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Tailwinds > Moats.
A thread.
Worth noting that when Softbank acquired ARM in ‘16, both NVidia and ARM had similar market cap - in the early $30bns. Now Nvidia is at $300b and ARM is being acquired for $40b!
1/7 https://www.theverge.com/2020/9/13/21435507/nvidia-acquiring-arm-40-billion-chips-ai-deal
A thread.
Worth noting that when Softbank acquired ARM in ‘16, both NVidia and ARM had similar market cap - in the early $30bns. Now Nvidia is at $300b and ARM is being acquired for $40b!
1/7 https://www.theverge.com/2020/9/13/21435507/nvidia-acquiring-arm-40-billion-chips-ai-deal
Nvidia has perhaps been amongst the biggest beneficiaries of rise of ML, self-driving cars, gaming where their GPUs have come in handy. As the need for compute power grew Nvidia found itself on the right side of ML tailwinds.
Whereas ARM, a virtual monopoly has languished.
2/7
Whereas ARM, a virtual monopoly has languished.
2/7
Sure, there have been perhaps management issues at ARM etc. And the comparison isn't exactly like to like. But if there is a takeaway here, it is that riding tailwinds is perhaps far more important than having moats.
3/7
3/7
Every pitchdeck and VC asks for moats, but no one talks abt tailwinds and riding them. Buffett thought of moats because the brands he invested in were growing at a measly 3-4%. Moats mattered there for pricing power. For venture and startups, moats matter zilch.
4/7
4/7
What matters instead is being on the right side of tailwinds. And if you can - picking the tailwinds to ride on.
For Milkbasket and Dunzo the moat hasn't been as important as COVID’s immense tailwinds.
Edtech has no real moat* - it has fierce tailwinds at its back though.
5/7
For Milkbasket and Dunzo the moat hasn't been as important as COVID’s immense tailwinds.
Edtech has no real moat* - it has fierce tailwinds at its back though.
5/7
* brand and customer data are decent moats if you grow to scale, i will confess.
6/7
6/7
So, let us not obsess unduly over moats. Being on the right side of trends or tailwinds is often more important than having moats or being a monopoly.
Tailwinds > Moats.
7/7 Fin.
Tailwinds > Moats.
7/7 Fin.
