Note: This article is for educational and informational purposes only and does not constitute investment advice in any way.

In my recent How The Wave Broke update, I mentioned that Nike and the Nike stock price has had about as bad a 5 years as you can have, as demonstrated by this chart:

Several people reached out to me wanting more of my thoughts on the company and I too was wondering if the decline had run too far given the size of the fall. So below is are my thoughts.

NIKE - the Origin story

The story of Nike is one of the great American business stories and Phil Knight’s book, Shoe Dog is a must read for investors and entrepreneurs. Several years ago, I enjoyed it, along with other quintessential americana, on a train I took from Portland, ME through Boston and on to New Haven, CT.

Knight was a student at Stanford University as well as an avid runner with a quirky, experimentative, innovative coach, Bill Bowerman. While at Stanford, Knight wrote a paper for his entrepreneurship class proposing that cheap, high-quality Japanese running shoes could break the American market dominance of German brands like Adidas and Puma, just as Japanese cameras had done to German cameras. After graduating in 1962, Knight took a trip around the world. Knowing that Japan was at the forefront of manufacturing, he traveled to Kobe, Japan, specifically looking to explore his thesis. While in Kobe, he found shoes made by Onitsuka Co. under the “Tiger” brand. Impressed by their quality and low cost, he cold-called the company requesting a meeting.

He had no business, little money and no experience. He was bluffing but, it so happened, that the Japanese shoe company were keen to explore opportunities in the US so they took him on face value and invited him to talk.

Knight met with Onitsuka executives in their boardroom. Pretty quickly, the executives asked which company he represented, and Knight realized he didn’t actually have one. Thinking on his feet, he recalled the blue track-and-field ribbons given to winning athletes and gave birth to a company, telling them he represented “Blue Ribbon Sports”.

He pitched them his thesis and incredibly, he secured the distribution rights for Onitsuka in the US. He ordered a few samples, and with his former track coach, Bill Bowerman, they went into business. In their first year, they went to race meets and they sold 1,300 pairs out of the trunk of Knight’s car, grossing $8,000. It continued to grow and they needed working capital. Domestic lenders were not supportive of their plans so, on the advice of their Japanese partners they turned to Japanese trading houses. Known locally as sogo shosha (総合商社), they are massive, highly diversified conglomerate companies that trade in a vast array of products and materials globally. They originally acted as simple middlemen to import raw materials into resource-poor Japan and export finished goods, they evolved into complex global investment and lending firms.

FROM THE FLAMES OF BLUE RIBBON

With their working capital secure and demand high, all goes well for several years until growing pains arise and Blue Ribbon and their Japanese partners part ways. Blue Ribbon rebrand to Nike, the Greek Goddess of Victory. In the rebrand they commission a graphic design student, Carolyn Davidson, $35 to design a logo for the new brand. Davis creates one of the most, if not THE most, iconic logos in history, the NIKE Swoosh.

Although she only billed Phil Knight $35 for the Swoosh design in 1971, Davidson received a massive surprise twelve years later. In 1983, Knight and Nike executives held a surprise party in her honour to formally recognize her contribution to the brand’s explosion and present her with two gifts:

1. A custom gold ring cast in the shape of the Swoosh, embedded with a diamond.

2. 500 shares of Nike stock.

Through decades of aggressive stock splits and company growth, that original 500-share gift grew to be worth many millions of dollars, assuming she didn’t sell.

The new company has an immediate and existential problem though - Onitsuka is gone and they no longer have product, cool innovative product that people want. They look inward for inspiration and Bill Bowerman the running coach exec raises the idea of developing a concept he’d been dreaming of for a better running shoe, the moon shoe. He creates a prototype of his vision by pouring rubber into his wife’s waffle iron, with the aim of creating a lightweight sole with superior traction. The resulting “Moon Shoe” and subsequent Waffle Trainer become the company’s first major proprietary bestsellers.

Source: Artsy / Nike, Waffle Trainer (1974) | Artsy

This recipe of obsessed and slightly crackpotty runners innovating in their kitchen with waffle irons is central to Nike’s success and is something that has been lost in recent years.

THE 70’s - THEY CALL IT YOGGING

The company rides this wave of innovating on their own proprietary designs for a decade but it had built its empire entirely on the 1970s running craze. By 1983, that boom had plateaued. The market for running shoes was saturated, and Nike, which was still viewed almost exclusively as a “track and field” company, saw its core sales stall. By early 1984, Nike reported its first-ever quarterly loss since going public. Inventory was piling up in warehouses, the stock price had plummeted, and Knight was forced to lay off roughly 400 employees (about 10% of the workforce). The company was facing another existential crisis and desperately needed a lifeline.

Here, again, Nike showed a spirit they lean into in such times. When the chips are down, they believe in themselves in a way they want you, the athlete wearing their gear to believe in yourself. They eat their own cooking so to speak.

Faced with extinction, they had one last play, $500k to spend on a non-running strategy. They decided on basketball but instead of spreading their $500,000 of endorsement across several solid NBA players (the standard industry practice), they decided to bet the entire budget on a single unproven rookie who could serve as the face of the brand. L

This is an insane move, a wild, crazy, completely audacious move.

We are of course talking about Michael Jordan but at the time, Jordan was earmarked for a good career but Nike was essentially betting its entire budget, and maybe its existence, on a rookie guard in a league ruled by towering centers and established veteran superstars like Magic Johnson and Larry Bird. It was a massive gamble.

Source: Air. Directed by Ben Affleck, Amazon MGM Studios / Warner Bros. Pictures, 2023.

The release of the Air Jordan 1 in 1985 revolutionised sports marketing and sneaker culture, turning a performance shoe into a billion-dollar lifestyle sub-brand.

When Jordan stepped out in his new black and red Nike basketball shoes, the NBA banned them because they violated the league’s strict uniform policy, known informally at the time as the “51% rule.” All players’ shoes had to be at least 51% white and must match both the team’s uniform colours and the shoes worn by their teammates. Jordan’s striking black and red shoes blatantly ignored this standard, leading the league to issue a formal letter to Nike threatening to fine Jordan $5,000 for every game he wore them.

