 15-years ahead of its time.
Links Referenced
Factors are not Commodities (Chris Meredith)
Fired Managers Outperform Hired Managers (Josh Brown)
Books Referenced
Dao De Jing: The Book of the Way
Surely You’re Joking, Mr. Feynman!
Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values
The Complete Poems and Plays: 1909-1950 (T.S. Eliot)
The Misbehavior of Markets: A Fractal View of Financial Turbulence
The Wealthy Barber: Everyone’s Common-Sense Guide to Becoming Financially Independent
The Snowball: Warren Buffett and the Business of Life
How to Win Friends and Influence People
Show Notes
2:50 – (first question) – How Jim got interested in investing and spent a lot of time at the James J. Hill research library in St. Paul, Minnesota.
6:03 – Going in depth on IA (Jim’s grandfather and Patrick’s great grandfather) and how character is fate
10:24 – Exploring the idea of pre-meditation and how it works
11:47 – Why you need to be bold
13:29 – What works on Wall Street
13:44 – Why you must be able to remove the emotion from investing
16:01 – How factor based investing can be derailed very easily if you don’t have discipline to follow it
17:49 – Factors are not Commodities (Chris Meredith)
18:57 – Looking at the mentoring relationship between Jim and Patrick, highlighted by an important mantra “look it up.”
20:09 – 5 Books Jim would subscribe
20:32 – Dao De Jing: The Book of the Way
21:07 – Adventures of a Bystander
21:46 – Surely You’re Joking, Mr. Feynman!
22:24 – Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values
23:06 – The Complete Poems and Plays: 1909-1950 (T.S. Eliot)
23:31 – Cloud Atlas
23:52 – The Misbehavior of Markets: A Fractal View of Financial Turbulence
24:33 – When Breath Becomes Air
24:57 – Looking at the stage of his career that Jim felt most alive
26:08 – The Wealthy Barber: Everyone’s Common-Sense Guide to Becoming Financially Independent
28:04 – Looking at the first robo advisor like portfolio that Jim launched, Netfolio
31:45 – Burning Up (Barron’s)
35:13 – The evolution of emotional response and the four horsemen of the investment apocalypse
37:10 – Pogo
38:17 – Fired Managers Outperform Hired Managers (Josh Brown)
39:50 – Biggest lessons learned from running businesses
45:24 – The Snowball: Warren Buffett and the Business of Life
45:32– Something Jim is most proud of in his career.
47:38 – Back to pre-meditation and wondering what roles in plays in luck and success
52:55 – Most memorable day of Jim’s career
54:03 – What does Jim that looks hard to outsiders, but is really easy for Jim
57:02 – What are some skills that Jim believes you can get better at with hard work
58:14 – How to Win Friends and Influence People
1:02:53 – Kindest thing anyone has done for Jim
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
FOR ITUNES
For comprehensive show notes on this episode go to http://investorfieldguide.com/jim
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
March 14, 2017
Permanent Equity, with Trish and James Higgins of Chenmark Capital – [Invest Like the Best, EP.28]
My guests this week are Trish and James Higgins, who run Chenmark Capital Management. In this episode we continue to explore a style of investing I call Permanent Equity. Returns in permanent equity come first from the ongoing cash flows of portfolio companies, not from reselling businesses down the line. The partners are Chenmark are pioneering this style of small business investing and share their experience with us thus far.
Links Referenced
Stanford’s Review of Search Fund Activity
Chenmark Capital: Weekly Thoughts
Books Referenced
Skin in the Game – Nassim Taleb (Coming Soon)
The Zurich Axioms: The rules of risk and reward used by generations of Swiss bankers
Show Notes
2:59 – (first question) – Looking at the process that they went through to identify their first company at Chenmark.
5:02 – Why the company ended up in Maine
5:58 – What was the raw material to first evaluate a business
7:50 – Exploring how they priced out that first company and the factors that played into it
9:42 – Asked about some of the hiccups of that first acquisition that wound up being things that they enjoyed.
