Welcome back everyone on today's.
Episode We're. Going to be looking at the
question. Why does Big Tech?
Always seem to win. We're talking about Apple.
Meta Microsoft, Amazon and Google.
Those are the five companies that I consider.
In the big tech category. And when we.
Look at the actual. Performance of these companies,
there's the common phrase that past performance isn't
indicative. Of future.
Performance. That is true, but.
It seems like big tech. Always is like an.
Exception to the. Rule they always.
Seem to do relatively well, in fact better than the benchmark.
Better than the index we have apple for.
Example over the past. 10 years. Without dividends reinvested.
This is without. Dividends, they've done 11. 100%
returns. 1100% returns if you invested in 2013.
That was decades after. Movies came out about Apple at
Forrest Gump investing in Apple. This company has compounded like
crazy and. Still today, it's viewed.
Favorably we have Amazon. Amazon over the past 10 years
have compounded 700 and. 42%. 742% isn't bad, and that's even
with a recent dip. So it's still.
Outperformed the QQQ. The S&P. 500 with the massive
dip. We have meta.
This one is no slacker either. Over the past 10 years, it's
done over 1000% in gains and it's it's had a remarkable
recovery from its low just a year ago.
We have Google. This one, funny enough, is
considered to be. That like the best?
Tech company in many. Cases A lot of people love
Google more than any other company.
But it's only done 400. And 10%.
And I say only. When this is.
A lot better than the SP500 and the QQQ.
So Google's a slacker in big tech, even though it's still.
Outperformed the broader indices and it's.
Trading at a cheaper. Valuation than most of the other
big tech companies. But then we have Microsoft.
This one over the past 10 years has been remarkable 822% for a
company like Microsoft again. Almost close to that 1000% gain
range. And if you factor in dividends
being reinvested? It gets you very.
Close to that point. So this is another one that's.
Had tremendous performance. All of these companies have had
tremendous performance. They continue.
To have tremendous performance. They still make up the majority
of the index and this is going. On for over a.
Full decade. Almost two decades now where
these companies have. Really.
Pushed the entire equity. Markets up.
And they always seem to win. Now we can.
We can give little. Examples of where they?
Lose, but usually they lose when they're competing with.
Each other like. Amazon trying to come out with
the Fire Phone, Lost to Apple, but in the realm of big tech.
One of them still won big tech in.
General them as a group always seems to win.
So as always. We have a lot.
To get into I'm very. Excited about this episode?
And I think this. Will be an informative look at
big tech. So let's start.
Off like we always do with a quick.
Portfolio update. Now the thing I want to point
out with my. Portfolio is the thing that a
lot of people have pointed out a.
Lot of people have said Joseph. You have so much money.
Invested in Big tech. Why don't you just buy the S&P
5? 100 or the QQQ.
That is an option I could. Buy those, but those.
Don't own enough big tech. To resemble My Portfolio.
I actually have more exposure. To Big tech.
A lot more than the indices. And I've done that
intentionally. I've overweighted My Portfolio
heavily into Amazon, Google. Microsoft and Apple.
And this? Is just the story Fund.
I have a massive waiting in each of.
These companies. Most of them have.
Done really well. Amazon has struggled a little
bit, but this one is recovering and I think it's going to.
Continue to recover. When we look.
At my other portfolio. The one that's been around a
little bit longer, the passive income portfolio, I also own two
large, very large holding and big.
Tech here as well. We have.
Microsoft and Apple again $54,000.
Invested into this one. 53,000 into this one.
The gains are 20. $5000 on Apple, $10,000 on Microsoft.
These have been largely outperforming positions.
That I've held for a number of years.
So I've invested very. Heavily in big tech for a long
period of time. And I'm still invested.
Very heavily in big tech. And the reason being is because
I believe these companies will continue.
To outperform the market, how? They're able to do.
This, on such a consistent basis, is perplexing.
It is confusing. Most people think that they've.
Done. Really.
Well, but it's just. A temporary thing, They're going
to slow down. But big tech has done something.
Very remarkable. They've been able to.