Instead of backing down or pulling the shoe, Nike recognized the opportunity and turned the penalty into one of the most successful marketing campaigns in history. Nike executives gladly offered to pay the $5,000 per game fines so Jordan could keep wearing the shoes on the court. They saw that the media coverage was worth far more than the penalty. The ban gave the sneakers an instant anti-establishment appeal. Teenagers and fans rushed to buy the shoes the NBA deemed “illegal,” transforming the Air Jordan 1 from a performance athletic shoe into a must-have cultural status symbol.

Today, the Jordan Brand generates approximately $7 billion in annual revenue for Nike. Michael Jordan receives 5%, forever, which is why you always see his name in the top 10 best paid athletes list every year.

THE JORDAN PLAYBOOK

On the back of this momentum, their new found cultural cache and their escape from being just an athletics brand, Nike began to grow and in 1988 they launched their Just Do It tagline. The 90’s and noughties were a time of win after win after win in marketing and culture. Their signing of Tiger Woods for example, had a reception from the golf establishment and traditionalists that was largely hostile, sceptical, and marked by a culture clash but Woods’ dominance put them again atop the pedestal as the brand of champions.

Remember this:

Source: The Masters | Tiger Woods’ Chip on 16 | Iconic Masters Moments

Priceless marketing with the swoosh front and center.

In the 2010’s the company moved to a dominant position, becoming the exclusive uniform provider for the NFL in 2012 and the NBA in 2017. Its SNKRS app became a major hit too, driving direct-to-consumer sales and creating manufactured scarcity for limited releases.

THE COVID-19 PANDEMIC

But then the pandemic came.

With people locked at home with little to do and in the US, with support cheques now in their pockets, the second-hand market for sneakers exploded. This was also happening in watches, trading cards and vintage apparel. This was happening at the same time retail traffic and revenues dried up due to lockdowns. Nike though, made the mistake of thinking this was the new status quo. They explicitly detailed this strategy in 2020/21, branding it as the “Consumer Direct Acceleration” (CDA). In their earnings calls and 2021 Annual Report, Nike explicitly stated they were actively reducing their reliance on what they termed “undifferentiated wholesale accounts” - corporate phrasing for independent sneaker shops and mid-tier retail chains that Nike felt didn’t offer a premium or unique presentation of their products. At the time Nike Direct accounted for c.39% of revenues which grew to 42.3% by Q3 2022 and Nike execs announced a target of 60% but once retail shops were reopened, demand returned to retail stores but now the relationships had been severely damaged. Nike had openly declared to retail footwear and apparel stores - tough businesses to make money on at the best of times - that they were no longer important or needed. Decades of partnerships cast aside almost on a whim. That includes specialty running stores, where Nike’s core, OG, customers - runners - go to talk to experts about the everything running, but especially the shoes. Nike had severed their connection to their original and spiritual partner, runners.

As this was happening, a host of high quality operators who had been waiting in the wings seized the opportunity. Hoka, ON and Brooks. They courted retail operators, especially specialty running shops, lavishing them with time, attention, enthusiasm, inventory and innovative new products that excite consumers. They took the shelve space and Nike will have to do something special to get it back. They need to innovate, rebuild retail TLC and tap into the spirit that got them there again.

WIN NOW, BUT WAIT, PACE IT

So what have they been doing about it?

Nike has initiated a multi-year turnaround effort, catalysed in late 2024 with the replacement of CEO John Donahoe with Nike veteran Elliott Hill, brought out of retirement for the role.

Hill is a Nike veteran who climbed from a 1988 internship to oversee its global operations before retiring in 2020. This was relatively short lived however, as he was brought out of retirement in 2024 to become President and CEO to lead the turnaround effort.

Hill began with an initial “Win Now” strategy, which focused on returning to their core approach, rebuilding retail partnerships, focusing back on performance athletics over lifestyle sneakers and reducing the supply of classic retro shoes. While the “Win Now” plan successfully cleared out billions in stale inventory and stabilized the running category, the broader product turnaround has taken longer than expected, leading Hill to introduce the more drastic, long-term “Pace” restructuring plan only in the last few days.

The more aggressive “Pace” restructuring plan focuses on:

• Pivoting Back to Wholesale: Reversing a costly over-reliance on Direct-to-Consumer (DTC) digital sales. Hill is actively repairing relationships with wholesale retail partners (like Foot Locker and Dick’s Sporting Goods) to reclaim physical shelf space ceded to competitors.

• Sport-Specific Restructuring: Nike reorganized its internal product teams back into sport-specific categories (e.g., running, basketball, soccer) rather than broad demographics (men’s, women’s, kids). This aims to speed up product innovation and tailor footwear more closely to athletes’ actual performance needs. Conway’s Law comes to mind.

• The “Pace” Cost-Cutting Plan: targeting roughly $2.5 billion in savings. This includes geographic restructuring and a fresh round of job cuts to streamline operating overhead amid continued weakness in Greater China and its legacy Jordan brand.

• Pricing Power & Inventory Cleanup: To protect brand equity, Nike is actively clearing stale inventory and weaning its digital platforms off constant promotions. Concurrently, the company has implemented targeted price hikes across core footwear and apparel categories to offset rising supply chain costs and tariffs.

• New Retail Partnerships: To capture under-penetrated consumer segments, Nike has begun introducing new wholesale partnerships, such as placing inventory with the popular women’s fashion retailer Aritzia.

WHERE WE STAND

Nike reported fiscal Q1 2027 revenue of $11.21 billion, below the $11.32 billion consensus, while EPS of $0.48 topped the $0.44 estimate.

The company is expanding its restructuring, targeting $2.5 billion in savings through fiscal 2031, and forecast a high-single-digit revenue decline for fiscal 2027.

As they say though, nobody ever cut their way to growth.

Weakness in China and other markets is driving further changes, including planned job cuts, a three-region operating model and removal of online sales rights from some large Chinese retail partners.

Analyst views shifted lower overall, with several firms cutting price targets and BofA Securities and Berenberg downgrading. DA Davidson upgraded the stock to Buy despite lowering its target.

Nike Brand revenue was $10.95 billion and Converse revenue was $263 million, both below consensus estimates. Management cited continued pressure in China and EMEA, as well as challenges in sportswear and the Jordan brand; CEO Elliott Hill said restoring performance in key segments will take time as Nike rebalances its product portfolio.

Analyst actions were mixed but predominantly cautious.

Other developments included a $200 million, 10-year apparel partnership with the University of Miami and the appointment of Alexandre Arnault to Nike’s board. Converse, Nike’s wholly owned subsidiary, apologized for and removed an advertisement after public criticism; soccer player Kylian Mbappé also ended his Nike partnership and joined On as a global ambassador.

