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Imagine someone telling you that
a single company, just one 

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single company, is going to be 
worth $16 trillion in 10 years. 

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I mean, 16 trillion, right? 
That is just a massive number. 

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Right. 
For context, that is roughly the

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gross domestic product of the 
entire Eurozone. 

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Now imagine they told you that 
this investment is like so 

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incredibly safe it is basically 
mathematically guaranteed to 

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make you money. 
Yeah, a guaranteed tech stock. 

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Exactly. 
Even if half of the company 

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completely fails and goes 
bankrupt. 

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So does that sound like magic? 
Or maybe just, you know, the 

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Wild West of Internet finance. 
I think we both know the answer 

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to that. 
Yeah, I mean, if you have ever 

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watched a video that promises A 
guaranteed minimum return on a 

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stock and you know how 
comforting it can feel, the 

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point to a chart. 
They lay out a few growth rates 

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and suddenly tell you that you 
are mathematically shielded from

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loss. 
Do you just plug in the numbers 

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and the machine outputs a pile 
of cash? 

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It feels clean, you know, It 
borrows the language of 

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engineering. 
We love things that seem neatly 

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categorized and predictable and 
risk free. 

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We really do. 
But the reality of valuing a 

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massive complex corporation is 
it's anything but clean. 

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Once you get past the surface 
level arithmetic, you are 

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swimming in some really 
diagnostic Muddy Waters. 

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Which brings us to the two 
sources driving our mission for 

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you today. 
The 1st is a viral YouTube video

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from a channel called rule #1 
Investing, and this was 

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published back in October 2026. 
The host of the video 

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enthusiastically breaks down 
Warren Buffett's massive $37.7 

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billion position in Alphabet, 
which is, you know, the parent 

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company of Google. 
And this video claims to have a 

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foolproof valuation model, 
proving this investment is 

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essentially a sure thing. 
Yeah. 

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A total sure thing. 
And then our second source is 

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this rigorous line by line 
alphabet valuation audit. 

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The reality check? 
Exactly. 

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This audit does exactly what you
should do when you're presented 

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with a sure thing. 
It stress tests the video's 

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exact claims, checking the 
actual corporate disclosures, 

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recalculating the projections, 
and just, you know, pulling 

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apart every single underlying 
assumption to see if the 

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structure holds up. 
And so our mission for this deep

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dive is to navigate this exact 
clash of perspectives. 

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We are going to separate the 
hard financial facts from the 

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overly optimistic assumptions. 
Because there are a lot of them.

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Oh, tons. 
Think of this as a master class 

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in how to critically analyze a 
stock valuation so you do not 

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get swept away by a really good 
story. 

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OK, let's unpack this, because 
this video makes a trillion 

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dollar tech giant look like the 
easiest bet in human history. 

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It really does. 
And to understand why the audit 

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pushes back so hard, we first 
need to lay out the pitch the 

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video is actually making to you,
the viewer. 

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We need to look at the machinery
of their $16 trillion 

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prediction. 
Right, so let's get into that 

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setup. 
The setup for the video is that 

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Wall Street thinks Warren 
Buffett is completely crazy for 

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buying Alphabet at a $4 trillion
market cap. 

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Which was around $350.00 a share
at the time. 

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Yeah, exactly. 
And a $4 trillion market cap 

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means the market is already 
pricing in a staggering amount 

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of future flawless success. 
Right, a lot of pressure. 

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But the video argues that you 
can ignore the noise, you can 

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ignore the daunting price tag. 
You just need to focus on 

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Alphabets 2 core profitable 
businesses. 

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So that's Google Services, which
is search and YouTube and Google

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Cloud, which the video just 
broadly labels as GCP. 

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And this is where the video 
starts doing some very heavy 

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math. 
We need to follow its logic 

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closely. 
Yeah. 

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Lay it out for us. 
So let's start with Google 

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Services. 
The video's host takes the 

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second quarter operating income 
for that division, which was 

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roughly $39.5 billion. 
OK, solid chunk of change, 

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right? 
And he annualizes that, meaning 

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he multiplies it out for a full 
year, factors in a 21% corporate

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tax rate, and he arrives at 
about $125 billion in pure net 

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income for the year. 
I mean, $125 billion in profit 

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for just one division, That is 
an astronomical number. 

