Benjamin Davies

The purpose of the law isn’t to minimise negatives and maximise positives. The purpose of the law is to uphold the rights of people.

Drugs are a net negative for society.

Legalising drugs will bring lawful competition to cartels and gangs, breaking geographical monopolies that perpetuate other (actual) criminal activity.

If they violate rights they should be punished by the law, that applies regardless of if they take drugs or not.

People on drugs violate the rights of others way more often.

Should drugs be legal?

All drugs should be legal because people have a right to do what they want, as long as it isn’t violating the rights of others.

This is not exactly true. The business still needs to produce something people want to buy, at a price they will accept. This is separate from competition.

Another way to say that is: all businesses are in competition with all others at the broadest level.

If you liked Snickers bars, but they suddenly 5x in price, it isn’t necessarily true that you will buy a different chocolate bar. You might go to the bakery instead, or use that money to put a little more fuel in your car.

Thank you, I think that is an important clarification.

Bounties should be clear about what currency they are being paid out in.

Why haven't all atheists killed themselves?

Being as evil as possible would include things like murdering people. I don't think businesses can get away with murdering people just because they don't have viable competitors.

If a business gets away with murdering people, it is usually for other reasons, like creating coverups or lobbying politicians.

I think it is an error to short stocks in most situations.

It might be an error correcting mechanism at the level of the market, but that is not what I am talking about when I say I don't like shorting. This discussion is specifically about making money in the markets.

Dealing in larger sums means you have to make big trades to building meaningful positions. Moving large money in, around, and out of the market takes time and needs to be done carefully (so that the price doesn't get away from you). Small investors can build proportionally large positions much easier.

It is like piloting an oil tanker vs a speed boat.

Dealing with larger sums of money narrows your investable universe.

As an example, Berkshire Hathaway has an investable universe of only a few hundred companies. Everything else is too small to move the needle for them.

There are many great opportunities available only to smaller investors.

Do you mean error correction within the company or at the level of the economy?

Yes, but I think it is largely the interpretation of information that matters.

Different people respond very differently to the same information.

An economic moat is a structural barrier that allows a business to resist the natural forces of competition. In a standard market, high profits act as a signal for other companies to enter, replicate products, and drive prices down—a process that eventually erodes a company's ability to generate wealth. A moat interrupts this cycle by making it difficult or expensive for competitors to take market share, enabling the business to perpetuate its earnings and survive far into the future.Because these barriers exist, the company does not have to constantly reinvent its core model to survive. Instead, it can rely on its established position to maintain a steady output of value. This structural durability makes the business's long-term trajectory more stable and less prone to the sudden decay that typical firms face when a new rival appears.

One of the most enduring forms of a moat is Brand Power, where a name creates such high consumer trust or habit that people are unwilling to switch to a cheaper alternative. Coca-Cola provides a classic example of this; it has spent over a century building a brand that occupies a unique "real estate" in the consumer's mind, allowing it to sell what is essentially a commodity with much higher margins than generic competitors. Similarly, Scale and Cost Advantages occur when a company grows so large that it can deliver services at a cost that smaller rivals simply cannot match. Amazon utilises its massive logistics network and volume to offer prices and delivery speeds that would be financially ruinous for a smaller retailer to attempt.

Other businesses perpetuate themselves through Network Effects, where a service becomes more valuable as more people use it. Instagram is a prime example of this dynamic; the platform's primary value to a user is the presence of their friends and family, which means a new competitor cannot simply offer a better interface to win—they would need to move the entire social circle simultaneously. This is often paired with High Switching Costs, which make it too painful for a customer to move to a competitor. Apple provides a masterclass in this with its "walled garden," an ecosystem where its hardware, software, and services (like iMessage, iCloud, and the App Store) are designed to work harmoniously together but intentionally difficult to use with outside devices. Once a user has invested in the apps, storage, and accessories within this garden, the cost of leaving—not just in money, but in time and frustration—creates a barrier that preserves the company's customer base. Each of these moats serves to insulate the business from the "mean reversion" that typically forces profits toward zero, making the long-term outcome of the business more a matter of its internal nature than of market dynamics.

I don't like shorting.

When you buy a stock, the most you can lose is 100% of your investment, but your potential gain is infinite. When you short a stock, your maximum profit is capped at 100% (if the company goes bankrupt), but your potential loss is mathematically infinite because there is no limit to how high a stock price can climb. This creates a "bad bet" where you risk everything for a relatively small reward.

Shorting is also a battle against time. To succeed, you must be right about a company’s failure and the exact timing of the market's reaction, all while paying interest on the shares you borrowed. Instead of fighting the natural upward trend of human progress and productivity, it is far more rational to invest in "compounding machines"—high-quality businesses that grow in value over the long term. This allows time to work in your favor rather than against you.

Markets are made up of fallible people and are often wrong, sometimes wildly wrong about what an asset is worth. A good investment often involves reading the situation better than other market participants and going against the tide.

The market often makes silly mistakes:

In 2021, Elon Musk tweeted "Use Signal" (referring to the private messaging app). Investors rushed into Signal Advance, an obscure medical device company, causing its stock to surge from around $0.60 to over $70 in days. The messaging app isn't even a public company.

Money is worth more today than in the future. We would all rather have $1,000 today than $1,000 in a year's time.

But how much more valuable is money now vs a year from now? Would you take $1000 now or $1100 a year from now?

Deciding what rate of return is acceptable to you is important for determining the rough degree of effort that will be required and what kinds of investments are worth pursuing. Someone trying to make 4%+ per year on their money has a much simpler task than someone trying to make 18%+.

Your answer will depend on what you are trying to achieve and what opportunities and knowledge you possess. Most prominent value investors want a minimum 10% return per year (often they are dealing with larger sums of money, which can make it harder to make higher returns).

This desired rate is what is used as the 'discount rate' when making a 'discounted cashflow' valuation of an asset.

My discount rate is 15%, as my goal is to make 15%+ per year in perpetuity.

A discussion about making money in financial markets.

You are fallible and the future is unpredictable. It is important to buy assets for significantly less than you think they are worth. The cheaper you buy something, the more margin you have for things to go worse than anticipated. This is called a 'Margin of Safety'. Paying a higher price for something inherently makes the investment more fragile and less profitable.

A crappy business can be a good investment if you get it cheap enough, and a wonderful business can be a terrible investment if you pay too much. (The dream is getting a wonderful business for cheap.)