Learning from your past mistakes is the best way to learn. The beauty of having a blog is that you can revisit your thoughts at the time. Let’s revisit one of my main mistakes.
The Thought Process
I thought Stitchfix was a low risk, high reward trade. The reality is that any company that is questionable if they’ll ever make money isn’t low risk, but let’s lay out the case for high reward.
- The world is moving from retail to e-commerce quickly
- Buying clothes online is a lot more complicated than it seems
- Stitchfix has been playing on hard mode with their business model – their new freestyle business model will significantly ease the difficulty of what they are accomplishing
- Valuation is very reasonable
The problem here is that I was completely off on the entire foundation of the investment decision. The world is I can still see my logic and honestly in the future this might come true, but that time isn’t today or anytime soon. Every step further down becomes less and less likely, so taking wild swings on the first step is. It’s just way too many steps to have to be right on.
“Am I confident that Stitchfix will make it? No. Am I confident this is a risk I want to take? Yes. It is different and doesn’t fully jive with the world we live in. But I don’t invest for the the world we live in. I invest for the world we will soon live in.”Me being a dumby in 2020
P.S – I’ve always been skeptical of companies that overly emphasize their use of data as a competitive advantage. Too many companies claim to use data better than their competition but don’t have any real proof showing this to be true (see OpenDoor, Mohawk Group, Lemonade, Upstart, etc…).