How This Tech Giant's Two-Sided Marketplace Will Dominate the Self-Driving Future

In the book Investing for Growth, Terry Smith tells us the story of Alex Bird, a professional gambler, and his incredible success betting on horse racing.

Back then, photo finishes were not digital, and it took time to develop the film into a usable image to determine the winner. Never ones to miss out on action, the racetrack and bookmakers laid odds on the outcome and kept taking bets.

Bird figured out the phenomenon of the Parallax Effect. An object's position shifts when viewed from different vantage points.

Bird would post up as close as possible to the winning post, close one eye, and create an imaginary line to tell which horse had actually won the race.

Alex did this for over 20 years, making 500 successful bets and building himself a small fortune.

Yes, if he could've picked the winning horse before the race, then he would've earned far greater returns. But could he do this consistently enough to not only recover previous losses but make money? The odds were stacked against him.

But fortunately for Alex, he did not need to identify winning horses pre-race. He simply needed to wait to see which horse had won and wait for the bookmakers to offer attractive odds against them.

The same principle applies to investing.

Too many investors try to pick tomorrow's winners before the race is run.

They chase the latest IPO, the hottest tech startup, or the most talked-about disruptor. It's a seductive strategy, but like trying to pick winning horses before they cross the finish line, it's fraught with risk.

What if, instead, like Alex Bird, we waited to see which companies had already won their races?

It was just last decade that a new disruptive industry emerged, built on the back of smartphones.

And it was a chaotic battlefield.

Multiple companies were burning through billions of dollars, all racing to achieve the critical mass needed to dominate their markets. The competition was brutal. Cash was hemorrhaging. Investors were placing massive bets on unproven business models, hoping to pick the winner before the dust settled.

But one company emerged victorious and built an unassailable network effect. The more users it attracted, the more valuable the platform became to all participants. This created a self-reinforcing cycle that competitors were unable to match.

Today, this winner's fundamentals tell a compelling story. Returns on invested capital are climbing steadily. Free cash flow generation has transformed from massive outflows to substantial inflows. The heavy investment phase is behind them, and the rewards of market dominance are flowing to the bottom line.

Yet the market hasn't fully recognized this transformation. Like the bookmakers still taking bets on a horse that had already crossed the finish line, Wall Street is offering us attractive odds on a company that has already won its race.