tnathan

Well yes the mechanics of an issuer turning on the ability to 'BNPL' something after purchase is relatively easy, and has been done by issuers for many years (I think Amex, Citi, Chase all have had offerings live for years) but they have not made a dent into the integrated at checkout BNPL players. The interesting question is not whether they can create their own offering post checkout, it's WHY these offerings have basically been a 0 while the core BNPL players continue growing at 20%+ annually. A few reasons: (1) The offer AT POINT OF SALE is the product!! You need to offer this while someone is checking out for conversion to be impacted. It's a much harder change in behavior to say to someone "buy it like normal and then split it in our app". An installment plan activated in a banking app after you already bought the thing does none the conversion work. ... whether you think it should is beside the point. It's just clearly not a viable offer based on the fact that these products haven't worked. (2) The economics are all wrong. What makes the BNPL at checkout model work is that the merchant is willing to pay fees because BNPL increases conversion and basket sizes. They're willing to pay ~4% on a pay in four txn vs. 2-2.5% on a normal cc txn. If you are Chase and offering an installment plan post checkout, you are taking on the same amount of risk as a BNPL provider, but not getting paid anything by the merchant to do so. For the group of consumers that would want to use this product, it becomes uneconomic (can you really compete with Klarna or Affirm when they get 4% from the merchant and you don't??) ... further, the lifeblood of the subprime issuers is the revolving interest on balances. Why would you transition someone from that highly profitable product to a much less profitable offering (installment loans). And if the issuers decided to charge substantial interest on the installment loans, why would a consumer use the product when they could get the same loan from Klarna or Affirm at a much better price because the merchant is paying a large chunk (or all) of the fee? (3) Because you are underwriting every transaction, Klarna and Affirm can reach consumers the credit card companies can't. For example, a thin-file consumer can get accepted for a $200 bnpl loan but would never be accepted for a $5k line of credit. Therefore, if a cc company can't bring in a customer on a normal LOC, they won't be able to offer them this post purchase installment product either. The beauty of the BNPL model is the reunderwriting of every transaction. the moat is that the loans are (a) merchant-funded (b) at point-of-sale (c) each txn is reunderwritten (d) signing agreements with all the merchants who have specific / custom terms that work for them and their customer base (e) the model puts Affirm and Klarna in front of consumers who have traditionally been excluded from the credit card ecosystem so there's a legitimate case that these consumers are incremental to merchants and improve conversion.

+1 agree here. I think the main mindset I've taken is many businesses that already have strong moats will improve that much more, but this isn't the time to think mediocre businesses will become much better through AI over the long term.

GPN is interesting. I think GPN / FIS / FISV are cases of AI could hurt OR help them but probably too early to know. Either they can increase their own product velocity and re-write old tech stacks internally to keep current customers or customers can more easily rip and replace with modern software because AI makes that process more simple.

AI will only increase margins for companies in industries where competitive intensity is low / where the company already has a moat. If a bunch of retailers all use AI to cut headcount needs, ultimately those savings will be passed to consumers if there is a lot of competition. Small caps in general tend to have less moats, so wouldn't be surprised if in the medium and longer term this didn't happen.

+1 commented on this before. Its nonsensical to buy something like UA especially when there are some truly amazing businesses on sale. I'll trust the process because I love the business structure but fundamentally disagree with the equity investing

Noticed this too but wasn't quick enough to buy some. Probably the cheapest stock in the market

Why doesn't Berkshire just start outright acquiring things like $BR (Broadridge) or an insurance broker?

If this is true I'm happy to be wrong about my previous question.

He made like $4B on Groq. That's the beauty of VC

I 100% understand everything you wrote, but everyone is hand-waiving the mediocre returns in RISKY investments by saying "well they don't need to be good for it to work for shareholders" ... I think we're talking past each other a bit. You are correct it doesn't need to work given the leverage on the float. But WHAT IF IT DID?? Like imagine if the equity returns had been 12% not 7.7%. My point is that clearly the equity arm has floundered even before risk adjustment. After risk adjustment I would argue its worse. Doesn't stop me from being a shareholder! Just think everyone should be more honest about how the math with an eye towards continuous improvement

What is your point?

Thanks this is what I was looking for. Appreciate it! As I stated above, (1) I agree the model clearly still works even if equity returns aren't that good, as long as the insurance is humming and fixed income rates are decent. (2) However, this chart makes my point. Two things can be true at the same time. the underlying business can be fantastic and the investing can be subpar, especially vs. the risk taken. I would argue 7.7% given the positions they are taking is subpar. How could that not be true?

That's why I asked the question of what the equity returns have been compounded since the 90s! Sure the returns have been great over the past 5 years, but what I'm trying to get at is: is the past 5 years the anomaly or the norm? The evidence seems to point to the latter but if I'm wrong someone tell me why!

He's pretty unqualified to talk about many of the things he claims to be an expert in, but his investment track record from a VC angle has been incredible. Don't have to like the guy to admit he's made some bangers (Groq)

Don't disagree! I'm not selling but I think it's fair to point out flaws -- lot of people are getting a bit too sure of themselves and not looking at areas that could go wrong / that have under performed in the past but are not performing a bit better.

Eurobank has probably been their best investment ever and it was a 15% CAGR. Very good, but nothing out of this world. Obviously I'm a nobody but he claims to follow Buffet and I'm not sure he actually invests that way

I guess this is conclusion I'm coming to re: Fairfax. Would love some pushback on this. (1) Fairfax is a great business and underpriced relative to intrinsic value. The float provides an amazing floor return over a 5-10 year period and I have a lot of confidence it will compound 15%+ over that time period. (2) I think on a risk-adjusted basis Fairfax / Prem are mediocre investors. They consistently attempt turnarounds and IMO would be better off trying to buy true compounders at good prices, or even just the market as a whole to juice returns. As Buffet says - "There Is No Award for Degree of Difficulty" -> has anyone done a lookback at Fairfax equity returns over a long time period (since the 90s)?

The brand is super impaired (no longer cool and hasn't been cool in a long time) and I don't think its asymetric at all on the upside. Would much rather have taken a stake into something like LULU if you're going to play in apparel. Definitely reeks of BB type thinking. there are so many great businesses on sale right now not sure why you'd want to target this one.

I really don't get the UA pick ... its such a head scratcher

BKNG and BR

Look at starbucks gross margins trend recently ... idk what the market likes about that!

Agree here as well. I don't actually think she's qualified point blank

yes

Any thoughts on ARX as a short? This was an interesting read https://theglobalmosaic.substack.com/p/accelerant-follow-the-money-not-the

Yep agree. I think if something does break a lot of people on here might not have the patience to take the drawdown, buy more, and wait for the other side