Avoid the. Reversion to the mean.
If you look at financial theory. It says that as a company grows
and becomes. Bigger it attracts.
More competition and its. Returns on incremental
investments. Go down when the return on.
Capital employed or incremental investments goes down the
company. Start to get lower.
Returns for the investors and the returns of the company start
to just match the market average.
They don't have excess returns anymore.
That's because of competition. Now we're not seeing that with.
Big tech. Somehow they're.
Able to avoid the. Reversion to the mean.
How are they able to do that? Let's.
Go ahead and take a look at how these companies are able.
To avoid that reversion to the mean?
How? They're able to keep.
Such high returns on capital employed.
We'll start off with. Apple, which I think is the.
Best example of this. This company is.
Remarkable in the way. That it's built out.
Such a strong. Mode every big tech.
Company starts off with something simple.
But it's the. Core business of the company.
In the case of. Apple, we have the.
IPhone. Now there's products that
predated the iPhone, the iPod, and the iPod shuffle and
whatnot, but the iPhone? Was really their core.
Product this is. Really.
Where the Apple today got started?
The iPhone became. Quickly the device.
On which everybody. Used every day.
It even. Surpassed the desktop.
So we always thought. That the desktop would be the.
Device we use all the time. Now it's the phone.
When the iPhone came out, it started.
Getting market share from every other phone, and it quickly
became the go to phone for people that had enough money to
afford one. Over time, more and more people
got the iPhone. It became more commonplace.
Off the back of the. IPhone.
Apple is able to. Expand their product line
dramatically. And this is what?
Big? Tech is great at.
Starting with one core product. And leveraging the growth.
In that product to grow other products that match that
product. So we have the iPhone and then
we go. Into the MacBook.
They make them work. Really well.
Together you can share files. You can do all sorts of things
together. They match the aesthetic.
If you're an iPhone user, you're likely to have a MacBook.
Then of course you have a different.
Tablet The iPad. Again, it works.
Really. Well, with the iPhone you have
all these different capabilities that can share with each other.
Notably, we have iMessage. Imesage was so.
Important because that was. Really one of the things that
tied. All of these devices together.
See, Apple is smart enough to make it so that messaging
worked. Better from one of.
Their devices to another. Of their devices than.
From one of their. Devices to a competitor.
That's called bundling when you make something bundled.
Together, that works better. In the bundle.
Or has superior. Pricing in the bundle.
That is a. Bundle effect with Apple.
It's also. Called an ecosystem.
When you have things in the same product category that seem to.
Work Better Together. Than they do with different
products. And that reinforce people.
Buying Macbooks and iPads. The.
IMessage tied that together. Then of course.
We have the launch. Of the air.
Pods. The Apple Watch, The Air.
Tags and so on and so forth. They have a lot of different
products now. All.
Of these products, notably. Work Better Together.
In an ecosystem. Than they do separately.
That is by design, Apple wants. It to work better with their
products. Than they do.
With other people's products. Because that creates incentive
for you to. Stay in the ecosystem.
But then what Apple did and keep in mind at this time period,
around this time period we have around 2015 two. 1016 2017.
This is when Apple is really a big.
Company one of the. Biggest in the world, if not
the. Biggest in the world?
But most of their sales, most of the stuff that.
They did, to make. Money was based on.
Hardware sales. And analysts looked at.
This and they thought that that's.
A little bit risky because we've seen.
Hardware companies come and go. They usually don't.
Keep a Moat for a long period of time.
So you have. Morningstar and other analysts
saying that they have a narrow mode they don't have.
A wide mode. Because they're just selling
hardware. And it's a competitive field.
Samsung's coming out with stuff and.
This can change anytime. Soon, But what?
Apple did. Was they leverage their already?
Existing ecosystem of. Hardware products.
To now build an ecosystem of digital offerings.
And this is what big tech again is good at taking one product.
The iPhone. Leveraging that to build another
ecosystem. And then taking that.
Ecosystem products and leveraging to build.
Another ecosystem of products to vastly expand the total
ecosystem of the company we have them build.
