1 00:00:00,040 --> 00:00:01,520 Welcome back everyone on today's. 2 00:00:01,520 --> 00:00:02,840 Episode We're. Going to be looking at the 3 00:00:02,840 --> 00:00:05,080 question. Why does Big Tech? 4 00:00:05,240 --> 00:00:08,720 Always seem to win. We're talking about Apple. 5 00:00:09,040 --> 00:00:12,080 Meta Microsoft, Amazon and Google. 6 00:00:12,360 --> 00:00:14,160 Those are the five companies that I consider. 7 00:00:14,160 --> 00:00:16,239 In the big tech category. And when we. 8 00:00:16,239 --> 00:00:18,840 Look at the actual. Performance of these companies, 9 00:00:19,120 --> 00:00:22,560 there's the common phrase that past performance isn't 10 00:00:22,560 --> 00:00:23,880 indicative. Of future. 11 00:00:23,880 --> 00:00:26,680 Performance. That is true, but. 12 00:00:27,130 --> 00:00:29,490 It seems like big tech. Always is like an. 13 00:00:29,490 --> 00:00:31,650 Exception to the. Rule they always. 14 00:00:31,650 --> 00:00:35,010 Seem to do relatively well, in fact better than the benchmark. 15 00:00:35,010 --> 00:00:37,130 Better than the index we have apple for. 16 00:00:37,130 --> 00:00:42,050 Example over the past. 10 years. Without dividends reinvested. 17 00:00:42,370 --> 00:00:45,650 This is without. Dividends, they've done 11. 100% 18 00:00:45,650 --> 00:00:49,410 returns. 1100% returns if you invested in 2013. 19 00:00:49,850 --> 00:00:53,540 That was decades after. Movies came out about Apple at 20 00:00:53,580 --> 00:00:57,940 Forrest Gump investing in Apple. This company has compounded like 21 00:00:57,980 --> 00:01:01,220 crazy and. Still today, it's viewed. 22 00:01:01,220 --> 00:01:05,860 Favorably we have Amazon. Amazon over the past 10 years 23 00:01:05,860 --> 00:01:13,220 have compounded 700 and. 42%. 742% isn't bad, and that's even 24 00:01:13,220 --> 00:01:15,380 with a recent dip. So it's still. 25 00:01:15,380 --> 00:01:18,860 Outperformed the QQQ. The S&P. 500 with the massive 26 00:01:18,860 --> 00:01:20,260 dip. We have meta. 27 00:01:20,890 --> 00:01:23,490 This one is no slacker either. Over the past 10 years, it's 28 00:01:23,490 --> 00:01:28,490 done over 1000% in gains and it's it's had a remarkable 29 00:01:28,490 --> 00:01:31,130 recovery from its low just a year ago. 30 00:01:31,610 --> 00:01:35,210 We have Google. This one, funny enough, is 31 00:01:35,210 --> 00:01:36,770 considered to be. That like the best? 32 00:01:36,770 --> 00:01:39,010 Tech company in many. Cases A lot of people love 33 00:01:39,010 --> 00:01:40,810 Google more than any other company. 34 00:01:41,450 --> 00:01:43,610 But it's only done 400. And 10%. 35 00:01:43,850 --> 00:01:46,010 And I say only. When this is. 36 00:01:46,170 --> 00:01:49,370 A lot better than the SP500 and the QQQ. 37 00:01:49,610 --> 00:01:53,650 So Google's a slacker in big tech, even though it's still. 38 00:01:53,650 --> 00:01:56,170 Outperformed the broader indices and it's. 39 00:01:56,170 --> 00:01:58,410 Trading at a cheaper. Valuation than most of the other 40 00:01:58,410 --> 00:02:01,010 big tech companies. But then we have Microsoft. 41 00:02:01,810 --> 00:02:07,010 This one over the past 10 years has been remarkable 822% for a 42 00:02:07,010 --> 00:02:11,330 company like Microsoft again. Almost close to that 1000% gain 43 00:02:11,330 --> 00:02:13,370 range. And if you factor in dividends 44 00:02:13,370 --> 00:02:14,850 being reinvested? It gets you very. 45 00:02:14,850 --> 00:02:17,450 Close to that point. So this is another one that's. 46 00:02:17,450 --> 00:02:20,890 Had tremendous performance. All of these companies have had 47 00:02:20,890 --> 00:02:22,730 tremendous performance. They continue. 48 00:02:22,730 --> 00:02:25,130 To have tremendous performance. They still make up the majority 49 00:02:25,130 --> 00:02:27,970 of the index and this is going. On for over a. 50 00:02:27,970 --> 00:02:31,210 Full decade. Almost two decades now where 51 00:02:31,210 --> 00:02:32,450 these companies have. Really. 52 00:02:32,450 --> 00:02:34,490 Pushed the entire equity. Markets up. 53 00:02:35,130 --> 00:02:38,410 And they always seem to win. Now we can. 54 00:02:38,960 --> 00:02:40,840 We can give little. Examples of where they? 55 00:02:40,840 --> 00:02:43,720 Lose, but usually they lose when they're competing with. 56 00:02:43,720 --> 00:02:47,160 Each other like. Amazon trying to come out with 57 00:02:47,160 --> 00:02:51,120 the Fire Phone, Lost to Apple, but in the realm of big tech. 58 00:02:51,120 --> 00:02:53,840 One of them still won big tech in. 59 00:02:53,840 --> 00:02:57,360 General them as a group always seems to win. 60 00:02:57,440 --> 00:02:58,640 So as always. We have a lot. 61 00:02:58,640 --> 00:03:01,040 To get into I'm very. Excited about this episode? 62 00:03:01,040 --> 00:03:03,040 And I think this. Will be an informative look at 63 00:03:03,040 --> 00:03:04,760 big tech. So let's start. 64 00:03:04,760 --> 00:03:06,360 Off like we always do with a quick. 65 00:03:06,360 --> 00:03:08,400 Portfolio update. Now the thing I want to point 66 00:03:08,400 --> 00:03:10,800 out with my. Portfolio is the thing that a 67 00:03:10,800 --> 00:03:12,120 lot of people have pointed out a. 68 00:03:12,120 --> 00:03:14,760 Lot of people have said Joseph. You have so much money. 69 00:03:14,760 --> 00:03:17,200 Invested in Big tech. Why don't you just buy the S&P 70 00:03:17,200 --> 00:03:18,680 5? 100 or the QQQ. 71 00:03:19,040 --> 00:03:21,560 That is an option I could. Buy those, but those. 72 00:03:21,560 --> 00:03:24,660 Don't own enough big tech. To resemble My Portfolio. 73 00:03:24,900 --> 00:03:27,300 I actually have more exposure. To Big tech. 74 00:03:27,300 --> 00:03:30,220 A lot more than the indices. And I've done that 75 00:03:30,220 --> 00:03:32,980 intentionally. I've overweighted My Portfolio 76 00:03:32,980 --> 00:03:37,100 heavily into Amazon, Google. Microsoft and Apple. 77 00:03:37,580 --> 00:03:39,180 And this? Is just the story Fund. 78 00:03:39,460 --> 00:03:40,980 I have a massive waiting in each of. 79 00:03:40,980 --> 00:03:42,740 These companies. Most of them have. 80 00:03:42,740 --> 00:03:44,860 Done really well. Amazon has struggled a little 81 00:03:44,860 --> 00:03:47,140 bit, but this one is recovering and I think it's going to. 82 00:03:47,140 --> 00:03:48,890 Continue to recover. When we look. 83 00:03:48,890 --> 00:03:50,730 At my other portfolio. The one that's been around a 84 00:03:50,730 --> 00:03:55,050 little bit longer, the passive income portfolio, I also own two 85 00:03:55,170 --> 00:03:57,410 large, very large holding and big. 86 00:03:57,410 --> 00:03:58,890 Tech here as well. We have. 87 00:03:58,890 --> 00:04:02,450 Microsoft and Apple again $54,000. 88 00:04:02,450 --> 00:04:05,290 Invested into this one. 53,000 into this one. 89 00:04:05,610 --> 00:04:09,730 The gains are 20. $5000 on Apple, $10,000 on Microsoft. 90 00:04:10,050 --> 00:04:12,330 These have been largely outperforming positions. 91 00:04:12,690 --> 00:04:14,010 That I've held for a number of years. 92 00:04:14,050 --> 00:04:16,329 So I've invested very. Heavily in big tech for a long 93 00:04:16,329 --> 00:04:17,930 period of time. And I'm still invested. 