Liberty

These are all just tools that can be misused or used properly. The idea is always to learn something about the underlying economics of an asset. Different tools can answer different questions. GAAP EPS can be very misleading in some cases, just like EBITDA or P/FCF can be... Same for ROIC, ROE, ROA, etc. If there was a perfect metric out there, we'd all know by now and everyone would be using it for everything. For example, if you take two almost identical businesses, one with high FCF and another with no FCF, most people will at first glance prefer the one with high FCF. But if you do some work to understand the underlying economics and realize that the first business is quite good, but has no reinvestment opportunities, so it is basically a cash cow, while the second business is just as good, but has huge reinvestment opportunities that can absorb all of its FCF to generate profitable growth, then maybe the best choice is the latter. You can't learn that just from looking at a metric. Same if you find a business with super high ROIC. That by itself sounds attractive, but the number won't tell you if this is a sustainable position, if there are barriers to entry for competition, if management is good, if the business is cyclical and currently at the peak of profitability, etc.

How do you like it? I read The World of Yesterday (his memoirs) a few months ago and quite liked it.

The existing payment rails are incredibly convenient and valuable. Nobody wants to have to get millions and millions of merchants big and small to accept a new form of payment, and have to deal with all the banks, the fraud, etc. That's why Apple built Apple Pay on top of the existing rails, and I believe that their rumored P2P system will probably use the existing system. Stuff that Google and Apple will do might compete with a few functions offered by banks/payment processors (virtual prepaid debit cards? cheap digital cheques between people?), but I doubt they are ready to replace the main function and be in the middle of an incredible web of merchants, banks, and consumers. Visa, Mastercard, American Express have been around a long time and have grown up with the economy and that's why they're everywhere. If you're trying to start a new payment network, you have a chicken and egg problem; why would merchants support you if nobody is paying with your system? Why would consumers sign up and use your system if few merchants support it? You just want to pay your groceries and move on, and the current system has very little friction, so whatever replaces it must be quite good (which is why Apple Pay has the most traction right now... even less friction while keeping all advantages of credit cards).

Thanks Charlie!

60 Minutes on Hamilton the play, and Lin-Manuel Miranda: http://www.cbsnews.com/news/hamilton-broadway-musical-60-minutes-charlie-rose/

Not sure if Saurabh is on the forum, but I will convey the message to him. Yes, I applaud him for his efforts, it is not easy to get these wonderful speakers to come visit Google. Yes, I also thank him for his efforts, and thank you rishi for your inside perspective on these and your useful questions on MA/V ;)

For those who haven't had Outsider overload yet, here's William Thorndike speaking at Google:

Holmes was on CNBC talking about the WSJ piece: http://www.cnbc.com/2015/10/15/theranos-ceo-fires-back-at-wsj-i-was-shocked.html

I'm pretty sure that even if Holmes was a quarter as smart as she seems, she would have made sure to calibrate her tests against other already established tests from other labs. It seems unlikely that all her tests are so bad that everything is completely outside of normal ranges (and far into unbelievable levels on some tests, like the piece claims), even after thousands, of not millions of tests done. And if that was the case, they wouldn't have come out of stealth mode, submitted tests to the FDA, etc, they'd have kept tweaking things. The more time passes, the more I realize that business is war. There are billions on the line, and the media is one of many weapons to be used to attack. I can't know if what Theranos claims is true, but they seem to be attacked by anonymous sources and quotes by fake doctors, their data and offers for demonstrations seem to be ignored, etc. Maybe that's all false, but it's not so hard to believe that many journalists won't let facts stand in the way of a good story, or are friendly with businesses they've been covering for years and are receptive to these "tips". It's like some of the things that I'm seeing in the Valeant attacks. Some journalist wrote with a straight face, and little context, that "Since 2007, Valeant’s drug prices have grown by a compounded annual rate of 48%". Really? 48% CAGR for 8 years? So VRX's drugs now cost 23x what they did? I don't know, maybe Theranos is all a big fraud. Or maybe the incumbents are trying to damage it and slow it down, because if Theranos can do what they claim, any time the old guard can gain, any doubt they place in the minds of potential customers will be worth billions over time...

The company's response: https://theranos.com/news/posts/statement-from-theranos We'll have to wait and see if there's really something rotten with the company or if this is just attacks by the incumbents who can expect their revenues to evaporate if Theranos is successful in the long-term...

Elizabeth Holmes interviewed by Maria Shriver at the Vanity Fair conference: http://youtu.be/Qeb_OVOX0NQ Looks like the incumbents (looks like) are playing rough. She says that they had to send legal letters to certain people pretending to be physicians and talking to the media about Theranos, talking about tests that they have no records of ever doing... If you go to the VF youtube page, you can see other videos from the same event (Elon Musk, John Malone, etc).

Liberty, at 58:00, I ask Russo about his third largest position, Mastercard and how it compares to Visa. Very good! I haven't had time to listen to the whole talk yet, but I'm looking forward to what he has to say about that. Thank you for asking the question! Finally had a chance to listen to the whole thing. His answer to your question was very interesting, and it certainly makes me look at the difference in margins between V and MA in a different light. Now what I'd love to find out more about is how effective the reinvestment at MA is, which seems to be a hard thing to judge from the outside... Again, thanks for asking the question.

Liberty, at 58:00, I ask Russo about his third largest position, Mastercard and how it compares to Visa. Very good! I haven't had time to listen to the whole talk yet, but I'm looking forward to what he has to say about that. Thank you for asking the question!

Thanks for posting, Norm :)

Listened to the album today, lots of fun. I get why this guy won a Macarthur award. Some great writing of very complex historical events.

Contact ValueAct: http://www.valueact.com/contact.pl I made a call to them. The receptionist told me to write an email to her and she will forward it to Jeff. Let's see what happens next. :) I can already picture the press release headline: ValueAct welcomes new partner Muscleman :D

Oh wow, thanks for that suggestion. Might be the only musical (other than Dr. Horrible) that I end up liking. http://youtu.be/IBl3MQ8-Tt8

They certainly do if the company has no competitive advantage/moat, or if it does but that moat is eroding. But certain industries have better ROICs than others, though, so a software or pharma business that reverts to the average ROIC in its industry might still do better than the average airline or junior miner all else being equal (and it never is, so this is just a theoretical exercise).

Good post too, Picasso. To me mind, "forever" is an ideal, but not something that you can pre-determine. Even if you think a business is very good and should keep creating value for the long-term, you need to monitor it for changes or for indications that you were wrong about it. In practice, "forever" also rarely means literally forever, but if you keep something 5-10-15 years, that might as well be forever compared to the average holding period in the market these days.

Very well said, Scott.

I have that one on my shelf, looking forward to reading it. I wasn't that familiar with Mr. Hamilton until someone - I don't remember who it was at the moment - explained why he was such a special man and that made me want to learn more. I'm currently reading a book about the Apollo Project. Not sure what I'll read next, but this thread has definitely bumped the Hamilton bio up the stack....

That should be fun. Thanks.

Indeed it is. I had not seen it. Sorry about that.

Why the raised eyebrow, Gio? Did I miss something? ???

New piece: http://www.inc.com/magazine/201510/kimberly-weisul/the-longest-game.html