Their digital offering? Because they already have so
many. People in their ecosystem of
hardware. That now they offer.
Apple Pay. Apple Pay is growing.
Quickly, there's reports. From the Wall Street.
Journal that it's scaring banks. JP Morgan has said that Apple is
a bank. That if you act like a bank, if
you do things that banks do, which is?
Store money. Then you are basically a bank.
So JP Morgan is saying that these big tech companies.
Especially. Apple is a threat.
Goldman Sachs wants to end their.
Partnership with Apple. I think because they consider.
Them too much of A threat. So Apple has suddenly moved from
becoming. Just this device hardware.
Maker to making banks. Nervous.
That happened overnight. See how this?
Works how they're. Able to go from one thing to
the. Next and they use.
The preexisting advantages. That they have.
To create further advantage. They have Apple Pay.
Now they're disrupting fintech, they're competing with PayPal,
they're making other shareholders nervous, and things
like Visa and MasterCard because of their huge network effect.
And even though they're trying to play nice.
And they're trying not to draw in attention from attention.
From regulators, it's. Still notable how?
Fast, Apple Pay was able to. Grow billions of people.
Billions of installs. Hundreds of millions of people
using it. Apple Pay is now commonplace.
At grocery stores and. Checkouts.
They came out with the. Credit card The adoption for
credit cards. Is tough.
For banks. They have to win over customers
and they have to give huge incentives.
You know, all the. Offers you get for credit card
rewards. Sign up.
And get this much. You know, Sky.
Miles and and points or whatever.
It may be Apple. Got those customers with?
Almost no cost of acquisition. Just because they had the.
Preexisting ecosystem it. Lowered their cost of.
Acquisition for credit card issuance far below what a bank.
Has to, so Citibank wells. Fargo.
JPMorgan. Bank of America.
They have to work hard to get people to use their credit
cards. Apple doesn't, Apple.
Has people use it because they already just love the?
Products in the ecosystem that they're in.
Then you have the savings account.
Apple got $1 billion in deposits in their.
Savings account. In like a day.
It was. Literally a day.
And they had a. Billion dollars in deposits.
They just. Offered a 4% high yield savings
account. People saw it show up.
It was. Defaulted in their device right
in their Wallet app. They didn't have to advertise.
Apple didn't have to pay anything they have to do.
Anything for it that a billion dollars.
Worth of deposits, assets. And management in just a day
after releasing a product. With no advertisement and no
customer cost of acquisition. Banks have to pay.
A fortune. To get a customer to put money
into a bank account. They have to advertise.
It Chase will run. Promotions where they say.
That if you. Use our savings account for like
6 months. We'll add in. $500.00 and
different things like that. They want you to.
Bank with them, and they're heavily incentivized.
To. Get you to bank with them.
Apple did. This is just an.
Expanded offering and the. Big thing here is they can
compete with banks without having the.
Cost of banks. This is the digital.
Offerings going into Fintech. And making real room.
In that category when this company started.
Off. Just selling iPhones, so.
They have one advantage with the iPhone, they have an install
base and they leverage it to make another advantage an
ecosystem of. Hardware products.
Now they have an. Ecosystem of hardware products.
They use that existing. Advantage to leverage it and to
further advantage. An ecosystem of digital.
Products. Now the investors that.
That I would say. Recognized what was going.
On a long time ago and we're. Able to make the judgment that
this ecosystem. Was going to grow dramatically.
They made a lot of money doing that.
Warren Buffett being one of them.
Warren Buffett recognized way back in like 2000. 15 that the
company was building. Out a big ecosystem that they're
going to find a million ways to monetize the Buffett.
Know they're going to. Come up with Apple Pay and the
credit card and all these different digital.
Offerings No. But he knew that the company had
customers in their. Existing ecosystem and he.
Knew that the company. Would find ways to monetize the
existing customer base. I felt the same way.
But I was a little later to the party.
I bought Apple back in 2017. It's been a tremendous.
Winner over that time period. And I had discussions.
The same discussions led me to believe.
The apple was. Growing this digital ecosystem.