94 00:04:17,930 --> 00:04:20,570 Very heavily in big tech. And the reason being is because 95 00:04:20,570 --> 00:04:22,170 I believe these companies will continue. 96 00:04:22,170 --> 00:04:24,770 To outperform the market, how? They're able to do. 97 00:04:24,770 --> 00:04:28,090 This, on such a consistent basis, is perplexing. 98 00:04:28,090 --> 00:04:30,290 It is confusing. Most people think that they've. 99 00:04:30,290 --> 00:04:30,690 Done. Really. 100 00:04:30,690 --> 00:04:32,690 Well, but it's just. A temporary thing, They're going 101 00:04:32,690 --> 00:04:35,090 to slow down. But big tech has done something. 102 00:04:35,090 --> 00:04:37,250 Very remarkable. They've been able to. 103 00:04:37,250 --> 00:04:39,570 Avoid the. Reversion to the mean. 104 00:04:39,970 --> 00:04:43,130 If you look at financial theory. It says that as a company grows 105 00:04:43,130 --> 00:04:44,650 and becomes. Bigger it attracts. 106 00:04:44,650 --> 00:04:47,530 More competition and its. Returns on incremental 107 00:04:47,530 --> 00:04:50,610 investments. Go down when the return on. 108 00:04:50,610 --> 00:04:54,170 Capital employed or incremental investments goes down the 109 00:04:54,170 --> 00:04:55,410 company. Start to get lower. 110 00:04:55,410 --> 00:04:58,490 Returns for the investors and the returns of the company start 111 00:04:58,490 --> 00:05:00,330 to just match the market average. 112 00:05:00,610 --> 00:05:02,370 They don't have excess returns anymore. 113 00:05:02,730 --> 00:05:06,450 That's because of competition. Now we're not seeing that with. 114 00:05:06,450 --> 00:05:07,970 Big tech. Somehow they're. 115 00:05:08,010 --> 00:05:10,330 Able to avoid the. Reversion to the mean. 116 00:05:10,810 --> 00:05:12,330 How are they able to do that? Let's. 117 00:05:12,530 --> 00:05:14,690 Go ahead and take a look at how these companies are able. 118 00:05:14,690 --> 00:05:16,530 To avoid that reversion to the mean? 119 00:05:16,730 --> 00:05:17,770 How? They're able to keep. 120 00:05:17,770 --> 00:05:19,690 Such high returns on capital employed. 121 00:05:19,970 --> 00:05:21,850 We'll start off with. Apple, which I think is the. 122 00:05:21,850 --> 00:05:24,570 Best example of this. This company is. 123 00:05:24,570 --> 00:05:26,770 Remarkable in the way. That it's built out. 124 00:05:26,810 --> 00:05:29,250 Such a strong. Mode every big tech. 125 00:05:29,250 --> 00:05:31,330 Company starts off with something simple. 126 00:05:31,650 --> 00:05:34,050 But it's the. Core business of the company. 127 00:05:34,450 --> 00:05:36,530 In the case of. Apple, we have the. 128 00:05:36,530 --> 00:05:38,620 IPhone. Now there's products that 129 00:05:38,620 --> 00:05:41,580 predated the iPhone, the iPod, and the iPod shuffle and 130 00:05:41,580 --> 00:05:43,900 whatnot, but the iPhone? Was really their core. 131 00:05:43,900 --> 00:05:45,100 Product this is. Really. 132 00:05:45,100 --> 00:05:47,140 Where the Apple today got started? 133 00:05:47,660 --> 00:05:50,660 The iPhone became. Quickly the device. 134 00:05:50,900 --> 00:05:52,740 On which everybody. Used every day. 135 00:05:53,180 --> 00:05:54,620 It even. Surpassed the desktop. 136 00:05:54,940 --> 00:05:56,740 So we always thought. That the desktop would be the. 137 00:05:56,740 --> 00:05:59,380 Device we use all the time. Now it's the phone. 138 00:05:59,970 --> 00:06:01,490 When the iPhone came out, it started. 139 00:06:01,490 --> 00:06:03,610 Getting market share from every other phone, and it quickly 140 00:06:03,610 --> 00:06:06,690 became the go to phone for people that had enough money to 141 00:06:06,690 --> 00:06:08,890 afford one. Over time, more and more people 142 00:06:08,890 --> 00:06:11,370 got the iPhone. It became more commonplace. 143 00:06:11,890 --> 00:06:13,490 Off the back of the. IPhone. 144 00:06:13,890 --> 00:06:16,290 Apple is able to. Expand their product line 145 00:06:16,290 --> 00:06:18,490 dramatically. And this is what? 146 00:06:18,490 --> 00:06:19,930 Big? Tech is great at. 147 00:06:20,210 --> 00:06:24,170 Starting with one core product. And leveraging the growth. 148 00:06:24,170 --> 00:06:27,370 In that product to grow other products that match that 149 00:06:27,370 --> 00:06:29,640 product. So we have the iPhone and then 150 00:06:29,640 --> 00:06:30,680 we go. Into the MacBook. 151 00:06:31,520 --> 00:06:32,680 They make them work. Really well. 152 00:06:32,680 --> 00:06:35,840 Together you can share files. You can do all sorts of things 153 00:06:35,840 --> 00:06:37,320 together. They match the aesthetic. 154 00:06:38,080 --> 00:06:40,680 If you're an iPhone user, you're likely to have a MacBook. 155 00:06:41,080 --> 00:06:42,760 Then of course you have a different. 156 00:06:42,760 --> 00:06:45,040 Tablet The iPad. Again, it works. 157 00:06:45,040 --> 00:06:46,520 Really. Well, with the iPhone you have 158 00:06:46,800 --> 00:06:49,040 all these different capabilities that can share with each other. 159 00:06:49,360 --> 00:06:52,280 Notably, we have iMessage. Imesage was so. 160 00:06:52,280 --> 00:06:54,440 Important because that was. Really one of the things that 161 00:06:54,440 --> 00:06:56,520 tied. All of these devices together. 162 00:06:56,930 --> 00:07:00,290 See, Apple is smart enough to make it so that messaging 163 00:07:00,290 --> 00:07:02,290 worked. Better from one of. 164 00:07:02,290 --> 00:07:05,090 Their devices to another. Of their devices than. 165 00:07:05,090 --> 00:07:07,050 From one of their. Devices to a competitor. 166 00:07:07,610 --> 00:07:11,490 That's called bundling when you make something bundled. 167 00:07:11,490 --> 00:07:13,690 Together, that works better. In the bundle. 168 00:07:13,690 --> 00:07:15,530 Or has superior. Pricing in the bundle. 169 00:07:15,930 --> 00:07:18,170 That is a. Bundle effect with Apple. 170 00:07:18,170 --> 00:07:20,050 It's also. Called an ecosystem. 171 00:07:20,370 --> 00:07:23,410 When you have things in the same product category that seem to. 172 00:07:23,410 --> 00:07:25,850 Work Better Together. Than they do with different 173 00:07:25,850 --> 00:07:27,880 products. And that reinforce people. 174 00:07:27,880 --> 00:07:30,680 Buying Macbooks and iPads. The. 175 00:07:30,680 --> 00:07:33,640 IMessage tied that together. Then of course. 176 00:07:33,640 --> 00:07:34,720 We have the launch. Of the air. 177 00:07:34,720 --> 00:07:36,120 Pods. The Apple Watch, The Air. 178 00:07:36,120 --> 00:07:38,400 Tags and so on and so forth. They have a lot of different 179 00:07:38,400 --> 00:07:39,920 products now. All. 180 00:07:39,920 --> 00:07:43,600 Of these products, notably. Work Better Together. 181 00:07:43,720 --> 00:07:46,280 In an ecosystem. Than they do separately. 182 00:07:46,640 --> 00:07:50,840 That is by design, Apple wants. It to work better with their 183 00:07:50,840 --> 00:07:51,760 products. Than they do. 184 00:07:51,760 --> 00:07:54,520 With other people's products. Because that creates incentive 185 00:07:54,520 --> 00:07:56,160 for you to. Stay in the ecosystem. 186 00:07:56,960 --> 00:08:00,920 But then what Apple did and keep in mind at this time period, 187 00:08:00,920 --> 00:08:05,640 around this time period we have around 2015 two. 1016 2017. 