Excess Returns

Michael Mauboussin | AI, Base Rates, and Investing in the New Economy

100 snips
Apr 2, 2026
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Michael Mauboussin
Michael Mauboussin, longtime investor and researcher on valuation and decision-making. He examines why AI growth claims look historically extreme, contrasts base-rate forecasting with ground-up models, and explores how intangibles reshape market winners and investment signals. Sharp takes on capex, competition, and who might capture AI’s economic value.
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INSIGHT

AI Can Strengthen Big Tech's Advantages

  • AI can be sustaining for incumbents or disruptive for newcomers depending on firm resources and strategy.
  • Big tech has vast financial firepower and proprietary tech that can make AI a strengthening sustaining innovation for them.
INSIGHT

Competition Likely Sends Most AI Value To Consumers

  • Competition tends to push most value to consumers unless firms achieve durable differentiation.
  • Use the four-part framework (willingness to pay, price, cost, willingness to sell) to see whether companies capture economic profit or concede surplus to consumers.
ADVICE

Assess Barriers To Entry Beyond Just Money

  • Evaluate barriers to entry across capital, talent, and economies of scale rather than assuming financial capital alone protects incumbents.
  • Talent mobility and fundraising ability are critical constraints for smaller AI entrants.
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