Last summer, I shared my views (see here) on the then-record sale of the NBA’s Los Angeles Lakers for $10 billion. I’d read the biography of Jack Kent Cooke, a publishing and cable entrepreneur who owned the franchise before the Buss family, so I was interested in the transaction. Jack bought the team for $5.17 million in 1965 and sold it, another team, and real estate to Jerry Buss for $67 million in 1979. Forty-six years later (last year), the Buss family sold the Lakers to finance entrepreneur Mark Walter for $10 billion.

Today I learned that the Lakers are being sold again, this time for $12.5 billion to former Disney CEO Bob Iger and venture capitalist Josh Kushner (see here). That’s over $2 billion more than Walter paid roughly a year ago.

It’s interesting that a storied franchise like the Lakers didn’t change hands for decades and then went through two ownership changes in about a year. I doubt this will become the norm for professional sports teams, but I’m curious about whether we’ll see any reaction from other team owners, players, or fans.

As I shared yesterday, I read The Bond King, a biography about famous investor Bill Gross and the investing empire he built with PIMCO. Two other things stood out to me about Gross’s story that I’ve been thinking about this week.

Even though he founded PIMCO, Gross wasn’t an entrepreneur. He started PIMCO as an experiment within the insurance company he was working for in the 1970s, Pacific Mutual Life Insurance Company. Pacific Mutual gave him and a few others $5 million to test out their bond strategies. By taking the intrapreneur route, Gross could enjoy a comfortable salary, not spend months or years trying to raise money from LPs for a fund, and use the resources and infrastructure of his employer. PIMCO made Gross a billionaire even though he wasn’t an entrepreneur and his risk was significantly reduced.

The other thing that stood out to me was the culture at PIMCO. It was sharp-elbowed and competitive, which helped them for decades. They pushed the boundaries, and it doesn’t sound like it was a fun place to work. It was an intense pressure cooker that paid extremely high salaries. People hated it, but they couldn’t leave. The culture Gross created ended up being a big part of the reason he was forced to leave abruptly.  

Bill Gross and the PIMCO story are fascinating. He’s a super-eccentric guy. He accomplished a lot, but his eccentric ways had many downsides.

Last week, I read The Bond King, a biography about Bill Gross and how he built PIMCO into an investing powerhouse. Gross is an eccentric character, which was one factor that contributed to his downfall and exit from PIMCO. But one thing that stuck with me was that he used a similar strategy to several other prominent investors who founded their own investing firms.

I wrote about this a few weeks ago (see here). Gross was early to understand that the 1970s high-inflation environment and subsequent decline meant that there was an opportunity to generate outsized returns by buying and selling bonds more frequently. This was different than the traditional “buy a bond, lock it in a vault, and collect your income coupons.” He wanted to trade bonds instead of just buying and holding them. This was novel at the time, and there weren’t other players doing this, so he essentially had the entire market to himself.

Gross found a small, inefficient market with no competition. He generated outsized returns there, then moved to larger, more efficient markets as his capital base grew. It’s the same playbook that others like Ed Thorpe, Warren Buffett, and others also used.

When lots of smart people land on the same strategy to achieve outsized success, that’s not a coincidence.

One thing I’ve noticed over time is how some of the smartest investors achieved outsize success early in their careers by starting out in small, inefficient markets. They took this approach because smaller markets have fewer players (specifically, big-money institutions). When they found an undervalued opportunity, the upside was often larger because it was mispriced to the downside. Those asymmetrical opportunities allowed them to turn a small amount of capital into a large amount of capital at a faster rate. At that point, they then usually entered larger markets. A few notable people I’ve read about used this strategy.

One of my favorite books is the autobiography of Ed Thorp, A Man for All Markets. It’s a combination biography and framework book that’s full of little hacks for navigating life. Thorp realized that equity derivatives (warrants and options) were new and nobody could figure out what they were worth. A mathematician, he used his training to create a formula to price them. He then used that information to buy underpriced derivatives and sell overpriced derivatives, generating outsize returns for decades.

Michael Milken did the same thing with junk bonds in the 1970s and 1980s, becoming the de facto market maker in the infant junk bond market. He helped create bond offerings and sold them to investors. His efforts not only birthed the junk bond market but also helped birth the private equity industry by providing debt for people wanting to take large public companies private.

Warren Buffett did the same with the investment partnership Buffett Partnership Limited from 1956 to 1969, pre-Berkshire Hathaway. He found, OTC, small public companies and some small private companies that were selling for much less than they were worth. He’d buy a huge position and then wait for the market to rerate the public company to true value and sell the private company. When he wound down the partnership in 1969, he’d mostly sold his holdings, except for a few like Berkshire Hathaway.

My takeaway is that it’s often better to start in a small, inefficient market with less competition. After you have some success there, then move to the larger markets where you can now compete better because you have a larger capital base and more experience.

In yesterday’s post (see here), I shared a quarterly letter written by an institutional investor that gives his thoughts on investing in public software companies. The letter references a 1997 email exchange between Warren Buffett and Microsoft executive Jeff Raikes, which caught my attention. Here’s that section of the letter:

SaaS is an amazing business model, which makes us reluctant to give up on the category entirely without deeper analysis. Buffett always says that the best business is a royalty on another fellow’s sales—someone else puts up the capital and takes the risk, leaving you a high-margin, capital-light, recurring revenue stream (particularly relevant during troubled times like recently with the Iran war, when traditional companies face oil/margin/ consumer demand risk and can become difficult to analyze). Traditionally, these royalty-like businesses were rare, expensive, and often no longer fast-growing. Software is a pure expression of that thesis (Jeff Raikes at Microsoft made this point to Buffett in his famous 1997 email) and happens to have the added benefit of continued high growth. When that royalty is offered cheaply, it’s worth looking into more deeply.