188 00:08:06,000 --> 00:08:07,440 This is when Apple is really a big. 189 00:08:07,440 --> 00:08:09,600 Company one of the. Biggest in the world, if not 190 00:08:09,600 --> 00:08:10,680 the. Biggest in the world? 191 00:08:11,120 --> 00:08:14,120 But most of their sales, most of the stuff that. 192 00:08:14,120 --> 00:08:16,480 They did, to make. Money was based on. 193 00:08:16,480 --> 00:08:18,920 Hardware sales. And analysts looked at. 194 00:08:18,920 --> 00:08:19,960 This and they thought that that's. 195 00:08:19,960 --> 00:08:21,680 A little bit risky because we've seen. 196 00:08:21,680 --> 00:08:24,080 Hardware companies come and go. They usually don't. 197 00:08:24,080 --> 00:08:25,760 Keep a Moat for a long period of time. 198 00:08:26,190 --> 00:08:28,270 So you have. Morningstar and other analysts 199 00:08:28,270 --> 00:08:30,470 saying that they have a narrow mode they don't have. 200 00:08:30,470 --> 00:08:32,030 A wide mode. Because they're just selling 201 00:08:32,030 --> 00:08:34,470 hardware. And it's a competitive field. 202 00:08:34,470 --> 00:08:36,309 Samsung's coming out with stuff and. 203 00:08:36,309 --> 00:08:39,190 This can change anytime. Soon, But what? 204 00:08:39,190 --> 00:08:41,390 Apple did. Was they leverage their already? 205 00:08:41,390 --> 00:08:44,310 Existing ecosystem of. Hardware products. 206 00:08:44,710 --> 00:08:48,830 To now build an ecosystem of digital offerings. 207 00:08:49,230 --> 00:08:53,070 And this is what big tech again is good at taking one product. 208 00:08:53,150 --> 00:08:55,750 The iPhone. Leveraging that to build another 209 00:08:55,750 --> 00:08:57,510 ecosystem. And then taking that. 210 00:08:57,510 --> 00:08:59,590 Ecosystem products and leveraging to build. 211 00:08:59,670 --> 00:09:03,990 Another ecosystem of products to vastly expand the total 212 00:09:04,070 --> 00:09:06,750 ecosystem of the company we have them build. 213 00:09:06,750 --> 00:09:09,230 Their digital offering? Because they already have so 214 00:09:09,230 --> 00:09:10,710 many. People in their ecosystem of 215 00:09:10,790 --> 00:09:12,950 hardware. That now they offer. 216 00:09:12,950 --> 00:09:15,510 Apple Pay. Apple Pay is growing. 217 00:09:15,510 --> 00:09:17,550 Quickly, there's reports. From the Wall Street. 218 00:09:17,550 --> 00:09:22,070 Journal that it's scaring banks. JP Morgan has said that Apple is 219 00:09:22,110 --> 00:09:24,790 a bank. That if you act like a bank, if 220 00:09:24,790 --> 00:09:26,870 you do things that banks do, which is? 221 00:09:26,910 --> 00:09:29,750 Store money. Then you are basically a bank. 222 00:09:30,030 --> 00:09:32,430 So JP Morgan is saying that these big tech companies. 223 00:09:32,430 --> 00:09:34,110 Especially. Apple is a threat. 224 00:09:34,510 --> 00:09:35,990 Goldman Sachs wants to end their. 225 00:09:35,990 --> 00:09:38,590 Partnership with Apple. I think because they consider. 226 00:09:38,590 --> 00:09:42,470 Them too much of A threat. So Apple has suddenly moved from 227 00:09:42,470 --> 00:09:44,390 becoming. Just this device hardware. 228 00:09:44,390 --> 00:09:46,750 Maker to making banks. Nervous. 229 00:09:47,190 --> 00:09:49,760 That happened overnight. See how this? 230 00:09:49,760 --> 00:09:51,600 Works how they're. Able to go from one thing to 231 00:09:51,600 --> 00:09:52,480 the. Next and they use. 232 00:09:52,480 --> 00:09:54,640 The preexisting advantages. That they have. 233 00:09:55,000 --> 00:09:57,920 To create further advantage. They have Apple Pay. 234 00:09:58,280 --> 00:10:00,920 Now they're disrupting fintech, they're competing with PayPal, 235 00:10:01,440 --> 00:10:03,400 they're making other shareholders nervous, and things 236 00:10:03,400 --> 00:10:05,840 like Visa and MasterCard because of their huge network effect. 237 00:10:06,240 --> 00:10:07,840 And even though they're trying to play nice. 238 00:10:07,840 --> 00:10:12,120 And they're trying not to draw in attention from attention. 239 00:10:12,120 --> 00:10:14,520 From regulators, it's. Still notable how? 240 00:10:14,520 --> 00:10:17,960 Fast, Apple Pay was able to. Grow billions of people. 241 00:10:18,310 --> 00:10:20,190 Billions of installs. Hundreds of millions of people 242 00:10:20,190 --> 00:10:22,670 using it. Apple Pay is now commonplace. 243 00:10:22,670 --> 00:10:24,310 At grocery stores and. Checkouts. 244 00:10:25,030 --> 00:10:27,790 They came out with the. Credit card The adoption for 245 00:10:27,790 --> 00:10:29,310 credit cards. Is tough. 246 00:10:29,390 --> 00:10:32,070 For banks. They have to win over customers 247 00:10:32,070 --> 00:10:33,750 and they have to give huge incentives. 248 00:10:34,150 --> 00:10:35,990 You know, all the. Offers you get for credit card 249 00:10:35,990 --> 00:10:37,270 rewards. Sign up. 250 00:10:37,270 --> 00:10:39,230 And get this much. You know, Sky. 251 00:10:39,230 --> 00:10:41,550 Miles and and points or whatever. 252 00:10:41,550 --> 00:10:44,470 It may be Apple. Got those customers with? 253 00:10:44,510 --> 00:10:48,150 Almost no cost of acquisition. Just because they had the. 254 00:10:48,150 --> 00:10:51,710 Preexisting ecosystem it. Lowered their cost of. 255 00:10:51,710 --> 00:10:55,710 Acquisition for credit card issuance far below what a bank. 256 00:10:55,710 --> 00:10:58,550 Has to, so Citibank wells. Fargo. 257 00:10:58,550 --> 00:11:00,430 JPMorgan. Bank of America. 258 00:11:00,630 --> 00:11:03,030 They have to work hard to get people to use their credit 259 00:11:03,030 --> 00:11:05,310 cards. Apple doesn't, Apple. 260 00:11:05,310 --> 00:11:07,150 Has people use it because they already just love the? 261 00:11:07,150 --> 00:11:08,870 Products in the ecosystem that they're in. 262 00:11:09,430 --> 00:11:10,910 Then you have the savings account. 263 00:11:11,350 --> 00:11:14,910 Apple got $1 billion in deposits in their. 264 00:11:14,910 --> 00:11:17,110 Savings account. In like a day. 265 00:11:17,430 --> 00:11:18,350 It was. Literally a day. 266 00:11:18,350 --> 00:11:19,950 And they had a. Billion dollars in deposits. 267 00:11:20,190 --> 00:11:22,390 They just. Offered a 4% high yield savings 268 00:11:22,390 --> 00:11:24,590 account. People saw it show up. 269 00:11:24,590 --> 00:11:26,270 It was. Defaulted in their device right 270 00:11:26,270 --> 00:11:28,630 in their Wallet app. They didn't have to advertise. 271 00:11:28,790 --> 00:11:30,910 Apple didn't have to pay anything they have to do. 272 00:11:30,910 --> 00:11:32,710 Anything for it that a billion dollars. 273 00:11:32,710 --> 00:11:35,510 Worth of deposits, assets. And management in just a day 274 00:11:36,310 --> 00:11:39,310 after releasing a product. With no advertisement and no 275 00:11:39,310 --> 00:11:43,230 customer cost of acquisition. Banks have to pay. 276 00:11:43,230 --> 00:11:45,930 A fortune. To get a customer to put money 277 00:11:45,930 --> 00:11:48,090 into a bank account. They have to advertise. 278 00:11:48,090 --> 00:11:50,370 It Chase will run. Promotions where they say. 279 00:11:50,370 --> 00:11:52,530 That if you. Use our savings account for like 280 00:11:52,530 --> 00:11:55,610 6 months. We'll add in. $500.00 and 281 00:11:55,610 --> 00:11:57,450 different things like that. They want you to. 282 00:11:57,450 --> 00:11:59,370 Bank with them, and they're heavily incentivized. 