We are experiencing the biggest sell-off in (growth) stocks since the credit crisis in 2008/09 and the Dotcom crash in 2000/01. More than 45% of the Nasdaq’s stocks are down more than 50%. Shopify, one of our larger positions, is down 67% in 2022. Spotify is down 55% and even Alphabet and Amazon, powerhouses with enormous earnings power, are down 19% and 27% respectively.

Meanwhile, the portfolio companies have reported solid 2022 Q1 earnings updates, especially given the challenging period, and the outlook remains good. We largely own the same businesses as in December 2021. We sell businesses when there are red flags that would indicate a material negative impact on long-term earnings power. So far, we have not seen such evidence related to our businesses.

We understand that people are confused by various tectonic shifts; rising inflation and interest rates, labor shortages partly driven by the emerging creator economy, geopolitical tensions, cyber threats, Apple’s IDFA changes, the transition from the pandemic to an era in which digitalization is still accelerating, the enormous impact of AI on society, changing business architectures driven by migration of workloads to the public cloud, supply chain challenges, and so forth.

Many of the world’s current problems are our businesses’ opportunities. For Cloudflare, Snowflake, and Crowdstrike, to protect data and enable efficient information intelligence for governments and enterprises. For Shopify and Spotify to enable entrepreneurs and creators to monetize their brands, to be discovered, and all that for lower costs.

We do not know when and where prices will rebound. Such major market drawdowns can easily last 12-18 months from the start (November 2021). Until that moment, valuations are not just declining because prices come down yet also because the businesses are growing.

In hindsight, it would have been great to sell all stocks in October and come back these weeks. However, dancing in and out of core investments is likely to be an inferior strategy going forward and not a game we will ever play. When dealing with scalable internet-enabled businesses, the biggest challenge going forward will be to be comfortable owning thriving companies at full valuation and through multiple swings in the price of the stock.

These mark-to-market losses are painful. The risk of a permanent loss of capital is largely determined by the investor’s horizon, and we have always made it clear that our horizon is at least 3-5 years ahead. This sell-off also provides a rare opportunity for those with the right mindset and horizon.

Finally, let me end by sharing this essay by Kevin Scott, CTO of Microsoft, about the progress in AI and the definition of ‘work’. Generative models such as Dall-E2 (a new AI system that can create realistic images and art from a description in natural language) and PaLM (Pathways Language Model) are becoming powerful and will have an impact on society. It is relevant because some of our businesses are leveraging these innovations to build better products.

Hold on.



We bought shares in Epic Games, a leading interactive entertainment company, operator of Fortnite, and provider of the Unreal Engine, which powers the world’s leading games as well as industrial simulations.

We think that Epic has a gigantic opportunity to thrive in the future internet. There, we are unlikely to conduct affairs while staring at a 5.7 x 2.8-inch two-dimensional box. Our experience of the network will be largely immersive, and our physical self will be better represented in a virtual space. This is a natural continuous development from text to image, to video and augmented reality. And from mainframes, to PC, to mobile, to virtual reality.

History shows that the dominant operating systems of the old medium seldom rule the new. The leading operating systems of autonomous cars as well as the metaverse are likely to be new businesses. As a gaming company, Epic has a fine position to expand; what else can you do in a game? One can walk out of a virtual soccer stadium and start to develop a 3D representation of a social space where the activities we can engage in are continuously expanding and include education, exploration, and enterprise. For instance, in August, Ariana Grande’s concert in Fortnite was attended by millions of people.

We believe that today’s ad-laden walled gardens will be mostly replaced by free spaces in which people interact in a more open and playful way. Today, millions of creators are building products and businesses in those virtual worlds. Those virtual and physical interoperating economies can be called the metaverse.

Our investments in Roblox and Epic Games, amongst others, give us a share of the wealth that is going to be created here. This article in the Washington Post gives some insight into Epic’s vision.

Yesterday, Facebook’s platforms disappeared from the Internet. We are co-owners of Cloudflare and its team wrote an interesting blog about what happened.

