I have a friend who is a Depression baby. Some traits never go away. Despite significant wealth, he keeps used paper towels and the used parts of every old piece of equipment. At one point in our economy's history, these were winning traits because our manufacturing capacity was so limited that these saving traits were advantageous. However, as I have blogged about, our economy is rapidly shifting from manufacturing to services as the point of constraint. Today's opportunities seem to lay in facilitating these services as "platforms" or "aggregators".
"Book value" and "tangible assets" have historically been good measures of intrinsic worth. Yet, increasingly, these are actually indicators of capital intensive businesses with low returns. It's as difficult to think that a big balance sheet is a disadvantage as thinking a big piggy bank is bad. Contrarians and "non-consensus" investors are attracted by the bargain of buying book value dollars for fifty cent pieces. Somehow we are wired to be stimulated by these opportunities, but it's better to leave that "stuff" alone.
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