If you are thinking of becoming rich through stock investing, it is very important to choose the right companies and be a long-term investor in them. So how to choose the right company? Everyone has different criteria. Some look at ratios such as price-earnings ratio. Some people look at technique. Some people look at financial statements. Some look at the developments in the market in which the company operates. All of these are important, but I think there is a more important and main criterion and I will tell you about that criterion today. If you do not have a philosophy as an investor, you will constantly be tossed around. You jump into the latest trending topic. You are deceived by the words of phenomena. You look at technical analysis and make strange decisions.
However, if you have a philosophy as an investor and you maintain and develop this philosophy for many years, and when you test the philosophy and see that the results you get are good, you become a much more comfortable investor and earn more money in the long run. In this context, today I will try to explain to you why I prefer monopolistic structures and why I prefer investing in the monopolies of today or the future. I will give examples of monopoly companies. I will try to explain what makes them a monopoly. Then I will try to explain how you discover monopolistic structures and how you invest. Of course, what I am about to tell you is not investment advice. Think of it more like education, or at least conveying to you what I have in my own mind.
The first book in which I discovered the importance of monopolistic structures is called Zero To One, written by Peter Thiel. Peter Thiel with Paypal founder Elon Musk. After leaving there, he invested the money he had in Meta, or Facebook as it was known at the time. Meta is basically a monopoly today. Now he is the founder of Palantir. I believe that Palantir will be one of the monopolies of the future, and it is also a partner in Elon Musk's Space X. Again, I believe Space X will also become a monopoly. Peter Thiel basically says this in his book; Competition is for losers. Because if you are extremely competitive, you cannot maintain the profit margin and you will enter into price wars. If you are involved in price wars and cannot maintain the profit margin, the company will not have the power to make new innovations, improve customer experience, and attract the best employees. This will eventually be reflected in the company's financials and you will be locked in the wrong investment.
On the other hand, if you invest in companies that are monopolies today or may create monopolies in the future, the company will have high profit margins due to its monopolistic structure. High profit margins mean high cash flow. If it uses this cash flow wisely, it can make new innovations, invest in the right areas, and attract the best employees. This is a tremendously positive cycle. Because such cycles eventually have a positive impact on the stock price. Recently, Nvidia is a good example of this. Nvidia sits right in the middle of the AI revolution and has a monopoly on the GPUs needed to make the AI revolution happen. When we say GPU monopoly, Nvidia has a monopolistic power not only in the production of GPUs, but also in the distribution, sales of GPUs, the software system and operating system on which they operate, and as the market believes in the monopolistic power of Nvidia, the company's stock rises upwards.
If AMD comes with an important product two days later or an important technology comes from another rival company and they are seen to break Nvidia's monopolistic power and this break becomes more severe, Nvidia's value will definitely go down. Because what do investors think? If the company has a monopoly structure, its profits will be very high and that wonderfully positive cycle that I just mentioned will begin. On the other hand, as the company loses its monopolistic features, its profits will decrease. On the contrary, this will pave the way for a downward trend. Of course, you are not a complete monopoly in any market.
It is possible to become a duopoly. So there is one main player. There seems to be another player next to him, or there may be a main player, a side player, or 4-5 minor players. These are also possible structures. But what is important is that your company is the main dominator in that market, the determinant of the market, the determinant of the price, and the determinant of the competition. When you invest in these types of companies, the value of the shares goes up as long as these companies maintain their monopoly power. Today, there are many monopoly companies similar to Nvidia in the world. Google, for example, is still a monopoly. It owns more than 90% of the world's search engine business. There is currently a slight meltdown in the monopoly structure due to artificial intelligence. Because of this, the value of the company decreases.
Apple is still a monopoly. Apple still produces almost all the electronic devices preferred by relatively high-income people. Yes, the competition has started to get tougher there too. That's why Apple's value is already melting, and if Apple doesn't say new things to compensate for this, Apple's value will continue to melt. Microsoft is a monopoly. It is still the operating system preferred by companies around the world, and when it enters a company, it manages to make money from it for many years. On the personal computers side, there may be competition with Mac, but all other computer brands still use Microsoft's operating system. Excel is a monopoly, and a calculation table as powerful as it has not yet been born. Nearly 700 million people use Excel and do Excel work every day.