These days, we are closing another pre-IPO investment in a great data & AI business.

We are shareholders in Square, the company that develops tools for merchants to transact and run their business. In August, Square announced to buy Afterpay, a leader in the Buy Now Pay Later industry, for USD 29 billion in stock and cash.

Afterpay has 17 million active clients that seek a better way to pay. The opportunity among younger people is immense as they demand transparent and efficient payment solutions. Afterpay charges no late fees and instead the account is paused when installments are due. To not ask questions at the start of a client relationship and instead rewarding good behavior has become a mission at many fintech companies. They are using data to develop their own risk models to be as inclusive as possible.

Brands are becoming more aware of the opportunity; offering BNPL solutions leads to significantly higher conversion. AfterPay has partnered more than 100k merchants and just reported 175% revenue growth in U.S.

The Guardian Fund also owns a stake in Affirm. On August 27th, it announced a partnership with Amazon to deliver flexible payment solutions to Amazon clients at checkout. Affirm’s share price is up significantly today and we will see how the new price is reflecting the increased intrinsic value. The opportunity for Affirm to grow to hundreds of billions of GMV is significant and both Afterpay and Affirm are riding a huge wave. It would not surprise us if a bigger company would acquire Affirm.

The businesses in which we like to invest are offering radically better choice and not just incremental marginal benefits. This combined with enormous scale and optionality coming from adding additional services and growing the market gives almost unbounded upside. In the field of commerce, this has led to interesting investments and we are excited about the opportunities we are seeing today.

It is impressive how fast Shopify is growing its relevance and moat. The decoupling of jobs from location and democratization of participation in the internet-enabled economy is changing lives and business architectures. The modern enterprise is a core with a big partner network of applications around it. Today, any person can lever this network to run a commerce strategy. In his excellent message to Shopify employees, Tobi Lütke, wrote that Shopify is not a family but a team of which the members must perform and will be judged on performance. Now this team can hire any skilled person with internet access regardless of location.

In the payments business (Merchant Solutions) Shopify takes a margin on Gross Merchandise Value (GMV) transacted via the platform. As GMV is growing faster than Subscription Solutions (pricing plans for merchants to access the commerce tools), merchant tools are increasingly becoming a way to grow GMV and therefore the payments business.

On June 15, Shopify announced the strategic move to open up Shop Pay, the excellent checkout system, to all retailers selling through Google and Facebook. As a result, stores that exclusively exist on Instagram (not Shopify) can use Shop Pay for payment processing. The reason for Google and Facebook to agree to this integration is that it drives better conversion of their stores (Shopify claims that checkout on Shop Pay is 70% faster than a typical checkout resulting in 1.72x higher conversion rate) and therefore it enhances Google’s and Facebook’s core business which is advertising.

Shopify is enabling Google and Facebook to better compete with Amazon. The multi-channel future of commerce is now going to make Shopify’s merchant tools even more important; Shopify president Harley Finkelstein said: “You now need to reconcile inventory across eight or nine channels. You now have to handle shipping and fulfillment across eight or nine channels. And so as the complexity increases, the value of using Shopify as the central retail operating system also increases.”

About 10% of all e-commerce in the U.S. is going through Shopify (versus 39% through Amazon). On June 29, Shopify announced that they are removing all revenue share on developer’s (together earning USD 233 million in 2020) first annual USD 1 million as well as cutting the commission rates from 20% to 15%, which is about half of what other app stores charge. It has become a no-brainer for software developers to create products for the Shopify App Store. This will further grow the quality of the ecosystem.

Environmental issues are on our mind when we do the investment analysis. The space in which we are investing is a net positive force in enabling our species to tackle problems such as emissions. It’s worth noting here that Shop Pay is one of the first carbon-neutral ways to pay as Shop Pay offsets 100% of the delivery emissions for every order.

On July 7, Harley Finkelstein said: “The future of commerce is still in front of us. Here’s what I mean: if the world of ecommerce was a baseball game – we are still at the hotel. We haven’t even left to go to the stadium yet. That’s how early we are in the story of ecommerce.”

