Acquired

The Legend Michael Mauboussin on Acquired!

We sit down with the one & only Michael Mauboussin to dive deep into his incredible body of work: untangling skill and luck, measuring moats, persistence of returns in venture capital, decision making and — particularly timely — expectations investing and how to think about valuations in the current 2021 market environment. (!!) Michael's work is maybe our most frequent carve out on Acquired, so we're pumped to finally have a chance to interview the man himself. Big thank you to Patrick O'Shaughnessy and Brent Beshore for introducing us all at Capital Camp this year! If you love Acquired and want more, join our LP Community for access to over 50 LP-only episodes, monthly Zoom calls, and live access for big events like emergency pods and book club discussions with authors. We can't wait to see you there. Join here at: https://acquired.fm/lp/ **Sponsors** - Thanks to SoftBank Latin America for being our presenting sponsor for this special episode. If you are an entrepreneur, employee, other investor or simply someone who's interested in learning about the best young companies in LatAm right now, get in touch with them at: https://bit.ly/acquiredsoftbanklatam , and tell them that Ben and David sent you! - You can get learn more about careers at their portfolio company QuintoAndar at https://carreiras.quintoandar.com.br - Thank you as well to Modern Treasury and to Fundrise. You can learn more about them at: - https://bit.ly/acquiredmoderntreasury (and you can find our reverse interview with them at https://www.moderntreasury.com/acquired ) - https://bit.ly/acquiredfundrise **Jobs!** - Big news — we now have a full Acquired Job Board! It's a one-stop-shop with all the very best opportunities from the amazing companies in the Acquired community, including folks like Solana, Italic, Pilot, RabbitHole, Modern Treasury, Vouch, Zapier, Levels and more. AND, if you're more casually open to opportunities, we have a form you can fill out and we'll handpick the best ones and personally send to you as they come up. Check it out at https://www.acquired.fm/jobs **Links:** - Michael's wonderful talk at Google: https://youtu.be/1JLfqBsX5Lc - The new revised edition of Expectations Investing: https://www.amazon.com/Expectations-Investing-Reading-Returns-Heilbrunn/dp/0231203047/ - The Success Equation: https://www.amazon.com/The-Success-Equation-Untangling-Investing/dp/1422184234/ - Measuring the Moat: https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1066439791&serialid=4uA2wHojCvFKzqWfwIyDvkSN1pkXRpb43LvyclLcJsk%3D&cspId=null - Public to Private Equity: https://www.morganstanley.com/im/publication/insights/articles/articles_publictoprivateequityintheusalongtermlook_us.pdf *‍Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.*

BGBen GilberthostDRDavid RosenthalhostMMMichael Mauboussinguest

Oct 5, 2021·1h 34m·Watch on YouTube ↗

📖 CHAPTERS

1. 1

   Fan-made intro animation + show kickoff

   Ben and David riff on the idea of open-sourcing an animated intro to listeners, then welcome everyone to a special Acquired episode. They introduce the interview format and set the tone for a macro-aware conversation with a longtime Acquired “hero.”

2. 2

   Sponsor spotlight: SoftBank Latin America Fund + QuintoAndar founder story

   A sponsored segment features Gabriel Braga, CEO of QuintoAndar, explaining how the company rebuilt Brazil’s rental transaction experience. He also describes how the LatAm startup ecosystem matured—especially after SoftBank’s entry as a major capital provider.

3. 3

   Why Mauboussin now: framing the interview around Expectations Investing

   David explains the motivation for having Michael Mauboussin on: his ideas map well to a “crazy” market environment. The conversation begins with Expectations Investing, prompted by the revised edition and its usefulness for making sense of prices-as-expectations.

4. 4

   Al Rappaport’s influence: cash flow, strategy + valuation, and market expectations

   Mauboussin recounts how Al Rappaport’s Creating Shareholder Value reshaped his entire career. He highlights three foundational ideas: cash flow over earnings, integrating strategy with valuation, and stock prices as signals of market expectations for managers and investors.

5. 5

   Expectations Investing in 30 seconds—and why “reverse engineering” beats price targets

   Mauboussin summarizes the Expectations Investing process: infer what the market must believe, test those expectations with strategic/financial analysis, then act (buy/sell/hold). The hosts discuss how this contrasts with typical bottoms-up modeling and aligns with inversion-style reasoning.

