In their recent episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Tobias Carlisle discussed ‘New Technology’ And Its Diminishing Law of Returns. Here’s an excerpt from the episode:
Tobias: ARKK is a classic example. I look at that portfolio as it stands, I think that’s a scary portfolio to hold.
Bill: I look at that. It has some pretty good 60% forward.
Jake: [laughs] And increasing.
Bill: That’s right. Everyday.
Tobias: Somebody did the analysis, where she started at 40, or 20, or something like that in the investment– [crosstalk]
Bill: Yeah, 40.
Tobias: They just calculated down, and then looked at it, and they said actually, 50% is less aggressive from here than 20% close from where she said it the first time around. It’s under [unintelligible [00:41:28] interview with her and then one of the comments underneath is a good one.
Jake: And even there’s multiple compression in there? That’s what she said?
Bill: Yeah. Well, there’s been some already.
Tobias: Last time I looked at, I think the multiples were too heroic relative to the market but the underlines is still pretty ugly. There’s not a lot of the revenues are filtering down, but bottom line. But maybe that changes, maybe it’ll hit an inflection point. I don’t know.
Bill: I tell you what, if the revenues are filtering down to the bottom line, then there’s no way it does 60% forward, because then there’s not enough reinvestment opportunities.
Jake: I don’t know how you can look at every other technological revolution that’s happened in humanity and assume that there’s going to be all of this profit available for you out in the future, and that you’re going to be able to pick the winners of that. Airplanes, radios, TVs, the list is endless of awesome world changing technology and yet, the ability to make money from these giant revolutions has just been really almost impossible.
Tobias: Yeah. Can you see it coming and switch from one to the next one?
Jake: [laughs] I don’t know. But if you’re doing any destination analysis of like, what is the competitive structure of this industry look like in year 2037.
Bill: Winner take all, baby.
Jake: Every single one?
Jake: It’s all profit.
Bill: You just got to define the niche, right?
Jake: Everyone’s going to have 80% profit margins out in the future?
Bill: Except for the old-world companies that are generating cash– [crosstalk]
Jake: Except for all those hosers that– Yeah.
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