We believe that the valuation of Shopify is fair because it is not just a software-as-a-service business; the platform is becoming a payment business that takes a royalty on global internet-enabled commerce. And as the leading central retail operating software platform the runway of non-linear growth is enormous. We have invested a significant percentage of the portfolios in Shopify because our vision is that this is becoming a USD 1 trillion market value before 2030.

The metaverse is an idea that describes the shared 3D spaces in a virtual universe. Recent advances in cloud computing, computing devices, and machine learning, enable the materialization of the metaverse.

Roblox was founded in 1989 by David Baszucki and Erik Kassel when they programmed a physics lab where students could study how cars would crash. Today, Roblox has become a leading platform with a mission to build a human co-experience that enables billions of users to meet to play, learn, and build friendships.

Whether a person likes to go scuba diving, adopt a pet, become a superhero, or explore ancient Rome, one can explore it on Roblox. Here, about 8 million active creators are developing over 20 million experiences where more than 37 million young people come each day for an average of two hours per day. Roblox has become a virtual economy that people can access anywhere on almost any device.

Robux, the digital currency, can be used to purchase items such as pets and cars. Earned Robux can be reinvested in the virtual worlds or can be exchanged for fiat currency. In 2020, over 1.2 million creators earned Robux and more than the equivalent of UD 320 million.

Roblox is at the intersection of gaming, communicating with friends, entertainment, and commerce. The firm is offering the tools to create; Roblox Studio is the platform where developers build, publish, and operate 3D experiences.

Recently, Roblox has become a publicly-traded company. Among the questions we are thinking about are; whether international expansion can attract hundreds of millions of users; how the age range can be expanded; how the growth of use cases such as experiencing concerts together, experiencing physics, collaborating, and monetizing the virtual economy will affect the value of the network.

The growth in daily users, hours engaged, bookings, and achieving more operating leverage, hint at a long runway of healthy profitable growth ahead. The long-awaited tipping point in the adoption of VR devices seems to be getting closer as well and might provide a further boost to engagement. All in all, Roblox is a business that we will be following closely.

Two thousand and twenty was the year in which the promise of artificial intelligence became more tangible. We are probably entering the phase in which the early majority is starting to adopt machine learning infrastructure. Breakthroughs such as GPT-3 (an autoregressive language model that uses deep learning to produce human-like text) and AlphaFold 2 (code that predicts the 3D structure of a protein based on its genetic sequence) are hints of what lays ahead the coming decades.

Tim Davidson, founder and CEO of Aiconic and one of our advisors in the field of artificial intelligence, concluded his year-end note by saying “In the unique world of machine learning, it was a year of meaningful breakthroughs. While uncertainty looms over 2021, we see enough evidence to support a bullish view on everything that is cloud + machine learning (ML). The expanding ML-as-a-Service industry and ever declining costs of research are likely to empower a new generation of ML products and companies. Lower failure costs combined with increased competition will accelerate the startup iteration cycle, providing investors with faster outcomes. Finally, corporations and governments will drastically increase their venture investment targets in an attempt to stay relevant in a rapidly digitalizing and automating economic environment.”

We are excited about emerging machine learning infrastructure companies that are able to deliver the end solutions that the market is now ready for to start implementing.

Over the past two weeks, most of our businesses presented their 2020 Q3 results. The numbers show the tectonic shift of wealth within society.

Just five years ago, a trillion dollar market valuation still sounded unimaginably big. Few people would have thought that the trillion dollar+ businesses would continue to grow at such a stunning rate.

Satya Nadella, CEO of Microsoft, said in the presentation of the third quarter earnings: “The next decade of economic performance for every business will be defined by the speed of their digital transformation. Tech spend is 5% of GDP. We think it will double in the next 10 years and if anything, this pandemic has perhaps accelerated that doubling. In that context, the large most secular need is the need for distributed cloud infrastructure. It’s both needed for modernizing existing applications you have, and that’s, by the way, 20% penetrated so there’s another 80% that needs to move.”

