Bill Gurley on why “TAM conservatism” often hurts investors “I’ve found that TAM conservatism hurts you more than it helps you as an investor. If you feel like something is super disruptive and it’s unlocking things, your optionality to build on top of that is going to be pretty spectacular.” Bill recalls NYU professor Aswath Damodaran’s conclusion that Uber was worth only $5.9 billion given the size of the taxi market. Bill responded in a blog post titled “How to Miss By a Mile”: “There are multiple reasons why this is a flawed assumption. When you materially improve an offering, and create new features, functions, experiences, price points, and even enable new use cases, you can materially expand the market in the process. The past can be a poor guide for the future if the future offering is materially different than the past.” To be fair to Aswath, Bill already knew that Uber was 20x the size of the taxi market in San Francisco at the time. But Bill cites a McKinsey study as another classic example. In 1980, they predicted that cell phone penetration in the U.S. by 2000 would be 900,000 units. This turned out to be less than 1% of the actual figure, 109 million. As Box CEO Aaron Levie put it: “Sizing the market for a disruptor based on an incumbent’s market is like sizing the car industry off how many horses there were in 1910.” Today Uber’s market capitalization is north of $150 billion—almost 30x Aswath’s estimate. Video source: @tferriss (2023)