Investing in the Future because of the Past

 When reviewing companies with the highest market caps, you see some major commonalities. Initially, I group the top companies into two groups: tech with great financials and dopamine stocks, but the lines are blurry.

The companies making up “tech with great financials” are Apple, Google and Microsoft. Some people will say that Apple isn’t a tech company, but that’s nonsense. The iPhone, Mac, etc don’t make Apple, iOS does. The business models are very different between three companies, but all scale very well and have high profitability.

The rest of the top companies all fall into the dopamine category. Facebook, Amazon, Netflix, etc… Social media causes cheap dopamine hits. Without self control, people will just keep scrolling. Netflix is similar, with so much engaging content. People want to keep watching. Amazon is a little mix of everything, but online shopping can definitely be a dopamine hit (AWS would fall into tech with great financials).

Everything gets clearer as you start to view on a wider lens. These companies have multiple streams of revenue (except Netflix, which makes up for it with subscription). These companies push forward in a very aggressive manner, often times “detrimentally”. Facebook bought Instagram for $1B because they were scared Instagram would be the next Facebook. People forget, but at the time, paying $1B for Instagram was objectively crazy. Amazon worsens its financials by pushing forward with same day delivery, 2 hour delivery, etc… Amazon does crazy things to scare away competition and then turns those crazy things profitable.

I’m going to learn from these companies and try to invest in companies like them. I want to invest in scalability, optionality, customer focus, craziness and persistent focus on evolving. The future will be different (better) than the past, but I believe these traits will still apply.