And they had. A way bigger Moat than investors
at the time We're giving them credit.
For so we have the digital products.
Here and they continue on Apple. All of a sudden competes with
Apple Music or Apple Music. Sorry, competes with Spotify.
When Apple Music. Started competing with Spotify.
Daniel Eck, the Spotify CEO, was.
Furious about it, he. Recognized that this was.
Unfair. The apple had an unfair
advantage because they made it work better with their watch.
They made music seamless. With all of their devices, they
made it work. Default with Siri they.
Built it into their. Ecosystem of products.
And like Apple always. Does they make their?
Stuff work a little bit better with their stuff.
Than with other people's stuff. That enforces people buying.
More of their stuff. When Apple actually.
Came out with the bundle, the Apple One Bundle.
Spotify came out with an. Official press release calling
upon regulators. To come after Apple.
Because they thought the bundle was so.
Unfair. And guess.
What Spotify was right. It is unfair.
Imagine trying to compete with a company like this that has the
ecosystem that Apple does the existing product.
Based and install base the lower.
Customer cost of acquisition, they actually control the.
App Store. So when you sign.
Up for Apple Music or Apple Fitness?
Or Apple TV or Apple News? Plus any of those Apple Arcade.
They don't have to pay. The booth The toll booth of the
App Store Spotify. Does and other.
Companies do as well. This is the ecosystem.
At work, The Moat at work. And this is so.
Different than typical finance. Normal finance would show that
when a company strays away. From its core products.
The returns on incremental investments.
Start to go down and that's what happens with a lot of companies.
They have a core. Product.
They invest in, they get high returns with that core.
Product when they invest. Outside of that core product,
the. Incremental returns on
investment go down. But we're seeing that that's not
happening. With companies like Apple.
They maintain very high returns on incremental investments
because they're so good at leveraging their preexisting
advantages, their existing ecosystem and we see this.
All throughout Big Tech. This is a very common theme.
With these companies. So in terms of.
Apple. You can talk about the.
Valuation we can discuss. If it's at the right P/E ratio
or free cash flow yield. But in terms of the actual Moat
and advantages of this company, I don't think it's ever been
stronger. I think that Apple.
Has one of the biggest moats in the.
Market and it's going to continue to do what it has done.
It's going to continue to build out new offerings and use the
existing offerings they. Have to create higher.
Returns on invested capital for those new offerings.
More so than an. Independent company.
If the company just creates music, it's going to have a.
Tough time competing with Apple the company.
Just creates a new. Reality Headset It's.
Going to have a tough time competing with.
Apple. Apple has the.
Advantage of their preexisting ecosystem now moving on we have.
Amazon. This one's slightly different,
but in many. Cases it looks very.
Similar to Apple. It started off with the retail.
Store and the Prime subscription with the retail store.
Amazon has been one of these businesses that spawns off
different businesses, but with the.
Prime membership and the growth of the retail business, not.
Only were they able to spawn off a WS which now.
Hosts a retail business. But they.
Also have prime. Video which they put.
Into the offering. That's a bundle.
They can offer prime. Video at a lower.
Cost because people using Prime Video are also using Prime
retail store with the two day shipping they offer Prime Music.
They've. Speed up the shipping times.
They've offered photo storage, and they have Twitch benefits as
well. All of these.
Come within the bundle. Every one of these.
Are bundled together except. For AWS but AWS.
In a way, is still. Bundled with the retail.
Store. Because Amazon has the.
Advantage of having one of the biggest customers on.
AWS be themselves. So with Amazon hosting
everything with. AWS.
They can test the product. They can iterate on it.
They can push new features into their.
Current their. Current company and then they
can release. It to other people.
Once it's thoroughly tested. So having this bundle together
everything together gives Amazon A.
Huge advantage over any individual company offering
these. Products.
Then from there, Amazon didn't stop.
They used one advantage. To make all.
Of these other. Products and companies that they
bundle. Together.
And then they used all of these. Products and bundled.
Companies to make other. Bundle to digital offerings.
We have the ads. On the marketplace?
