Raymond Moay

Investment thoughts and my dabblings in entrepreneurship

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Fundamental questions for management

I haven't been writing for awhile as I have been through many things. One of which is getting my hands dirty with entrepreneurship. I code as a hobby and I do so during the weekends to find some way to add value. I'll be launching something soon and will be updating this blog to reflect a more technologically savvy self. But fret not, investing and business is still my roots (no matter how fun I find coding and creating stuff to be). They are in fact, joined at the hips. After all, the best investors are entrepreneurs who never sold. This piece was inspired while studying Airbnb's Q1 2021 investor letter. Reading it (the investor letter), you will find a narrative that is skewed towards "building a sustainable business" rather than simply reporting financial results to investors. It is no wonder that the market prices Airbnb at such a ridiculous multiple even after considering COVID effects on the travel industry. Perhaps the market has learned from Bezos.


One of two duties of management is to work on widening the "moat" (the other being hiring, training and keeping talented individuals). But it is inefficient to go around asking them directly. "What have you done this year to widen the moat?" is not going to get you good answers. It might even get you judgemental looks considering how retail investors has recently rendered "moats" moot under the probably misguided influence of the Technoking. Instead, it is your job to figure out what contributes to the widening of this moat and question the management accordingly. For instance, for a B2C, I'd focus on their relentless dedication to customer satisfaction. That's the root determinant of the success of any business. It is a truth and not a falsifiable theory. I always bring up Costco as a prime example of some good conduct (arrest me). For instance, when deciding whether to pass on cost efficiencies to clients versus keeping the price the same such that the margins are higher, they chose the former. The same can be said about Amazon and Bezos.

With that being said, I'd like to add that It is surprising to me how boring investor conferences are. The focus is always on short term figures and targets. If I had the chance to sit in with the management of my portfolio companies, here is what I would focus on:

  1. What have we done during this period to delight our customers? I'd like to hear about everything, from the minor improvements to the major capital allocations that drove these changes. This gives me a sense of how attached (or detached) the management is from the roots of running a business. It also gives me a glimpse into their creativity, long-terminism, and overall wholesomeness (people who know what value they add to society and strive to improve upon that are generally good people). I'd also appreciate an answer that dives into the Nth order effects of their actions.
  2. What is the % improvement in measurable customer satisfaction KPIs? Management should report customer satisfaction numbers and preferably by a third party. Amazon does this. Overall, I'd like to know how they view the trickle down effect of customer satisfaction to bottom line would happen, how long it would take for that to occur, and consider that to their capital allocation decisions.
  3. What was the biggest hiccup this period? What has it costs us and what can we do to fix that? It's always good to see a management that owns up to their mistakes and talks about how they view it and what they learned from it. I'm surprised how rarely, if ever, that this gets asked during investor meetings.
  4. What have we done to delight our own employees? It's always right to treat employees well. Some companies see it as a liability and it is best to avoid such companies.
  5. What big bets are being made? No big bets means that management aren't serious about build a strong defence against the tide of time. The more traditional a business is, the greater the need for innovation. Only the paranoid survives and thrives.

If you enjoy my writings, please drop me an email on your thoughts. I'd love to discuss conflicting ideas and it's best if you could point out my mistakes. The benefits are obvious and certain–we’ll enjoy it and you’re likely to come out as the smarter one!

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