1/ If you own a business and are deciding whether to hire software developers to create a new service you are making a capital allocation decision. You must determine whether the present value of the long-term cash flows from the investment exceeds the relevant costs.

2/ Passing the NPV test means that $1 invested in the business is worth more than $1 in the market. Just passing the NPV test isn't enough to be a wise decision since a business owner should seek the most attractive opportunity of all the opportunities that are available.

3/ All capital has an opportunity cost – what you can do as the next best alternative. It is your second best alternative that determines your opportunity cost as the owner of the business. The specific business owner's alternatives are what matter.

4/ Because human error, bad luck, or volatility in a complex, unpredictable and rapidly changing world may result in a mistake, a business owner should include a margin of safety before investing and stay within their own circle of competence, which may or may not include tech.

5/ The process described in this thread is value investing as a bottoms-up *analytical style*. This style has nothing to do with investing using statistical factors based on an analysis of large numbers of stocks or whether an asset is historically cheap based on a a ratio.

6/ If there's another way business owners should be making capital allocation decisions I'd like to hear it. A business isn't an annuity- predicting future cash flows is hard but unavoidable. Relying on the tooth fairy to help make decisions is a triumph of hope over experience.

7/ I was going to tell a joke about value investing as an analytical style, but so many people mistakenly believe it involves statistical factors like book value, there's no margin of safety.

8/ I was going to tell a joke about pro forma accounting, but I would have to exclude items.