An acquaintance of mine invested in each of the companies mentioned above. He messaged me some of his trading receipts showing scraps of thousands of dollars that are now worth hundreds of thousands of dollars. I asked him how he knew to invest in these companies back in 2011, 2012, and 2013.
He said: “My dad works in privacy law, and these companies scared the shit out of him because they were getting so powerful and no one could stop them.”
The closest Warren Buffett quote that reminds me of this is the “silver bullet” test, when a young Warren Buffett said he would call around industry executives and ask them which competitor they would destroy if they could. It was Buffett’s way of ferreting out the “economic moats” for which he would later became famous.
In recent years, I think Buffett has liked keeping the halo around his head just fine, thank you, and for that reason, he wouldn’t formulate an investment selection test as: “Which company do you fear overpowering some segment of society the most?”
Amazon, Apple, Microsoft, Google, Netflix, and Facebook have so much data about your personal lives that they can outgun any emerging competitor because they know exactly what makes you tick and exactly how to tailor a sales pitch that will result in your purchase.
If Amazon knows that you love buying early 20th century religious texts and can choose to advertise those to you everywhere you browse, how can some start-up online bookstore provide you with a more compelling “buy message” than the business that already knows everything about you?
And it’s all so loosely regulated. The only real governing body that is interested in restraining what these companies can do with your personal data is the European Commission. In the United States, the regulatory inquiry is limited to defining duties to safeguard data against third-party theft. There is no movement to regulate what these firms can do with the vast data that it has already collected to you. I mean, my gosh, Facebook not only has all your messages, statuses, and likes, but it also knows your keystrokes for messages typed but not sent as well as your off-site browsing if your cookies are not cleared.
I understand why Buffett has sunk $50 billion into Apple. Among these superpower stocks, Apple maintained the most traditional P/E ratio that someone with a Benjamin Graham bent could at least understand.
For a long time, I was missing the point with these businesses. I thought they were all about the high profit margins and low cost of capital. No. It’s all about the data, and the power that comes with using it to one’s advantage.