One of the most important things an investor can do is look back on why an old thesis is wrong to avoid making that mistake again. Six months ago, I wrote a substack post called

“Netflix’s Biggest Competition is Still Sleep”. Here are the lessons I've learned.

My thesis was that $NFLX had a competitive advantage in economies of scale in shows and data which would enable them to add 30 million users per year while increasing ARPU. Those assumptions are very wrong and Netflix’s stock price has appropriately reflected that.

My first mistake was in the title and not taking the competition seriously. When competition is incoming (even if it is inferior competition) it is a serious threat to the company. The competition gives consumers more choices and better alternatives to your product.

My second mistake was being tricked that Netflix was a technology company. It is a media company that uses technology, not the other way around. Companies that trade at tech multiples that are not tech get crushed (see gambling, fake food, and others).

My third mistake was in overestimating the value proposition. Just because I like Netflix shows does not mean everyone else does. Many people think content from other providers like HBO and Disney is of higher quality and I should have incorporated that.

The one silver lining from this experience is I ran when the numbers did not match what I quantitively believed. I saw when the competition was increasing subs while Netflix was flat, I knew I missed something. I escaped at ~$400 and avoided another leg down.

While it is obviously much more fun to look back on investments when they go right, it is even more important to look back on when they went wrong and to learn from your mistakes.