Investment Thesis Pt. 1: Beliefs
Outlining what I believe so that I can dissect where I want to look
Before I get into the juicy bit that will be my investment thesis, I think it will be important to really ground myself by understanding what I believe. Knowing my beliefs should help to frame where I expect the world to go, which will in-turn help provide subject matter and evidence to my thesis. I want all of my beliefs to tie into a specific, distilled thesis. They may or may not, which is why I’m building this in public - so that others can help poke holes or find solutions with me. So this piece will be the little one before the big one.
What do I believe?
Without a doubt this is a loaded question and thesis aside, a good question to ask yourself if you want to think about something long and hard. That also makes me think I should probably try to journal… but let’s focus on this writing for now.
1) I believe that Covid has pushed the world to a place of individualism and self-empowerment. While related, the two are deserving of different approaches. Individualism stems from a feeling of independence. Covid left millions, if not billions, of people on their own to follow ways of life that fit them best. Whether via work, health, friendships, or otherwise we all made decisions about how we want to support ourselves. Coincidentally, Covid brought a mistrust of big government and to an extent big enterprise as well.
Self-empowerment ties to the control one feels over their own life. I believe that like myself, other people picked up new skills and habits over Covid that they wish to keep. I (tried) learning to code. Others learned to cook or bake. I got into much better shape. Millions of side hustles emerged. All of those are to say that we took ownership over new parts of our lives for financial or personal empowerment.
2) I believe that the “software is eating the world” mindset is still in an early part of an S curve or exponential chart. I wrote about it a bit in “Ahead in the Clouds” and still believe that we're so, so early when it comes to the tech. Tons of legacy companies are still using dated software that's homegrown or purchased from a dying business. As we shift to remote and asynchronous work, software becomes critical to business success. Even for work that requires in-person staff, software will improve the way that work is done, live. There are so many industries that have barely even been touched by new technologies still. Legal tech? Mining tech? We have a long way to go.
There’s a reason all of these high-growth companies are considered high-growth. Take Datadog, one of my favorites (Disclaimer: I own shares and this is not investment advice). Datadog adds new customers, and therefore revenue, in huge increments ever year. While at some point it may slow down a bit, Datadog is going to grow in noticeable amounts for a long time. It is certainly a leader, but given that it’s the perfect combination of a software company that helps companies observe and manage their software, there’s a reason I chose it. Datadog growing means that other companies are growing and using more software.
(Datadog Investor Presentation - Customer Growth p96)
3) Despite believing in the power of the individual, I also believe that much of an individual’s power is sourced from being part of a community. Humans naturally want to belong, so I believe that companies and organizations that can foster a strong sense of community will win. Communities drive a sense of equality and inclusion. Whether that comes through using a common platform, having shared beliefs, or something else, we feel welcome in communities. That can mean being a part of a Discord server for an NFT or even a digitally-banked member in a previously cash-only African city who can now facilitate payments digitally with other users. Finding common footing is a unifier.
Communities can offer a leveled playing field and in a time where we are increasingly aware of the haves and have nots. A sense of getting any closer is a reason to join a community. Reddit’s wallstreetbets is an example of this, but I believe that alternative asset investing platforms (such as those that let you invest in wine, real estate, art, etc.) are similar. At the same time, something like Notion does the same from a B2B lens. Notion can turn a business into an efficiently organized machine through communal working in public and non-siloed resources. It’s a tool that brings teams together. To work as a community.
4) I’d be remiss if I didn’t include the subject of most of my writing around the turn of the year, crypto. I still don’t know exactly what crypto and web3 will be. Anyone who says they do is lying. We know there are use cases, but NFTs, currencies, and smart contracts are likely just the tip of the iceberg. What I do know is that if someone isn’t already knee deep in web3 or curious enough to do deep dives on a Friday night, they’re likely ngmi. Just kidding, they’re just not going to be an early adopter. I’ve talked about how the UX and onboarding process to web3 is brutal at the moment. I believe that the teams who can emerge from the current crop that make web3 accessible to normal people will be the long term winners.
web3 is even convoluted to folks who have been in the ecosystem for a while. It’s an ever-growing field that has more and more brilliant minds moving over from web2 companies every day. Is the confusion a passable hurdle? Absolutely. Will it happen soon? That’s to be determined, but I think keeping an eye on companies that bridge that gap will be an important place to be.
5) My last belief is the one I’m probably least knowledgeable about. But I believe that hardware will continue to make a run back to the spotlight. Semiconductors have been all the rage, wearables are changing the way we view our health, and we’ve proven that we can get to space reusing a single rocket. Hard tech is back, baby.
I won’t pretend that I’ve got specific, industry-changing views for hardware, but I do believe that it won’t just be software making impactful changes to our lives in the next ten to twenty years. I’m going to look out for the physical, too.
There are a lot of things I believe. Some might be true, others not. All might be wrong. But that’s why investing is exciting, it’s a crap shoot to start and then the best execution wins. Picking right is never a sure bet, but using the information available and knowing what to believe separates the winners and the losers.