283 00:11:59,530 --> 00:12:00,730 To. Get you to bank with them. 284 00:12:01,210 --> 00:12:02,770 Apple did. This is just an. 285 00:12:02,770 --> 00:12:06,490 Expanded offering and the. Big thing here is they can 286 00:12:06,490 --> 00:12:08,370 compete with banks without having the. 287 00:12:08,370 --> 00:12:11,630 Cost of banks. This is the digital. 288 00:12:11,630 --> 00:12:14,670 Offerings going into Fintech. And making real room. 289 00:12:14,670 --> 00:12:17,230 In that category when this company started. 290 00:12:17,230 --> 00:12:19,470 Off. Just selling iPhones, so. 291 00:12:19,910 --> 00:12:22,910 They have one advantage with the iPhone, they have an install 292 00:12:22,910 --> 00:12:25,510 base and they leverage it to make another advantage an 293 00:12:25,590 --> 00:12:27,350 ecosystem of. Hardware products. 294 00:12:27,670 --> 00:12:29,750 Now they have an. Ecosystem of hardware products. 295 00:12:30,070 --> 00:12:33,950 They use that existing. Advantage to leverage it and to 296 00:12:33,950 --> 00:12:36,390 further advantage. An ecosystem of digital. 297 00:12:36,390 --> 00:12:38,550 Products. Now the investors that. 298 00:12:39,330 --> 00:12:41,450 That I would say. Recognized what was going. 299 00:12:41,450 --> 00:12:45,450 On a long time ago and we're. Able to make the judgment that 300 00:12:45,450 --> 00:12:47,650 this ecosystem. Was going to grow dramatically. 301 00:12:48,250 --> 00:12:49,970 They made a lot of money doing that. 302 00:12:49,970 --> 00:12:51,290 Warren Buffett being one of them. 303 00:12:51,330 --> 00:12:54,730 Warren Buffett recognized way back in like 2000. 15 that the 304 00:12:54,730 --> 00:12:57,530 company was building. Out a big ecosystem that they're 305 00:12:57,530 --> 00:13:00,250 going to find a million ways to monetize the Buffett. 306 00:13:00,250 --> 00:13:01,930 Know they're going to. Come up with Apple Pay and the 307 00:13:01,930 --> 00:13:04,090 credit card and all these different digital. 308 00:13:04,090 --> 00:13:07,540 Offerings No. But he knew that the company had 309 00:13:07,540 --> 00:13:11,060 customers in their. Existing ecosystem and he. 310 00:13:11,060 --> 00:13:13,980 Knew that the company. Would find ways to monetize the 311 00:13:13,980 --> 00:13:16,700 existing customer base. I felt the same way. 312 00:13:16,700 --> 00:13:18,380 But I was a little later to the party. 313 00:13:18,620 --> 00:13:22,700 I bought Apple back in 2017. It's been a tremendous. 314 00:13:22,700 --> 00:13:26,180 Winner over that time period. And I had discussions. 315 00:13:26,580 --> 00:13:28,340 The same discussions led me to believe. 316 00:13:28,740 --> 00:13:31,100 The apple was. Growing this digital ecosystem. 317 00:13:31,380 --> 00:13:33,740 And they had. A way bigger Moat than investors 318 00:13:33,740 --> 00:13:35,460 at the time We're giving them credit. 319 00:13:35,460 --> 00:13:38,100 For so we have the digital products. 320 00:13:38,100 --> 00:13:41,500 Here and they continue on Apple. All of a sudden competes with 321 00:13:41,500 --> 00:13:45,220 Apple Music or Apple Music. Sorry, competes with Spotify. 322 00:13:45,700 --> 00:13:48,180 When Apple Music. Started competing with Spotify. 323 00:13:48,540 --> 00:13:51,260 Daniel Eck, the Spotify CEO, was. 324 00:13:51,260 --> 00:13:53,300 Furious about it, he. Recognized that this was. 325 00:13:53,300 --> 00:13:55,100 Unfair. The apple had an unfair 326 00:13:55,100 --> 00:13:57,100 advantage because they made it work better with their watch. 327 00:13:57,530 --> 00:14:00,090 They made music seamless. With all of their devices, they 328 00:14:00,090 --> 00:14:02,250 made it work. Default with Siri they. 329 00:14:02,250 --> 00:14:04,650 Built it into their. Ecosystem of products. 330 00:14:04,930 --> 00:14:07,250 And like Apple always. Does they make their? 331 00:14:07,250 --> 00:14:09,730 Stuff work a little bit better with their stuff. 332 00:14:09,810 --> 00:14:12,890 Than with other people's stuff. That enforces people buying. 333 00:14:12,890 --> 00:14:15,810 More of their stuff. When Apple actually. 334 00:14:15,810 --> 00:14:18,330 Came out with the bundle, the Apple One Bundle. 335 00:14:18,610 --> 00:14:21,570 Spotify came out with an. Official press release calling 336 00:14:21,570 --> 00:14:23,450 upon regulators. To come after Apple. 337 00:14:23,650 --> 00:14:25,370 Because they thought the bundle was so. 338 00:14:25,450 --> 00:14:27,330 Unfair. And guess. 339 00:14:27,330 --> 00:14:30,890 What Spotify was right. It is unfair. 340 00:14:31,170 --> 00:14:34,930 Imagine trying to compete with a company like this that has the 341 00:14:35,130 --> 00:14:38,250 ecosystem that Apple does the existing product. 342 00:14:38,250 --> 00:14:40,090 Based and install base the lower. 343 00:14:40,090 --> 00:14:43,130 Customer cost of acquisition, they actually control the. 344 00:14:43,170 --> 00:14:44,810 App Store. So when you sign. 345 00:14:44,810 --> 00:14:47,170 Up for Apple Music or Apple Fitness? 346 00:14:47,170 --> 00:14:51,050 Or Apple TV or Apple News? Plus any of those Apple Arcade. 347 00:14:51,490 --> 00:14:55,770 They don't have to pay. The booth The toll booth of the 348 00:14:55,770 --> 00:14:58,450 App Store Spotify. Does and other. 349 00:14:58,450 --> 00:15:03,890 Companies do as well. This is the ecosystem. 350 00:15:03,930 --> 00:15:06,530 At work, The Moat at work. And this is so. 351 00:15:06,530 --> 00:15:10,330 Different than typical finance. Normal finance would show that 352 00:15:10,330 --> 00:15:13,010 when a company strays away. From its core products. 353 00:15:13,290 --> 00:15:15,010 The returns on incremental investments. 354 00:15:15,010 --> 00:15:18,090 Start to go down and that's what happens with a lot of companies. 355 00:15:18,420 --> 00:15:19,300 They have a core. Product. 356 00:15:19,300 --> 00:15:21,340 They invest in, they get high returns with that core. 357 00:15:21,340 --> 00:15:24,060 Product when they invest. Outside of that core product, 358 00:15:24,300 --> 00:15:25,540 the. Incremental returns on 359 00:15:25,540 --> 00:15:28,460 investment go down. But we're seeing that that's not 360 00:15:28,460 --> 00:15:30,540 happening. With companies like Apple. 361 00:15:30,860 --> 00:15:34,140 They maintain very high returns on incremental investments 362 00:15:34,420 --> 00:15:38,100 because they're so good at leveraging their preexisting 363 00:15:38,100 --> 00:15:41,820 advantages, their existing ecosystem and we see this. 364 00:15:41,820 --> 00:15:44,700 All throughout Big Tech. This is a very common theme. 365 00:15:44,740 --> 00:15:47,060 With these companies. So in terms of. 366 00:15:47,060 --> 00:15:49,240 Apple. You can talk about the. 367 00:15:49,240 --> 00:15:52,560 Valuation we can discuss. If it's at the right P/E ratio 368 00:15:52,560 --> 00:15:55,320 or free cash flow yield. But in terms of the actual Moat 369 00:15:55,320 --> 00:15:57,680 and advantages of this company, I don't think it's ever been 370 00:15:57,680 --> 00:15:59,080 stronger. I think that Apple. 