Now they're an advertiser and they have the.
Ads on Prime Video. We're going to.
Start seeing. Ads in there as well.
Then we have the ads on Twitch. So now Amazon is advertising
everywhere. Huge ad company, so now we have
3 big intrinsic. Value drivers of the.
Company we have Amazon Prime. That's a big subscription that
brings in high margin revenue. We have a.
WS That's another. Big Value driver.
Of the company. Has very good margins and then
we have ads. Now we don't know the margins of
their ad. Business, but it's very.
Targeted ads I'd. Assume the margins are.
Very high. For that as well.
And all three of those are. Growing the Prime subscription.
The, a, WS and the. Advertising is growing.
So they have the three. Big bundled together, Intrinsic.
Value drivers of the company and they continue to do what
they've. Done.
Spawn off. Different business ventures.
They try to. Add on different things and see.
If they work and if they don't make any progress, they can
scrap it. They're doing.
That with pharmacy with. Healthcare, with home automation
and with grocery. Amazon like Apple.
Is able to. Leverage their current product.
Base their. Current advantages to get?
More advantage in different products.
Therefore artificially raising their.
Incremental returns on capital. You see what these companies
have in common? Every big tech company has the
same commonalities they use. One advantage, one advantage to
get another. Advantage.
And once they have one or more advantages, then they have the
bundle, the ecosystem, and they. Leverage that to get.
Even. Further advantage over
individual companies competing with them.
And individual companies which? Offer just like 1 product,
whether it be something like music or just one social app.
Is very difficult. For that one company to compete.
With a big bundle, with a big ecosystem.
They're pushed out. Because they can never offer.
The same value so. All of these tech companies have
the same intrinsic. Value driver.
Ultimately, it might be in the case.
Of network effects might be in the case of bundling or
ecosystem, but it's all basically the same thing.
Using one big existing advantage to get.
Further advantage. We can look at this in the.
Case of meta Meta. Started off with Facebook.
It grew very quickly. It was a big.
Success. But what did?
They do. They followed the playbook that
every. Big Tech Company follows.
First of all, Mark Zuckerberg bought up Instagram.
And WhatsApp they had. Low amounts of users at the
time, but. They were able to use Facebook
to push users. Into Instagram and WhatsApp.
More than Instagram? And WhatsApp could do in and of
themselves if they're just left by themselves.
If those companies. Weren't purchased by Facebook.
They would not be. As big as they are today.
The reason? They're as big as they are
today. Is because the existing.
Advantage of owning Facebook, if you recall.
When Facebook bought Instagram, it didn't have nearly as many
users on it. But what?
Did Facebook do? They all of a sudden promoted.
It in the app. Stores.
They got a lot of exposure to it.
And then they made Instagram integrate with Facebook.
So you could post on Instagram and you could.
Also say. I want to.
Cross post over to. Facebook.
So every Instagram post is automatically shared on
Facebook. Well, what do you think a lot of
people do when they're on Facebook and they're seeing?
All these Instagram posts show up in their feed.
They go. You know what that sounds like?
Fun seeing this photo app. I want to create an account.
There, this is one advantage. Owning Facebook getting.
Another advantage pushing. Users over to Instagram.
So all of a. Sudden Facebook now owns.
A huge social network. That was mostly text.
Based. But now they have one that's now
completely photo based. They just.
Completely doubled the capability of their.
Company and they did it only because they already.
Had an advantage, an advantage that other companies
independently didn't have. They're the.
Biggest social media in the. Company in the world at the
time. And they did the exact same
thing with WhatsApp buying the company.
Cross promoting it like crazy, pushing exposure to it.
Getting their massive user base. From Facebook and Instagram over
to WhatsApp. So we see the exact same
storyline. Here a company.
That has one massive success, but in this case it's not the
iPhone or Amazon Prime. It is Facebook.
They use that one massive success to push usage and
leverage it. Into creating another massive
success, which is Instagram and then WhatsApp.
And then since they. Have the bundle.
The ecosystem of users. And all of their products.