All these monopolies I have mentioned, but their common feature is that they have high values. So your chances of making money from your investment in these are slightly less. Yes, they can continue to rise. Yes, I believe that Apple, for example, will make a good comeback and revive its dissolving monopolistic structure with new products and artificial intelligence technologies. But frankly, I don't think Apple will go up 10 times or 20 times from here. Because their monopolistic structure is already reflected in profit margins, cash flows and valuations.
Therefore, we need to catch companies that are not monopolies yet but show signs of having a monopolistic structure. This naturally leads us to the question: What are the basic features that make a company a monopoly? I think monopolistic companies basically have two characteristics. One of them is to differentiate themselves from the competition on the technology side. Secondly, they differentiate on the customer experience side and establish great distribution infrastructures that can easily explain these differences to their customers. Because in the end, if you cannot bring your product and your idea to the customer, the rest is always a lie. Technological differentiation means that the product has a superior feature. When they first came out, iPhones were completely superior to their competitors. Because touch screens seemed to work best on them and customers were falling in love with that touch screen.
But the other element that has always made Apple different from its competitors has been customer experience.
Their stores, packaging, ease of use of their products, and design of the products all differentiated them from their competitors and offered a better experience. When these two come together, technological differentiation and experience differentiation, it becomes easier to gain customers and you become a niche for at least a certain customer group. Here, Apple has managed to become a heavy monopoly of people with upper segment incomes or people who gamble, undress and emulate the upper segment income. Another monopolistic power effect comes from the network. For example, there are alternatives to WhatsApp today, such as Telegram. But we cannot go to them. Because all our friends are on WhatsApp and leaving that network has a heavy price. That's why we choose to stay there. We have seen this type of network-based monopolistic powers, especially in social media companies. But there are interesting examples in other areas as well.
A third feature of being monopolistic may also arise from cost advantages. You may be producing your product so economically that competitors cannot match it with the expected quality. Toyota, for example, is an almost monopolistic power in the automotive industry. Yes, the automobile industry is a place where it is very difficult to return to monopoly due to its structure. But we can say that Toyota operates in a structure close to monopoly, with the production numbers it has achieved and the determination it has achieved. That's why being able to produce at a low cost is one of the powers that will make a difference for you in terms of natural production quality. But it is also worth saying this. You cannot equate Toyota's monopolistic power with Google or Apple. When you look at the profit margins, you cannot see such profit margins of 60, 70, 80% in Toyota. Therefore, the effect of competitiveness based on low costs only goes so far.
One of the aspects that make a company monopolistic may be its brand. Rolex is a great example in this regard. Rolex is an unrivaled company in the watch world, which is a very competitive world. It is still the best-selling luxury watch in the world. They have super high profit margins. How did Rolex achieve this? Perhaps it is an advantage that it is managed by a foundation. Since it is a foundation, Rolex's managers are not people who are eager for much growth. They are more focused on preserving the value of the brand. For this reason, Rolex produces in limited numbers. It produces very good watches and appeals especially to people in the business world in two ways. One of them is, of course, an element of prestige.
But there is a second important feature. The money you carry on your arm. Something wrong happened in the country you live in today, you need to escape. The Rolex on your wrist can save you wherever you go. Because it turns into money quickly. For this reason, Rolex keeps their production limited. It can protect it in a way that makes it look like a precious metal like Bitcoin or gold. That's why managing the brand is one of the important aspects of establishing a monopolistic structure. I think it's a slightly more difficult aspect. Competitors can also create brands, but if you have been producing with a philosophy for many years like Rolex and embrace it, you can also create a monopoly from there.
