Speaker
Chris Mayer
Appearances over time
1 episodes
Episodes
1
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Quotes & moments
When SpaceX hit a $2.6 trillion market cap, it was trading at approximately 145 times revenue, far exceeding Google's IPO multiple of under 10 times revenue.
Google went public in 2004 at a market cap of roughly $20 billion and less than 10 times revenue, yet delivered fabulous long-term returns despite seeming overvalued at the time.
Amazon, one of the greatest long-term compounders in history, suffered a 90% drawdown from peak to trough at some point in its journey.
If a business is truly exceptional, investors have many 'bites at the apple' and do not need to rush in at the earliest opportunity — waiting for confirmation rarely costs a fatal amount of upside.
A Worldly Partners study found that 82% of stocks that returned 100x or more since 1972 lost more than 50% of their market value at some point along the way.
The same Worldly Partners study found the average maximum drawdown for 100-bagger stocks was 65%, illustrating the brutal volatility required to capture exceptional long-term returns.
Despite brutal drawdowns, the stocks in the Worldly Partners study that became 100-baggers returned 533 times from their starting point on average.
The Worldly Partners study found that 100-bagger stocks went an average of 8 years between setting new all-time highs, requiring extraordinary patience from investors.
Apollo's chief economist Torsten Slok found that if you back out AI-related and energy companies from the S&P 500, the rest of the index is down for the year.
Apollo's Torsten Slok identified approximately 84 AI-related companies in the S&P 500, including semiconductor companies, that have driven much of the index's gains.
A CIBC note cited by Chris Mayer suggested that in 2003, 80% of market trading volume was driven by human decision-makers not following algorithms, versus just 7% today.
Within a 12-month span, SpaceX, OpenAI, and Anthropic are expected to go public all with valuations of at least $1 trillion — an unprecedented concentration of mega-IPOs.
SpaceX's S-1 includes an incentive compensation clause that grants Elon Musk a bonus — reportedly around a trillion dollars — if he establishes a colony of 1 million people on Mars.
Chris Mayer shared anecdotal evidence from expert networks showing that some large enterprise customers consider their software vendor's AI product a complete waste of time that adds no value.
A study by Wes Gray (also associated with Michael Mauboussin) showed that a hypothetical 'God portfolio' — the objectively best stocks over any 5-year period — still suffered drawdowns of 35% or more, enough to get any manager fired.
When SpaceX hit $2.6 trillion, it was trading at 145 times revenue. Google at IPO was under 10 times revenue — and people thought that was expensive. In finance, the bubbles get bigger every generation.
Pets.com died. Chewy lived. Lots of dot-com ideas didn't work until someone figured out the real problem. The same dynamic is playing out with AI — and the eventual winners may not look like tech companies at all.
Every company is adding AI features because it's the thing to do — not because it solves a problem. The returns won't materialize, a pause will come, valuations will get crushed, and value-minded investors will pick up the real long-term winners at a discount.
The 100-bagger research is clear: if a business is genuinely exceptional, you'll have many entry points. Waiting a few quarters to see real traction show up in the financials is not going to cost you a 100-bagger.
SpaceX is three very different businesses under one ticker. 'AI' means something different at Google, IBM, and a golf app. When a label does your thinking, you skip the analysis — and that's where you get hurt.
82% of the greatest compounders in history — stocks that returned 100x or more since 1972 — lost more than half their value at some point. Average drawdown: 65%. Average return from starting point: 533x. The price of greatness is volatility.
Wes Gray built the hypothetical 'God portfolio' — the perfect stocks over any 5-year period from 1927 to 2016. It still got hit with 35%+ drawdowns repeatedly. Any client would have fired God. The problem is never the stocks; it's the investor.
SpaceX's IPO structure gives Musk full board control and prohibits shareholder lawsuits. For a long-term investor, that's a governance nightmare — unless you trust the person completely. Most people obviously decided they did.
Look at compensation first. If the founder isn't extracting wealth through salary and options, that's signal. Then collect the small anecdotes — the office, the car, how others describe them. Your internal bullshit detector, as Hemingway called it, is a real investment tool.
Musk gave stock to everyone at SpaceX, including a Mexican immigrant welder who became a millionaire. When employees are owners, the culture that made the company great gets preserved and carried forward by the people most invested in it.
Apollo's Torsten Slok found that if you remove the roughly 84 AI-related and energy companies from the S&P 500, the rest of the index is down year-to-date. The headline number is hiding a deeply lopsided market.
Within 12 months, SpaceX, OpenAI, and Anthropic could all debut at over $1 trillion valuations. Ten years ago, the idea of Apple hitting $1 trillion seemed absurd. The question isn't whether it's possible — it's whether it's rational.
Defining your company's value as 'we'll own the TAM' is circular logic. You can build a wonderful, highly profitable business capturing a small corner of a large market — and that business might be worth far more than the TAM-based math suggests.
Every investor who buys a stock believes management will figure it out and reward them over time. That optimism is rational exuberance. The question Alan Greenspan couldn't answer — and neither can we — is exactly when it becomes irrational.
Investors idealize a stock, expect steady gains, then face devastating drawdowns and years-long waits for new highs. The frustration and demoralization come from a mismatch between expectation and reality — not from the stocks themselves.
Analysis
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- Business 92%
- Technology 8%
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