They can unnaturally push usage to things like.
Reals competing with TikTok things like Stories competing
with Snapchat and communities with Reddit.
They can only do that because of the bundle.
Effect. And then to even make this point
more clear, we have. Twitter.
Twitter was. The one standout?
From the. Rest of Big tech.
The one smaller company that was competing in some.
Capacity to Big tech. And look what happened.
Meta just released threads and suddenly it has 100 million
users. About 1/4.
Of the. Users of Twitter in total and
they. Got there in two days now, isn't
that remarkable? That threads was able.
To grow that quickly even more remarkable.
Is that threads was created by meta with.
Apparently only 20 employees. I'm not 100% sure.
If that's correct, but that's the rumor.
It was only. 20 employees and they started it around the
beginning of this year, so in six months.
Time with 20 employees. They're able to grow.
An app to 1. 100 million users that competes.
Directly with Twitter. Why are they able to do that so
well? By again leveraging their
preexisting advantages. In this case they already had a
massive advantage. You didn't even need to create a
new account. To create a threads.
Account you just used your existing Instagram account and
said I want a threads. Account you press 1.
Button and boom, you have a threads account.
No entering and user information.
No filling out your first and last name, no uploading a
profile. Pic.
It was all already there, therefore.
Removing all of the. Friction to.
Onboarding normally when a company has a new user.
There's an onboarding process. When someone joins my.
Patreon They have to put in some information.
They have to create a Qualtrum account.
That's part of the onboarding process.
There's a. Little bit of friction there.
They have to create an. Account but with meta.
There's no onboarding process, there's no friction.
So they can spin up 100 million accounts like it's nothing in
two days? This is such.
An unfair advantage? Over things like Twitter, where
somebody signs up for. Twitter they have.
To create a Twitter account. But this is big tech.
This is how it works. All of them leveraging their
existing bundle existing. User base.
Existing advantages to get? Further advantage.
Now, you might say that all of this.
Seems unfair. But remember that we're
investors. We're not here to be judging
what's fair and unfair. We're here.
To be judging which company is going to do well observing the
business models of these companies.
It becomes. Clear why they've.
Done so well. Moving on, we have Google as
another example here, starting off with the core search
product, leveraging that to buy YouTube now.
YouTube in and of. Itself was doing really.
Well, but the. YouTube creators before Google.
Did not. Know how to grow the company
they. Had no algorithm experience.
And they had very. Very tough time hosting.
All the videos YouTube. Would have never grown the way
that it. Has without Google.
So if Google search. And that.
Product didn't exist then YouTube in the way that it
exists. Right now, would not exist
either. All the people at Google that
had experience building algorithms after buying.
YouTube They decided to. Implement all of that experience
into the recommendation algorithm.
As well as their experience hosting things and having huge
servers also came in handy. For hosting so many.
Videos for free. So they used one existing
advantage. Leverage that into another
advantage in owning YouTube. And now they have a massive.
Video property. That is competing with Disney
and it's. Competing with NBC and it has
more more time than even Netflix at this point.
YouTube is massive. Possibly the biggest video.
Streaming. Outlet ever to exist.
In all of human history, then of course they have Chrome,
Android, Gmail photos. On and.
On and on. There's literally a list of like
100 different products that they've launched.
And that creates the. Ecosystem.
Google does the same thing to a certain.
Extent as Apple. Where they make their products.
Work slightly Better Together. Than outside of them.
But not to the same. Degree of Apple.
Google's products are a little bit more disjointed.
They operate. In a little bit less sync and a
less of. An ecosystem than Apple?
And I would say that's one of the reasons that Google.
Has not enjoyed the same returns as.
Apple over the past. Decade.
Hasn't even been close. Apple has over doubled.
Almost tripled the returns of Google.
And I really. Believe that a big part of that
is Google's. Ecosystem has not been as
flushed out as. Well orchestrated as Apple's,
but regardless, just the fact that they have.
These big advantages has created market beating returns with.
A very low risk profile. Now from the advantages they had
in search. And YouTube and Chrome and Gmail
and Photos and all of this data, they're.
