Patrick O’Shaughnessy asks Gaurav Kapadia what makes a great business. It’s all the basic stuff, “but really when you go down to it, if you look at a lot of the great businesses, they’ve created niche monopoly things. No one likes to say it because you’re not allowed to say it.” Kapadia lists at least four monopolies: cable companies, software companies, aircraft engine manufactures, and medical device companies – but the real insight is no one is allowed to say it.
Our new dictionary series highlights the opposite end of Kapadia’s point. New words new thoughts.
Later Kapadia talks about diversity and inclusion in the investing industry. “I don’t think anyone’s heart is in the wrong place, I think everyone’s heart is in the right place. So we have to stipulate that, people really care, but so many decisions are made by network. And so the only way you can break down existing network effects is with data.”
For words like monopoly the network has agreed on one meaning, and it’s a mispricing. For words like diversity the network has agreed on one meaning, and again it is mispriced.
The same week Mike Prada joined Wharton Moneyball and was asked a kind of ‘what’s next in basketball?’ question. One thing Prada pondered was what if Memphis is playing the next form of basketball? There’s no fast break or half court offense, only running. Types of offense thinking, like monopoly and diversity, hides value.