THE BULLS AND BEARS

The bull and bear scenarios for Nike’s stock, hinge on the company’s ability to execute innovation, rebuild its retail partnerships and navigate macroeconomic pressures, especially China.

The Bull Case

The upside potential of relies predominantly on it rebuilding its relationships with 15,000 retailers in the US and a turnaround in its China business.

The Bear Case

The downside case is basically an inability to deliver on the bull case targets while also seeing market share continuing to be eaten by newer brands.

For me, is straddling two equally likely futures, where the upside potential doesn’t pay for the risk of the downside. Although the price is down c.80% in five years, at this price I would need the business to have some truly attractive, and more likely an upside, or I would need the price to be much more compelling, i.e. in deep value territory. One to keep watching.

Some insightful pieces on Nike I came across in writing this:

Evan Sohn of Revelio, Nike’s Next Layoffs Haven’t Started. Its Headcount Is Already Down 8,843.

, Nike Just Did IT, then Undid it

Sun Tzu, The Art of War

In my latest poll I asked if $META’s pop of 10% on reports that they would start selling excess AI capacity was good, bad or neutral for the AI narrative. Bad slightly edged it but broadly it was evenly split between the 3 views.

This is incredibly interesting. It flies in the face of the efficient market hypothesis for one (if that’s still a thing people believe in). It also revealed how we look at singular important events through different lens’. Several of those who responded also emailed me to express their views and there was one respondent who put their thoughts in the comments and across all responses there was a spread of thinking.

If I can summarise, the high level arguments are:

GOOD: It is more capacity for AI, signifies growth, promotes wider adoption and is a sign of a maturing sector.

BAD: overbuilt for AI demand and is now repositioning to limit losses potentially signalling a broader repositioning as AI Hyperscalers struggle to generate the returns on investment for the massive capex outlays. Cheaper Asian offerings and reports of token costs exceeding the engineers replaced support the view.

NEUTRAL: Meh. More of the same.

My own view is that it is BAD for the story but could be great for one of the players. To me this shows a levelling out of demand and the herd being culled. Those hyperscalers who have seen little take up in demand and are clearly not in the race are starting to hedge their exposure. Meta and xAI are the two operators who have begun to sell their excess compute and they account for just over 1% each per below.

LLM Revenue Share Q1 2026

Source: Counterpoint Research, April 2026

it should be noted are still reeling from the metaverse fiasco which had reduced the stock price to $89 and consumed over $80bn of capex. AI guidance for 2026 is $120bn - $145bn. It’s no surprise that they are one of the first to flinch. Grok have also indicated they would be selling compute capacity albeit they framed it as having an excess of build rather than insufficient demand. Neither Meta’s Llama and xAIs Grok have broken through on market share and as such, like a political race, are bowing out to others and rightfully so.

This is where things get interesting. Until now the question was whether AI would succeed but now the question itself is bifurcating into whose AI will succeed and is that worth anything. This is shakier ground for the broader narrative that markets have been moving on and for which IPO’s are being positioned for. Meta is relatively insulated because of its major cash generation and Grok is also insulated behind the SpaceX and Starlink shields (see previous piece SpaceX: Musk vs reasonable stock valuations here) albeit this should under normal circumstances impact the narrative but that’s not a normal price setting. This leaves - of the companies on extended valuations - , , Open AI and Anthropic. As competition bows out it leaves fewer to share the spoils. My feeling is that, based on unit economics there is more bowing out to happen but my current thoughts are as follows:

Read more

Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

The IPO of SpaceX set off a global avalanche of commentary, much of it in writing.

Newspaper articles, social media posts, reports, magazines, texts, emails, maybe even some handwritten letters. Of the thousands, maybe millions of articles and of the millions, billions, maybe, dare I say it, trillions of words written about this company and it’s unique IPO, I have not seen 3 particular words written anywhere. Nothing written, nothing on video, no discussion across the panels yet they are arguably the 3 most important words in the whole discussion:

Key. Person. Risk.

It seems to have flown under the radar. It is normally a dedicated piece of analysis in professional investment assessments but the focus seems to be on the valuation and the business rather than the key person here.

Elon Musk is the general at the head of the army of SpaceX, Tesla, Starlink, xAI, X, The Boring Company, Nueralink etc. He manouevre’s the army and he is the person people follow. He delivers the grand visions that people get behind. People dedicate their lives and their money to him and his ideas and that has paid off handsomely for many.

If something should happen to him and he can no longer lead in the same way, what does it mean for his multitude or for these stratospheric valuations? I don’t think many people have asked themselves that. Without Musk’s once in a generation vision and ability to deliver, I believe we would be left with, not quite an undisciplined multitude but a multitude with an inability to affect the valuations even a fraction of how Musk can affect them. In such an instance, I would expect those valuations to collapse.

There are no signs that this will happen anytime soon, he is fit and still operates at his unrivalled level of productivity without issue it seems. But as I learned on my 14th birthday when I went to the glorious space opera, The Fifth Element, life is vulnerable to king and pauper alike.

Make sure you are considering this in any assessment of SpaceX because it will drastically affect the valuation should it ever come to pass.

Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

In The Art of War, Sun Tzu observed:

There are not more than five musical notes, yet the combinations of them give rise to more melodies than can ever be heard.

In the equity markets, the fundamental drivers of a company’s value are similarly limited - revenue growth, margin expansion, free cash flow generation, capital return, and competitive advantage. Yet, from these basic elements, the financial industry has engineered tens of thousands of mutual funds, smart-beta ETFs, and complex portfolio strategies.

For decades, we have been sold the idea that to be “safe” investors, we must own every colour, taste, and note simultaneously. We call this diversification. But as the structure of public markets rapidly shifts, it is time to ask a difficult question: Is broad equity diversification actually protecting us, or is it just diluting the upside?

The Case For Diversification: The Only “Free Lunch”

The consensus view, rooted in Harry Markowitz’s Modern Portfolio Theory, is that diversification is the only “free lunch” in investing. The premise is mathematically sound: by combining equities that do not move in perfect lockstep, you can reduce the volatility of your portfolio without necessarily sacrificing expected returns.

Mitigating Idiosyncratic Risk: No matter how deep your research, individual companies are vulnerable to unpredictable shocks - accounting scandals (see our upcoming book club conversation), abrupt regulatory changes, or sudden technological obsolescence. Holding 30+ stocks ensures that a catastrophic failure in one business doesn’t wipe out your portfolio.