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But how does he leap from that 
to a multi trillion dollar 

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valuation? 
Like what's the next step? 

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Well, by projecting a very, very
optimistic future, he assumes 

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that services is going to grow 
that net income at 12% a year, 

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every single year for the next 
10 years. 

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Wow, OK. 12% every year, right? 
Then in the year 2037, he 

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applies a price to earnings 
ratio AP/E ratio of 24 to that 

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future earnings number. 
Let's pause on the jargon for a 

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second. 
Just explain to the listener 

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what applying AP/E ratio of 24 
actually means in real world 

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terms. 
Yeah, of course, AP/E ratio is 

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simply what the market is 
willing to pay today for $1.00 

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of a company's profit. 
So a P/E of 24 means investors 

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in 2037 would be willing to pay 
$24.00 for every $1.00 the 

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services division makes in 
profit that year. 

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Got it. 
So it's basically a measure of 

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confidence. 
Exactly. 

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It implies that even 10 years 
from now, the market believes 

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the company has a long, highly 
profitable runway ahead of it. 

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So by multiplying those inflated
future earnings by that 24 

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multiple, he concludes that 
Google services alone will be 

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valued at $9.3 trillion. 9.3 
trillion just for services and 

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then I assume he runs the exact 
same playbook for the cloud 

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division. 
He does. 

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He takes their $8.8 billion 
quarter. 

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He annualizes it to about 27 
billion in net income and then 

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assumes a 20% annual growth rate
for a straight decade. 20% a 

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year for 10 years. 
Yeah. 

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And he justifies this by 
pointing out they just had 1/4 

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with an 82% surge in revenue. 
So he just projects that out. 

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OK. 
But a surge is different from 

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sustained decade long growth. 
Completely. 

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And then finally, he applies a 
40 * P slash E ratio to cloud in

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2037. 
Wow. 

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A 40 multiple is massive. 
It means the market expects 

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explosive, flawless growth for 
years to come. 

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So you do that math and cloud 
becomes a $7 trillion company. 

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OK, so let me do the math here. 
9 trillion for services, 7 

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trillion for cloud. 
You put them together and he is 

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projecting a $16 trillion 
valuation for Alphabet by 2037. 

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That's the dream. 
But the biggest hook of the 

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video, like the part that is 
really designed to make you feel

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completely safe putting your 
money in, is his claim about a 

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guaranteed floor. 
Oh yeah, the worst case 

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scenario. 
Right, The host claims that even

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if Cloud entirely fails, even if
all the artificial intelligence 

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initiatives just burn up, and 
the way MO self driving cars go 

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to 0 Google services alone 
provides a worst case absolute 

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minimum return of 8% annually 
over 10 years. 

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He explicitly says this is 
better and safer than a Treasury

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bill. 
Which is an incredibly audacious

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claim, right? 
I mean, AUS Treasury bill is the

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global benchmark for a risk free
investment. 

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It's backed by the US government
claiming a tech stock is safer 

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than AT Bill is completely 
designed to disarm your 

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skepticism. 
It's a huge red flag. 

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The video actually calls it a 
heads I win Tails I Win 

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scenario. 
It treats the company like a 

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sundae. 
A sundae. 

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Yeah, like the core businesses 
search and YouTube are the ice 

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cream. 
Everything else like AI and the 

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experimental tech is just the 
cherry on top. 

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If the cherry goes sour, you 
just toss it away and enjoy the 

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ice cream. 
And see, that metaphor is 

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exactly where my alarm bell 
started ringing. 

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Because treating AI is a cherry 
on top that you can just throw 

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away if it gets too expensive. 
It makes no structural sense, 

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no. 
Not at all. 

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It's like looking at a Formula 
One car and saying, well, if the

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engine development gets too 
pricey, we'll just cut that 

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budget and let the chassis coast
to the finish line. 

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Right. 
Good luck with that. 

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Exactly. 
The AI isn't an optional Cherry.

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It's the engine powering the 
cloud services and the search 

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algorithms. 
You cut the engine, the car 

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stops. 
Can the rest of Alphabet fail 

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without dragging down the core 
business? 

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I mean, probably not. 
What's fascinating here is how 

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the video evaluates these 
business segments in a complete 

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vacuum. 
Like they're totally separate 

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companies. 
Yeah, as if they don't share 

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resources or personnel or 
infrastructure. 