This “famous” email is new to me. I’m really curious to understand why it’s so famous and to learn more about Raikes’s and Buffett’s thinking on royalty-like businesses.

I’m going to see if I can dig up this email exchange. If I find it, I’ll share what I learn in another post.

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This weekend I was doing research on X about public software companies. I wanted to understand the lens other investors are looking through to view these companies in the age of AI. I found some interesting posts, and one from Tim Liu, founder of Meditation Capital Management, particularly caught my attention. He linked to his fund’s Q2 letter, which focused exclusively on the lens he uses for investing in (and avoiding) software companies. See the post here and the link to the letter here.

He makes some good points, and his framework for evaluating software was interesting. I noticed that software stocks are trading as a “basket” (i.e., they’re correlated and they move together), but I found that the stocks in that basket are very different. The companies all sell software, but they serve different types of customers (enterprise vs. SMBs) and solve different problems (e.g., marketing vs. financial reporting). I think this basket approach the stock market is taking to valuing software companies will provide an opportunity to savvy investors who do the work to understand which companies in these baskets are unique and will thrive in the age of AI instead of being displaced by AI.

The part I found most useful was his framework for thinking about how AI will impact software. A lot of his thinking is logical, but I disagree with his view that customers will rebuild and customize core software that’s key to their business operations. Some will, but the majority, especially SMBs, won’t. As I shared in this post, rebuilding and maintaining a critical system is a heavy lift that carries a ton of risk. Many companies can get a better return on the time, energy, and cost required to build a system from scratch. I think a more likely path is that companies will create apps to handle niche use cases (like specific processes) and integrate those apps into their off-the-shelf, mission-critical systems (i.e., pump the data back into the system of record). This will allow them to use their domain expertise to solve the problem in the way they see fit while avoiding a mammoth allocation of resources to build and maintain a new system.

Overall, I enjoyed Tim’s letter, and it’s a great read for anyone curious about how institutional public market investors are evaluating investment in SaaS companies in the age of AI.

I had a debate with an entrepreneur this past weekend about AI and software companies. The question was whether AI will disrupt mission-critical software companies. Think ERP, CRM, and HCM software like NetSuite, HubSpot, Salesforce, Workday, etc.

Having built an ERP system with CRM functionality, my answer is no. In the short to medium term, these software companies will continue to have a strong moat. I believe this for two reasons. First, these systems are very complex and run functions that are mission critical. The risk of replacing one of them with a system that doesn’t work as well is too high, even if the upside is saving money. Disrupted operations can lead to significant financial losses and tarnish a company’s brand. Most companies don’t want to take those kinds of risks (start-ups might, though).

When I was running my company, there was zero chance you could get me to change from the ERP/CRM system we built for ourselves. The risk and learning curve associated with switching were too high. Even if someone had given me the software for free, I would have said “no thanks.”

Cost is the second reason I believe mission-critical companies aren’t about to be disrupted by AI. Having AI build a system as complex as the ones mentioned above would take significant time and energy and cost a ton via tokens. Then there’s maintenance. You can’t just build it and forget about it; you have to maintain homegrown systems, which can require material resources. When a company thinks about the time, energy, and cost required to build and replace a system, they’ll keep what they have and allocate those resources to high-return activities.

My company’s internal software was a living thing. We were always making improvements and changes to it. I learned over the years to budget a certain amount of salary and team bandwidth for maintenance of this software.

Complex, mission-critical software is the backbone of many companies. If one of these systems stops working, a company is flying blind and in some cases can’t operate at all.

As of today, I don’t think these companies are at risk of losing customers. Whether they’ll continue to grow at historical rates is a legitimate question. I think the probability that they will is high, because I doubt that company leaders want to start building these types of systems from scratch. The return on the allocation of resources doesn’t make sense.

Yesterday, I shared (see here) that SpaceX was raising an additional $20  billion by issuing bonds. The deal priced today, and per Bloomberg (see here), the final order book has “less than three times the amount of debt offered . . . .” I took that to mean the demand was two or three times greater than the offer so orders totaled somewhere between $50 and $75 billion.

I don’t know a ton about bond issuance or bonds in general. I’m curious, though, and hope to get time to learn more about them. Public technology companies have issued a lot of bonds in 2026, and SpaceX just added to that list.

Last week, SpaceX completed the largest IPO raise in history (see more here): roughly $75 billion, it’s reported (see here). Now, the company is raising an additional $20 billion through bond issuance. The plan is said to be for the bonds to mature in between five and thirty years. It appears that the majority of these funds will be used to refinance a bridge loan that’s roughly the same size as the bond offering. They’re looking to convert the loan from high-cost short-term debt to lower-cost longer-term debt.

In the last month or so, we’ve seen several large tech companies raise tons of capital. And debt raises have been a material part of their capital-raising plans. I’m really curious to see how this plays out. I’m wondering if this is a window that companies are taking advantage of before it closes or, conversely, it will become the new norm for tech companies looking to raise significant capital.

SpaceX completed its IPO offering. According to Bloomberg (see here), SpaceX has raised a staggering $75 billion from investors by selling 555.6 million shares at $135 each. At that price, the company will have a market cap of roughly $1.77 trillion. For context, the second-largest amount ever raised during an IPO was $29.4 billion; that was Saudi Aramco’s IPO in 2019. SpaceX will begin trading on the stock market later today. I’m curious to see how receptive public-market investors will be to the company in the coming weeks and months. Regardless, this is a record-setting IPO.