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@BessemerVP recently released some of their investment memos ( https://www.bvp.com/memos )">https://www.bvp.com/memos&quo... providing an interesting set of case studies, and some insight into the venture thought process. Perhaps some of the key takeaways is the value of management and low-probability bets... https://twitter.com/borrowed_ideas/status/1305311577168633859">https://twitter.com/borrowed_...
Like BVP notes, many of the household names we know today were totally different in their early days, having evolved in almost unpredictable ways. Few people - if any - could have predicted Amazon& #39;s AWS or Apple’s lead in smartphones...
But what might be more possible to predict was the opportunity these businesses had that others didn& #39;t, largely driven by the people at the helm. This is where investing becomes more of an art. Buffett met Gates and Bezos early enough, but passed on investing...
Investing is a game of understanding possible outcomes, and betting accordingly. In BVPs Fiverr memo, the base case was a 0-2x multiple, with a low-probability outcome of a home run (7-32x). The value is being exposed to this outcome, and letting the scenarios play out...
This is what makes Bezos a great capital allocator. Although his successes (Prime + AWS) were unpredictable, it was the positioning to get lucky in the first place that mattered. “Big winners pay for so many experiments…”
@MarceloPLima and @ChrisWMayer both touch on the concept of business through an ecological lens, which I find fascinating. The world we live in is complex, dynamic, and everchanging. Businesses are organisms which must adapt, and often do so in unpredictable ways…
The business I study today might be completely different down the road - something I can& #39;t imagine. The driving factor in the success may very well be the willingness of management to take risks. As Gates writes, "We have to take these risks in order to have a long-term future."
Ultimately, there are no rules. The landscape is constantly changing. Studying the core business is crucial, but management analysis is underrated. I think the best investors aren’t the ones who know the future, but the ones who know they don’t know for sure, and bet accordingly.