371 00:15:59,080 --> 00:16:00,320 Has one of the biggest moats in the. 372 00:16:00,320 --> 00:16:04,480 Market and it's going to continue to do what it has done. 373 00:16:04,680 --> 00:16:08,800 It's going to continue to build out new offerings and use the 374 00:16:08,800 --> 00:16:11,600 existing offerings they. Have to create higher. 375 00:16:11,600 --> 00:16:14,600 Returns on invested capital for those new offerings. 376 00:16:15,000 --> 00:16:17,120 More so than an. Independent company. 377 00:16:17,540 --> 00:16:19,740 If the company just creates music, it's going to have a. 378 00:16:19,740 --> 00:16:21,980 Tough time competing with Apple the company. 379 00:16:21,980 --> 00:16:24,500 Just creates a new. Reality Headset It's. 380 00:16:24,660 --> 00:16:26,020 Going to have a tough time competing with. 381 00:16:26,020 --> 00:16:28,100 Apple. Apple has the. 382 00:16:28,180 --> 00:16:32,380 Advantage of their preexisting ecosystem now moving on we have. 383 00:16:32,620 --> 00:16:35,060 Amazon. This one's slightly different, 384 00:16:35,060 --> 00:16:36,860 but in many. Cases it looks very. 385 00:16:36,860 --> 00:16:40,260 Similar to Apple. It started off with the retail. 386 00:16:40,260 --> 00:16:43,180 Store and the Prime subscription with the retail store. 387 00:16:43,580 --> 00:16:46,700 Amazon has been one of these businesses that spawns off 388 00:16:46,700 --> 00:16:48,300 different businesses, but with the. 389 00:16:48,300 --> 00:16:51,060 Prime membership and the growth of the retail business, not. 390 00:16:51,060 --> 00:16:54,140 Only were they able to spawn off a WS which now. 391 00:16:54,140 --> 00:16:56,220 Hosts a retail business. But they. 392 00:16:56,220 --> 00:16:58,820 Also have prime. Video which they put. 393 00:16:58,860 --> 00:17:01,180 Into the offering. That's a bundle. 394 00:17:01,460 --> 00:17:03,260 They can offer prime. Video at a lower. 395 00:17:03,260 --> 00:17:06,619 Cost because people using Prime Video are also using Prime 396 00:17:06,619 --> 00:17:09,819 retail store with the two day shipping they offer Prime Music. 397 00:17:10,240 --> 00:17:11,680 They've. Speed up the shipping times. 398 00:17:11,880 --> 00:17:15,520 They've offered photo storage, and they have Twitch benefits as 399 00:17:15,520 --> 00:17:17,000 well. All of these. 400 00:17:17,000 --> 00:17:19,640 Come within the bundle. Every one of these. 401 00:17:19,640 --> 00:17:22,520 Are bundled together except. For AWS but AWS. 402 00:17:22,520 --> 00:17:25,040 In a way, is still. Bundled with the retail. 403 00:17:25,040 --> 00:17:26,720 Store. Because Amazon has the. 404 00:17:26,720 --> 00:17:30,360 Advantage of having one of the biggest customers on. 405 00:17:30,920 --> 00:17:34,330 AWS be themselves. So with Amazon hosting 406 00:17:34,330 --> 00:17:35,610 everything with. AWS. 407 00:17:35,930 --> 00:17:38,250 They can test the product. They can iterate on it. 408 00:17:38,490 --> 00:17:40,210 They can push new features into their. 409 00:17:40,210 --> 00:17:43,050 Current their. Current company and then they 410 00:17:43,050 --> 00:17:44,330 can release. It to other people. 411 00:17:44,490 --> 00:17:47,970 Once it's thoroughly tested. So having this bundle together 412 00:17:48,050 --> 00:17:50,890 everything together gives Amazon A. 413 00:17:50,890 --> 00:17:53,730 Huge advantage over any individual company offering 414 00:17:53,730 --> 00:17:54,450 these. Products. 415 00:17:55,170 --> 00:17:57,450 Then from there, Amazon didn't stop. 416 00:17:58,210 --> 00:18:00,510 They used one advantage. To make all. 417 00:18:00,510 --> 00:18:02,750 Of these other. Products and companies that they 418 00:18:02,910 --> 00:18:03,830 bundle. Together. 419 00:18:04,190 --> 00:18:06,070 And then they used all of these. Products and bundled. 420 00:18:06,070 --> 00:18:09,270 Companies to make other. Bundle to digital offerings. 421 00:18:09,590 --> 00:18:12,390 We have the ads. On the marketplace? 422 00:18:12,670 --> 00:18:15,030 Now they're an advertiser and they have the. 423 00:18:15,070 --> 00:18:17,310 Ads on Prime Video. We're going to. 424 00:18:17,310 --> 00:18:18,990 Start seeing. Ads in there as well. 425 00:18:19,350 --> 00:18:23,190 Then we have the ads on Twitch. So now Amazon is advertising 426 00:18:23,470 --> 00:18:26,290 everywhere. Huge ad company, so now we have 427 00:18:26,290 --> 00:18:27,970 3 big intrinsic. Value drivers of the. 428 00:18:27,970 --> 00:18:30,930 Company we have Amazon Prime. That's a big subscription that 429 00:18:30,930 --> 00:18:33,690 brings in high margin revenue. We have a. 430 00:18:33,690 --> 00:18:35,570 WS That's another. Big Value driver. 431 00:18:35,570 --> 00:18:38,250 Of the company. Has very good margins and then 432 00:18:38,250 --> 00:18:40,650 we have ads. Now we don't know the margins of 433 00:18:40,650 --> 00:18:42,170 their ad. Business, but it's very. 434 00:18:42,170 --> 00:18:44,330 Targeted ads I'd. Assume the margins are. 435 00:18:44,330 --> 00:18:45,730 Very high. For that as well. 436 00:18:46,090 --> 00:18:48,690 And all three of those are. Growing the Prime subscription. 437 00:18:48,690 --> 00:18:51,490 The, a, WS and the. Advertising is growing. 438 00:18:52,000 --> 00:18:55,360 So they have the three. Big bundled together, Intrinsic. 439 00:18:55,360 --> 00:18:58,040 Value drivers of the company and they continue to do what 440 00:18:58,040 --> 00:18:58,560 they've. Done. 441 00:18:58,800 --> 00:19:00,680 Spawn off. Different business ventures. 442 00:19:01,000 --> 00:19:03,480 They try to. Add on different things and see. 443 00:19:03,480 --> 00:19:05,640 If they work and if they don't make any progress, they can 444 00:19:05,640 --> 00:19:06,800 scrap it. They're doing. 445 00:19:06,800 --> 00:19:09,400 That with pharmacy with. Healthcare, with home automation 446 00:19:09,400 --> 00:19:12,000 and with grocery. Amazon like Apple. 447 00:19:12,000 --> 00:19:14,200 Is able to. Leverage their current product. 448 00:19:14,200 --> 00:19:16,400 Base their. Current advantages to get? 449 00:19:16,400 --> 00:19:17,960 More advantage in different products. 450 00:19:17,960 --> 00:19:19,560 Therefore artificially raising their. 451 00:19:19,560 --> 00:19:22,120 Incremental returns on capital. You see what these companies 452 00:19:22,120 --> 00:19:24,600 have in common? Every big tech company has the 453 00:19:24,600 --> 00:19:28,920 same commonalities they use. One advantage, one advantage to 454 00:19:28,920 --> 00:19:30,480 get another. Advantage. 455 00:19:30,760 --> 00:19:33,720 And once they have one or more advantages, then they have the 456 00:19:33,720 --> 00:19:36,720 bundle, the ecosystem, and they. Leverage that to get. 457 00:19:36,720 --> 00:19:38,320 Even. Further advantage over 458 00:19:38,320 --> 00:19:40,080 individual companies competing with them. 459 00:19:40,540 --> 00:19:43,580 And individual companies which? Offer just like 1 product, 460 00:19:43,580 --> 00:19:46,540 whether it be something like music or just one social app. 461 00:19:46,980 --> 00:19:49,580 Is very difficult. For that one company to compete. 462 00:19:49,660 --> 00:19:51,980 With a big bundle, with a big ecosystem. 463 00:19:52,220 --> 00:19:54,220 They're pushed out. Because they can never offer. 464 00:19:54,220 --> 00:19:57,660 The same value so. All of these tech companies have 465 00:19:57,660 --> 00:19:59,580 the same intrinsic. Value driver. 