Oh, one thing that changed since the last time I was more active here is that I am now a complete Apple fanboy. OK, maybe not really, as I don’t wait in line for hours for anything. But I used to be 100% Windows but now I am sort of all mixed up. I have a Windows 10 desktop, Windows 10 laptop that sort of broke, a Linux desktop and a MacBook Air.
I’ve talked about this in the past, getting fed up with Windows, getting into Linux etc. I am actually really happy now with Windows 10 (doesn’t crash all the time; it has been really stable, and OneDrive is great so both my Windows laptop and desktop and even my MacBook Air are always in sync etc.), but still love Linux and do a lot of work on my Linux box.
I probably mentioned all of this before, but if you are interested in Linux, there is a lot of great, free, open source software. For the usual Office stuff, you can use Libre Office, with spreadsheets, word processor, presentation stuff and other cool things. Check it out. They are all compatible with Microsoft Office file formats (.xlsx, .doc etc.) My kid has an expensive Adobe Suite subscription (which I pay for), but I personally use free stuff like GIMP as a Photoshop alternative, DarkTable as a Lightroom alternative, Kdenlive for video editing, Inkscape for SVG editing, Krita for drawing etc… There is just so much great free stuff out there. I think all of these have versions for Mac and Windows too.
I’ve seriously considered just switching completely to Linux and ditching Windows altogether. There is very little now that I would need Windows for; I can do everything I need to do in Linux. I may one day drop Windows completely, but I haven’t gone there yet. At the very least, I don’t think I will ever buy another Windows laptop. If I need more than this Air, I would want a laptop running Linux.
Also, the other big change, of course, in my work flow, is the cloud. I have bots running all the time, doing things, sending me and others emails when certain things happen, data scraped off the internet, dumped into databases, analyzed, processed, web pages updated and emails sent etc. All of this, I used to do on my machines at home. But now 99% of that stuff run on virtual machines (VM) on AWS. Well, this has been true for a while, though… This part is not new…
So very often, when I do work, I am just opening up a terminal (whether on my Linux or Windows desktop or MacBook) and SSHing into a VM, and doing stuff off the command line. I write most of my code in vi (simple text editor) so it is easy for me to do this. For bigger projects, I will do it on a desktop, like if I need a full-blown IDE etc. (why bother with a command line when we have just so much great GUI and mouse? Here’s one simple example. Let’s say you have a messy folder with all sorts of files in it. And you notice that a lot of the space is taken up by images (say, jpg files). Let’s race. I can get rid of all of them by typing this line “rm *.jpg”, and then hit enter and they’re all gone. What are you going to do with your mouse?)
Oh, and by the way, the other reason why I love the cloud so much is that, I think I told you guys before, but I was evacuated out of my apartment for weeks after 9/11/01. If I had a PC running stuff from home, data stored in hard drives and whatnot, it would have been a big pain. Well, I wasn’t doing much then, but let’s say I was doing all the stuff that I am doing now, and I had to evacuate. Or even worse, I am out of the house, and something happens and I can’t go back to my apartment to pick stuff up. If this happened today, there would be no problem at all.
As I said, everything is stored in the cloud, all the bots are running in the cloud, all my most important code running in production are stored at Github. All I would have to do is to go to Best Buy, buy a cheap laptop, log in and I would have everything at my fingertips. Even if I didn’t do that, all my cron jobs would keep running with no need for me to do anything. Imagine that. That gives me great comfort. I see all the things lost in fires, tornadoes and all that. I have my most valuable family photos backed up in Amazon Photos as well as Google Drive, and some other places. Still, if my apartment burned down, that would really, really suck, of course. But with so much in the cloud, I feel much better.
…and towards the Mac…
OK, so where is this going, and where does the Mac come in? This is the thing about having a kid. You get hand-me-ups. My kid has been a Mac fanboy from the very beginning. He had a MacBook Air, and he got it replaced with a Pro (apparently, this was necessary for school work. I doubt that, but OK, whatever… You need to pick your battles).