11:31 – Looking at the things that were supposed to be difficult that weren’t there
14:06 – The balance of maintaining Chenmark’s edge while also looking to grow the portfolio
17:12 – Asking about the future vision of the company
20:46 – What talent and skillsets from their prior careers have helped them in this field
26:00 – When it comes to buying a business, what are the factors that provide them with comfort to going to the next level
27:58 – Diving into the rest of the Chenmark portfolio
29:40 – The Bait Shop Concept
32:26 – A look at the competition in the search fund market
35:24 – Stanford’s Review of Search Fund Activity
39:38 – What are their thoughts about outside investors
43:07 – What are their thoughts on fees, as far as what they could charge and what they think about the ones that exist in the rest of the investing world
48:40 – What does it feel like to have skin in the game and to be taking so much risk in the venture personally
48:48 – Skin in the Game – Nassim Taleb (Coming Soon)
49:25 – The Zurich Axioms: The rules of risk and reward used by generations of Swiss bankers
54:03 – Chenmark Capital: Weekly Thoughts
54:22 – Dare to be Great Essay
55:21 – Looking at the most memorable day of their careers
59:24 – Explore the kindest thing anyone has done for them.
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
FOR ITUNES
For comprehensive show notes on this episode go to http://investorfieldguide.com/chenmark
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
March 7, 2017
How to Live a Longer, Higher Quality Life, with Peter Attia, M.D. [Invest Like the Best, EP.27]
My guest this week is Peter Attia, M.D., whose mission is to understand and improve human lifespan and healthspan (quality of life). Reading Peter’s research, you find that there are many similarities between health and investing—for example, ideas like compounding—which we explore in detail.
We spend a lot of time on mind, body, spirit and performance as it relates to living a better life. Of particular interest is the strategic problem that we face when studying longevity. As Peter puts it in our conversation: we are the species of interest, but we can’t conduct the kinds of experiments on humans—randomized trials, with control groups—that we apply to solve other big problems. So we have to back our way into a better understanding of longevity and quality of life.
To that end, we discuss what we can learn from studying centenarians, the problem of progress in science, a drug called Rapamycin (which Peter believes could be revolutionary), eating, the importance of muscle mass, and the idea of distressed tolerance. We emerge with a framework for thinking about health and well-being which can hopefully help us all live longer, better lives. Please enjoy!
Posts From Peter Attia That You Should Read
How You Move Defines How You Live
Long List of Questions Answered: Part 1 and Part 2
Links Referenced
The Scientific Method-Richard Feynman
Knowing Versus Understanding-Feynman again
Books Referenced
Barbarians at the Gate: The Fall of RJR Nabisco
Show Notes
2:31 – (first question) – Getting Peter to define the concept of wealth and how it might have changed in his life
5:01 – How do you increase the number of really good people in your life.
6:50 – Looking at the relationship between healthspan and lifespan and a chart that Peter created on this specific topic.
11:11 – Drilling down into the different dimensions and aspects of this chart that could be most important for people, especially how compounding plays into our health.
16:57 – The difference between strategies and tactics that will help you extend lifespan
17:54 – The Scientific Method-Richard Feynman
21:41 – Different types of intermittent fasting
28:59 – What role does repair play in health
34:17 – Barbarians at the Gate: The Fall of RJR Nabisco
36:01 – Looking back, what health trends today will look absurd
36:19 – Diffusion of Innovations
39:24 – What are the primary benefits of weight lifting
40:21 – The importance of glucose disposal
45:07 – Good Calories, Bad Calories
46:31 – What is the state of progress in the scientific community
52:14 – Peter is asked about how he guards against getting too attached to old beliefs
1:01:51 – A look at how performance relates to healthspan
1:03:34 –Peter’s first great auto-racing experience
1:09:17 – Looking into Peter’s medical practice and understanding his thinking that goes into helping people
1:18:11 – The most memorable day in Peter’s career
1:22:31 – The kindest thing anyone has done for Peter
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
February 28, 2017
Slow and Steady Wins the Race, with Ariel’s John Rogers – [Invest Like the Best, EP.26]
My guest this week is John Rogers, founder, CEO and CIO of Ariel investments, one of the longest standing asset management businesses still in existence. John has a very impressive resume. In addition to his success at Ariel, he was the captain of the Princeton University men’s basketball team, he was the co-chair of Barack Obama’s Presidential Inauguration, he sits on the board of McDonald’s, and he has given back to his community more than I can list here. John and I discuss Ariel’s investment process and its evolution over the years, lessons from John’s basketball career, value investing, and asset management’s diversity problem among many other interesting issues. Please enjoy!
Books Referenced
A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing
Contrarian Investment Strategies: The Psychological Edge
Links Referenced
Video of John playing Michael Jordan
Show Notes
2:20 – (first question) – Explore John’s experience playing basketball and what he has learned from playing on a team.
7:22 – What is the cleanest way to keep the investment team honest by pointing out any mistakes they are making.