Capturing Market Beta: Broad diversification ensures you participate in the long-term upward drift of human progress and corporate profitability.

Behavioural Protection: Highly concentrated portfolios are volatile. Even if a concentrated portfolio outperforms over a ten-year horizon, the violent drawdowns along the way often cause investors to panic and sell at the exact wrong time. Diversification, in theory, smooths the ride, keeping you in the seat.

The Case Against Diversification: Protecting Against Ignorance

The counter-argument, championed by legendary investors like Warren Buffett and Peter Lynch, is that extreme diversification is simply a hedge against not knowing what you are doing.

“Diworsification”: If you have done the rigorous work to identify five truly exceptional businesses with wide moats and excellent management, why would you allocate capital to your 40th or 50th best idea? Every stock you add beyond your highest-conviction ideas dilutes your overall return.

Diluting Your Edge: In the equity market, alpha (market-beating returns) is a zero-sum game. If you hold 200 stocks, your portfolio closely mirrors the benchmark. By definition, you cannot beat the market if you *are* the market.

The Attention Deficit: A portfolio manager can deeply understand the mechanics, threats, and opportunities of 15 to 20 businesses. Nobody can intimately track the micro-economics of 150 companies.

What the Latest Research is Saying vs. The Consensus

The consensus heavily favours passive, broad-market index investing - buying the whole haystack. But recent academic research and modern market dynamics paint a more nuanced, disruptive picture of *why* markets behave the way they do.

The cornerstone of modern equity research is Hendrik Bessembinder’s landmark study, which revealed a brutal power law: just 4% of publicly traded companies account for all of the net wealth creation in the stock market above Treasury bills since 1926. The other 96% of stocks, collectively, were dead weight.

How this is interpreted depends entirely on what game you are playing and what level you are playing it at. If you have an informational or analytical edge, true wealth is generated by avoiding the dead weight, not buying it.

Why the Industry is Set Up This Way

If concentration is required for outsized returns, why does the average actively managed mutual fund hold over 50 stocks? The answer lies in the structural realities of the asset management industry.

1. Career Risk and “Tracking Error”

John Maynard Keynes famously noted that it is better for a reputation to fail conventionally than to succeed unconventionally. In the institutional world, portfolio managers are judged against a benchmark (like the S&P500). If a concentrated manager is wrong and underperforms the benchmark by 15%, they lose their job. If a highly diversified manager closely hugs the benchmark and underperforms by 1.5%, they get a bonus. The industry optimizes for career survival, which mandates looking exactly like the crowd.

2. The Asset Gathering Machine

Asset management is a business of scale. Firms get paid a percentage of Assets Under Management (AUM). If a brilliant manager runs a concentrated portfolio of 15 mid-cap stocks, the strategy has strict capacity limits - if they manage too much money, they end up owning too much of the underlying companies, destroying their liquidity. To manage $50 billion, a fund *must* buy hundreds of stocks. They are diversifying not because it makes for a better portfolio, but because it is the only way to absorb more fee-paying capital.

3. Closet Indexing

Many active funds are essentially “closet indexers.” They charge active management fees but hold so many equities at weightings so close to the benchmark that they mathematically cannot justify their cost. They sell the illusion of active oversight while hiding behind the safety of extreme diversification.

The Verdict

Ultimately, determining your stance on diversification requires profound self-awareness.

If your goal is capital preservation, market-average compounding, and peace of mind, broad equity diversification is a beautiful tool. But if you are seeking genuine capital accumulation and market-beating returns, you have to acknowledge the math: alpha requires taking a differentiated stance. You cannot paint a masterpiece by blindly mixing all the colours together - you just end up with grey.

Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

In 2017, I was at my desk watching the Tesla story play out in real time. I was following analysis and opinion closely, industry analysts, fintwit analysts, office analysts. My own analysis clearly pointed to the collapse of the company at any moment. Missed guidance, shambolic production, a litany of broken promises, troves of service horror stories, high capex burn, a lack of supporting infrastructure etc. I waxed lyrical to colleagues about the imminent demise of Tesla. But, I was completely wrong. It soared to levels that were greatly disconnected from fundamentals and appropriate risk tolerances. Today it sits at $420, the eponymous 2funding secured figure. It has a market cap greater than all the other major car companies combined and commands a market cap over 14x that of peer BYD, who sell nearly 25% more EV’s than Tesla.

The Tesla experience was a vital one for me and my investment philosophy. Every now and then prices will develop in a stock or stocks that can’t be justified by optimistic fundamentals - or even visionary ones, but equally, being deadly sure that it can’t possibly last - let alone grow in value is naïve.

On June 12th, SpaceX is set to IPO in a record breaking and controversial float. It is a story of risk, genius, innovation, science fiction and above all, money.

The SpaceX story is fascinating and will undoubtedly be required reading on finance courses in the near future. It is likely to be the most valuable IPO in history by a wide margin ($2T vs Saudi Aramco in 2019 for $1.7T). Before we outline why this fits the bill for the Sun Tzu quote - The supreme art of war is to subdue the enemy without fighting - we have to step back and understand the background to SpaceX.

🏗️ 2002: The Founding

Musk funded the inception and early development of SpaceX entirely himself with roughly $100 million of his own capital, which he had earned from the sale of PayPal to eBay.

During its first few years, SpaceX operated independently, aiming to prove that a small, vertically integrated team could build a cheaper, reusable rocket from scratch.

The stated, long-term goal was to make humanity multi-planetary and colonize Mars, but the immediate business problem was that traditional aerospace contractors were too expensive and moved too slowly.

🚀 2008: Orbit and Survival

By 2008, SpaceX had attempted to launch its small Falcon 1 rocket three times. All three launches had failed, and Musk was virtually out of money. Everything inged on the fourth launch succeeding in September 2008. Failure and the endeavour was over or success and the dream could continue. Thankfully, it was a success and on the back of that success and SpaceX’s participation in NASA’s Commercial Orbital Transportation Services development program, NASA awarded SpaceX a $1.6 billion Commercial Resupply Services contract in December 2008 to fly cargo to the International Space Station, effectively saving SpaceX and providing the capital to develop larger rockets.

