The October 13 edition of Beach Reads featured the thoughts of Stratechery's Ben Thompson on the antitrust case against big tech currently ongoing in the United States and pondered what Colombia law professor Tim Wu, might think. Well, in a response, Wu addresses Thompson's "aggregation theory" arguing that internet companies don't gain dominance solely because of unique business models. "Here is the danger: If you think competition is all about flavor and buzz (in the 1890s) or Thompson's aggregation theory (right now), you might end up overlooking all of the other strategies and factors that could also lead to a lasting advantage," Wu says. These strategies include activities such as buying competitors. Wu seems to think that subscribers to aggregation theory will be duped into believing that any online marketplace is, by definition, good. "Antitrust should be dealing with the reality of anticompetitive behavior in markets, not ideals of how companies work. And it is the difficult job of the law to determine which of these durable advantages just described are part of fair competition (for example, a better user experience) and which are not (for example, buying out dangerous rivals, or exclusionary deals that keep out competitors)." Getting the details right about both the business model and competitive dynamics of large tech companies is undoubtedly critical.

Thompson didn't miss a beat in publishing his own thoughtful response to Wu, arguing that Google is the poster child for aggregation theory. It's a company where "the marginal transaction costs for serving one additional customer are zero," Thompson says. "That is why Google, from the moment it launched, could be used by anyone in the world. Like Amazon, the company didn't need to build out physical stores, but unlike Amazon, the company didn't need to build out delivery infrastructure either. And unlike every retailer in existence it didn't need to pay for supply." Thompson's focus on Google seems well-founded, especially as he argues that it has no "natural drags on scale." Which brings us to one of the key points raised by Wu – the idea that, despite superior business models, companies can still become anticompetitive vis-a-vis things like acquisitions: "The difference I have with Wu, as far as I can tell, is that I see these agreements and acquisitions as frosting on an Aggregation cake, as opposed to the fundamental drivers of their dominance. Google isn't dominant because they broke the law, they are (arguably) breaking the law well after their dominance was established, and that distinction matters when it comes to crafting remedies and regulations that actually work." I think these two authors agree on more than they may think.

It's not the first time Beach Reads has featured non-GAAP's "Mike," an ex-activist investor who provides a framework for investors on how to integrate corporate governance signals into company analysis. In this post, Mike introduces readers to the G.O.V.E.R.N. framework. Each letter in G.O.V.E.R.N. corresponds to a step investors should take in applying a corporate governance lens to investing – my favorite (although perhaps the most nebulous) is the last, which refers to "narrative." From the article: "If you can recognize and/or anticipate the Board and management is about reset around a realistic narrative, significant risk-adjusted returns are available. And unsurprisingly, changes to compensation can be the 'canary in the narrative coal mine'." Understanding a narrative reset and likelihood of execution (backed by understanding remuneration strategies outlined in the post) seems like an important way to find companies that are setting themselves up for improved performance.

Patrick O'Shaughnessy interviews Anu Hariharan, a partner at Y-Combinator who previously worked at companies including Andeersen Horowitz and BCG, in this podcast. The two discuss a wide variety of topics relating to growth investing. One of my favorite topics was Hariharan's description of what she looks for when investing, especially in early-stage businesses. These are 1) team; 2) market opportunity; and 3) performance to date. Give this wide-ranging conversation a listen if you want to learn more about growth investing, opportunities outside the US, and more.

I'm a long-time fan of the Columbia Business School's "Graham and Doddsville" publication and this most recent edition features some great student theses on Hanesbrand, The TJX Companies, and Farfetch. It also includes interviews with some fantastic investment managers and of particular note is Oakmark Capital's Bill Nygren's on investment philosophy. "It was important to have an investment approach that was consistent with the way I thought about money and all other aspects – trying to get the most value for my dollar and applying that same process to investing," Nygren says. "I wasn't fighting any cognitive battles inside my own head...I learned that being good at executing one's personal investment philosophy didn't really matter if the people that you worked with were using a different philosophy." Investors who don't pursue a philosophy that aligns with their internal sensibilities run the risk of a critical mismatch. But investors MUST remain adaptable – finding the right balance of what makes sense internally and externally through time is therefore key.

Disclaimer: To the extent that Beach Reads discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. The companies and or securities referenced and discussed do not constitute an offer nor recommendation to buy, sell or hold such security, and the information may not be current. The companies identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the companies identified was or will be profitable. Beach Reads does not constitute a recommendation or a statement of opinion, or a report of either of those things and does not, and is not intended, to take into account the particular investment objectives, financial conditions, or needs of individual clients.