$SPOT is a 500$ Stock Today
The history of our civilization is a dance between advances in energy and information flow. $SPOT represents a key component of this ‘matrix’.
Today, I got carried away reading “Origin Story” by David Christian, which is basically a big history of everything (like a quick version of Sapiens, with some savvy twists). In this book, I finally found a very concise way of explaining why buying shares of $SPOT is a good investment. Now I feel compelled to share it.
Energy and Information Flows: the precursors of wealth.
The author portrays money as a compressed form of energy, captured from the sun. In my opinion, this is a fundamental abstraction in terms of understanding $SPOT (bear with me). Moving on, he looks at much of the Anthropocene as a series of evolutionary steps both in terms of how we harvest energy / information and how we channel it.
He denotes that perhaps the most important historical event in the Anthropocene is the discovery of the Americas, followed by the discovery of fossil fuels. The first, created a worldwide exchange of resources and ideas. The second, allowed us to tap into vast reservoirs of energy. In my opinion, from this point on, history is mostly about us monkeys, co-inhabiting a rock that floats in the middle of nothing, generating and consuming more and more energy and information, in smarter ways.
Think about it. The first industrial revolution was about mechanizing alternative rectilinear movement. The second industrial revolution was about evolving those movements to continuous rotatory movement and putting more energy into it. The world you see around you today is the result of exploiting higher density energetic sources, that are channeled with increasing efficiency to satisfy our needs, coupled with an increasingly freer flow of information. Money essentially encapsulates this abstraction, into a tangible and exchangeable format.
As capitalism and science began to intermingle in Europe coming out of the middle ages, the competition of the modern day era emerged. Since then, advances in information and energy have pretty much taken our civilization by the hand. Those who have capitalized on these advances, have generated considerable wealth. Consider Jeff (Bezos), who recently found a way to connect sellers and buyers, by exploiting an information arbitrage.
Leonardo Da Vinci: started acquiring books at age 40. His genius took off soon after that and so did that of the West. Books 2.0 are here a.k.a podcasts.
Over Christmas I read Da Vinci´s biography, by Walter Isaacson. It´s a true work of art and manages to convey what made Leonardo a genius. However, the key takeaway for the purpose at hand is that he was not able to acquire books until the age of 40, around the year 1500, a few years after Gutenberg invented the printing press.
The Renaissance was arguably catalyzed by advances in accounting (information), which enabled commerce to flourish across Europe. The resulting wealthy merchants then aimed to assert power by investing in culture and as result, figures like Leonardo emerged. Funnily enough, Leonardo´s genius did not fully take off until an increasing body of knowledge was made available to him. He did show immense talent in numerous works, but the ones we remember him for today only came beyond the year 1500.
After the printing press, a fundamental shift in the flow of information occurred. Literature of all kind went from being scarce and written in Latin, to being increasingly available and written in modern languages. This generated an explosion of knowledge and rationality across the board, that ignited the advancement towards humanism that we enjoy today. Soon emerged Francis Bacon, Isaac Newton and other giants of our civilization.
I enjoy reading many books myself, exploring topics vertically and then making connections between them horizontally. As a user, however, I find that books are flawed in the following ways:
- They require the highest degree of attention. There´s not much else you can do when reading a book, other than sit down and read.
- Extracting value out of books often requires reading all the pages, when in fact, following a Pareto distribution, 20% of the pages deliver 80% of the value.
- Books are written in monologue format. Although this enables jumping into someone else´s mind, which can be fantastic, it´s a fairly limited standpoint of exploration.
Now, we see the emergence of podcasts. Podcasts fix the above issues. You can move around whilst you consume them and actually, I find that grasping key ideas is far less laborious than with books. Also, podcasts tend to be dialogues and for some reason, this seems to add richness to the information presented. In my opinion, podcasts are books 2.0. I believe that books 2.0 (podcasts) will revolutionize our society, by a similar or even larger extent that did their predecessors. Leonardo would have been marveled to learn that he could consume information about the flight of birds whilst he painted, or whilst he contemplated nature. It would have absolutely blown his mind.
Spotify: A new and fundamental advancement in the flow of information, that will in turn be further encapsulated into money.
The internet works in mysterious ways. I have previously discussed how when a brand in a given vertical takes a dominating position, it takes quite a large amount of energy to remove it from there. If you would like to dive into this idea, read this post about the Bitcoin network I wrote recently.
Now, $SPOT is top of mind in audio, whilst it has competitors (but so does $NFLX). I may come back to this sentence and drop some irrefutable evidence, but there is no time today. Nonetheless, I am sure that Spotify is well ingrained into your psyche as the go-to audio platform, unless you happen to be South Korean ($SPOT is entering this market as we speak). Being top of mind in the internet space for a given vertical is a real estate that has gone far beyond the expectation of any rational thinker in the past few decades. Think Google for search, Amazon for shopping, Uber for moving around and a long list of etcs.
If you understand that in fact our history is essentially a dance between advances in information and energy and that these advances are encapsulated into money, then at last you are ready to see $SPOT as what it is: a fundamental advance in the flow of information, that will in turn be further encapsulated into money. Audio is hands /eyes free, which means that the default level of information consumption rises through this format, compared to other media formats. You can consume information whilst you do the groceries, whilst you exercise or whilst you contemplate a sunset.
In terms of business, an hour and a half of the JRE (Joe Rogan Experience), a beacon and pioneer of the podcasting era, is estimated to generate for guests more merchandise sales (or whatever accruement it happens to be) than actual massive physical events, such as tours. The unit economics of podcasts are far more impressive than those of music (which has dominated the audio media format for a couple hundred years now), because audiences pay a lot of attention to their favorite podcast hosts for hours and hours, often many times a week for years. $SPOT pays 0.75$ to music labels for every 1$ it makes. This is going to be way less with the broad audio spectrum that´s opening up as we speak. This makes $SPOT a 500$ stock today. The math is simple — head over to the I/S for TTM and apply a reasonable cost of revenues, given the new incoming reality. I get an EPS of around 20$ and applying P/E, voila: 400$ +. 500$ because growth.
Podcasting is a totally new media business which in my opinion, will grow to be even bigger than movies or series. This is because you can podcast about anything and in turn, you can listen to podcasts about anything, together with the fact that it is a media format that allows for a massive jump in information consumption. For instance, I was at my aunt´s dental clinic a few weeks ago (she´s a dentist), when she told me she loves walking around the neighborhood after work listening (on $SPOT) to the podcast of a local Madrid priest that is very dear to her. She walks for hours and hours listening to this podcast. Evidently, she couldn´t consume the man´s thoughts if he happened to choose books over podcasts as a media format.