📉 2015: The Economics Shift

7 years later in 2015, SpaceX fundamentally altered the economics of spaceflight by successfully landing the first stage of a Falcon 9 orbital rocket back on Earth. And it can’t be denied, when the light clears and we see the first stage standing upright it is a truly inspiring moment, a true leap forward for space exploration. By proving that orbital-class boosters could be recovered and reflown, rather than discarded into the ocean, SpaceX began driving launch costs down to a fraction of the competitors’. For example, since 1981 with the Space Shuttle to 2026 with SpaceX Starship, the cost of getting a kilogram to space will have fallen by a factor of over 200x, from $54k per kilo in 1981 with the Space Shuttle to c.$200 per kilo for Starship.

Historic cost of getting a kilogram to space

Source: https://www.visualcapitalist.com/the-cost-of-space-flight/

The cost of getting freight to space via SpaceX is now so low it can best be demonstrated by the space selfie. CrunchLabs sent a satellite into space on a SpaceX rocket for the sole purpose of allowing people to get their selfie taken in space - you can check it out here. This is truly an incredible leap in economic accessibility and SpaceX and Musk can be entirely credited with that.

🛰️2019: The Connectivity Network

On the back of the successful launch program, SpaceX launched the first operational batch of Starlink satellites into Low Earth Orbit, beginning the assembly of a mega-constellation designed to provide low-latency, high bandwidth, broadband anywhere in the world. It could even be achieved on Ryanair flights if needed but not at a cost O’Leary would tolerate.

Starlink has not been without serious concerns either - e.g. Musks influence over war zones but it has proven to be a highly profitable business.

The following year, SpaceX’s Crew Dragon spacecraft successfully carried NASA astronauts to the International Space Station, ending a nearly decade-long US reliance on Russian Soyuz rockets for crew transport.

💪 2024: Market Dominance

By 2024, SpaceX was routinely flying refurbished Falcon 9s and executing over 130 launches a year taking Starlink satellites to space along with paid slots for other companies, capturing more than 50% of the global commercial launch market. Meanwhile, the fully reusable, super-heavy-lift Starship vehicle began hitting major developmental milestones, paving the way for much heavier payloads and lunar missions. Starship will truly be a breakthrough for humanity. It is expected to be able to carry over 100 metric tonnes into space - this is important for delivery the parts needed for larger scale structures such as lunar bases, datacentres in space and the colony on Mars, Musk has dreamed of.

🤖 2026: The AI Pivot

In February 2026 the story changed however, SpaceX acquired xAI, Musk’s AI venture - more commonly known as Grok. The messaging around the combining of these businesses suggested SpaceX was no longer just a space operations company but was now going to be an artificial intelligence and orbital computing infrastructure business. The move added complexity to the vision and muddied the clear story of SpaceX but it also boosted the valuation. Some say the motivation was for a vision like never before, AI and Space under one roof but others are concerned it is a convenient way to shield the capex hungry and less attractive xAI story behind the strength of the SpaceX story.

This is where Musk is subduing the enemy without fighting.

People associate SpaceX with launch services - in which they have a monopoly. Starlink and xAI however, are most certainly not monopolies. Starlink is profitable with a good future ahead of it but faces competition from domestic telecoms and data networks. xAI is in a land war with Anthropic, OpenAI, Google, Meta and a host of Chinese AI models and only a few will survive when the dust has settled. It is also devouring capital and revenue growth is patchy at best. By putting xAI into SpaceX that story has been shifted and is no longer part of the hyperscaler land war conversation but now part of the inspiring sci-fi story. Bold visions sell stocks and Musk knows this. But what of the numbers? Let’s look at the basic headline figures.

Estimated valuation of SpaceX (launch services + Starlink + xAI) on IPO - $2trillion

Based on these numbers and accounting for the rate of growth currently being experienced, it would take 11.5 years for REVENUES to reach $2 trillion, let alone profits. That’s also assuming that growth momentum continues at the current pace which it rarely does. It is one of the more stretched valuations you will find, going well beyond the “priced to perfection” label that is often associated with such valuations. I would go as far as to say that the valuation of $2T is a nonsense compared to fundamentals but that is not to say it will not hold its value or even grow.

As I learned through my Tesla experience and as was discussed in our recent Boom and Bust conversation with John Turner and William Quinn, these dynamics occur with some regularity.

THE MUSK EFFECT

The Musk premium is an important factor. The combination of the great vision laid out, his previous achievements in innovation, his cult-like following and his history of delivering incredible stock performance against all odds are all in play. Maybe not as brightly as was with Tesla or maybe there is a new guard of devotees minted in the last few years who can send SpaceX stock - to the moon.

NAUGHTY NASDAQ

A second factor, which has been a controversial one is how Nasdaq have altered the rules to include SpaceX into the Nasdaq-100. They changed three major rules to win the SpaceX listing and they are worth understanding because structurally they enhance the probability of SpaceX performing.

SEASONING - Historically, companies were required to trade publicly for three to 12 months before they were eligible to be added to the Nasdaq-100. This “seasoning” period existed to allow the market to discover the stock’s true price before passive index funds were forced to buy it but for SpaceX, Nasdaq introduced a “Fast Entry” rule that allows megacap stocks to be added to the index just 15 trading days after their IPO. The consequence is that there is a 15 day window of free price action - not typically enough to find a proper level - before the passive tap is switched on and the wave of passive flows bouy and boost the price.

FREE-FLOAT - Nasdaq eliminated the rule requiring a minimum 10% free float for index inclusion, clearing the way for companies with massive valuations but tightly held ownership to join immediately. Because SpaceX is expected to float only about 5% of its total equity at listing, it would have failed Nasdaq’s previous requirements. Only having 5% of your shares setting the price is a structural advantage as that 5% sets the price for whole 100%, largely held by Musk. If the buyers of the 5% are predominantly fanboys who are not interested in fundamentals and passive funds then the level is likely to be distorted upward.

INDEX WEIGHTING - The Nasdaq-100 has been until now a market-cap-weighted index but if they included SpaceX, with only 5% of shares of a $2T market cap available to buy, this would cause a host of problems. As passive indexes buy shares to try replicate the index they would be driving demand for the shares through the roof as there would not be enough shares for them all to fulfil their allocations. To mitigate this, Nasdaq introduced a rule that if the available amount of shares is less than 33% of the total shares in a company, the market cap would be 3x the valuation of the listed shares valuation (i.e. 5% x 3). It could still cause some issues and will need to be watched.