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It just ignores the structural 
reality of how a modern tech 

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behemoth operates. 
And that is exactly where the 

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Alphabet valuation audit steps 
in to apply a magnifying glass 

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to this 8% minimum floor. 
Because an 8% guaranteed floor 

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on a tech stock just sounds too 
good to be true. 

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So when the audit stress tested 
this claim, did the math 

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actually hold up? 
Well, the audit score finding is

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critical for anyone who 
evaluates stocks. 

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The arithmetic in the video is 
completely sound. 2 + 2 does 

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indeed equal 4 OK, but the 
inputs driving that math are 

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purely hypothetical assumptions.
So the calculator is working 

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fine, but the numbers being 
punched in are just fantasies. 

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Pretty much. 
Let's look at how he constructs 

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that worst case downside 
scenario. 

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The video claims that if 
everything else fails, you still

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make 8% a year. 
How? 

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00:09:23,240 --> 00:09:27,440
Yeah, how? 
By assuming that Google services

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will comfortably grow its 
earnings by 12% annually for a 

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straight decade. 
With 12% a year compounding for 

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00:09:34,040 --> 00:09:37,160
10 years, that means they have 
to more than triple their 

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current earnings. 
Exactly. 

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00:09:39,400 --> 00:09:44,800
They would have to grow from 125
billion to over $388 billion in 

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00:09:44,800 --> 00:09:48,720
net income, and on top of that, 
the market would still need to 

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be willing to pay a premium 24 *
P slash E ratio for the stock at

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the end of that decade. 
But that is not a worst case 

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scenario. 
That is a wildly successful 

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super bullish scenario. 
It is a highly optimistic 

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00:10:02,360 --> 00:10:05,000
projection masquerading as a 
baseline guarantee. 

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00:10:05,600 --> 00:10:09,080
Growth does not mechanically 
entitle a business to AP/E 

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00:10:09,080 --> 00:10:11,160
multiple equal to twice its 
growth rate. 

194
00:10:11,720 --> 00:10:13,160
Right, that's not how the market
works. 

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00:10:13,560 --> 00:10:16,320
No, the market dictates the 
multiple based on future 

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00:10:16,320 --> 00:10:19,240
expectations, interest rates, 
competition, all sorts of 

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things. 
The audit provides some 

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00:10:21,280 --> 00:10:24,160
alternative math to show how 
incredibly sensitive this 

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00:10:24,160 --> 00:10:27,360
supposed floor really is. 
Here's where it gets really 

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00:10:27,360 --> 00:10:29,840
interesting for me, because I 
want to know what happens when 

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we tweak those perfect 
assumptions just a little bit. 

202
00:10:32,920 --> 00:10:35,480
Like what does the audit show? 
Well, if you adjust the 

203
00:10:35,480 --> 00:10:39,160
assumptions slightly, say 
services, growth slows down to a

204
00:10:39,240 --> 00:10:44,160
respectable 6% instead of 12% 
and the market gives it an 18 * 

205
00:10:44,160 --> 00:10:47,440
P slash E ratio, which by the 
way is historically very normal.

206
00:10:47,480 --> 00:10:49,400
OK. 
A normal market environment. 

207
00:10:49,480 --> 00:10:53,480
Right, in that scenario, that 8%
guarantee completely vanishes. 

208
00:10:53,720 --> 00:10:57,800
Your annual return drops to a 
measly 0.07%. 

209
00:10:58,000 --> 00:11:02,400
Basically 0, so 10 years of 
holding the stock for zero 

210
00:11:02,400 --> 00:11:05,160
return, yeah. 
And if earnings simply stay 

211
00:11:05,160 --> 00:11:10,680
flat, like 0% growth with a 15 *
P slash E ratio, the investor 

212
00:11:10,680 --> 00:11:13,720
actually loses 7.3% a year. 
Wow. 

213
00:11:13,960 --> 00:11:17,200
The audit proves that massive, 
painful losses are entirely 

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00:11:17,200 --> 00:11:19,720
compatible with the video's own 
mathematical model. 

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00:11:19,960 --> 00:11:23,240
It's like someone saying hey, my
absolute worst case scenario for

216
00:11:23,240 --> 00:11:25,040
my marathon time is 3 hours 
right? 