So I started using my kid’s MacBook Air, and I was surprised at how well it works, how smooth it is, how it never crashes, that it just seems to work. And once you get in the terminal, you can do most of what you can do in Linux, so it almost feels like a Linux machine. And, it feels just as solid and stable. As I said, I do a lot of work just SSHing into VMs, so I don’t even usually need all that much processing power, memory or even storage. I fell in love with it. I loved it so much that I eventually upgraded the old MacBook Air to a new one not too long ago. I take it everywhere with me, and it never, ever fails. It is solid, and it integrates well with my iPhone. Oh, and all those free, open-source programs? They all work on a Mac, no problem.
And the other huge factor that made the switch to a Mac (at least for laptops) easy was that I installed the OneDrive app on the Air, and voila, now I have everything that is on my Windows desktop right here on my MacBook (just the files. Not the apps, of course). That was huge. It made the transition very easy.
Oh, and I can go on and on about the iPad. I owned one years ago but my kid mostly used it to play games and whatnot, so I never really got to use it much. I have an iPad Pro now, and I use it for taking notes in meetings, read Apple News+ (which is great as I get to browse tons of magazines), read comic books (don’t get me started on that topic), do art (Procreate is an amazing piece of software to create digital art) etc…
To go further, I now do most of my reading on my phone. I still own a Kindle, which is really great, and I love it, but I just use the Kindle app in my phone and read a lot of my books there. I still read physical books too, of course, but all my Kindle reading is done on my phone.
Your machine doesn’t even matter much anymore…
When you put it like this, what machine you have really doesn’t matter as much anymore. I do everything in the cloud. I store stuff in Google Drive, Dropbox, Amazon AWS s3, use those to share with others, have scripts running in VMs and whatnot. The only things where I might need a powerful desktop is doing stuff with media, editing photos, editing / compiling videos and whatnot. But almost everything else, it doesn’t even really matter anymore if it’s Windows, Linux or Mac.
Oh yeah, and software, a lot of that is just moving into the cloud, so many things that used to be desktop software is now just a website. Like QuickBooks. You just log in from anywhere, any machine, and do what you have to do. Investment / trading-related stuff is all just web-based now too. Google Docs, Sheets etc. I can go on and on.
I keep telling people that eventually, all I will need is a $200 Chromebook. As long as I have a good wifi connection, it won’t matter at all to me. I say that, but I haven’t gone there yet. I am still using this MacBook Air.
What does this mean for investing? I’m not sure. My above story sort of shows how maybe the barriers stopping people from switching from Windows to Mac might be disappearing. There was a way, for a long time, to run Windows apps on Macs, but the fact that more and more are directly available for Macs, and how more and more apps are just moving / converting to web apps, makes the OS less relevant. Sure enough, Windows market share has been declining over time, and Mac has been increasing.
I have been looking at Dropbox, Box, Digital Ocean and many other things. I already own AMZN, MSFT and GOOG (I only bought AMZN years ago when AWS started to be talked about, and MSFT when a programmer friend told me how great Azure is).
I love Dropbox and Box (well, Dropbox more than Box), but as investments, I can’t help thinking that if it’s just file syncing and sharing, how much of a moat is that? Yes, Amazon s3 works a bit differently, as does Azure, but MSFT has OneDrive which is really great. A bit different in terms of sharing and whatnot, but how much ‘tech’ or moat is there if any of the big players wanted to get into the business? At the moment, the tech giants seem to partner with Dropbox etc., but at some point, when they go in search of more revenues, won’t they just start their own Dropbox?
Yes, there is the cost and hassle of migrating, so existing clients may be somewhat sticky. Especially if you have large amounts of data, exporting that stuff and importing it to another service can be a huge hassle…
But I don’t know. I know Dropbox and Box are adding services and are expanding beyond just file syncing and sharing, but I don’t know. The moat part gets me. Same with Digital Ocean. It is great, but so is Linode and probably Vultr too. Amazon Lightsail was directly targeted at these guys, with their $3.50/month low-end, easy to run VMs, and $15/month managed database. Digital Ocean is so small that it’s almost not even worth AMZN’s time to try to take their business, but then if AWS growth starts to stall and they need revenue growth, it looks to me like low-hanging fruit to go after the smaller cloud users. I do have stuff at Digital Ocean too, just so I know what it feels like to work with their products, compared to AWS.