466 00:19:59,580 --> 00:20:01,780 Ultimately, it might be in the case. 467 00:20:01,780 --> 00:20:05,180 Of network effects might be in the case of bundling or 468 00:20:05,260 --> 00:20:08,100 ecosystem, but it's all basically the same thing. 469 00:20:08,450 --> 00:20:11,290 Using one big existing advantage to get. 470 00:20:11,290 --> 00:20:13,490 Further advantage. We can look at this in the. 471 00:20:13,490 --> 00:20:16,330 Case of meta Meta. Started off with Facebook. 472 00:20:16,370 --> 00:20:18,050 It grew very quickly. It was a big. 473 00:20:18,050 --> 00:20:19,690 Success. But what did? 474 00:20:19,690 --> 00:20:21,890 They do. They followed the playbook that 475 00:20:21,890 --> 00:20:23,370 every. Big Tech Company follows. 476 00:20:23,890 --> 00:20:26,170 First of all, Mark Zuckerberg bought up Instagram. 477 00:20:26,170 --> 00:20:29,330 And WhatsApp they had. Low amounts of users at the 478 00:20:29,330 --> 00:20:32,850 time, but. They were able to use Facebook 479 00:20:33,250 --> 00:20:36,050 to push users. Into Instagram and WhatsApp. 480 00:20:36,420 --> 00:20:38,980 More than Instagram? And WhatsApp could do in and of 481 00:20:38,980 --> 00:20:41,100 themselves if they're just left by themselves. 482 00:20:41,380 --> 00:20:44,020 If those companies. Weren't purchased by Facebook. 483 00:20:44,260 --> 00:20:45,940 They would not be. As big as they are today. 484 00:20:46,220 --> 00:20:47,380 The reason? They're as big as they are 485 00:20:47,380 --> 00:20:48,940 today. Is because the existing. 486 00:20:48,940 --> 00:20:51,860 Advantage of owning Facebook, if you recall. 487 00:20:51,860 --> 00:20:55,060 When Facebook bought Instagram, it didn't have nearly as many 488 00:20:55,060 --> 00:20:56,620 users on it. But what? 489 00:20:56,620 --> 00:20:58,620 Did Facebook do? They all of a sudden promoted. 490 00:20:58,620 --> 00:20:59,740 It in the app. Stores. 491 00:20:59,740 --> 00:21:01,220 They got a lot of exposure to it. 492 00:21:01,540 --> 00:21:05,220 And then they made Instagram integrate with Facebook. 493 00:21:05,530 --> 00:21:07,250 So you could post on Instagram and you could. 494 00:21:07,250 --> 00:21:08,730 Also say. I want to. 495 00:21:08,730 --> 00:21:10,410 Cross post over to. Facebook. 496 00:21:10,690 --> 00:21:13,530 So every Instagram post is automatically shared on 497 00:21:13,530 --> 00:21:15,370 Facebook. Well, what do you think a lot of 498 00:21:15,370 --> 00:21:17,010 people do when they're on Facebook and they're seeing? 499 00:21:17,010 --> 00:21:19,090 All these Instagram posts show up in their feed. 500 00:21:19,570 --> 00:21:20,970 They go. You know what that sounds like? 501 00:21:20,970 --> 00:21:23,090 Fun seeing this photo app. I want to create an account. 502 00:21:23,090 --> 00:21:26,770 There, this is one advantage. Owning Facebook getting. 503 00:21:26,770 --> 00:21:30,170 Another advantage pushing. Users over to Instagram. 504 00:21:30,450 --> 00:21:33,450 So all of a. Sudden Facebook now owns. 505 00:21:33,830 --> 00:21:35,990 A huge social network. That was mostly text. 506 00:21:35,990 --> 00:21:38,270 Based. But now they have one that's now 507 00:21:38,310 --> 00:21:40,190 completely photo based. They just. 508 00:21:40,270 --> 00:21:42,510 Completely doubled the capability of their. 509 00:21:42,510 --> 00:21:45,350 Company and they did it only because they already. 510 00:21:45,350 --> 00:21:47,790 Had an advantage, an advantage that other companies 511 00:21:47,830 --> 00:21:49,990 independently didn't have. They're the. 512 00:21:49,990 --> 00:21:52,470 Biggest social media in the. Company in the world at the 513 00:21:52,470 --> 00:21:54,430 time. And they did the exact same 514 00:21:54,430 --> 00:21:56,830 thing with WhatsApp buying the company. 515 00:21:57,230 --> 00:22:00,230 Cross promoting it like crazy, pushing exposure to it. 516 00:22:00,550 --> 00:22:03,630 Getting their massive user base. From Facebook and Instagram over 517 00:22:03,630 --> 00:22:05,550 to WhatsApp. So we see the exact same 518 00:22:05,550 --> 00:22:07,070 storyline. Here a company. 519 00:22:07,070 --> 00:22:09,870 That has one massive success, but in this case it's not the 520 00:22:09,870 --> 00:22:12,470 iPhone or Amazon Prime. It is Facebook. 521 00:22:12,750 --> 00:22:16,070 They use that one massive success to push usage and 522 00:22:16,350 --> 00:22:18,430 leverage it. Into creating another massive 523 00:22:18,430 --> 00:22:21,070 success, which is Instagram and then WhatsApp. 524 00:22:21,430 --> 00:22:23,350 And then since they. Have the bundle. 525 00:22:23,430 --> 00:22:26,350 The ecosystem of users. And all of their products. 526 00:22:26,830 --> 00:22:30,030 They can unnaturally push usage to things like. 527 00:22:30,030 --> 00:22:33,190 Reals competing with TikTok things like Stories competing 528 00:22:33,190 --> 00:22:35,390 with Snapchat and communities with Reddit. 529 00:22:35,750 --> 00:22:37,550 They can only do that because of the bundle. 530 00:22:37,550 --> 00:22:40,270 Effect. And then to even make this point 531 00:22:40,270 --> 00:22:42,190 more clear, we have. Twitter. 532 00:22:42,910 --> 00:22:44,990 Twitter was. The one standout? 533 00:22:44,990 --> 00:22:46,350 From the. Rest of Big tech. 534 00:22:46,430 --> 00:22:49,190 The one smaller company that was competing in some. 535 00:22:49,190 --> 00:22:51,830 Capacity to Big tech. And look what happened. 536 00:22:51,910 --> 00:22:55,750 Meta just released threads and suddenly it has 100 million 537 00:22:55,750 --> 00:22:57,090 users. About 1/4. 538 00:22:57,090 --> 00:22:59,170 Of the. Users of Twitter in total and 539 00:22:59,170 --> 00:23:00,930 they. Got there in two days now, isn't 540 00:23:00,930 --> 00:23:02,650 that remarkable? That threads was able. 541 00:23:02,650 --> 00:23:05,290 To grow that quickly even more remarkable. 542 00:23:05,290 --> 00:23:08,490 Is that threads was created by meta with. 543 00:23:08,490 --> 00:23:11,850 Apparently only 20 employees. I'm not 100% sure. 544 00:23:11,850 --> 00:23:13,330 If that's correct, but that's the rumor. 545 00:23:13,330 --> 00:23:16,010 It was only. 20 employees and they started it around the 546 00:23:16,010 --> 00:23:18,250 beginning of this year, so in six months. 547 00:23:18,250 --> 00:23:20,890 Time with 20 employees. They're able to grow. 548 00:23:20,890 --> 00:23:23,250 An app to 1. 100 million users that competes. 549 00:23:23,250 --> 00:23:26,330 Directly with Twitter. Why are they able to do that so 550 00:23:26,330 --> 00:23:28,850 well? By again leveraging their 551 00:23:28,850 --> 00:23:32,010 preexisting advantages. In this case they already had a 552 00:23:32,010 --> 00:23:34,730 massive advantage. You didn't even need to create a 553 00:23:34,730 --> 00:23:36,770 new account. To create a threads. 554 00:23:36,770 --> 00:23:40,330 Account you just used your existing Instagram account and 555 00:23:40,330 --> 00:23:42,530 said I want a threads. Account you press 1. 556 00:23:42,530 --> 00:23:44,770 Button and boom, you have a threads account. 557 00:23:45,190 --> 00:23:46,870 No entering and user information. 