Welcome to The Nightcrawler, a weekly collection of thought-provoking articles and analysis on technology, innovation, and long-term investing. The Nightcrawler is written and published every Friday evening by Eric Markowitz, Nightview Capital’s Director of Research.

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In this evening’s email… 

Quote of the week: “Dressing up is inevitably a substitute for good ideas. It is no coincidence that technically inept business types are known as ‘suits.'” ― Paul Graham

Priced to perfection

Last week, I shared an excellent Art of Quality podcast featuring Peter Mazia, a long-time Costco executive. Peter offers a detailed exploration of the patterns within the unique Costco culture that’s led to the company’s long-term resilience—and the stock’s incredible outperformance. It’s that outperformance that Andrew Walker of Rangeley Capital now examines in a recent thought-provoking piece that examines the recent performance of “quality” companies, which he titles “The quality bubble?”

“Are we in a ‘quality’ bubble?” Andrew writes. “I realize saying we’re in a ‘quality’ bubble is provocative. Bubbles invite images of popping and speculators crying when they’re wiped out. I don’t think that’s what’s going on with these business; I just think they’re really good businesses that are priced to absolute perfection.” 

• Key quote: “Again, no one is doubting Costco is a great company. It’s got a great moat and the model is hugely defensible….. but it’s not a huge growth company. They grow their store base by 3-5%/year (and that’ll probably shrink a bit as the store base is pretty penetrated in the U.S.) and their membership a bit more than that. Earnings have been growing ~10%/year and seem set to continue to do that for several more years (after that, their existing store base is going to be large enough that growth will have to come down simply because new units don’t budge the needle as much).”

Can curiosity save the world?

My friend Tom Morgan delivered a superb 5-minute presentation on the powers (and importance) of curiosity at the 2024 Sohn Investment Conference this week. Sohn presentations are typically run-of-the-mill stock pitches, so I was delighted to see them offer airtime to an unconventional thesis: even beyond finance and investing, we must encourage individuals to take their curiosity more seriously—if we do, it could meaningfully change the world. (Here’s a link to Tom’s full 20-minute version of the presentation on what he calls “The Mystery of Curiosity.”)

• Key quote: “The taboo: there might be an intelligent benign force guiding our attention. Why is this so offensively taboo? Well, we reject any external challenges to our intellect. The left hemisphere by nature is competitive. It lies. And it denies the existence of anything more ‘intelligent’ than itself. I think we all know those people. But there is a problem. Our intellect alone cannot navigate the world. The world is what’s called ‘combinatorially explosive.’ Which just means there’s too many choices, too little time…. The analyst knows all the numbers, but the PM knows what’s relevant. But how do we know what’s relevant all the time? Our environment helps signal it to us. What we are attracted to narrows our options. We all intuitively understand this in romantic relationships. But I believe the same applies to information. Evolution’s solution to combinatorial explosiveness is curiosity.”

A few more links I enjoyed: 

Resist the Machine Apocalypse – via Iain McGilchrist

• Key quote: “What matters for the future of humanity is imagination. The left hemisphere is often an impediment to imagination, and its goal is single and simple: power. AI exists to make things happen, to give us control; but its doing so is good only if we make progress in wisdom as fast as we make progress in technical know-how. Otherwise, our ‘progress’ is like putting machine guns in the hands of toddlers.”

From bullied to brilliant: How Temple Grandin embraces autism – via Big Think

• Key quote: “When I first started working with cattle, I looked at what cattle were looking at when they moved through shoots to get vaccinated. And at that time, I thought everybody was a visual thinker. I think in pictures. It’s what’s called an object visualizer. Everything I think about is a picture. And it was difficult for me to understand why other people didn’t notice that the cattle would refuse to walk over a shadow. They’d balk if they saw a reflection off the bumper of a vehicle. That’s just so obvious to me. I thought everybody thought that way until I was in my late thirties And there was a shock to find out that some other people thought in words. And not everybody’s thinking works the same way.”

Christopher Tsai on Investing in an Age of Disruption – via This Week in Intelligent Investing

• Key quote: “In this episode, co-hosts Elliot Turner and John Mihaljevic welcome special guest Christopher Tsai, President and Chief Investment Officer of Tsai Capital Corporation. The trio covers a range of topics, with particular focus on intelligent investing in an age of disruption.”

Duolingo: Free Speech – via Business Breakdowns / Colossus 

• Key quote: “Thaiha and I cover the fascinating founder story behind Duolingo, how Duolingo has succeeded in a largely offline market, how they’ve approached monetization, and how they plan to expand from here.”