Enterprises are moving workloads to the cloud at an accelerated pace. It enables cost efficiencies and enhances security. The whole non-Chinese world is basically moving to three cloud infrastructure platforms. Amazon Web Services is growing 29% and is now at a USD 46 billion annual revenue run rate. Amazon’s cloud business alone is worth more than USD 600 billion. Microsoft’s cloud division hit a USD 25 billion revenue run rate and is growing at 47%. Google’s cloud is around USD 14 billion and is growing at 45%. Google’s cloud growth even accelerated as growth in 2020 Q2 was 43%.

These powerful cloud operations are one reason why the valuations of these three holding companies remain fairly attractive.

Besides the three cloud giants, smaller companies are emerging with niche services. Increasingly, compute power and security are moving to the ‘edge’ – computing that is closest to the client. This enables applications to upload with minimal latency as the fundamental limit of speed remains the speed of light. Here, Cloudflare and Fastly are well-positioned. Fastly did not meet its own third quarter forecast due to regulatory uncertainty about TikTok which accounted for 10.8% of its revenue. Such short-term glitches provide long-term owners with the opportunity to buy at a reasonable price.

We are excited about current investment opportunities.


The digital revolution perhaps marks the greatest disruptive transformation in the history of mankind so far. The evolution of human intelligence spans about 7 million years, roughly from the separation from the genus Pan. The emergence of almost limitless artificial intelligence is now starting to have a significant impact on society. The unfolding of machine learning is proceeding at a revolutionary speed. It is likely to cause more change to the way we live over the next few decades than it did over the past few centuries.

A good way to get an understanding of what is happing is by studying today’s relevant businesses. During these summer days, I’m spending most of the day reading company reports and listening to the Q2 earnings conference calls. These insightful discussions are open to anyone on the Investor Relations websites of every public company. The staggering growth of some firms is showing the shift of behavior; for example, Shopify reported revenue growth of 97% in the second quarter and Amazon’s revenues increased by 40%. The fact that Amazon, with a market value of USD 1.5 trillion, can grow at such a speed is unprecedented.

We are experiencing the Cambrian explosion of cloud-based technologies. Of software connecting to software and of unsupervised learning at a pace so fast that those looking in the rearview mirror are at risk of being replaced by machines.

The role of software is increasing at an accelerated pace. Satya Nadella, CEO of Microsoft, said last week that “the last five months have made it clear that tech intensity is the key to business resilience. Organizations that build their own digital capability will recover faster and emerge from this crisis stronger.”

One positive effect of running a distributed business is that the global pool of talent can be accessed irrespective of where a person happens to live. The decentralized way in which many people are able to work is increasing the measurability of every person’s added value and decreasing the benefits of, for example, having a charismatic character. Today, business leaders know better than ever who is relevant and who is replaceable.

Once, the leaders of companies were mainly the well-adjusted social people, those with the personality to move up the corporate ladder. This social setting is getting upgraded now as the autodidact hackers who create art by writing code release their creations into society. Their influence is derived from the beauty of the virtual worlds they are building; masterpieces that eat the role of physical assets as well as that of humans.

While this technological revolution is chaotic and disruptive like any transformation, there will also be many positive effects on the quality of our lives. For instance, we own shares in Livongo, a firm that leverages data to empower people with chronic conditions such as diabetes to live healthier lives.

Today’s younger companies are growing faster and reaching scale at record speeds. Most of these companies are cloud-native and using machine learning to get insights from data. Eugene Wei, a former product developer at Amazon, Hulu, and Oculus VR, wrote this week:

“TikTok didn’t just break out in America. It became unbelievably popular in India and in the Middle East, more countries whose cultures and language were foreign to the Chinese Bytedance product teams. Imagine an algorithm so clever it enables its builders to treat another market and culture as a complete black box. What do people in that country like? No, even better, what does each individual person in each of those foreign countries like? You don’t have to figure it out. The algorithm will handle that. The algorithm knows.”