558 00:23:46,870 --> 00:23:49,590 No filling out your first and last name, no uploading a 559 00:23:49,590 --> 00:23:50,310 profile. Pic. 560 00:23:50,590 --> 00:23:52,790 It was all already there, therefore. 561 00:23:52,790 --> 00:23:54,790 Removing all of the. Friction to. 562 00:23:54,790 --> 00:23:57,310 Onboarding normally when a company has a new user. 563 00:23:57,310 --> 00:23:59,670 There's an onboarding process. When someone joins my. 564 00:23:59,670 --> 00:24:01,630 Patreon They have to put in some information. 565 00:24:01,830 --> 00:24:03,190 They have to create a Qualtrum account. 566 00:24:03,470 --> 00:24:05,070 That's part of the onboarding process. 567 00:24:05,070 --> 00:24:06,430 There's a. Little bit of friction there. 568 00:24:06,470 --> 00:24:08,710 They have to create an. Account but with meta. 569 00:24:08,990 --> 00:24:11,350 There's no onboarding process, there's no friction. 570 00:24:11,590 --> 00:24:14,110 So they can spin up 100 million accounts like it's nothing in 571 00:24:14,110 --> 00:24:15,760 two days? This is such. 572 00:24:15,760 --> 00:24:19,560 An unfair advantage? Over things like Twitter, where 573 00:24:19,560 --> 00:24:21,400 somebody signs up for. Twitter they have. 574 00:24:21,400 --> 00:24:24,160 To create a Twitter account. But this is big tech. 575 00:24:24,440 --> 00:24:27,120 This is how it works. All of them leveraging their 576 00:24:27,120 --> 00:24:29,080 existing bundle existing. User base. 577 00:24:29,080 --> 00:24:31,560 Existing advantages to get? Further advantage. 578 00:24:31,720 --> 00:24:32,880 Now, you might say that all of this. 579 00:24:32,880 --> 00:24:35,440 Seems unfair. But remember that we're 580 00:24:35,440 --> 00:24:37,120 investors. We're not here to be judging 581 00:24:37,120 --> 00:24:38,960 what's fair and unfair. We're here. 582 00:24:38,960 --> 00:24:41,880 To be judging which company is going to do well observing the 583 00:24:41,880 --> 00:24:43,400 business models of these companies. 584 00:24:43,740 --> 00:24:45,140 It becomes. Clear why they've. 585 00:24:45,140 --> 00:24:47,900 Done so well. Moving on, we have Google as 586 00:24:47,900 --> 00:24:50,340 another example here, starting off with the core search 587 00:24:50,340 --> 00:24:53,540 product, leveraging that to buy YouTube now. 588 00:24:53,700 --> 00:24:55,860 YouTube in and of. Itself was doing really. 589 00:24:55,860 --> 00:24:59,340 Well, but the. YouTube creators before Google. 590 00:24:59,340 --> 00:25:01,100 Did not. Know how to grow the company 591 00:25:01,220 --> 00:25:03,300 they. Had no algorithm experience. 592 00:25:03,540 --> 00:25:06,580 And they had very. Very tough time hosting. 593 00:25:06,620 --> 00:25:10,260 All the videos YouTube. Would have never grown the way 594 00:25:10,260 --> 00:25:12,260 that it. Has without Google. 595 00:25:12,680 --> 00:25:14,560 So if Google search. And that. 596 00:25:14,560 --> 00:25:17,440 Product didn't exist then YouTube in the way that it 597 00:25:17,440 --> 00:25:19,080 exists. Right now, would not exist 598 00:25:19,080 --> 00:25:20,800 either. All the people at Google that 599 00:25:20,800 --> 00:25:23,200 had experience building algorithms after buying. 600 00:25:23,200 --> 00:25:25,960 YouTube They decided to. Implement all of that experience 601 00:25:25,960 --> 00:25:27,440 into the recommendation algorithm. 602 00:25:27,800 --> 00:25:30,440 As well as their experience hosting things and having huge 603 00:25:30,440 --> 00:25:33,160 servers also came in handy. For hosting so many. 604 00:25:33,160 --> 00:25:36,040 Videos for free. So they used one existing 605 00:25:36,040 --> 00:25:38,080 advantage. Leverage that into another 606 00:25:38,160 --> 00:25:40,840 advantage in owning YouTube. And now they have a massive. 607 00:25:40,840 --> 00:25:43,780 Video property. That is competing with Disney 608 00:25:43,780 --> 00:25:45,620 and it's. Competing with NBC and it has 609 00:25:45,620 --> 00:25:48,300 more more time than even Netflix at this point. 610 00:25:48,540 --> 00:25:51,660 YouTube is massive. Possibly the biggest video. 611 00:25:51,700 --> 00:25:53,660 Streaming. Outlet ever to exist. 612 00:25:53,660 --> 00:25:56,580 In all of human history, then of course they have Chrome, 613 00:25:56,860 --> 00:25:59,660 Android, Gmail photos. On and. 614 00:25:59,660 --> 00:26:01,220 On and on. There's literally a list of like 615 00:26:01,220 --> 00:26:02,940 100 different products that they've launched. 616 00:26:03,390 --> 00:26:05,110 And that creates the. Ecosystem. 617 00:26:05,430 --> 00:26:07,510 Google does the same thing to a certain. 618 00:26:07,510 --> 00:26:10,070 Extent as Apple. Where they make their products. 619 00:26:10,070 --> 00:26:12,550 Work slightly Better Together. Than outside of them. 620 00:26:12,910 --> 00:26:15,350 But not to the same. Degree of Apple. 621 00:26:15,630 --> 00:26:18,110 Google's products are a little bit more disjointed. 622 00:26:18,230 --> 00:26:21,030 They operate. In a little bit less sync and a 623 00:26:21,030 --> 00:26:22,950 less of. An ecosystem than Apple? 624 00:26:23,350 --> 00:26:25,270 And I would say that's one of the reasons that Google. 625 00:26:25,270 --> 00:26:27,150 Has not enjoyed the same returns as. 626 00:26:27,150 --> 00:26:28,950 Apple over the past. Decade. 627 00:26:29,360 --> 00:26:31,760 Hasn't even been close. Apple has over doubled. 628 00:26:31,760 --> 00:26:33,400 Almost tripled the returns of Google. 629 00:26:33,760 --> 00:26:35,800 And I really. Believe that a big part of that 630 00:26:36,080 --> 00:26:39,120 is Google's. Ecosystem has not been as 631 00:26:39,120 --> 00:26:42,560 flushed out as. Well orchestrated as Apple's, 632 00:26:43,000 --> 00:26:45,320 but regardless, just the fact that they have. 633 00:26:45,320 --> 00:26:49,640 These big advantages has created market beating returns with. 634 00:26:49,640 --> 00:26:53,840 A very low risk profile. Now from the advantages they had 635 00:26:53,840 --> 00:26:55,880 in search. And YouTube and Chrome and Gmail 636 00:26:55,880 --> 00:26:57,520 and Photos and all of this data, they're. 637 00:26:57,520 --> 00:27:00,200 Collecting they. Leverage that advantage into. 638 00:27:00,200 --> 00:27:02,640 Barred AI. They leverage it. 639 00:27:02,720 --> 00:27:05,360 Into Cloud Cloud. Was a natural. 640 00:27:05,360 --> 00:27:08,160 Play for Google, remember? They had to host. 641 00:27:08,160 --> 00:27:10,920 Their own servers for search. Then they had to create even 642 00:27:10,920 --> 00:27:12,560 more more hosting for. YouTube. 643 00:27:12,920 --> 00:27:14,800 So they already. Had the servers and then they 644 00:27:14,800 --> 00:27:17,240 decided, well Amazon is doing this. 645 00:27:17,480 --> 00:27:19,720 We have other players going into this. 646 00:27:20,100 --> 00:27:22,620 Why not create cloud we have. Excess capacity as well. 647 00:27:22,860 --> 00:27:25,340 So now Google's a big cloud. Player They're growing very 648 00:27:25,340 --> 00:27:26,220 quickly. It's going to. 649 00:27:26,220 --> 00:27:29,620 Probably be profitable. By the end of this year, then, 650 00:27:29,620 --> 00:27:32,300 we have Google. Pay competing with Apple Pay and 651 00:27:32,300 --> 00:27:35,140 other payment. Processors we have, YouTube TV 652 00:27:35,180 --> 00:27:36,580 we have. YouTube Music and we have a 653 00:27:36,580 --> 00:27:39,940 whole host of subscriptions. Like YouTube Premium and they're 654 00:27:39,940 --> 00:27:44,380 able to push 8100 million up to. 200,000,000 plus subscriptions 655 00:27:44,660 --> 00:27:45,660 and they're. Able to do that? 656 00:27:45,660 --> 00:27:48,220 Because of their already. Existing ecosystem. 