217
00:11:25,400 --> 00:11:28,000
Assuming I comfortably run a 6 
minute mile the whole way. 

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00:11:28,200 --> 00:11:29,800
The weather is perfect and I 
never get. 

219
00:11:30,160 --> 00:11:33,160
That is so true you. 
Haven't defined a floor, you've 

220
00:11:33,160 --> 00:11:36,080
just defined a slightly less 
optimistic perfect race. 

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00:11:36,280 --> 00:11:40,040
You're hitting on the exact flaw
the audit exposes, and this 

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00:11:40,040 --> 00:11:42,640
actually brings up a vital 
distinction, one that the video 

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00:11:42,640 --> 00:11:45,320
gets completely tangled up in. 
Oh, what's that? 

224
00:11:45,600 --> 00:11:48,680
The video leans really heavily 
on a quote from Warren Buffett 

225
00:11:48,840 --> 00:11:51,600
where Buffett says the 
investment is likely to give a 

226
00:11:51,600 --> 00:11:54,880
return better than AT Bill. 
The video takes that to mean the

227
00:11:54,920 --> 00:11:57,640
investor's stock price will go 
up by 8% a year. 

228
00:11:57,960 --> 00:12:01,400
And the audit argues that is a 
misinterpretation of Buffett's 

229
00:12:01,400 --> 00:12:04,160
philosophy. 
Completely, the audit clarifies 

230
00:12:04,160 --> 00:12:07,080
that Buffett was talking about 
the business returns on invested

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00:12:07,080 --> 00:12:08,920
capital. 
Oh, OK. 

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He means that the money Alphabet
reinvests internally into its 

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own data centers, and engineers 
will generate a higher yield 

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than a government bond. 
But internal business returns 

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00:12:19,040 --> 00:12:22,120
and your external stock returns 
are two entirely different 

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things. 
Right, because of the stock 

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price. 
Exactly. 

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A company can generate fantastic
internal returns while its stock

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price stays flat or even falls, 
depending on the valuation 

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premium you paid to buy the 
stock in the first place. 

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Which means the price you paid 
today matters immensely. 

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You can't just plug in a 12% 
growth rate for a decade, ignore

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the $4 trillion starting price, 
and call it a worst case 

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scenario. 
No, you really can't. 

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Assuming perfect perpetual 
growth is exactly how investors 

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00:12:50,240 --> 00:12:52,960
get trapped in bubbles. 
And that stress testing reveals 

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the video's biggest operational 
blind spot. 

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Because, you know, if we accept 
that the 12 and 20% growth 

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assumptions are actually best 
case scenarios, we have to ask a

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fundamental question. 
Which is. 

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What exactly is fueling that 
massive growth? 

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00:13:07,600 --> 00:13:09,480
Right. 
And this goes right back to my 

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Formula One engine analogy. 
The video claimed Alphabet could

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just abandoned its money losing 
businesses like AI if they don't

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pan out and still keep that 12% 
growth in search and YouTube. 

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The audit absolutely dismantles 
this idea. 

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00:13:23,520 --> 00:13:26,600
The analysis points out that the
videos math completely ignores 

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$5.8 billion in quarterly 
Alphabet level expenses. 5.8 

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00:13:32,360 --> 00:13:38,360
billion. 5.8 billion. 1/4 That 
equates to about $18.3 billion 

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00:13:38,360 --> 00:13:41,440
annually after tax that just 
vanishes from the video 

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00:13:41,440 --> 00:13:43,840
spreadsheet. 
I mean, $18 billion a year is a 

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00:13:43,840 --> 00:13:45,520
lot of money to sweep under the 
rug. 

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00:13:45,640 --> 00:13:47,560
What is that money actually 
being spent on? 

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A massive chunk of it is shared 
artificial intelligence research

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and development. 
The engine of the car. 

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Yep, and this exposes A fatal 
double counting flaw in the 

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00:13:56,200 --> 00:13:58,840
video's logic. 
You cannot assign the cloud and 

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services divisions a decade of 
massive, uninterrupted growth 

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00:14:02,480 --> 00:14:05,640
while simultaneously pretending 
the AI research driving that 

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00:14:05,640 --> 00:14:08,760
growth can just be casually cut 
to save money. 

