Value Investing Meets Venture Capital w/ Kyle Grieve (TIP801)
Speakers
Kyle Grieve -- Guest
— We Study Billionaires host
Summary
- Power laws dominate investment returns: 5% of VC investments generated 60% of Horsley Bridge's returns; speaker's own portfolio shows 5% of picks (2 positions) contributed 45% of his total returns.
- Investors must accept numerous small losses as the necessary cost of capturing outsized, long-tail winners; hit rate is less important than the magnitude of the wins.
- Moore's Law (costs fall as tech improves) and Metcalfe's Law (network value grows exponentially with users) are foundational for identifying scalable, high-margin platform businesses.
- A key VC lesson is to scale positions as a business becomes "de-risked" (e.g., technology/product/distribution risks fade), exemplified by Buffett's large Apple purchase in 2016, long after its risky startup phase.
- Unpopular or overlooked businesses, which may be ignored by major funds, can generate exceptional returns (e.g., XPEL listing on TSX Venture after US VC rejection).
- Value investors should overcome anchoring bias and be willing to "average up" into winning positions if the business continues to improve and the valuation multiple is reasonable relative to growth.
- "Long-horizon arbitrage": Focus on whether a business is fundamentally improving (increasing cash flow, widening moat) rather than short-term price validation; time arbitrages the gap between intrinsic value growth and market price.
- Assess investment asymmetry using MOIC (Multiple on Invested Capital) / multi-bagger framework; speaker targets investments with a 2x bear case, 3x base case, and 10x bull case.
- CEO evaluation is critical: Scour past transcripts for execution on stated initiatives, analyze language for long-term orientation, and review capital efficiency metrics (ROIC, ROE) and incentive structures.
- Current market flow from SaaS to AI financing ($377B in H1 2025) is creating potential opportunities in overlooked, cash-generative SaaS businesses that are being sold off.
Trade Ideas
Speaker sold Micron (MU) shares at ~$53 after buying at ~$45, missing a subsequent rise to ~$420 (a 9-bagger). He cites this as a painful lesson in selling a potential power law winner too early. The core error was selling a business that continued to improve fundamentally, driven by anchoring to his purchase price instead of assessing ongoing business improvement. WATCH as a case study in the cost of misapplying value investing principles (e.g., selling for a small gain) to a business with power law potential. The implication is to monitor such compounders for sustained fundamental improvement. The business fails to continue its improvement cycle, validating the original sale decision.
Speaker uses Apple as the prime example of Buffett's "de-risking" investment strategy. Buffett invested heavily in 2016, long after the iPod, iPhone, and App Store launches, when technology/product risks had faded, and it was a cash-generative business with a loyal ecosystem. The lesson is not about Apple's current appeal, but about the *framework*: wait for a great business to pass through its high-risk, early-phase uncertainty before scaling a position, even if it means paying a higher absolute price. WATCH as the archetypal model for applying VC-style staged investing (adding as risk dissipates) to public equities. It's a strategic lesson for identifying and timing investments in other potential compounders. The framework is misapplied to businesses that do not possess Apple's durable competitive advantages.
Speaker finds Duolingo "scary" and an "easy pass." He is skeptical of the bull case that it's a gamified app, as that pits it against thousands of undifferentiated mobile games. He also sees a risk of ChatGPT disrupting language learning. The business model appears to lack a durable competitive advantage or deep utility; its "gamified" nature makes it potentially substitutable, and it faces existential technological disruption. AVOID due to high narrative risk, potential for disruption, and unclear economic moat in a crowded market segment. Duolingo successfully evolves its product to create a defensible, non-game-based utility that locks in users.
Up Next
This We Study Billionaires video, published March 21, 2026, features Kyle Grieve discussing MU, AAPL, DUOL. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Kyle Grieve · Tickers: MU, AAPL, DUOL