8:28 – Looking at John Rogers investment process to determine his edge
12:27 – How does John analyze managers and executives, especially as it relates to their longer-term investment strategy
13:27 – What are the biggest red flags that make you want to avoid a business
19:31 – Going back to the beginning of Ariel and John’s interest in investing
19:30 – A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing
22:13 – How did John tackle his portfolio early on and what industries he focused on then
24:37 – What helped to inspire John’s value investing strategy
24:54 – Contrarian Investment Strategies: The Psychological Edge
26:16 – The Money Masters
28:14 – What has changed in terms of the prospects for value investing from when he started till now
30:46 – Looking at John’s investment philosophy against the current market
33:58 – How important is brand when evaluating a company as a potential investment and how is that quantified
36:32 – How do you hire people that are going to have vision and be a good fit
38:48 – How to screen for someone who has vision
42:18 – What are the key business lessons John has learned running a firm
45:16 – A look at the I Have a Dream Class
45:53 – Exploring John’s community activism and what has the highest rate of return that are most worth someone’s time.
50:38 – Getting John’s take on the issue of minorities and women in investing and how to improve the situation
55:35 – Identifying the most memorable day of John’s professional career
57:18 – The kindest thing anyone has ever done for John
57:56 – What excites you most about markets today and into the future
59:18 – How did John get to play Michael Jordan in basketball…and beat him
1:00:45 – Video of John playing Michael Jordan
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
February 21, 2017
Building Modern Monopolies, with Alex Moazed – [Invest Like the Best, EP.25]
My guest this week is Alex Moazed, the co-author of Modern Monopolies: What It Takes to Dominate the 21st Century Economy, which explores the platform business model (Uber, Airbnb, Github). Alex is also the founder and CEO of Applico, a company that he started in his dorm room that is since grown into a huge enterprise that helps startups and Fortune 500 innovate with platforms. Alex and I talk about history and future of businesses and different types of business models. There’s a lot in here for investors, entrepreneurs, and historians. Please enjoy!
If you like the podcast or the book, here are a few extra articles that I’ve enjoyed by Alex:
Why Walmart Spent $3.4B On Second Place
The Best Kind of Digital Transformation
Books Referenced
Modern Monopolies: What It Takes to Dominate the 21st Century Economy
The Systems Bible: The Beginner’s Guide to Systems Large and Small
The Master Switch: The Rise and Fall of Information Empires
Zero to One: Notes on Startups, or How to Build the Future
Links Referenced
Show Notes
2:39 – (first question) – Exploring the history of business models from linear to platform.
5:46 – A look at the share of overall business platform companies have taken over
7:06 – Modern Monopolies: What It Takes to Dominate the 21st Century Economy
7:48 – The potential for platform businesses over the next 20 years
9:18 – Detailing the difference between a linear and a platform business
12:08 – Exploring transaction costs and core transactions across different business models
19:49 – Is the platform business model good for investors and VC’s since so many can get crushed when there’s a sole victor, or is it just for the founders and entrepreneurs.
24:35 – How the self-driving car is going to deliver more opportunity for consumer consumption
27:15 – Untapped supplies as the opportunity for new platforms and where we could see new openings
30:24 – How consolidated will things become across all platforms
33:16 – How do platform companies create a moat to keep others from replicating their business strategy
37:03 – Are there platform strategies that specifically don’t work
37:40 – Failed Color App
38:45 – Why complex systems typically don’t scale up and you should think small and easy to get started
38:47 – The Systems Bible: The Beginner’s Guide to Systems Large and Small
40:02 – How the origin of so many larger companies started out small and localized, and why it makes investors more comfortable
41:37 – How Alibaba had to tweak their business model to accommodate the Chinese market
44:07 – Why are the modern monopolies better for consumers
47:52 – Exploring platforms that are asset heavy
49:00 – What do you look for as a VC to determine
52:05 – Alex’s take on whether a platform based company like Uber should be more asset heavy
54:31 – Exploring some lesser known platform businesses that Alex finds interesting
56:18 – If there is a demand in the secondary markets for a product, why don’t the primary suppliers simply raise their prices
57:03 – What Alex’s portfolio of platform-based businesses would look like
58:48 – A couple of most influential books Alex has read
59:12 – The Master Switch: The Rise and Fall of Information Empires
59:38 – Zero to One: Notes on Startups, or How to Build the Future and other Peter Thiel books
59:53 – Looking at Applico, how it started and how it become so focused on the platform business model
1:03:56 – Most memorable day for Alex
1:05:13 – Kindest person to Alex in his life
1:06:10 – What platform opportunities could exist in the financial world
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
