Curiosity@Intelsense
Weekly dose of learning
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Here is the recording for those who may have missed the investor meetup last month.
1.
The addiction / dopamine economy
The world’s most valuable resource isn’t data, compute, oil, or rare earth metals; it’s dopa, i.e., the fuel of the addiction economy, which runs the most valuable companies in history. Addiction has always been a component of capitalism — nothing rivals the power of craving to manufacture demand and support irrational margins. Sugar and rum were the dopa-delivery systems and currency of the Triangle Trade. Later, the British East India Company was the Sinaloa Cartel of the 19th century, producing and distributing a product China became addicted to: opium. At its peak in the last century, Big Tobacco acquired customers with TV ads and endorsements from doctors, but the addictive ingredient, nicotine, is how the industry extracts $86k to $195k per customer — and costs those customers $1 million to $2 million in expenditures, opportunity costs, and health-care expenses.
Historically, the most valuable companies turn dopa into consumption. Over the last 100 years, 15 of the top 30 companies by cumulative compound return have been pillars of the addiction economy. The compounders cluster in tobacco (Altria +265,528,900%), the food industrial complex (Coca-Cola +12,372,265%), pharma (Wyeth +5,702,341%), and retailers (Kroger +2,834,362%) that sell both substances and treatments. To predict which companies will be the top compounders over the next century, consider this: Eight of the world’s 10 most valuable businesses turn dopa into attention, or make picks and shovels for these dopa merchants.
2.
Why most Investors are mostly wrong most of the Time!
I think there are several causes for the poor performance of investors as well as for corporations. First of all, most people, including fortune-tellers, investors, politicians, army generals and company executives grossly over-estimate their ability to forecast the future.
I suggest that a serious investor must start out with the knowledge that he really does not know what will happen in five minutes, let alone one year. The future is simply unpredictable. Otherwise, how would you explain that 85% of all fund managers under-perform the stock indexes. Naturally, every year there will be some forecasters and investors who can claim to have been right. But the problem is that every year there will be different forecasters and investors who will have been right in their projections. Therefore, to simply follow the advise of the advisor who correctly forecasted events last year will in no way guarantee any success the following year.
Pic of the Week
Thought of the Week
“When I look back on all these worries, I remember the story of the old man who said on his deathbed that he had had a lot of trouble in his life, most of which had never happened.” – Winston Churchill
“There are more things to alarm us than to harm us, and we suffer more often in apprehension than reality.” – Seneca
Video of the Week
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