Thus our first lesson: businesses logically are worth far more than net tangible assets when they can be expected to produce earnings on such assets considerably in excess of market rates of return. The capitalized value of this excess return is economic Goodwill. — Warren Buffett, Berkshire Hathaway shareholder letter, 1983 Download the Slides…
Category: Capital Allocation
Why Every Compounder Reaches a Crossroads – What Success Does to a Business
If something cannot go on forever, it will stop. — Herbert Stein, former Chairman, U.S. Council of Economic Advisers Download the Slides Deck: The_Compounder_Crossroads Listen to the deep-dive discussion – The internal physics of business compounding I. The Same Label on Different Businesses Coca-Cola and PepsiCo sell drinks to the same world, ride…
The Stock You Can Sleep On: The Toll Whose Growth Is Free — and Asks No Decision
“I have to be able to sleep at night. It has to be sufficiently obvious… because what kills you as an investor is permanent loss of capital.” — Sir Chris Hohn, TCI Fund Management Download the Slides Deck: THE_FREESURFER Listen to the deep-dive discussion –How Freesurfer stocks capture free growth I. The Investor…
The Tollkeeper That Outlives Its Payers – MSCI and the Migration of a Toll
The industry needs us more. — Henry Fernandez, November 2025 Download the Slides Deck: MSCI_Toll_Structural_Cartography Listen to the deep-dive discussion – How MSCI outlives its dying customers I. The Paradox Late last year, the chief executive of MSCI sat for an interview and described his own business with unusual candor. Three quarters of the…
The Light Toll Builds Its Railroad: Microsoft’s Bet on A Absorbing Its B
We have to manage a capital-intensive business, but using all of the levers that software gives us… those are all the things that I think will generate great ROIC — and this is probably unique. — Satya Nadella, March 2026 Download the Slides Deck: The__190_Billion_Absorption Listen to the deep-dive discussion – Microsoft’s 190 Billion…
The Price of Free Growth
Truly great businesses, earning huge returns on tangible assets, can’t for any extended period reinvest a large portion of their earnings internally at high rates of return. — Warren Buffett, 2007 Download the Slides Deck: The_Capital_Cap Listen to the deep-dive discussion – The Price of Free Growth Visa earns a return on invested…
Why Heavy-Toll Compounders Are Rare
Capital intensity by itself, it’s part of the equation. — Chris Hohn Download the Slides Deck: Heavy Tolls Capital Absorbers Listen to the deep-dive discussion – The Dangerous Illusion of High ROE In 2025, Duke Energy reported a return on equity of roughly twelve percent. In the same year it spent fourteen billion…
The Three Components of Compounding: Return, Quantity, and Duration — and Why They Cannot All Be Maximized at Once
Compounding is arbitrage, not optimization. — The Infinite Investor Download the Slides Deck: Compounding_Components Listen to the deep-dive discussion – Why Compounding Is A Structural Arbitrage I. The Perfect Model Every business is a flow of capital between two reservoirs. The first is the toll — the cash the business collects in…
Capital Absorption and the Nature of Compounding – How Businesses Actually Compound
“What an organism feeds upon is negative entropy.” — Erwin Schrödinger, What is Life?, 1944 Download the Slides Deck: Capital_Absorption Listen to the deep-dive discussion – The Impossible Triangle of Compounding I. The Cult of the Compounder No word in investing carries more reverence than compounding. The compounder is the prize — the…
How Cash Flow Ratios Measure Value Creation or Destruction : Locating a Business on the Spectrum of Absorption
“A company’s anticipated value creation is measured by how much its return on invested capital exceeds its cost of capital, as well as how long it can maintain a positive spread.” — Michael Mauboussin Download the Slides Deck: The_Spectrum_of_Absorption Listen to the deep-dive discussion – Why most companies actually destroy value I. From Principle…