6. 6

   Intangibles, accounting distortions, and why cash flow matters more than ever

   They explore how intangible investment has overtaken CapEx, making traditional accounting less informative for modern businesses. Mauboussin explains what counts as intangibles and why expensing them can misstate profitability—especially for software-heavy companies.

7. 7

   Free cash flow nuance and the Walmart lesson: investing can justify “losing money”

   Mauboussin clarifies that “free cash flow” equals earnings minus investments—and that negative FCF can be good when returns on investment are high. Walmart’s early public history illustrates how profitable expansion can create long-term value despite negative FCF.

8. 8

   How Mauboussin teaches Security Analysis: markets, valuation, moats, and decisions

   Mauboussin outlines his four-part course structure and why decision-making has become the newest and most important module. He argues that temperament and decision quality under stress separate good investors from great ones more than spreadsheet skill.

9. 9

   Measuring the Moat: defining advantage and linking strategy to ROIC mechanics

   Mauboussin explains the difficulty of synthesizing Porter, Christensen, and increasing-returns theory into an investor-usable framework. He defines competitive advantage with absolute and relative components and connects sources of advantage to ROIC via margins and capital velocity.

10. 10

    Early-stage investing, complexity, and real options thinking

    The hosts discuss why moat measurement is difficult for seed-stage companies and pivot to complexity and options. Mauboussin frames startups as “real options,” where volatility can increase value and where management quality and capital access determine whether options can be exercised.

11. 11

    Tesla as a case study: reverse engineering extreme expectations + reflexivity

    Using Tesla, Mauboussin illustrates how to work backwards from lofty valuations and consider embedded optionality beyond visible cash flows. He emphasizes reflexivity: rising stock prices can change fundamentals by enabling capital raises, which then extend runway and opportunity.

12. 12

    Sponsor break: Modern Treasury and payment operations infrastructure

    Ben and David describe Modern Treasury’s role in automating payment operations via software and APIs. They highlight customer examples, the company’s momentum, and a free “reverse interview” LP episode offered to listeners.

13. 13

    Decision-making under uncertainty: base rates, pre-mortems, red teams, and journaling

    Mauboussin shares practical tools to improve decisions by expanding the set of considered outcomes and creating feedback loops. He argues that investors routinely overestimate foresight and benefit from disciplines that counteract overconfidence and hindsight bias.

14. 14

    Untangling Skill and Luck: from Moneyball to the paradox of skill and persistence

    Mauboussin explains what sparked his skill-vs-luck work and defines both concepts. He introduces the luck-skill continuum, the paradox of skill (as skill rises, outcomes look more random), and how persistence differs across public markets, buyouts, and venture capital.

15. 15

    Preferential attachment in venture, regression to the mean, and streaks like Buffett

    They dig into why venture shows more persistence, with Mauboussin offering a preferential attachment theory—top firms attract top founders and reinforce advantage. The conversation turns to streaks, regression to the mean, and whether a Buffett-like multi-decade run is repeatable in today’s hyper-competitive environment.

16. 16

    Career advice: find “easy games,” apply leverage via geography/neglect, and build for real problems

    Mauboussin reflects on what he might do if starting today, emphasizing finding underplayed “poker tables” and acknowledging his ambivalence about finance versus solving big societal problems. He suggests looking for neglected securities, underserved geographies, or nascent arenas like crypto—while staying ethical.

17. 17

    Will we see a $10T company? Discount rates, top-10 churn, and the next 20 years

    They discuss how low interest rates mathematically inflate valuations, especially for high-growth companies. Mauboussin highlights dramatic turnover in top market-cap leaders: only Microsoft remained in the top 10 from 2001 to 2021, underscoring how uncertain durable dominance can be.

18. 18

    Wrap-up: where to find Mauboussin + Acquired Job Board announcement

    Mauboussin shares how listeners can follow and contact him, and the hosts close with community updates. They announce the Acquired Job Board as a curated extension of the Slack jobs channel and point listeners to LP membership and upcoming episodes.