The current discussion about TikTok shows that technological supremacy has become a geopolitical matter. Machine learning, computing power, cybersecurity, and space dominance, amongst others, have become essential themes of national defense. The arms race in these fields will remain an important topic for the rest of our lives.

In 2030, when looking back at 2020, we will be amazed that some of the most valuable businesses were still smaller private ventures today. While I think that the businesses in which we own shares will thrive, sentiment in markets and stock prices will forever fluctuate wildly. Market participants who are selling shares of great businesses based on someone’s opinion that valuations are rich are likely suffering from a failure of imagination where certain businesses, as well as our species, are headed.

I am writing this update in the garden of a medieval building and from underneath an old oak tree that has been here before 1788, the year of birth of Bank of New York Mellon, the oldest company on this year’s Fortune 500. It helps me to get perspective as businesses continue to come and go. The free market is always destroying the old economic structure and creating a new one and I feel we have to be on the ball closer than ever before. Therefore, Jeff Bezos continues to remind his team that today is Day One and to keep acting like a startup.

Now it’s time for me to listen to the next company’s earnings report. All I need to do is to open my Spotify app. This is the most interesting time of my investing life so far.

The massive global scramble to digitalize both private and professional matters is creating big winners and losers. Today, we are at a shockingly early point in the digital transformation.

The economy of the internet is still only a single percentage of global GDP. We are gradually heading to a place where the GDP of the internet will provide the majority of economic activity. This big social change is like a huge tailwind driving the most successful businesses in the next decade.

E-commerce penetration in the U.S. grew from 5.6% in 2009 to 16.0% in 2019. Then it grew about 30% in April. There are 5.7 billion adults on the earth of which about 4 billion have a smartphone. The penetration of e-commerce is still low in most countries because people lack good internet and digital tools. If one would like to buy a handmade fabric from a person in Senegal online, then there are quite a few complications with regard to the exchange of goods and money. However, the teams at companies such as Starlink, Stone, Stripe, Shopee, Square, and Shopify, are determined to provide the most efficient platforms that allow and urge everyone to participate.

As digital commerce is growing more businesses are building a direct relationship with the consumer. For instance, L’Oréal’s chief digital officer said “We are setting ourselves up for a world where half of the business is e-commerce and 80% of customer interactions will happen online.” L’Oréal quickly shifted its advertising and marketing spending online, which led to an increase from 50% to 70% of its total since the start of the pandemic. As a result, digital advertising on platforms such as Instagram, Amazon, Cardlytics, Spotify, and Roku, is set on a trajectory this year to overtake spending on traditional media.

Changes are clear beyond commerce; the pandemic has caused a massive acceleration of remote education and telehealth which grew from an 11% penetration in 2019 to about 46% currently. The pandemic has increased the need for technology that enables on-demand virtual urgent care, virtual visits, remote personalized monitoring, and collection of data to improve care driven by machine learning.

The investor does not need to have an opinion on the general economy. It does not matter what the general economy or the stock market will do. What matters to the investor is whether one belongs to the group to whom wealth is shifting.

The pandemic is accelerating existing trends to digitalize. We further concentrated on technology businesses that benefit from current developments and that provide winning platforms in e-commerce, cloud computing, gaming & e-sports, digital payments, and machine learning.

On April 27th, Loren Padelford, Chief Technology Officer of Shopify, the e-commerce platform, tweeted ‘this crisis is a time machine that brought 2030 to 2020. It accelerated the digital transformation on many enterprises who weren’t ready. We have helped thousands of large retailers unshackle from legacy systems and start writing their next chapter.’ Over the past month, Shopify experienced strong volumes every day. Heinz and Lindt, amongst others, announced their online stores on Shopify to build direct consumer relationships.

On April 29th, Satya Nadella, CEO of Microsoft, said ‘As COVID-19 impacts every aspect of our work and life, we have seen two years’ worth of digital transformation in two months.’

While there is a large audience for doomsday scenarios about the virus, unemployment, corporate defaults, government debt, money printing, etc., the intelligent strategy is to co-own a focused selection of great companies that will thrive.

The strong businesses seem to emerge stronger from this crisis.