WINDOW of ACCOUNTABILITY

Another advantage to Musk and the stock price is the inherent timeline to Space. 11.5 years (for revenues to reach valuation) isn’t a long time when it comes to space, things take time - even SpaceX will take time to get things done. This dynamic works to the advantage of lofty valuations and promises of them delivering science fiction like outcomes in the future. If the valuation ultimately gets accepted by the market - which is likely due to the gaming of the Nasdaq rules, then Musk has vastly wider time horizons to keep the story spinning than he did with Tesla, where, for example, missed visions of autonomous vehicles and cybertrucks could only be excused for so many quarters.

CONCLUSION

In conclusion, the valuation is a nonsense. That rules me out of buying it. But I would also not short it. The structural elements at play mean this IPO has been engineered to maximise upside and minimise downside. In addition, the exuberance from those who idolise Musk and believe wholeheartedly in his ability to deliver science fiction in a matter of years will keep the stock elevated. I believe that it is very probable that the SpaceX stock price defies gravity and goes ad astra. But I won’t be onboard.

Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

Nvidia’s market cap currently sits at 5.46T, larger than the annual GDP of every country in the world except the US and China and larger than all the markets in the world except US, China and Japan. Microsoft has a market cap of over $3 trillion, Apple $4.3T and Google $4.8T. AI has driven incredible amounts of paper value on these stocks alongside very real capex expenses.

Source: Apollo Global Management, Putting the total amount of hyperscaler capex into perspective Feb 2026

It is a gold rush, some companies are buying mines and some are selling picks and shovels. Nvidia are in the envious position of selling the picks and shovels and even more enviable is that they sell the best picks and best shovels and everyone wants the best. They have more control over their outcomes than those buying mines and hoping to find gold.

The war is happening between the miners, the hyperscalers, Microsoft, Google, Meta, Amazon, IBM, Oracle and increasingly OpenAI and Anthropic. They see a golden future, they’re not quite sure how much gold there could be but they are confident there should be gold on the other side. They are unlikely to all be right, some mines have gold and some don’t but people are excited and they don’t want to miss out they wager it’s better to back anything than nothing. This is not a good strategy.

Sam Altman recently said, “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes.

In our recent BREAKINGWATERS Boom and Bust conversation on bubbles, it was clear that the AI rush closely resembles a bubble but, as with all bubbles, it has it’s own unique characteristics. William Quinn, co-author of Boom and Bust and, senior lecturer on bubbles, noted that one of the key differences here is that the capital in this instance is not coming from the everyday investors. It is mostly a mix of corporate bonds, private credit and sovereign fund capital being deployed to the cause. A lot is off balance sheet too. Professor John Turner, the other co-author noted that this may also be a politically driven bubble masquerading as a technology bubble - when Deepseek burst onto the scene with a step change in performance for a fraction of the cost, many have declared we are in an AI cold war - see this headline from the Washington Post a few days ago.

This war is putting huge pressure on the players involved. Cash is being hoovered up, debts levels are skyrocketing and all in the name of, at this time, unclear investor value creation (there is clearly value creation to consumers). There is no doubt that revenues are rising fast but this is not a fait accompli for success for investors.

AI is starting to look like it will be a utility for life, like the internet or smartphones, it will become a necessity of the everyday for everyone. Utilities though tend not to be very attractive investments. For the internet and smartphones cycles, the value went to those that built on top of the infrastructure. Apple was an exception in the amount of value it could extract from it’s hardware, a result of it’s magical marketing (see this Sun Tzu-esday) but in general the ones that made the most money were software, search, social media and market places. Low capex, high profit.

In this new cycle we are already seeing some bifurcation of roles. Anthropic are leaning towards off the shelf enterprise solutions by passing a host of specialist providers that have popped up. Open AI is where everyone started but, if my anecdotal conversations are right, people are drifting and trying other models. Most seem to land on Anthropic’s Claude or Gemini or a combination of both. I use Gemini I have never had no reason to try anything else. I have used ChatGPT and it wasn’t as good, it gave so so answers or at times it just couldn’t deliver an answer, something I have never experienced on Gemini (an indication of Google’s infrastructural advantage). The other options are Chinese AI providers and Tencent, Alibaba and others are in their own regional war. They are tending towards a lower cost or in some cases free model. Deepseek have aimed for a cost efficient offering too.

These hyperscalers must continue to spend to try eek out a lead and that is their primary focus in this phase, grab share and worry about everything else after that. Making money is a problem to be figured out once they have won the space. This clip from Silicon Valley gives an insight into how the thinking works in Silicon Valley.

The longer it goes on the more damaging it will be to the long term prospects of the “nations” involved as they burn ever more capital in pursuit of the goal. It has the hallmarks of the telecoms arms race which ended with a slew of lumbering debt laden utility-like giants that were unattractive investments and ultimately created little value for investors. Absolutely, not all players will survive this build out, they will either be wiped out altogether - I am thinking of the more fragile businesses who need more pieces to deliver the goal (capital, infrastructure, distribution) or they will be severely damaged and their hands tied with debt like the once dominate telecoms.

I have no doubt that there is a transition started in the global order of companies. Every couple of decades, new businesses rise up to dominate for a long cycle and I think we are at the beginning of this. There will be a business that unlocks a use case with AI that is low capex, high take up, high profit with a flywheel that will roll them into the future unlocking further profit channels. I don’t know what that is yet but I am watching. It’s important too to realise you don’t have to see it before anyone else for it to work, you can still make a lot of money if you miss the first rally, there is time - just listen to Peter Lynch:

As I look across the landscape, I do have thoughts on what I am seeing - paid subscribers only

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Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

One of the key considerations when analysing companies is how they respond to change. Change is a constant, sometimes fast and sometimes slow but constant. We develop beyond the “current” to the “next”. We discussed this in last week’s Sun Tzu-esday [May 5 + for paid subscribers here] in the example of Steve Jobs who realised that someone was eventually going to put a music player in a phone and the result would kill his, still young, revolutionary cash cow product, the Ipod. He didn’t hesitate and sacrificed his darling to remain relevant for the next phase of change.

WHY ARE YOU LAUGHING GRANDAD?

