2024 Annual Letter

The Story of Generative Value: Where We’ve Been and Where We’re Going

A year ago, I wrote an article titled ‘Generative Value.’ In it, I changed the newsletter's name from “AI & Tech Investing” to “Generative Value.” That marked the turning point of the newsletter from my personal investment journal to something more serious (or more professional, at the very least!)

The core idea is the same: study the ideas in technology and business I find most interesting (and important) and share those learnings with you all.

In the last year, I’ve covered the largest markets in technology, the largest companies in technology, and some of the ideas I find most interesting. It was a year of exploration: trying out weekly news updates, investment theses, industry deep dives, company deep dives, and even taking some time off from publishing.

Since that article a year ago, the newsletter’s grown from under 1000 subscribers to over 7000, I joined the investment industry professionally, and I’ve met some of the most interesting people across the technology and investing landscape.

On to the subject of the annual letter:

I’m afraid I don’t have the foresight or the inclination to predict what will happen in technology or markets over the next 12 months (and I can’t imagine anyone else wants that!). I don’t want to misalign incentives by sharing follower growth or number of views (that’s not why I do this). So, I’m left with relatively few options.

I decided to share the story I know best: the one of Generative Value, the lessons learned along the way, and some business ideas that never change.

The first?

1. Never Underestimate How Big the Internet is

I grew up in a small town in rural Indiana, out in the country (for context, we didn’t even have Wi-Fi!) In one of the fortunate misfortunes of my life, my father was injured and forced to retire early. He needed a hobby in his free time, so he picked up investing and asked me if I wanted to join.

I took $1000 I had saved up, and started investing. 11 years ago now. Coming full circle, the pain of growing up without Wi-Fi became a blessing as I read everything I could get my hands on. Most of that happened to be investing books: Warren Buffett’s letters, Charlie Munger, Ayn Rand, and even (gasp) Jim Cramer.

For the next decade, I developed my thoughts on investing. I had the privilege of not being “taught” investing; everything came from first principles: what made sense to me?

In high school and college, I was the investing guy. Along the way, I got a scholarship to study engineering in college, and I worked for Microsoft for a time after that.

Throughout all of this, investing was my passion. Last year, I started writing a personal investing journal online to document my thought processes.

In just over a year:

• I had developed a considerable following of tens of thousands of people.

• Several of the most successful investors in the world had subscribed to the newsletter.

• CEOs of some of the largest companies in the world have shared my work.

• I interacted with some of my investment heroes.

• I joined the VC industry professionally with Felicis.

There was never a grand plan. I just loved investing. I’m 18 months in and have had an incredible journey. Imagine what we’ll see in the next 18 months.

Never underestimate how big the internet is.

2. Patience is Everything

If I were to (humbly) venture one piece of life advice to readers, it’d be to play compounding games. They’re the only games without “wasted time.”

The caveat is that the value of compounding vehicles is always right around the corner. Investments, media, and networks are all compounding vehicles, meaning the majority of the value is at the very end of the timeline.

The path to Generative Value seems clear in hindsight, but the value was in not quitting.

I get a surprising (and encouraging) amount of readers reaching out asking for advice on starting their own Substack/research service. I’ll keep it simple: just start writing.

If you need a secondary piece of advice later on: just keep writing!

Greatness is doing ordinary things for an extraordinary amount of time. In compounding games, it’s a matter of sticking around long enough to see the fruits of your labor.

3. The Power Law Rules the World

Very few businesses create the vast majority of value, in both public and private markets. WB says it over and over again,

”The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.”

The mandate for investors is to be in those few businesses; whether through index funds, skill, or luck, it’s the only option for investors who want to be great.

Those businesses are defined by quality: quality leaders, business models, and attention to detail.

I’ve found the same to be true with my work: the best research I do typically receives the best response.

The piece I’ll add is that people are driven by the Power Law as well. A tiny amount of people drive the vast majority of value, commercially and socially, in the world. My investment methodology continues to index more and more heavily on finding these people.

4. Quality > Everything

There’s an X factor in business that’s hard to describe: some combination of determination, work ethic, attention to detail, and a willingness to improve that creates incredible companies.

It’s not clear to me what this combination is, but it is clear that an obsession with constant improvement is necessary.

Morgan Housel shared this advice:

I once asked a successful author how to market a book. He waved me off and said, “If the book is good you don’t need to market it. If the book is bad, no amount of marketing will help.”

He was exaggerating: I think his advice is like 80% true. But it’s definitely 80% true. And it applies to almost any product. The best marketing is a good product.

My best articles have contributed the vast majority of success to the newsletter.

Quality articles, quality products, and quality businesses are all built on these factors that lead to incredible outcomes.

5. No Lessons are New Lessons

The most common piece of constructive feedback I get on my articles is, ”Do you really need such a long history section in your articles?”

My response falls along the lines of “It’s really the only thing I need.”

To not read biographies, business history, and fundamentals of science is unnecessarily putting yourself at a disadvantage.

The goal of reading history is to understand the things that never change.

The VAST majority of anomalies to those rules come from incredible individuals who had an outsized impact on the world around them, and learning what makes up those incredible individuals is perhaps the most worthwhile intellectual pursuit I’ve found.

History leaves clues, and every trend we see today has happened before (of course, insert ‘history rhyming’ quote). We can look at the current infrastructure buildout for AI and look over a hundred years ago at two trends with pertinent lessons to the buildout of today: the railroad buildout and the electric grid buildout. (More on these analogies in future articles).

Look back to look forward.

6. Value is Everything

The core idea of Generative Value is looking for positive risk-reward opportunities in investing across whatever landscape I have access to.

The goal of investing, for me at least, is simple: find companies that are creating extraordinary amounts of value for customers, with leaders who are obsessed with those customers, with business models that can protect the marginal value created compared to competitors, at reasonable prices that can create value for investors.

The goal of Generative Value is to study those opportunities, share learnings from that research, and hopefully create value for those of you who choose to spend your time reading my work.

I’m grateful for that time, and I hope to continue generating value for many years to come.

If there’s anyone still reading (there’s got to be someone!), I’ll share one last thought.

You have to start somewhere.

Nick Sleep described in his 2007 letter,

”When I finish writing these letters, I am happy with them, at least happy enough to send them out. I make a habit of re-reading them sometime later and frequently they disappoint. It is as if the letters have a short shelf life.”

Undoubtedly, this will be true of this letter. I’m going in eyes wide open!

I’ll steal one more quote from Nick Sleep’s 2007 letter (apologies Nick, you know the quote about imitation).

“If I had to live my life again, I’d make the same mistakes, only sooner”. - Tallulah Bankhead (actress)

2024 was a year of experimentation (my humble term for mistakes). Despite that, we saw fairly incredible success. We’re just getting started.

What to expect in 2025? More company deep dives, more industries, more lessons.

If you’ve been reading my work, I’ve made one thing clear: I’m a student and not an expert. If there’s one thing I’ve learned from history’s great businesses, it’s that the derivative (speed) and the second derivate (change of speed) of learning are the most important variables to success. Generative Value is my pursuit of that and I hope it helps you do the same.

I don’t take the opportunity lightly to do what I love for a living. In large part, that’s because of the support from you all. Thank you.

Onwards and Upwards. To 2025.