😮 I Sold All My Facebook (FB) Shares
I have been a net-buyer of Facebook (FB) shares since ~2013, but three weeks ago, I sold everything.
I am working on an episode of Compound Money Quietly that explains my reasoning in complete detail, but I want to give you a preview. This post includes timeless investing wisdom from Warren Buffett and Charlie Munger.
Earnings certainty is key
Apple’s new privacy prompt is disrupting the data Facebook requires to make their advertising platform (“Ads”) so effective. I am much less certain about Facebook’s future earnings as a result.
📚 Read what Facebook says about how this will hurt their advertising business here.
👉 Did You Know: 98% of Facebook’s revenue comes from advertising.
💬 Warren Says: “Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now..." —Warren Buffet
👉 Never Forget This: In the long-term, the price of a stock reflects the earnings of the business.
Apple is testing the durability of Facebook’s moat
The future is uncertain. A competitive advantage makes future earnings more certain. That’s why I won’t buy a business that I believe is lacking in the ‘moat’ department.
💬 Warren Says: “The key to investing is...determining the competitive advantage of any given company and, above all, the durability of that advantage. The products and services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”
👉 Remember This: Most moats are hard to sustain.
💬 Warren Says: "You have to understand when competitive advantages are durable and when they’re fleeting.”
💬 Charlie Says: “…a lot of the old moats are going away and of course people are creating new moats all the time. That's the nature of capitalism. It's like evolution and biology; new species are created and old species are dying.”
Apple has power over Facebook
Facebook needs Apple. Apple doesn’t need Facebook.
💬 Facebook Says: “We disagree with Apple’s approach and solution, yet we have no choice but to show Apple’s prompt. If we don’t, they will block Facebook from the App Store…”
Facebook has to do something that hurts their business, and failure to do this means iPhone users won’t be able to get the apps for Facebook, Instagram, Messenger and WhatsApp.
Apple: 3+ years of “privacy” positioning
March 2018: Apple’s Tim Cook criticizes Facebook over user privacy controversy — TODAY
Apple CEO Tim Cook criticized what he called Facebook’s business model, saying, “If our customer was our product, we could make a ton of money. We've elected not to do that.”
March 2019: 'Privacy. That's iPhone' ad campaign launches, highlights Apple's stance on user protection — AppleInsider
December 2019: Apple making first CES appearance in decades, talking privacy with Facebook and others — 9to5Mac
📺 Watch Tim Cook’s Privacy Speech
Cook doesn’t say Facebook by name, but it’s clear who he is talking about in this 2021 speech.
"Technology does not need vast troves of personal data stitched together across dozens of websites and apps in order to succeed. Advertising existed and thrived for decades without it, and we're here today because the path of least resistance is rarely the path of wisdom.”
Bonus Content: Warren Buffett on Certainty
If you read this post in entirety. you will understand why I included this.
Does this change your post?
https://constine.substack.com/p/pressclub-with-mark-zuckerberg-daniel
Facebook:
‘ [00:31:02]When it comes to, the iOS 14 changes, for example, and their impact on our business, I think the reality is that I'm confident that we're gonna be able to manage through that situation. And we'll be in a good position. I think it's possible that we may even be in a stronger position.
[00:31:16]If Apple's changes encourage more businesses to conduct commerce on our platforms, by making it harder for them to basically use their data in order to find the customers that would want to use their products outside of our platforms.
[00:31:30]But the thing that I've been mostly focused on is that a lot of these changes are going to make it harder for small businesses and developers. And I think the situation is going to be challenging for them to navigate. And, I just think it's one of the reasons why Facebook has been a bit outspoken on this is, there are certain principles that we care about and empowering individuals is one of them.’