Today AI dominates the conversation in the investment industry. I was at a talk recently with one of the UK’s foremost hedge fund managers and the session was entitled, The Last Economy. The interviewer put it to the hedge fund manager that he was deeply worried about his children’s futures. What work could they get in a future with AI or, would there even be any work for them at all if AI and humanoid robots have taken over everything. It’s a fair question to ask and it’s a situation that needs to be monitored or it could run amok but history tells us that humans adapt to the new technology, not the other way around. One person at the session made the point that if he (in his 50’s) told his grandfather (a WW2 veteran) that he paid someone a living wage to stand over him at the gym (he would have to explain gyms) to offer him advice on how to lift things better, his grandfather would laugh at him.

OPPORTUNITIES SPRING FORTH

Since I entered university to now, whole new vibrant economies have developed around online advertising, influencing, smartphones, ecommerce, logistics, cloud etc. Technological advances have always had the same outcome, productivity has increased, life has gotten better for most and opportunities have expanded. In particular, the opportunity to do what you love and build a life around it has never been so possible as it is now. Musicians can use technology to bring their ideas to life and they can then distribute them to the world immediately on a variety of platforms. Movie makers only need a smartphone, some time and a vision to do the same. Even, global equity wonks can’t be stopped from setting up their soapbox substacks and blasting out their thoughts and feelings on the daily (ish) - they can even do it with edited videos, graphics, sound effects, jingles, etc. See, life is getting better. You’re welcome.

CELEBRATE OR ROTATE

For investors though, the question they should be asking is how are their investments shaping themselves to the nature of the ground before them? One of the major headlines out there is that CEO’s are letting people go at record rates, replacing them with AI. Investors have been generally reacting positively to this as a sign that costs will be cut and margins will expand. I would be very careful about celebrating a company for this, especially if it is all that they are doing.

Consider the typical office work environment. It is an environment of constraint, restriction and limitations. Budgets, cost management, hiring freezes, either/or decisions. Surpluses, like flakes of gold in muddy waters, need to be protected.

EXPLAIN IT TO ME LIKE I’M 5

I have yet to meet the person that doesn’t want more resource to put toward their job, to expand their responsibilities, to respond to issues quicker, to target new revenue channels, to enhance their current offering, to stave off the competition. That is what AI could be to organisations but removing the experienced, trained, dedicated person with AI will only create commercial stasis, business processes and offerings frozen in time. You need people to expand, enhance and improve. You need them to convey the culture of an organisation, it’s feelings on risk, it’s history. Large, mature, businesses will not hand over new products or initiatives to AI, it’s too risky - they can and have gone rogue in big ways (See recent PocketOS situation). Your people are your water and everyday they shape the business to the landscape being revealed. If you are invested in a company that is using AI to fire people to gain a short lived bump on the tape then you need to find other opportunities. That company has run out of ideas.

Don’t ask me, ask Trevor Noah.

My guess is, there will be a wave of rehiring in 9-12 months as these businesses realise they need experienced humans to supervise the AI and that they will inevitably start losing market share to the AI native competition.

For paid subscribers I include the below prompt to check your stocks for this trait. I use Gemini via the "=AI() function in Google Sheets and it returned this response for Klarna, a notable AI replacement story.

In the last six months, Klarna has maintained its strategy to reduce its workforce from 3,000 to 2,000 by 2030, a goal explicitly linked to AI automation and natural attrition. While the company previously cut approximately 700 roles due to AI, recent reports from early 2026 indicate a pivot to rehiring human agents via a flexible model following a decline in service quality.

During this same period, Klarna has aggressively pursued AI-led growth initiatives, including launching an AI-powered shopping assistant, developing internal productivity tools like Kiki, and using generative AI to reduce marketing costs by 25% while increasing campaign volume. The company also integrated payment options into Google's Gemini app and expanded its merchant network through partnerships with eBay and Walmart.

This dual approach of aggressive automation and product expansion is likely to lead to significant growth. By achieving a 152% increase in revenue per employee and maintaining profitability over four consecutive quarters, Klarna is successfully leveraging AI to improve margins and scale its market share, despite the operational challenges of replacing human labor.

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Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

As in war, sport, fashion, business and many other facets of life, there are those that can see the game in front of them better than their opponents or at least, their ability to make a call on where it’s going, ahead of time sets them apart in their outcomes.

EXAMPLE OF SUN TZU

There are many examples of this in business and many counterexamples. Apple is such an example. Many today might not know that Apple began as a personal computer company. They are now known for smartphones but this was not always the case. What seems like a no brainer in hindsight was a tenuous time for the company and a bold move my its captain, Steve Jobs.

In 2007, even though Mac’s and Ipods made up the majority of revenues for Apple, he saw the direction of travel for PC’s and Ipods and then saw the direction of travel for mobile phones and he made the call to modify the tactics of the business.

This was no small decision. It was a signal to all his teams that their roles and everything they had done to that point would not be the focus going forward. If he was wrong, the results would be disastrous for everyone involved - which is why Sun Tzu says, “and thereby succeed in winning”. He was effectively ending the Ipod which had been an incredibly successful and revolutionary product for the company that was only a few years in the world.

Steve Jobs was right of course, mobile phones was the strategy to pursue. In releasing the Iphone he also raised the bar for others, he introduced a smartphone that was intuitive and exciting with revolutionary new technology, touchscreen.

COUNTEREXAMPLES

Apples entry into the space and their innovation drove some counter examples to Sun Tzu’s advice that didn’t “modify their tactics” or did so too slowly. Nokia was the first counterexample, it failed to modify in relation to its opponent i.e. move to the smartphone.

They instead held the belief [full addendum detail for paid subscribers] that this new player and new technology was not a threat to their 50% market share. This belief was quickly proven false, by which time it was too late for them to reposition their resources and people to offer a defence. Another counterexample, cut from the same product launch was Blackberry. They owned the corporate mobile markets and they looked at the iPhone launch and saw a fragile toy with terrible battery life, a clumsy digital keyboard, and a lack of military-grade security. They assumed no serious businessperson would ever trade the efficiency of a BlackBerry keyboard for a flat piece of glass. Again, they were quickly proven wrong and by the time they went to reposition, it was too late [full detail for paid subscribers].

TAKEAWAY FOR INVESTORS

For investors, when looking at a company, it is important to consider Sun Tzu’s words and ask

1. is this company sitting at an inflection point for its products or industry?

and,

2. if it is, does it have a leader who can modify their tactics accordingly to protect, or even better, expand your investment.

