The biggest investing mistake 

A risk to any investment strategy is betting on a company that turns out to be a dud. That’s fairly obvious. A less obvious (but arguably greater investing risk) is selling a wonderful company far too soon. The fact is, there are only a handful of truly outstanding/generational companies in the world, and selling early can very often be a disastrous decision. Back in our Q3 2020 investor letter, we wrote about our views on the dangers of exiting a position too soon, and the importance of riding winners when you maintain high conviction in a company. Along those lines, this week, I came across Chris Cerrone’s smart take on a similar subject titled “The Art of (Not) Selling.”  Cerrone, a partner at Akre Capital Management, begins the piece by writing: “Of our most costly mistakes over the years, almost all have been sell decisions.” He continues: 

“Taking a step back, our investment philosophy involves concentrating our capital in a small number of what we believe to be growing and competitively advantaged businesses. These kinds of businesses are rare and are only periodically available for purchase at attractive valuations. With that in mind, we do our best to hold on for the long term, so that our capital may compound as the businesses grow. Holding on means resisting the temptations to sell — and there are many. We tune out politics and macroeconomics. To the surprise of many, neither valuation nor price targets play a role in our sell decisions… Allowing our investments to compound uninterrupted is our North Star.”

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The trillion-dollar audio opportunity

Something I think about relatively often (especially as a new parent) is this: we spend way too much time looking at screens. Audio, broadly speaking, has been a wonderful diversion to consume content (podcasts, lectures, audiobooks, music, etc.) while getting my eyes off the screen. This is a main thesis behind the new era of audio and Spotify—as Daniel Ek said a couple years ago, “Video is about a trillion dollar market. And the music and radio industry is worth around a hundred billion dollars… Are our eyes really worth 10 times more than our ears?” With that context, I thoroughly enjoyed (and recommend) this deep-dive conversation between Tilman Versch, founder of Good Investing, Jeremy Deal of JDP Capital, and Sleepwell Capital about the future of Spotify and innovation across the audio landscape. Tilman is a fantastic interviewer and covers so many elements of the Spotify story in this conversation.

“Like all great companies, [Spotify] started in one place and leveraged itself into a very different place… [the company] has become an enabler for the creator—and the fan—to interact in a way that wasn’t really possible before.” (Jeremy Deal)

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The carbon capture question

A few days ago, Mother Jones published this rigorous long-form investigative piece examining the usefulness of direct carbon removal technologies. The author, Clive Thompson, takes a deep, and somewhat skeptical look at many of the claims being made by companies leading the carbon capture movement. “This may all sound like a smart idea,” he writes, “but it grows more complex as you look closely at the world these companies envision.” He continues: 

“The only viable path to saving the planet, according to the entrepreneurs, is to get fossil fuel companies on board. That’s partly because Big Oil has the infrastructure and know-how to build these kinds of facilities at scale and to pipe captured CO2 to locations where it can be permanently sequestered. But it’s also because, in the eyes of the DAC inventors, internal combustion will be with us for a while yet. They envision using DAC mostly for catch-and-­release over the next few decades: Harvest CO2 from the air, convert it into synthetic fuels, burn those fuels, and recapture the CO2. We wouldn’t start removing legacy carbon until 2060 or 2070 because only then will DAC, by small improvements, become cheap enough that companies and nations (at today’s tax rates, anyway) will be open to paying for it.”

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A few more links I enjoyed: 

Breaking the Rules w/ David Gardner – via We Study Billionaires
“Trey Lockerbie sits down with David Gardner. David is an accomplished investor, author, and entrepreneur, who co-founded the well-known financial advisory company, The Motley Fool. They cover some great subjects, including why optionality is a great indicator of a company’s future success and a point system to identify risk.”
Metaverse! Metaverse? Metaverse!! – via Benedict Evans
“‘Metaverse’ is the buzzword of the moment, yet it doesn’t really exist as more than a label on a whiteboard, and many of the ideas it tries to combine might not happen, or not like that. This might be the new ‘information highway.’ But however it works, some kind of break-out of new devices, new experiences and new kinds of popular culture seems pretty easy to believe in.”
The Death and Birth of Technological Revolutions – via Ben Thompson / Stratechery
“Moreover, the ‘Capital’ part of Perez’s theory seems to fit as well: some of the best returns over the last fifteen years have been in established public companies like Apple, Microsoft, Google, Amazon, and Facebook — ‘Production Capital’, in Perez’s nomenclature. Venture capital, meanwhile, which is theoretically speculative ‘Financial Capital’, has increasingly become professionalized and standardized, thanks in part to the rise of cloud platforms like AWS; building a new SaaS company to take on another old-world vertical certainly takes hard work, but the playbook is fairly well-known.”

This information should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investments or strategies referenced were or will be profitable, or that investment recommendations or decisions we make in the future will be profitable. This article contains links to 3rd party websites and is used for informational purposes only. This does not constitute as an endorsement of any kind. While Nightview uses sources it considers to be reliable, no guarantee is made regarding the accuracy of information or data provided by third-party sources. Nightview Capital Management, LLC (Nightview Capital) is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Nightview Capital including our investment strategies and objectives can be found in our ADV Part 2, which is available upon request.