Collecting they. Leverage that advantage into.
Barred AI. They leverage it.
Into Cloud Cloud. Was a natural.
Play for Google, remember? They had to host.
Their own servers for search. Then they had to create even
more more hosting for. YouTube.
So they already. Had the servers and then they
decided, well Amazon is doing this.
We have other players going into this.
Why not create cloud we have. Excess capacity as well.
So now Google's a big cloud. Player They're growing very
quickly. It's going to.
Probably be profitable. By the end of this year, then,
we have Google. Pay competing with Apple Pay and
other payment. Processors we have, YouTube TV
we have. YouTube Music and we have a
whole host of subscriptions. Like YouTube Premium and they're
able to push 8100 million up to. 200,000,000 plus subscriptions
and they're. Able to do that?
Because of their already. Existing ecosystem.
So Google. Falls into the same category.
The company that starts with A1 core product leverages it.
To create better. Incremental returns on other
products then. Leverages those to create.
Better incremental returns than. Other companies count on other
products the same exact story over and over again.
Finally, we get to Microsoft and it just.
Is like deja vu. It's all the same.
They have the office suite, they use the office.
Suite to create the 365 bundle. Things like teams would never
have been as successful if it was not bundled in the already.
Existing Microsoft Office suite, so if another company just.
Came out and invented. Microsoft Teams it would have
never competed. With Slack.
It would have never grown the way that it.
Has Microsoft used the? All.
Encompassing bundle the. Power of the bundle really
pushed Microsoft. They have the Xbox, they were
able to buy other. Companies like LinkedIn and
GitHub and other products like Minecraft.
Because they have the existing bundle.
They have such high. Returns on that bundle, they're
able to venture in and scoop. Up any deal they can and push
any new product they can into the bundle now they have.
Azure. Which is something they.
Relate to the game on but they know so well.
How to do this? Stuff that they created.
Azure and then they. Use the.
Bundle to push Azure. So most of the customers using
Azure, the reason that they pick it is.
Guess why? They're Microsoft Office suite
users. Companies already.
Have the Microsoft products. They need somewhere to put it in
the cloud and Microsoft. Came out with a.
Solution saying. Hey, we're the Cloud Guide.
Now you can. Push it up to us and.
We have our integration. Tools that work.
Easier with. Us than any other cloud hosting
so we have. Azure, we have all the cloud
products, we have ChatGPT. We have them going into
cybersecurity and cloud gaming, so on and so forth.
They'll continue to venture into other categories.
And the thing that. They can do here.
Is the. Better that they make the new
categories fit into their. Existing bundle, the higher the
returns are going to be on those new categories.
So I hope looking at this gives insight to the type of things
I'm focusing. On when I do analysis of these
companies. I get asked questions all the
time. Joseph, Is Apple a buy right
now? Is it too expensive?
Is it overvalued? Or a little bit too cheap.
Apple might be 10 or 15 bucks too.
Expensive 10 or $15 Too cheap. Everybody has opinions.
On where the valuation is. But I think that.
Misses the big picture. If you're focused on whether or
not the company is 10 or 15. Bucks Too expensive or cheap?
You're missing the picture. Whether or not Apple.
Is successful in growing massive amounts of wealth.
And cash flow over the next 5 to 10 years.
All comes down to the existing ecosystem and if it can maintain
it. And grow it.
That is the main measure I look. At as the intrinsic value driver
for the company. And any of these.
Big tech companies. Are there core businesses?
The most of them. In the.
Intrinsic value drivers, which are the bundles.
The ecosystems, the cohesive. Product offerings, are those
intact? Are they growing?
Or are they under threat? Or being broken apart.
If the company's ecosystem is getting smaller.
Weaker getting broken up or is under threat then that would
mean that I would sell the company.
Because at the end of the day. The way that big tech.
Always seems to win. Is because of the.
Ecosystem because of the bundle. Because of their already.
Existing huge advantages? They're.
So good at. Leveraging them and that's how
they. Win, so that's.
This episode for today. I hope you enjoyed.
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