Today there are several industries and companies facing dilemmas of innovation and I break down some of the names, industries and behaviours to watch out for in the [addendum for paid subscribers].

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Sun Tzu, The Art of War

Note: None of the material or content contained herein constitutes investment advice. It is solely for educational and informational purposes. Past performance is not an indicator of future performance.

Investing is a funny game. You need to be open minded but sceptical, convinced in your view but ever doubtful, patient but paranoid, not watch the tape but be ever watchful to changes in the story. This paradoxical existence can often lead us to taking on battles we needn’t be in.

Within the investing world, at any one time, there are a myriad of battles occurring. Portfolio managers big and small engage in back and forths in the public forum about the merits of a range of investment theses, from the more general, such as the direction of major markets to the more niche, like how Sirius XM will do (a stock with a high short interest to its active long interest). They do so to generate attention, to test their argument (this is a more theoretical reason in practice), to signal their prophetic prowess and, in some cases, they hope to move the price in the direction of their argument. But, investing is also a game where if you wait long enough, the numbers will eventually appear on the board and those locked in battle will know who is right, and who is dead (to quote the famous The Princess Bride scene above). Stocks where there are relatively high short positions compared to the active long positions are called battleground stocks.

Earlier in my career, I felt -strongly - that I had the measure of stocks that were clearly in line for a fall and while I never explicitly went short, I was very vocal and very smug in expressing my views. Very often they did not play out as I had said and I was left red faced. The relatively minor cost to my ego though was an invaluable investment experience. I learned that spotting shorts is not as straightforward as spotting longs and where the twain meet, you don’t really need to be.

Later in my career I ran headlong into such a situation. In H2 2019, Wirecard was a darling of European tech, loved by the sell side and held up as an example of Europe’s ability to develop tech companies. It was on our list and was heavily recommended. Then Dan McCrum of the FT wrote a pointed piece outlining his concerns about the company, serious concerns. This created a hive of battle activity, backs and forths, mostly in defence of the company. Committees were arranged, auditors hired, meetings held, notes upon notes were written, many conference calls (as it was at the time) were made. The price fell at first but regained the lost ground and moved on. The sell side didn’t move their view much but bolstered their position that the company had addressed the issue, but when you looked through the hive of activity, they hadn’t really addressed the concerns Dan raised. I followed the backs and forths at first but quickly realised I was not going to get an edge, or even if i did it wouldn’t be worth that much. So, for my part, under some challenge and pressure, I pushed through the removal of the name from the list. Ultimately, we didn’t need the battle. There are thousands of opportunities out there, we moved on and dedicated resource to that. A few months later, it came out that Dan and the FT were correct. The stock collapsed. It wasn’t edge and insight that protected the portfolio from Wirecard, it was simply avoiding a battle that wasn’t necessary to the goal.

Have you faced similar battles? Are you fighting a battle today that maybe isn’t worth it and you can just step away?

-Sun Tzu

Image generated from Gemini

THE ART OF WAR

Written in China roughly 2,500 years ago and attributed to military strategist Sun Tzu, The Art of War is one of the most influential treatises on strategy, tactics, and conflict ever produced. It is composed of 13 chapters, each dedicated to a different aspect of warfare - from laying plans and manoeuvering armies to using spies and understanding terrain.

What makes the text so enduring is that it is not really about the mechanics of hacking with swords or shooting arrows. It is a profound study of human psychology, resource management, and strategic positioning. Sun Tzu’s core philosophy revolves around efficiency: winning with the least amount of destruction, avoiding prolonged conflicts, and securing victory through superior planning and positioning before the battle even begins.

A STAPLE OF 1980s FINANCE

The Art of War was a cliched desk adornment of bankers in the 80’s and 90’s and has remained a tongue in cheek element of the industry, I have a copy sitting proudly on my book shelf. In this new series, I will take a piece of advice from the book each Tuesday (Sun Tzu-esday) and apply it to prevailing markets, hopefully it is fun and thought provoking.

EVEN THE FINEST SWORD

This week’s inaugural Sun Tzu quote - Even the finest sword plunged into salt water will eventually rust. - reminds use that even the finest swords [companies, investments, people] can rust if they’ve spent too much time in salt water.

What is salt water to investing, business and people though?

Salt water refers to an unsuitable environment, conditions that over time will damage and decay that which is not suited to it. Crucially too, it is a relatively slow process that can only be truly seen when looked for by those who know what it looks like.

This could be any range of items in an investment thesis:

• A structurally declining industry - cable tv, landlines, coal mining, tobacco, physical retail are all examples of industries in structural decline and having an extremely fine company sitting in the middle of one of these needs to be understood deeply.

• Toxic corporate culture - these are more prevalent in industries moving really fast (e.g. AI, tech, social media) or in industries moving really slow, where, without opportunity or the chance of recognition, politics and behaviours fester. Something to watch out for if investing in booming AI companies.

• Loss of focus on the products/services in favour of marketing - Steve Jobs was hyperaware of this and in a world of shortened attention spans and overwhelming focus on social media marketing, it is more likely than ever:

• Arrogant leadership - one of the fallouts of the digital age of the internet was that everyone has to be on a mission, but visionary founder missions can be dangerous to investors - Mikhail Zverev mentions as much in our recent EiC with him - as they can burn through investor capital (more often than not they end up very wealthy though….) on a fruitless plan, e.g. WeWork.

• Chronic capital misallocation - when a company hits on a cash cow product and are suddenly dealing with more capital than they’re use to, they can often go down paths of empire building, M&A, acquisitions or similarly wasteful uses of capital.

• Poor strategy - incoming leaders tend to want to be seen to make change to justify their existence. If it ain’t broke though and they fix it, it can often derail the successful process and momentum that was in place.

• Product missteps - staying ahead of competition in what you do and/or getting too far from what you do well can be fatal, Blackberry did two missteps in a relatively tiny amount of time, first they didn’t move to touchscreen when Apple did and this lost them huge share but those that remained, did so for the keyboard. When they launched their next model it had a touchscreen (too late) and no keyboard (forgot or ignored their core offering) and ultimately saw them disappear having been near dominant in corporate mobiles.

• Debt - we all know about this one.

For investors there are a few too, it can be paying too high a price, having too many eggs in one basket, not doing your research, not managing exposures, being too slow - or - quick to react or debt (leverage) too.

Good corporate and investment management requires that you regularly ask yourself, what is the salt water?

What do you think?