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00:14:08,880 --> 00:14:10,880
Because they're connected. 
Exactly. 

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The video treats AI and the 
custom chips Alphabet makes 

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called TP use as optional 
upside. 

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00:14:16,920 --> 00:14:19,320
But Alphabet themselves 
explicitly state in their 

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00:14:19,320 --> 00:14:23,000
disclosures that AI models like 
Gemini are the very things 

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00:14:23,000 --> 00:14:25,680
currently driving growth across 
their cloud products. 

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00:14:26,120 --> 00:14:29,920
Let me make sure I am grasping 
the scale of this error because 

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00:14:29,920 --> 00:14:32,320
this is huge. 
The video is treating AI as a 

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00:14:32,680 --> 00:14:36,560
free bonus price you can throw 
away if times get tough, when in

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00:14:36,560 --> 00:14:40,480
reality it's the incredibly 
expensive multibillion dollar 

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00:14:40,480 --> 00:14:42,400
engine keeping the core 
businesses alive and 

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competitive. 
Yes, you cannot have the revenue

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00:14:45,480 --> 00:14:48,000
growth without paying for the 
engine that creates it. 

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It just doesn't work. 
And that brings us to the final,

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00:14:51,000 --> 00:14:54,400
perhaps most crucial piece of 
the audits analysis, which has 

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00:14:54,400 --> 00:14:57,160
to do with the difference 
between accounting earnings and 

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00:14:57,160 --> 00:15:00,640
actual cash flow. 
OK, this is where a lot of 

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00:15:00,640 --> 00:15:03,280
people can get lost in the 
financial weeds, myself 

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00:15:03,280 --> 00:15:06,760
included. 
I need the Eli 5 version here. 

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00:15:06,760 --> 00:15:09,560
Explain it like I'm five. 
What is the difference between 

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00:15:09,560 --> 00:15:12,200
cash flow and accounting 
earnings in this specific 

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00:15:12,200 --> 00:15:13,480
context? 
Sure. 

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00:15:13,640 --> 00:15:16,960
So the video relies on metrics 
called operating income and net 

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00:15:16,960 --> 00:15:18,880
income. 
These are accounting figures. 

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00:15:19,400 --> 00:15:22,360
Let's say Google buys a billion 
dollar AI supercomputer today. 

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00:15:23,080 --> 00:15:25,640
In accounting, they don't 
subtract a billion dollars from 

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00:15:25,640 --> 00:15:28,360
their profits this year. 
They slice that cost up and 

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00:15:28,360 --> 00:15:30,760
spread it out. 
They depreciate it over, say, 

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00:15:30,760 --> 00:15:32,600
five years. 
On paper, this makes their 

300
00:15:32,600 --> 00:15:35,080
profit margins look incredibly 
stable and smooth. 

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00:15:35,600 --> 00:15:38,880
But accounting earnings do not 
equal distributable cash. 

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00:15:39,080 --> 00:15:42,560
The reality is that full billion
dollars in cash left their bank 

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00:15:42,560 --> 00:15:44,720
account today. 
So the accounting makes them 

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00:15:44,720 --> 00:15:47,560
look highly profitable on paper,
even while massive amounts of 

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00:15:47,560 --> 00:15:49,240
cash are flying out the door in 
real time. 

306
00:15:49,320 --> 00:15:51,280
Exactly. 
That is the perfect way to put 

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00:15:51,280 --> 00:15:53,480
it. 
If you look at Alphabets actual 

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00:15:53,480 --> 00:15:56,720
bank account, in that second 
quarter they generated $39 

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00:15:56,720 --> 00:16:01,080
billion in operating cash, but 
they spent a staggering $44.9 

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00:16:01,080 --> 00:16:05,440
billion in capital expenditures.
44.9 billion. 

311
00:16:05,480 --> 00:16:08,080
In one single quarter. 
What does that even buy? 

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00:16:08,080 --> 00:16:09,240
Like how do you spend that much 
cash? 

