Are value investors starting to rethink value investing? In recent years, many well-known value investors have not performed well. Many people should have read the book "Rob the Investor". His author, Monish Pa

Are value investors starting to rethink value investing?

In recent years, many well-known value investors have not performed well.

Many people should have read the book "Rob the Investor". His author, Monish Paperle, is a classic value investor who has been transforming in recent years because of poor performance.

He regretted his shareholder letter last year, and the benefits of holding a bull stock for a long time far exceeded the constant stock swaps. He regretted that he had sold the Ferrari stock he had held heavily, and if he got the stock now, he would make far more money than his current assets.

Buffett himself said:

"Just see Howard in the mailbox. Max's investment memorandum, I will open it right away to read!"

Howard Max has begun to rethink value investing:

"Unlike in the '50s and '60s, everything seems to change every day. It's hard to imagine a company or industry that will neither be disruptor nor be disrupted (or both) in the coming years.

If anyone thinks that all the leading growth companies on today's list will still be around five or ten years from now, there's a good chance he'll be proven wrong.

For investors, this means that there is a new world order. Words like "stability," "defense," and "moat" will no longer be as important in the future. Many investments will require more technical expertise than in the past.

Investments based on the conservative thinking that yesterday's story will repeat tomorrow will be subject to increasing scrutiny by the market. ”

It is clear that Howard Max has sensed that the world is now evolving to iterate at a much faster rate than in the industrial age of the last century. "Stability", "defense" and "moat" are actually characteristics of the slow-moving industrial age.

Value investing is essentially linear thinking, the strong hengqiang, matthew effect. That's what Howard Max called "yesterday's story is bound to repeat itself tomorrow." The faster the evolution, the faster the competitive advantages that have been accumulated will be eliminated.

So, is competitive advantage completely unimportant? That's not right, competitive advantage is still important, but the meaning has changed.

Conservative-minded Buffett and Charlie Munger take it for granted that tesla is a new species, and Tesla's boss, Musk, doesn't look down on Buffett's old-fashioned thinking.

In 2018, the two sides fought a war of words on the moat issue on the Internet.

Musk said something like this:

Sooner or later, the moat will be breached by the enemy, and it is impossible to defend it, and it is necessary to replace the defense with an attack. The speed of innovation is the real competitive advantage of enterprises.

Musk's philosophy is the first principle, he has said many times that manufactured products can be reinvented, only raw materials are not replicable, and the manufacturing process itself can be completely subverted.

Based on this assumption, it can be inferred that sooner or later competitors can catch up with you, and your only advantage is to innovate faster than your opponents, so competitive advantage is dynamic, while moats in the traditional sense are static.

Another person who doesn't bird Buffett's moat theory is Marc Andreessen, the father of the Internet browser and the founder of the idea of "software devouring the world."

Tim: "Would you invest in TheSis Confectionery?" ”

Mark: "No, absolutely not. And whenever I hear something like TheSis Candy Company, I want to go to a new superfood candy company and prove that what they're doing is completely wrong. In this sense, we are the complete opposite of them. Essentially, Buffett is betting that change won't happen, and we're betting that change will happen. When he makes mistakes, the reason he makes mistakes is that he didn't expect things to change; when we make mistakes, the reason we make mistakes is that things have changed beyond our expectations. ”

The conversation above takes place between Tim Ferriss and Mark Anderson.

In essence, the competitive advantage Buffett is more suitable for the industrial economy.

Competitive advantage in the Internet era has changed compared to the competitive advantage of the industrial age. The Internet pays more attention to demand-side economies of scale (network effects), and one of the most important sources of network effects is the first-mover advantage. Whoever creates the network ecology first wins all. The Internet pays more attention to iterative speed, and software releases are eager to release updates every day.

This is also Musk's main philosophy, the speed of innovation above all else. So, Mark Anderson and Elon Musk's philosophy is the same.

Essentially, an electric car is a large computer. The intelligence of electric vehicles is more important than electrification. What intelligence needs is chips and software. The iteration speed of semiconductor chips and software is far faster than that of mechanical (engine) and electrical and electronic (motor).

The only competitive advantage is to act faster than your opponents, to iterate, to set no limits on yourself, and to search for possible innovations in the widest possible range.

So, is Buffett's thinking in the new era completely useless? Obviously not. Buffett's investment in Apple is the perfect representative of his moat thinking in the new economic era.

Apple's most powerful thing is the demand-side economy of scale advantage, that is, network effects. Because Apple occupies the commanding heights of the operating system, it exclusively occupies a closed ecosystem.

Secondly, Apple has the advantage of economies of scale on the supply side, because its single product sales are the largest, and if the opponent uses the machine sea tactics, then the scale advantage is definitely worse than the large single product.

Apple occupies the commanding heights of chips and software, can cross-border robbery everywhere, traditional headphones have been subverted by him, and traditional watches have also been subverted by him. Soon, the traditional car he will also come to grab meat to eat.

Unfortunately, companies like Apple are too scarce. It is one of the few old antiques in the new economy, and it is a moat super powerful antique.

To sum up, in a new era of rapidly changing business environment and emerging cross-border competition, our understanding of investment thinking should also keep pace with the times. The value investing approach remains valid, but it also embraces new investment thinking.