Well, I focused on the importance of monopolies. I also mentioned some of the characteristics of monopolistic companies and also explained why investing in existing monopolies may not provide very good investment returns. In this case, choosing companies that will become monopolies in the future and investing in them today may be one of the best returns. You can understand what I mean much more easily when you look at the past value increases of companies such as Nvidia, Google, Apple and Microsoft. These are companies that have increased their value 10, 20, 30, 40, 50, 100, 1000 times since their establishment. Because they explained their monopolistic power to the market. They convinced him, and that's how the value of the investment grew. So, which companies do I have in my portfolio that could become monopolies in the future?
One of them is of course Palantir, which I believe may become a monopoly in the future. Because I'm sure that founder Peter Thiel did not establish Palantir, his current most important venture, without the idea of a monopoly behind it. A common feature of these types of new companies is that they can make losses for many years. Amazon is a typical example of this. For many years, Amazon either made a loss or made very little money. Because these types of companies invest all the money they earn back into themselves, just like Palantir. It tries to establish the necessary technology, brand, distribution channel, management infrastructure and customer relations to establish monopolistic power. I am a Palantir investor because I observed these in Palantir. I believe that Palantir will have a monopoly on managing big data and using artificial intelligence to make decisions from big data in the future. Of course I could be wrong. That's why it's not investment advice anyway. But this is my belief.
My other monopoly candidate is of course Tesla. Tesla is obviously not a monopoly right now. There are many companies that produce electric cars. He had a monopoly on this for a long time. But now there is a lot of competition, especially from China. But these are the only companies that make a profit. In that respect, it is still a monopoly. In other words, Tesla has reached such a large scale and can produce its cars at such a low cost that Tesla can make a profit while everyone else is losing money in electric cars. This means: Most of the competitors will be eliminated. This is the main reason why traditional automobile companies, in particular, are slowly turning away from electric. Most of those in China will also be eliminated. Because most of them don't make a profit. But frankly, I'm not investing in this aspect of Tesla. It's not an aspect that interests me much.
Because remember, I just explained in the example of Toyota that low-cost, large-scale structures cannot be maintained for a very long time. I see the monopolistic power regarding Tesla in the charging system. As a matter of fact, it has now become a monopoly in America. It has the largest charging network, but the profit margin it creates is low. Of course, I see the main thing in autonomous driving. Because if Tesla can reach its goal in autonomous driving and create the world's first fully autonomous, self-driving cars in all conditions and on all roads, the sales of existing cars will increase significantly thanks to this software. Because they will make a huge technological difference. It will also be able to add value to its value by licensing this software to others.
In addition, these fully autonomous vehicles should not be seen as just a car. These may turn into distribution vehicles in the future. In the future, these may turn into a taxi service like Uber but without a driver, and Tesla may go into brand new areas such as robots, thanks to the technologies and know-how it has developed for autonomous driving. When we look at it in this context, I do not see the monopoly that Tesla can create on the automobile side. It still has a ways to go there. I think that especially economic vehicles worth 25000 dollars will lead to the establishment of a monopoly-like structure. There seem to be competitors, but since most of them do not make a profit, I think they will withdraw from the electric car market and collapse. But I see the real power in fully autonomous software.
There are smaller companies in my portfolio, for example Recursion Pharmaceuticals is an example of this. What Recursion does is to use artificial intelligence to speed up companies' drug production processes and reduce costs. Here, they have a unique operating system and an interesting system that combines the physical world, that is, the traditional wet laboratory, with the digital world, that is, artificial intelligence, in simulation. But Recursion Pharmaceuticals is just at the very beginning. One of the most important factors that form the basis of my investment philosophy is this issue of monopoly and monopolistic structure.
No company can have 100% monopolistic power. After all, the competitors are not picking pears. But when I find companies with strong advantages in this direction, I prefer to invest in them. These investments may not produce good results in the short term, for the reasons I just mentioned. In the long run, they may not be able to achieve this monopolistic issue. That's why I'm more interested in whether the companies I invest in are making progress in preserving and developing this monopolistic structure than their short-term turnover and profit margins. Because I'm trying to see if I can catch a new Amazon. I hope it was useful.
The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.