Not really a tech investor, but…
I don’t consider myself a tech investor at all, even though, clearly, my biggest winners over the past few years are mostly (not all) tech stocks. I don’t even really consider some of these things tech stocks anymore. That’s like an old-fashioned way to look at things. I mean, Netflix is a media company, no different, really, than Blockbuster. It’s just that their delivery mechanism is different. But the business itself is still just media / entertainment.
But I have been invested in what we call tech stocks, just because I invested in “what I know and understand”. For example, I understand Google a lot better than I understand, say, pharmaceutical companies or oil companies. That’s simply because I use Google every day, I have stuff in Google drive, I use Gmail, I have done machine learning and data projects in the Google Cloud Platform etc. (mostly just doing online courses). I have done similar things in Azure and AWS, so I feel like I understand their products from an end-user point of view, and I think I understand how companies can benefit from these products, how they may change the world (and this is why I can tell you that the IBM cloud services just really, really sucks. Shockingly bad).
So, as Peter Lynch and Buffett often say, invest in what you know. I see my kid playing a lot of games, so of course, I investigate Unity and other gaming related companies (he told me to avoid Roblox at all costs as it’s garbage). My kid (to my horror) is always ordering stuff on Uber eats (now he uses Doordash more). So I have to investigate Uber, Doordash etc.
This is no different than when Peter Lynch told us to go to the mall, see which stores are seeing a lot of traffic, try out new restaurants. It’s the exact same thing to my mind. I am not poking around in the tech world because it’s “hot” or “popular”. It’s just that that’s where my time happens to be spent, and the rest of my family too. So this is just a Peter Lynch thing.
I have not made posts about most of these names in the past because I always considered this sort of a Buffett-style value investment blog, and I didn’t feel like I had any more to say about, say, MSFT, than what people are already saying about it. What can I contribute to that discussion? Not much. And there was no real, amazing valuation point of view either. But this was not true about, say, BRK, MKL and most financial companies. I feel I almost always had much to add about names like those because at the time, except for a small group of some fanatics, most people didn’t seem to view many of these companies correctly. So of course, I had a lot to say about them, and a lot to add to the public discussion.
Stocks like MSFT, AMZN, GOOG? Not really. I don’t have any profound insights about them etc. I think I might have written about GOOG years ago, though. And yes, I did write a lot of negative things about AAPL, but I did warn, do not short it!
Anyway, this is why, recently, companies like Godaddy, Squarespace, Digital Ocean and many companies like this make my list to “investigate”. This is simply because I am a pretty active user for these and similar services so I feel like I actually understand what they do (I do help people run their Squarespace websites too, even though it’s a completely closed system with no room for programmers to get under the hood and do cool stuff).
Oh, and then there is Shopify too. I do actually run a Shopify store for someone, so I feel like I know that from a user point of view too. So I should look at that for sure, even though I will probably not invest in it (or most of the above names). Oh, and I sold a lot of my kid’s old PC gear on Ebay, so I feel like I understand that business better than before. It was great to be able to offload old monitors (as he used to replace his PC monitor every other month… his CPU, graphics card etc. At least I can get something back for them on Ebay!)
So this is the world I live in. There is no doubt I understand these products much better than what I see in the mall. What do I know about fashion? I see guys on CNBC say they walked into a store and loved it. What do they know about what teenagers are going to like? lol… You are an old, balding, white guy, and you are going to walk into a teen retailer and tell me you like what you see? Well, that might actually be BAD because you are not their target audience!
