FutureBlind - Latest Comments

Re: Why big moats can be bad

Brent — Sun, 06 May 2012 16:45:51 -0000

Microsoft products are awful. Where do you draw the line though? If I'm a monopoly, it's in my best interest to push down competition. In Microsoft's case, this might be alternatives to the Office Suite, or simply Excel over Lotus 123. At some point, the customers catch up-- say Google Docs or any of the other Office compatible alternatives. These alternatives "creatively destroy" your cash cow, yet at what point would you decide as a manager to sacrifice your own cow before your competitors do? I think it's a tough decision. I guess what I'm saying is how much can you say it's motivated by complacency? Perhaps it's more a matter of risk aversion?

Re: On Biglari Holdings and Type X Behavior

Qtangie918 — Sun, 08 Apr 2012 21:57:24 -0000

All I know is that once Sardar took over, the entire face of SNS changed. I worked there for 11 years and just had to quit. It is not the same, and it's all outside people coming in to lead. I was an internal hire who worked my way up, and I hate seeing people come in off the street that know nothing about SNS culture. I know that Sardar has done many good things for the company, but I agree with the author; culture is changing, and it is not good.

Re: Early Berkshire Hathaway Letters

Joeagresti — Sat, 25 Feb 2012 17:11:03 -0000

find any of the other missing ones?

Re: The McDonald’s Success Story

ranvijay singh — Mon, 02 Jan 2012 13:02:33 -0000

think big & do for that

Re: The Real Causes of the Financial Crisis

Martin Masilko — Fri, 28 Oct 2011 13:17:48 -0000

What are the Real Causes of the Financial Crisis?

Actually, there is only one. Our approach to the issuing of our currencies - either controlled or free.

You can find more details at:
http://skanda42.wordpress.com/...

You can find a comprehensive summary (videos) of the topic at:
http://bit.ly/vuB4K6

Enjoy! ;)

Re: Generalists vs. Specialists (And the Specialist’s Dilemma)

Dila 13 — Thu, 27 Oct 2011 19:55:18 -0000

good

Re: On Biglari Holdings and Type X Behavior

Guest — Wed, 17 Aug 2011 13:49:29 -0000

Apparently the company culture has changed, and as recently as this month, vital key executives responsible for the growth strategy have bolted.
Watch for more turnover which could be the demise of this company

Re: On Biglari Holdings and Type X Behavior

Anon Com — Wed, 17 Aug 2011 12:54:04 -0000

As a manager at a SNS and an investor, I agree with the author regarding Sadar's being an egotistical Type X personality. He is hiring more and more upper managers with this same type X personality, and I don't see great results coming. Is SNS going back to the way it was? I think so!!!

Re: The McDonald’s Success Story

steven — Fri, 01 Jul 2011 08:32:03 -0000

Thanks, I have never read Ray Kroc's and McDonald's story so in detail before.
I have linked my blog to this website.

Re: Underestimating the Groupon Model

Max Olson — Sun, 05 Jun 2011 23:08:18 -0000

Rick,
Thanks for the comment.

For any company or business model still under 3 years old, nothing is set in stone and things could certainly be completely different than they are now a few years out (for good or bad). In other words, I realize my thoughts on Groupon could be proven wrong very easily. Also, any numbers or financials for a company this young probably shouldn’t be given much weight in a decision about the future of the business. That’s why I think any analysis of a startup or early-stage company like this should be light on numbers and heavy on mental models/concepts. [Sorry, this isn’t really a response to your comment but just something I wanted to get across that I didn’t mention in the post.]

RE: “getting there first”: I agree that being first mover does not necessarily mean you have the advantage. Groupon’s efforts to increase quality and credibility probably do rub off on other deal sites, but I still think the Groupon brand is a factor (with trust, word of mouth, etc.). In terms of the float, I don’t think they need it to *survive* but just to grow. And in that case, float is cheaper than raising equity.

RE: Groupon vs. Entertainment: Had not heard of Entertainment before -- like you said, they are both in local advertising (using coupons) but the business models are different. It doesn’t seem to me that Entertainment’s method is necessarily “better” than Groupon/LivingSocial’s for customers -- just different. I think most customers of the deal sites understand what they are getting and still believe it’s a good service. Average “use” per customer will probably go down after a while once hype/novelty wears down (as pointed out elsewhere this has already happened in older markets), but overall it’s still a good service and people will use it in one form or another in the foreseeable future.

RE: LivingSocial -- I’ll agree with you here. If they both traded publicly and I had to choose one to buy regardless of price, it would be LivingSocial. They have more room to grow and I think will take market share from Groupon as the concept “settles” over the next few years. But in reality, price makes all the difference and I probably wouldn’t buy either if they were both public today (once again, not because of any belief the business is bad, but because of the high valuations & low return to equity holders even if they model works out well).

Re: Underestimating the Groupon Model

Rick.M — Sun, 05 Jun 2011 16:17:22 -0000

I believe that you are going to find Groupon's moat, built from:

- being first
- permission marketing
- a good record with customers

is of abysmal quality as fortification from competition as their business model is entirely replicable.

More times than not "getting there first" just means getting crushed sooner, and the effort and and expense Groupon puts into getting and maintaining permission-to-solicit and maintaining product credibility actually benefits it competitors as much as itself through a halo effect (most people really don't differentiate between it and LivingSocial, with some even believing them to be the same company). Moreover, Groupon's propensity to NEED float just to survive to the next funding cycle is highly remeniscent of the dot coms which made bubbles famous.

Also, where I would agree that the concept to arbitrage the gap in the local market is an effective strategy - the fact is that Groupon was not the first to enter that space; the incumbent player in that space was and still is Entertainment Publications, LLC (long-time publisher of the 2-for-1 Entertainment coupon book), which has been unambitiously sitting back and quietly enjoying consistent (although relatively meager) returns on this concept for decades.

