tldr; Asking How many ___ ? will set you on an exploratory investing journey and makes learning about companies fun.
When you listen to Warren Buffett talk, it is interesting to see how he uses simple numbers whenever he talks.
I am usually a prose or poetry kind of guy. I will get lost in the fantasy of the topic like a Fiction Novel. I will describe things focused on feelings.
I would say You should have gone to Yellow Stone, it is a Wild Life Safari without going to Africa. You should taste a Tres Leches Cake, it is heavenly with the milk bursting in your mouth on every bite, yum!Costco is amazing, the warehouse is so huge.So many deals, toilet paper is so cheap! etc.
Most of us probably describe it through feelings because of the poet in us?
But Warren Buffett talks using simple numbers. He doesn’t use the Sigmas, or quotient this and XYZ rate that as the Analysts on CNBC do (Although, I am confident he can talk hours on it).
He talks about how many 8oz cans of Coca-Cola were sold last year? Simple and very clear. How many “(Tons)x(Miles)” did the Burlington Railroad transport this year. Square Footage of stores. How many items in the Catalog of a store (I mean who thinks about Stores like that? I am more interested in what fashion designer they have hired etc.)
Of course there is also earnings and revenue, his Schiller PE ratio etc.
What I find fascinating is how he uses numbers to describe day to day things.
If you ask me to describe a Developer say Lennar or someone; I would mention iconic locations, that great Spanish Architecture, the tiles or maybe the build quality. Warren Buffett will be like Clayton Homes sold 350k homes in the year 2065!. I mean he doesn’t care much about the Qualitative aspects. Are the Houses nice? Does it have great views? Nope, he doesn’t care about such things. What he focuses on are the simple numbers. He also emphasizes that simple numbers and/or Arithmetic is enough to be great at Investing. If you need a calculator then you are doing it (Value Investing) wrong.
Fun Fact about about Geniuses and measuring. Newton, when he was a kid, used to measure the speed of wind by using a stick. He would jump against the wind and start counting. Then see if and when he falls behind the stick, he would measure that and deduce the speed of wind!
I am more of abstract fiction kind of a Guy. What I find interesting how they associate numbers with the real world objects.
There is always earnings and stuff which you have to use if you are in the Finance World. Associating or Measuring day to day things/activities with numbers is very fascinating to me. This is where ideas come from!
I did a mental experiment of asking How many to every situation I was in. It was eye opening. Say you are driving on the Freeway and bored. Ask yourself How many ___? and Fill anything in the blank
How many cars are there on this Freeway? Take a guess, precision is not important. Ball park ranges are fine. Then you have a rough idea of how many gallons of Gas vs Diesel is being utilized. Next is How many tires are being used. Then you get interested tire manufactures. Which tire manufacturer stock can I buy? Well, that’s the end goal I was trying to convey.
How many Toyotas on the Freeway? How many Billboards, Milestones did I see so far? How many Freeway Signs there are? Then you ask, I bet whoever contracted to make those Milestones etc. is in good business right? The more you observe and count, the more informed you are.
It doesn’t have to stop there. Just asking how many opens a new perspective. Take anything or any idea and ask How many?
So you want to evaluate a Business. Evaluate is a Big Word! May be you want to get excited and go on that Adventure of exploring that Business. Start with How many? No, not just the Earnings. Just ask how many on any aspect of the Business.
Let’s pickup a lame company like HomeDepot.
Let us apply our How Many ___? formula and see what happens.
When I say How Many? You say ???
How many stores does HomeDepot have?How many employees does HomeDepot have? How many catalog items does an average store carry? How many items were sold online? How many countries does it operate in?How many square feet does an average warehouse have? …
Then comes comparisons part. You can compare each one of these simple numbers with Lowes and see who is more efficient etc. and come to an informed decision about the strengths of a company in a fun self-exploratory way.
Let’s do a cool one now. Tinder! Assume we are interested in the parent company $MTCH.
How many right swipes were there? How many left swipes? How many matches? How many paid users? How many males vs females on the App?
It also gives you insights and your mind sort of asks more How many questions naturally. This ultimately gets you the right data to make your Business Decision. It’s also fun when you are proactive find answers to How many instead of reading lengthy boring papers.