657 00:27:48,640 --> 00:27:50,640 So Google. Falls into the same category. 658 00:27:50,960 --> 00:27:54,240 The company that starts with A1 core product leverages it. 659 00:27:54,520 --> 00:27:57,000 To create better. Incremental returns on other 660 00:27:57,000 --> 00:27:59,200 products then. Leverages those to create. 661 00:27:59,200 --> 00:28:02,720 Better incremental returns than. Other companies count on other 662 00:28:02,720 --> 00:28:05,840 products the same exact story over and over again. 663 00:28:06,160 --> 00:28:09,080 Finally, we get to Microsoft and it just. 664 00:28:09,080 --> 00:28:10,800 Is like deja vu. It's all the same. 665 00:28:11,080 --> 00:28:12,880 They have the office suite, they use the office. 666 00:28:12,880 --> 00:28:17,450 Suite to create the 365 bundle. Things like teams would never 667 00:28:17,450 --> 00:28:20,850 have been as successful if it was not bundled in the already. 668 00:28:20,850 --> 00:28:24,170 Existing Microsoft Office suite, so if another company just. 669 00:28:24,170 --> 00:28:27,410 Came out and invented. Microsoft Teams it would have 670 00:28:27,410 --> 00:28:28,690 never competed. With Slack. 671 00:28:28,690 --> 00:28:29,970 It would have never grown the way that it. 672 00:28:29,970 --> 00:28:32,410 Has Microsoft used the? All. 673 00:28:32,890 --> 00:28:36,650 Encompassing bundle the. Power of the bundle really 674 00:28:36,650 --> 00:28:40,010 pushed Microsoft. They have the Xbox, they were 675 00:28:40,010 --> 00:28:42,130 able to buy other. Companies like LinkedIn and 676 00:28:42,130 --> 00:28:44,730 GitHub and other products like Minecraft. 677 00:28:45,350 --> 00:28:46,910 Because they have the existing bundle. 678 00:28:47,070 --> 00:28:49,270 They have such high. Returns on that bundle, they're 679 00:28:49,270 --> 00:28:52,510 able to venture in and scoop. Up any deal they can and push 680 00:28:52,510 --> 00:28:55,630 any new product they can into the bundle now they have. 681 00:28:55,630 --> 00:28:58,150 Azure. Which is something they. 682 00:28:58,150 --> 00:29:00,350 Relate to the game on but they know so well. 683 00:29:00,350 --> 00:29:03,230 How to do this? Stuff that they created. 684 00:29:03,230 --> 00:29:05,190 Azure and then they. Use the. 685 00:29:05,190 --> 00:29:08,710 Bundle to push Azure. So most of the customers using 686 00:29:08,710 --> 00:29:11,430 Azure, the reason that they pick it is. 687 00:29:11,430 --> 00:29:14,190 Guess why? They're Microsoft Office suite 688 00:29:14,270 --> 00:29:16,090 users. Companies already. 689 00:29:16,090 --> 00:29:18,770 Have the Microsoft products. They need somewhere to put it in 690 00:29:18,770 --> 00:29:20,690 the cloud and Microsoft. Came out with a. 691 00:29:20,690 --> 00:29:22,690 Solution saying. Hey, we're the Cloud Guide. 692 00:29:22,690 --> 00:29:24,930 Now you can. Push it up to us and. 693 00:29:25,330 --> 00:29:26,930 We have our integration. Tools that work. 694 00:29:26,970 --> 00:29:29,170 Easier with. Us than any other cloud hosting 695 00:29:29,690 --> 00:29:31,210 so we have. Azure, we have all the cloud 696 00:29:31,210 --> 00:29:33,850 products, we have ChatGPT. We have them going into 697 00:29:33,850 --> 00:29:36,890 cybersecurity and cloud gaming, so on and so forth. 698 00:29:37,170 --> 00:29:39,730 They'll continue to venture into other categories. 699 00:29:40,290 --> 00:29:42,170 And the thing that. They can do here. 700 00:29:42,530 --> 00:29:44,410 Is the. Better that they make the new 701 00:29:44,410 --> 00:29:47,810 categories fit into their. Existing bundle, the higher the 702 00:29:47,810 --> 00:29:50,330 returns are going to be on those new categories. 703 00:29:50,410 --> 00:29:53,130 So I hope looking at this gives insight to the type of things 704 00:29:53,170 --> 00:29:55,570 I'm focusing. On when I do analysis of these 705 00:29:55,570 --> 00:29:57,410 companies. I get asked questions all the 706 00:29:57,410 --> 00:29:59,850 time. Joseph, Is Apple a buy right 707 00:29:59,850 --> 00:30:00,970 now? Is it too expensive? 708 00:30:00,970 --> 00:30:02,730 Is it overvalued? Or a little bit too cheap. 709 00:30:03,250 --> 00:30:05,370 Apple might be 10 or 15 bucks too. 710 00:30:05,370 --> 00:30:09,170 Expensive 10 or $15 Too cheap. Everybody has opinions. 711 00:30:09,170 --> 00:30:11,570 On where the valuation is. But I think that. 712 00:30:11,570 --> 00:30:14,530 Misses the big picture. If you're focused on whether or 713 00:30:14,530 --> 00:30:17,250 not the company is 10 or 15. Bucks Too expensive or cheap? 714 00:30:17,490 --> 00:30:20,890 You're missing the picture. Whether or not Apple. 715 00:30:20,890 --> 00:30:24,290 Is successful in growing massive amounts of wealth. 716 00:30:24,330 --> 00:30:27,090 And cash flow over the next 5 to 10 years. 717 00:30:27,410 --> 00:30:31,930 All comes down to the existing ecosystem and if it can maintain 718 00:30:31,930 --> 00:30:32,930 it. And grow it. 719 00:30:33,300 --> 00:30:36,380 That is the main measure I look. At as the intrinsic value driver 720 00:30:36,380 --> 00:30:38,260 for the company. And any of these. 721 00:30:38,260 --> 00:30:41,020 Big tech companies. Are there core businesses? 722 00:30:41,020 --> 00:30:42,300 The most of them. In the. 723 00:30:42,340 --> 00:30:44,540 Intrinsic value drivers, which are the bundles. 724 00:30:44,740 --> 00:30:48,780 The ecosystems, the cohesive. Product offerings, are those 725 00:30:48,780 --> 00:30:50,820 intact? Are they growing? 726 00:30:51,020 --> 00:30:53,820 Or are they under threat? Or being broken apart. 727 00:30:53,940 --> 00:30:56,380 If the company's ecosystem is getting smaller. 728 00:30:56,460 --> 00:30:59,900 Weaker getting broken up or is under threat then that would 729 00:30:59,900 --> 00:31:01,260 mean that I would sell the company. 730 00:31:01,590 --> 00:31:04,350 Because at the end of the day. The way that big tech. 731 00:31:04,430 --> 00:31:07,070 Always seems to win. Is because of the. 732 00:31:07,190 --> 00:31:10,430 Ecosystem because of the bundle. Because of their already. 733 00:31:10,430 --> 00:31:12,830 Existing huge advantages? They're. 734 00:31:12,830 --> 00:31:14,950 So good at. Leveraging them and that's how 735 00:31:14,990 --> 00:31:15,990 they. Win, so that's. 736 00:31:15,990 --> 00:31:17,950 This episode for today. I hope you enjoyed. 737 00:31:18,190 --> 00:31:19,950 If you like this type of content, make sure to join the 738 00:31:19,950 --> 00:31:21,710 Patreon. We have exclusive content. 739 00:31:21,910 --> 00:31:24,190 We have access to. Qualtrum this data analysis 740 00:31:24,190 --> 00:31:26,270 website. Lots of other fun stuff, so you 741 00:31:26,270 --> 00:31:29,190 can try that out for free with a link in the description below. 742 00:31:29,510 --> 00:31:35,440 See you in the next one. I don't know what's going on.