I will admit that Groupon and Entertainment use different business models, but unfortunately (for justification of a Groupon valuation) is that the business model used by Entertainment is more favorable to the customer - e.g. no money other than the cost of the coupon book needs to be put up front and there is a single, long-term expiration date for all of the offers, whereas with Groupon the customer pays the full cost up front and the expirations and terms vary with each offer. You can rest assured that people WILL evetually figure this out.

Now I'll also be the first to admit that Entertainment has really been a slug through all of this; they clearly do understand that the competitive world has come to their niche and from their response (establishing their own e-mail-based Daily Deal) they clearly do not have a clue as to why people buy Groupons. So although I'd like to see Entertainment get this figured out (and it's not that hard to figure out if you're a customer of both, is it?), since they haven't yet, I think its clear that the future of local deep-discount introduction lies more in the Entertainment model (with some modifications) rather than the Groupon model, but with someone other than Entertainment Publications at the helm.

To sum up:
- Any valuation on Groupon is too much as they won't last
- If you like the Groupon model, buy LivingSocial
- If you believe what I do about the inherent advantages of the Entertainment model over the Groupon model, wait for the replacement for Entertainment that properly counters the very minor advantages of Groupon over Entertainment and consider buying that

Re: Quality Without Compromise

Johanna Morgan — Sat, 21 May 2011 00:35:27 -0000

The most delicous chocolates in the world. Could I open a store in Sydney Australia PLEAAAAAAAAASE?
Kindest Regards
Johanna

Re: The McDonald’s Success Story

Omid — Sat, 14 May 2011 15:04:09 -0000

tremendous!

Re: Apple Inc: The Greatest Turnaround in Corporate History

james moylan — Fri, 21 Jan 2011 00:54:10 -0000

I have a web site where I research stocks under five dollars . I have many years of experience with these type of stocks. I can not believe that apple computers shares traded at just 5 dollars in 1998 the stock trades at 350 dollars a share today. their are many stocks trading today that once traded under 5 dollars. this is just one of many examples.

Re: Berkshire Part 2: Selling Puts

Theodore Biesinger — Fri, 03 Dec 2010 01:00:41 -0000

I really cherish this blog. Wewish I could come here all the time.

Re: On Biglari Holdings and Type X Behavior

ITEXBROKER — Thu, 04 Nov 2010 13:18:37 -0000

Someone finally has him pegged. Sadar is about as egotistical as they get. He is not a genius and never will be. He has his little professor by his side and continues to quote Buffet at every turn. At least Mr. Buffet knows how to treat people. Sadar will never be a Warren Buffet and will never be compared to Warren Buffet. As far as I'm concerned, any idiot except the old management at SNS could have turned the company around. Every change he made had been proposed to the management in the past. They just would not listen. Sadar and his holding companies. Didn't work at Western Sizzle and won't work at SNS. Would not have worked at Jack in the Box. Would not have worked at the auto parts stores. Won't work at the insurance company. What's next???? SONIC!!!!! Why not buy a country club in San Antonio? He's now making over 1/2 $million at SNS. If I was a shareholder, I would be screaming bloody murder. Someone will turn on this guy. Watch and see.

Re: PetroChina: A Look Back

azmath — Mon, 22 Feb 2010 04:50:01 -0000

Hi, I was exactly looking for this, and I found your article. But, can you say why buffet should choose 12x? Well, that must be the whole trick. But, to arrive at a particular multiple need a lost of wisdom. But its also equally strange, when he mentioned that company was worth $100 B when he bought it. How can he stick so exactly to the 12x multiple!

Re: The Restaurant Investor

Tariq — Wed, 25 Nov 2009 11:02:41 -0000

Great stuff Max. I like to see that blogging hasn't dissuaded you from long form writing!

Re: Berkshire Part 2: Selling Puts

selling put options — Sat, 21 Nov 2009 15:30:26 -0000

Excellent insight into the topic. I have looked all over the web for useful sources of information as good as this. Can anyone suggest similar-quality sources I can review?

Re: Finding an Edge

PlanMaestro — Sun, 08 Nov 2009 14:12:00 -0000

Thanks for that very good particle. I am preparing a couple of articles on how to use the institutional mentality against them to gain an edge. So many ideas so little time.

Very good site, glad I stumbled upon it.

Re: The McDonald’s Success Story

Jeff Annello — Thu, 29 Oct 2009 15:33:58 -0000

Looking forward to the rest of the piece, Max. You never disappoint.

Re: Finding an Edge

Evelyn — Wed, 09 Sep 2009 21:13:27 -0000

Wouldn't a couple of better questions be "Of the edges I believe I have, how is this situation dependent on my having them in perfect condition? How could this situation depend on an edge I just don't have?"

Re: Finding an Edge

MCS — Mon, 24 Aug 2009 02:30:24 -0000

Fantastic article. I plan to incorporate it into my investment checklist (Charlie Munger style) with the question "What is my edge in this investment?"

Re: Buffett on Franchises

Sebastian — Wed, 01 Jul 2009 10:49:23 -0000

gr8 resrch bro

Re: Baupost Fund Allocations: 1995-2001

Max Olson — Fri, 26 Jun 2009 02:04:50 -0000

Jim,

Yes - one big spreadsheet with all the investments is basically how I did the above analysis.

As for the #2 reason, it wasn't very quantitative and was primarily based on my reading of Klarman's investment philosophy. Margin of Safety, his speeches, etc. However, I did look at his actual holdings, and if you classify the equities by industry, you can definitely see a bias toward more asset-heavy businesses. Things like Oil & Gas, Manufacturing, Telecom, and to a lesser extent, Banks and Insurance.

Max