313
00:16:09,320 --> 00:16:13,480
Physical infrastructure, Real 
estate, millions of miles of 

314
00:16:13,480 --> 00:16:17,440
copper and fiber optics, massive
data centers out in the desert, 

315
00:16:17,680 --> 00:16:20,400
cooling systems, and just 
hundreds of thousands of 

316
00:16:20,400 --> 00:16:24,040
specialized AI servers. 
Because they spent so heavily on

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00:16:24,040 --> 00:16:27,320
all that physical equipment, 
their free cash flow, which is 

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00:16:27,320 --> 00:16:29,920
the actual cash leftover at the 
end of the quarter that could 

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00:16:30,200 --> 00:16:33,960
theoretically be given to 
shareholders, was negative $5.8 

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00:16:33,960 --> 00:16:35,160
billion. 
Oh wow. 

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00:16:35,800 --> 00:16:38,280
So while the video is 
enthusiastically saying they 

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00:16:38,280 --> 00:16:42,160
made 40 billion in profit, they 
actually bled almost 6 billion 

323
00:16:42,160 --> 00:16:45,080
in real, tangible cash because 
they had to buy so much physical

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00:16:45,080 --> 00:16:48,080
equipment just to keep up. 
Yeah, that's the reality. 

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00:16:48,560 --> 00:16:51,920
Now, to be fair, negative free 
cash flow doesn't inherently 

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00:16:51,920 --> 00:16:54,240
mean it's a bad investment. 
Right, because they're building 

327
00:16:54,240 --> 00:16:55,760
for the future. 
Exactly. 

328
00:16:55,760 --> 00:16:58,920
Spending 10s of billions on data
centers today could create 

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00:16:58,920 --> 00:17:00,840
massive value and dominance 
tomorrow. 

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00:17:01,120 --> 00:17:04,119
But. 
But convincing valuation model 

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00:17:04,119 --> 00:17:06,160
cannot simply ignore this 
reality. 

332
00:17:06,640 --> 00:17:10,160
If you assume Google is going to
grow its cloud division by 20% A

333
00:17:10,280 --> 00:17:13,480
year, you have to factor in the 
10s of billions of dollars in 

334
00:17:13,480 --> 00:17:16,599
cash they have to spend every 
single quarter to build the data

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00:17:16,599 --> 00:17:18,280
centers required to support that
growth. 

336
00:17:18,839 --> 00:17:21,720
The video's model ignores 
capital expenditures entirely. 

337
00:17:21,760 --> 00:17:23,680
It just assumes the growth 
happens by magic. 

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00:17:23,920 --> 00:17:27,000
Which is a pretty big oversight 
for a guaranteed floor. 

339
00:17:27,640 --> 00:17:31,040
Are there any other hidden costs
the video glosses over? 

340
00:17:31,520 --> 00:17:34,840
Yes, the audit notes. 
It also ignores future share 

341
00:17:34,840 --> 00:17:37,560
issuance. 
Oh right, stock compensation. 

342
00:17:37,680 --> 00:17:40,280
Exactly. 
Alphabet frequently issues new 

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00:17:40,280 --> 00:17:42,720
stock to compensate its 
engineers and executives. 

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00:17:43,280 --> 00:17:46,400
And if a company issues more 
shares, your individual slice of

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00:17:46,400 --> 00:17:49,400
the pie gets smaller. 
That dilution drags down your 

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00:17:49,400 --> 00:17:52,840
personal return, even if the 
company's overall market cap 

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00:17:52,840 --> 00:17:57,040
goes up. 
You know, if we step back, this 

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00:17:57,040 --> 00:18:00,280
raises a huge warning flag for 
anyone watching these kinds of 

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00:18:00,280 --> 00:18:03,200
finance breakdowns on YouTube or
wherever. 

350
00:18:03,720 --> 00:18:06,120
The host of that video is 
incredibly energetic. 

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00:18:06,800 --> 00:18:09,520
You read the transcript and he's
saying things like, let that 

352
00:18:09,520 --> 00:18:11,800
sink in. 
You know, framing this is a 

353
00:18:12,040 --> 00:18:15,000
foolproof Warren Buffett secret.
Right. 

354
00:18:15,000 --> 00:18:18,120
It's very persuasive. 
He promotes his workshop by 

355
00:18:18,120 --> 00:18:21,240
saying his mathematical process 
removes all the guessing. 

356
00:18:22,160 --> 00:18:24,920
If we connect this to the bigger
picture, it shows why a 

357
00:18:24,920 --> 00:18:28,000
structured valuation process is 
a double edged sword. 

