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Collection: Charlie Munger - #153 'Which is a Better Buy: Startups or Mature Industry?'



Michael [Inaudible] would like to know, do you think it’s best to invest in the common stocks of businesses early or while they are more nascent and the industry is smaller, or wait until they are the clear winner of a more mature industry?


Well, I think Warren and I are better at buying mature industries than we are at backing startups like Sequoia.

The best venture capital operation probably in the whole world is Sequoia’s and they are very good at this early stage investing. And I would hate to compete with Sequoia in their field. I think they’d run rings around me.

So, I think for some folks, early-stage investing is best, and for other folks, what I’ve done in my life is best.


[Inaudible] ask, Charlie, last year, almost every ecommerce, internet, and internet adjacent stock was up 100 plus percent.

You’ve said recently that Sequoia is the greatest investment firm ever. Do you think that digital economy has reached a tipping point such that "this time is different" and that conventional valuation measures for these types of companies are dead, or does this environment remind you of 1999?

How do you reconcile the idea of paying 50 or 60 times revenue for a growing but unprofitable business with the more traditional value investing concept of a margin of safety?


Well, generally speaking, I don’t try and compete with Sequoia. You can argue that I got close to Sequoia when with Li Lu we bought into BYD. That was not a startup, but it was so small and thinly traded that we were buying into a venture capital type investment but in the public market.

With that one exception, I’ve stayed out of Sequoia’s business because they’re so much better at it than I would be and I don’t know how to do it the way they do it.


[YAPSS Takeaway]

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