top of page

Collection: Guy Spier - #10 'Value Investing In Tech'



Hi. Have you – you are in the value investing space, have you thought about how to apply your investing philosophy in growth, venture capital, new emerging technologies type of investment?


You know, so people of my ilk, I think, often have sort of tech envy and we would love to invest in businesses that are in growth mode. And so if I think about – so I'll give you an example of why it's so hard.

I had an investment in a company called ITG, Investment Technology Group. So ITG, in an age where the internet was just getting going, had created a stock crossing network that enabled people to sort of put their – it was well before these, sort of like all this stuff that "Flash Boys" talked about – but it enabled people to put their stock so they couldn't trade, very large institutions, like huge volumes that they wanted to put in the market into a blind pool where if two people matched opposite sides of the trade, it worked. And you've got to match and then they – and then ITG would take the commission.

They had spent 15 years building it. It was called POSIT. I think it still exists. They'd spent 15 years building it up and it looked beautiful, and I felt like I'd discovered a sort of like a kind of a Costco, the low cost operator, the thing that offers the clients the best value for money in the financial markets.

And then at the time, I don't remember the name of the network but something came up within three months and achieved the same volumes. And then within a year or two later there were dozens of competitors. And ITG is still around, but the beautiful growth prospects that existed just weren't there.

So I think that what is so hard and I've tripped up on this on a number of occasions is that you're buying the future and the future's not certain and you'd like to believe that the company that you've invested in, and I'd like to believe that the company that I've invested in, is going to be the winner. But it's just so hard to do.

That said, a very famous value investor, Bill Miller, at the time that AOL was like the dominant internet company, made a huge amount of money. You know, this was a time when AOL was marketing their service, their internet service, by sending direct mail out with these CDs.

Can you even remember? Yeah. We don't even have CD drives anymore in our computers.

But he'd figured something out, but then he lost a huge amount of money in the tech crisis. And there are some value investors today, there's a guy that I respect an awful lot who has, who had a very large position in Amazon, and so I get envious because I look at it and he made four times his money so far and I – believe me, there are plenty of my investments that have not made four times my money.

And you know, I understood, after talking to him for a couple of days, I understood a lot more about Amazon than I did. But I just found, I've discovered that in my case by, in doing that, I get it wrong more often than I get it right. So I think it's really hard.

And there's an idea written up where buying the future is not a great thing to do because it often doesn't turn out that way. So I don't think it actually works very well and I have a certain amount of angst, because I think that what everybody in this room is doing is creating a better world for us.

And what actually am I doing? I'm helping some rich people get richer and maybe I'm allocating some capital, but I think that what's going on here is actually a lot more meaningful.

And I think that, especially visiting the Google campus, I think in a different version of my life I would've stayed studying mathematics and physics, and maybe gone to an MIT and ended up – And so I'll leave you with this idea. So all of you, you know, the grass on the other side of the road is always greener.

So I was a classmate of Mark Pincus, so I got to know him. He's in the section – my section at Harvard Business School. He taught me a lot about playing chess. He was a game player then. He just loved games. That's what he loved to do.

I think actually Mark Pincus is a great example, with a zinger, of how, when your inner world, your love of games, is aligned with the outer world, extraordinary things can happen. And then, when you realize that your outer world is all about management and that's not what your inner world is about, you need to leave and you need to do something else.

But he – so I visit him in San Francisco a few years after business school, and I've fallen in love with Warren Buffett and I'm doing value investing. And he just looks at me, he says, "look, Guy, you could make large amounts of money, but at the end of the world who cares? I'm here changing the world."

And I think he's got a really good point, and – So I have a certain amount of angst about it, but I'm not going to change what I do now 'cause I'm enjoying my life.


[YAPSS Takeaway]

bottom of page