Having said all that, just because you are a user doesn’t really mean you are going to be right. Sometimes, you get the worst advice from industry insiders. One of my biggest winning short term trades was when a commercial real estate executive, who is an heir to a real estate fortune, told me that commercial real estate is about to go off a cliff (this was during the financial crisis). That very day, I went home and bought some REITs, lol… A real prodigy, whizkid programmer I knew in high school told me in the early 90s that Sun Microsystems is dead (just before running up into the late 90s to take over the world). A Google employee friend told me back in the early 2010s that he is selling GOOG stock as fast as he can, as soon as it vests, he is out. He said GOOG management is lost. Another GOOG employee told me the same thing saying that anyone who is going to get rich on GOOG stock is already rich, but people getting stock now won’t do well. Oops. I guess when you work in a sausage factory, you just don’t eat sausages, lol… So maybe there is such a thing as knowing too much.
…but valuations matter, right?
Yeah, that’s the thing. I usually only invest in profitable companies. I don’t mind P/E’s on the high side, but I do want to see profits and growth. This is why I never even looked closely at any of the unicorns or companies like them that keep losing money.
Having said that, I keep hearing that “value” stocks will start to come back, or that the value-growth gap will close etc. As I said in a post a while back, this may be true, but one has to be very careful about how much of this gap is secular, and how much of it is cyclical. I have a feeling that in the past, it used to be much more cyclical, but now, a lot more of it is secular.
I think I even used this example. Do you want to be long BBBY and short AMZN? No way. BBBY, by the way, used to be one of my favorite companies. Luckily, I have never owned the company (I might have owned a little for a short period of time a long time ago, but not at all in the past few years), as it was always way too expensive for my taste when they were growing, and then not so interesting when they were not growing. Their products, to me, was one of the first, and easiest category to be picked off by the likes of AMZN and even WMT, TGT etc… You don’t need to see, touch, or feel plastic storage containers, a coffee machine, or most of those simple kitchen and bathroom supplies. Anyone who can deliver it to me cheaply will work fine for me.
If you can’t separate that out, the cyclical component and the secular component of extinct businesses, I think that value-growth gap is basically meaningless.
I know this sounds frighteningly close to the new economy / old economy argument of the late 1990s (and after 2000, value stocks did really well). Not all value stocks are going away or are in declining industries. But I have been reading about this value / growth convergence for years now. I guess the right way to look at it is, not to say they won’t ever converge again, but that it may take years for it to happen, and even if it does, we won’t know to what extent.
Also, I’ve confessed to this before, but years ago when I first started investing for myself, I felt really smart going long MO (Philip Morris), with high margins, high ROE, high moat, low P/E and then going short SBUX (just a cup of coffee! What’s the big deal?!). Needless to say, that didn’t work out well. Even in the early days of quant trading, the most primitive systems did pairs-trading, which means, you go long/short similar stocks. Either highly correlated, in the same industries or whatever. But you never go long, say, a utility stock and short a fast food chain (again, unless there was a very high correlation and the price gap widens beyond a quantifiable historical normal range).
Oh, and one more thing…
I keep hearing people say that AI is going to make programmers obsolete, so don’t get into computer science. I don’t know, I can’t predict the future any more than anyone else, but this just doesn’t sound right to me. Did we stop teaching math once we invented the calculator?
I can understand warning people against, maybe some of those really expensive coding boot camps. That is risky, I agree. I’ve dealt with some boot camp people, and some of them know how to do exactly one thing, but know little else. If there is any variation in anything, they are totally lost. They are taught to do exactly one thing, almost as if they were taught to memorize one physics equation so can solve exactly one physics problem, but understand very little else and can’t solve other problems. Those things, I agree, may be risky, just like the HTML/CSS/JS people in the past were wiped out by DIY websites, WP, Squarespace etc. A new service (not even AI) can easily wipe out people with very narrowly focused skills.
But I don’t think software engineering will go away at all. Sure, there may be less demand than before, and all the tedious tasks will go away, and the things you have to do may change as many things will become unnecessary. But I would not write off that stuff so easily. There will always be more things to do, in different ways.
So anyway, this post is already getting way too long, so I will stop now. But I may make more posts about this stuff in the future.
Oh, and don’t annualize or extrapolate this pace of new posts. Of course, I won’t be making posts every day or even every week. But maybe there will be more early on just because of the pent up amount of stuff I may want to write about.