Welcome to the Sunday Briefing newsletter where we share some of the interesting lessons in life, business, and investing that we’ve come across during the week.
Latest on Junto
No notes were published on Junto during the week. I’m still working on a deep dive on Disney for members which I expect to release in the coming week.
What we’ve been reading
A guide to organization design. Even if org design isn’t part of your profession, knowing this stuff is more important than you might think. A good guide to systems thinking and incentives.
The Teledyne buyback effect. Buybacks contributed a lot to Henry Singleton’s brilliance in allocating capital at Teledyne.
Company of the week
Our company of the week is Carvana Co, the rapidly growing, no-hassle online car hub.
With Carvana, you’re betting on an industry-changing market share grab on a massive and (almost) unprecedented scale fueled by scale economies. You can talk yourself into pretty much any valuation you want, but it pays to remain conservative.
My valuation, shown in summary at the bottom left of the fundamentals sheet and which you find in the full Sanity Check model here, is built on the assumptions:
- 10-year high-growth period
- 40% rev growth for five years with subsequent gradual decrease to terminal growth rate
- 7% EBIT margin converging in year seven
- Marginal invested capital turnover of 2
- 10x EV/EBITDA terminal value
Photo of the week
I visited The Franklin Institute in Philadelphia. The magnificent entrance of Franklin himself greeting you as you embark on the scientific history of the museum was something to capture.
Quote of the week
Mortimer Adler on school lectures.
“A lecture has been well described as the process whereby the notes of the teacher become the notes of the student without passing through the mind of either.”
Memorizing mental models is the easy part. Thoroughly understanding their flexibilities and limitations is the real task at hand.
I will publish bunches of articles on mental models and their nuances in decision making over the coming months.
Have a great coming week,