Sir Chris Hohn | In Good Company | Norges Bank Investment Management
Two risks every investor must understand:
- Competition risk: a competitor takes your market share
- Replacement risk: your product becomes obsolete entirely
Two levers of growth:
- Volume growth: selling more units
- Pricing growth: raising prices with no added cost; every extra dollar of price flows straight to profit
What separates great businesses: barriers to entry.
- Irreplaceable physical assets: airports can’t be duplicated
- Intellectual property: aircraft engines, embedded software
- Switching costs: once installed, customers don’t leave
The paradox of moats:
- Low barrier to entry → competition floods in
- High barrier to entry → regulators come knocking
- The ideal case: competition exists, but it’s weak, or only appears threatening
Risky industries:
- Banks
- Retail
- Most manufacturing
- Airlines
- Fossil utilities
- Telecom
- Transitional asset managers
- Media
- Advertising agencies
What makes a great investor:
- Fundamental analysis: understand the business deeply
- Longtermism: resist the pressure to think short
- Intuition is
- thinking without thinking
- the opposite of intellect
- a higher level of intelligence
- knowing
Sir Chris Hohn on the In Good Company podcast.