Thoughts on $UBER, Neo Clouds, $GOOG, $TSLA, $APP, $PYPL and more… Today, $UBER sold off after the Waymo news. Whether I’m right or wrong about $UBER isn’t really the point. What interests me is how quickly the market starts questioning a business once it thinks the moat might be weakening. Stocks don’t need the business to collapse. Investors simply need to believe tomorrow won’t be as good as yesterday. Look at $ADBE, $PYPL, and $FI. All three looked objectively cheap at different points. Yet they kept getting cheaper because the market wasn’t debating today’s earnings. It was debating tomorrow’s economics. That also makes me think about capital allocation. Investors love buybacks, but buybacks aren’t automatically great capital allocation. They only create value if the business you’re buying becomes more valuable over time. If the market is correctly identifying that the moat is weakening, buying back billions of dollars of stock may actually destroy shareholder value instead of creating it. A stock can look statistically cheap and still become dramatically cheaper if investors believe the future economics are deteriorating. Sometimes the market is wrong. Sometimes it’s simply repricing a business whose future has changed. I’ve made this argument about $UBER for a long time. Investors don’t need to see the entire business disrupted overnight. They only need to see a few major cities like SF, LA, or NY start getting penetrated by autonomous fleets from $GOOG and eventually $TSLA. Once the narrative changes, the multiple usually changes long before the financials do. This also makes me think about the so called Neo Clouds. Today’s economics look incredible because demand is greater than supply. But what happens when supply catches up and everyone starts competing on price? I don’t know exactly when that’ll happen, but I struggle to believe competing against $GOOG and $AMZN is bullish for anyone’s long term margins. I think investors often confuse scarcity with a moat. They’re not the same thing. A shortage creates pricing power. A moat protects pricing power after the shortage disappears. Those are two completely different things. One lesson I’ve learned over the years is that extraordinary margins attract extraordinary competition. High returns are like a giant sign that says, “Come compete with me.” Capital always flows toward the best economics until those economics become far more ordinary. Perhaps that’s the invisible elephant in the room for $APP? Generally speaking, in transportation one thing I’ve learned is that when technology improves and competition increases, the biggest long term winner is usually the customer. Better service, lower prices, more convenience, etc. That’s fantastic for society, but it doesn’t always translate into fantastic returns for shareholders. Maybe I’m completely wrong. Maybe $UBER moat proves much stronger than I think, and maybe the Neo Clouds keep earning exceptional margins for another decade. But whenever I see extraordinary economics, I always ask myself one simple question. “Who wants those margins?” Because history has shown that if the answer is everyone or the 800lb gorillas, those margins rarely stay extraordinary forever. Happy Friday to you all and thank for reading! 🌹