358
00:18:28,480 --> 00:18:31,720
A mathematical formula is only 
as good as the human judgement 

359
00:18:31,720 --> 00:18:34,200
picking the numbers. 
Yeah, garbage in, garbage out. 

360
00:18:34,560 --> 00:18:37,280
Exactly. 
A spreadsheet can brilliantly 

361
00:18:37,280 --> 00:18:40,320
organize your thoughts, but it 
cannot magically force an 

362
00:18:40,320 --> 00:18:42,520
uncertain, highly volatile 
future. 

363
00:18:42,520 --> 00:18:46,120
To be perfectly exact, 
recognizing that a plausible 

364
00:18:46,120 --> 00:18:50,720
bullish scenario is just that. 
A scenario is how you survive in

365
00:18:50,720 --> 00:18:53,240
the market. 
A best case scenario is not a 

366
00:18:53,240 --> 00:18:56,400
floor. 
So what does this all mean? 

367
00:18:56,960 --> 00:18:59,640
If you are taking all this in 
trying to figure out what to do 

368
00:18:59,640 --> 00:19:02,200
with your own portfolio, what is
the ultimate take away here? 

369
00:19:02,520 --> 00:19:05,560
Well, the Berkshire Hathaway 
investment in Alphabet is very 

370
00:19:05,560 --> 00:19:09,280
real and Alphabets profits, at 
least on an accounting basis, 

371
00:19:09,280 --> 00:19:12,960
are objectively massive, right? 
But whenever someone pitches you

372
00:19:13,000 --> 00:19:16,760
a mathematical worst case 
return, you must inspect the 

373
00:19:16,760 --> 00:19:19,760
underlying assumptions. 
If a model tells you that a 

374
00:19:19,760 --> 00:19:23,160
stock is guaranteed to beat a 
risk free treasury bill, you 

375
00:19:23,160 --> 00:19:25,280
really have to look for the 
hidden costs they left. 

376
00:19:25,560 --> 00:19:28,440
Outlook for the $18 billion in 
shared R&D. 

377
00:19:28,480 --> 00:19:31,560
Exactly. 
Or the $45 billion in server 

378
00:19:31,560 --> 00:19:34,160
costs that mysteriously vanished
from the spreadsheet. 

379
00:19:34,600 --> 00:19:37,760
You have to look past the smooth
accounting numbers and ask where

380
00:19:37,760 --> 00:19:41,200
the actual cash is going. 
And that actually leaves me with

381
00:19:41,200 --> 00:19:43,000
a final thought. 
I want you, the listener, to 

382
00:19:43,000 --> 00:19:46,160
ponder on your own. 
We talked about that staggering 

383
00:19:46,160 --> 00:19:50,320
capital expenditure, $44.9 
billion in a single quarter. 

384
00:19:50,480 --> 00:19:53,680
Just massive. 
Consider how this new AI arms 

385
00:19:53,680 --> 00:19:56,560
race is forcing even the most 
profitable monopolies in human 

386
00:19:56,560 --> 00:19:59,920
history to spend cash faster 
than they can actually generate 

387
00:19:59,920 --> 00:20:02,400
it. 
Yeah, think about that. 

388
00:20:02,560 --> 00:20:06,760
If the ultimate corporate modes 
of tomorrow require $50 billion 

389
00:20:06,760 --> 00:20:09,400
a quarter in physical 
infrastructure just to maintain 

390
00:20:09,400 --> 00:20:12,920
today's competitive edge, are we
entering a new era? 

391
00:20:14,000 --> 00:20:17,040
An era where traditional P/E 
ratios and paper accounting 

392
00:20:17,040 --> 00:20:19,960
earnings completely failed to 
capture the true risk of 

393
00:20:19,960 --> 00:20:22,840
technological obsolescence. 
It's a great question. 

394
00:20:23,720 --> 00:20:27,320
Are you really paying for a 
perfectly safe first floor, or 

395
00:20:27,320 --> 00:20:29,880
are you financing an 
astronomically expensive rocket 

396
00:20:29,880 --> 00:20:31,960
ship just to keep the house from
falling down? 

397
00:20:32,760 --> 00:20:35,880
Ponder that the next time you 
look at the safe tech bets in 

398
00:20:35,880 --> 00:20:36,680
your portfolio.