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  • Writer's pictureArjan Bartlema

Build a best of breed company in a dematerialising world (cont)

I used the Christmas break to ponder what such a company would be. As this is the follow-up of the last post please see the earlier post here So, can we already think of such a company? Or more of them? Nothing really came to mind, only Shopify. Why Shopify? Well it has a 2-way network effect (self enforcing moat). So the competition can be kept at bay in this new digital world. You can easily argue it is exponential, scalable, frictionless and disruptive. But this is the case for so many network or platform companies. Focussing on what the client is willing to pay, this is the world it lives in (with its fellow network and platform companies): It costs $0 to meet on Zoom It costs $0 to design on Canva It costs $0 to learn on YouTube It costs $0 to research on Reddit It costs $0 to reach out on LinkedIn So the new digital world is brutal. This left one staw to hold on to. High return on reinvested investment. The live blood of the future. Does the company have it within itself to use its profits to make more of itself, in a compounding way. Does it generate these profits? Yes. Can it redeploy these profits? Yes, I think so. Will it redeploy these profits? The Investing Cash Flows (2019–2021) indicate that way. And according to StoreLeads Shopify added 330,000 stores in 2020, 388,000 stores in 2021, and 754,000 stores in 2022, of which 323,000 were added just in Q4, 2022. So, it definitely points in the right direction. I guess I am looking for a digital example of the old economy successes, like Coca Cola, McDonalds, Domino’s Pizza’s. But now digital. Like a digital franchise. Is that what we should be looking for? Maybe. I guess the quest continues.

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