ValueLetters

Bayes and Base Rates AI Forecasts and Probabilistic Thinking Mauboussin and Callahan 2026

This extended audio podcast is based on the Morgan Stanley Consilient Observer report “Bayes and Base Rates: How History Can Guide Our Assessment of the Future,” written by Michael J. Mauboussin and Dan Callahan and published on February 10, 2026. The report explores how investors can evaluate aggressive financial projections in the artificial intelligence sector using Bayesian reasoning and historical base rate data. Instead of relying solely on company specific narratives, the authors suggest starting with the statistical outcomes of similar companies over long periods of time and then updating those assumptions as new evidence emerges. Using a dataset covering more than 75 years of U.S. public company history, the research shows that extremely rapid revenue growth at large scale is historically rare. As a result, some of the revenue expectations currently discussed for AI related businesses such as OpenAI or Oracle Cloud imply outcomes that have very low historical probability. The report also examines the risks associated with massive infrastructure investment supporting the AI boom. Historical evidence from large project databases shows that fewer than ten percent of major infrastructure projects are completed both on time and within budget, highlighting the uncertainty surrounding the global buildout of AI data centers and computing capacity. In addition to financial forecasts and infrastructure risks, the analysis considers strategic motivations behind large AI spending announcements. Firms may commit to large capacity expansions as a preemptive competitive strategy designed to discourage potential entrants and strengthen their leadership position in emerging markets. Ultimately, the report argues that investors should adopt a probabilistic mindset when evaluating transformative technologies. By combining historical base rates with Bayesian updating, analysts can better assess the uncertain but potentially transformative impact of the generative AI revolution. 📈 Topics Covered • Bayesian analysis and probabilistic forecasting • Why base rates matter when evaluating AI revenue projections • Historical growth outcomes of U.S. public companies • Infrastructure risks in large scale AI investment projects • Strategic motives behind massive AI spending • Applying probabilistic thinking to emerging technology markets Source report Michael J. Mauboussin and Dan Callahan Bayes and Base Rates How History Can Guide Our Assessment of the Future Morgan Stanley Consilient Observer Publication date February 10 2026 https://www.morganstanley.com/content/dam/im/assets/publication/thought-leadership/consilient-observer/article_bayesandbaserates_ltr.pdf?1773434665395 [https://www.morganstanley.com/content/dam/im/assets/publication/thought-leadership/consilient-observer/article_bayesandbaserates_ltr.pdf?1773434665395] Explore all ValueLetters playlists https://www.youtube.com/@ValueLetters/playlists [https://www.youtube.com/@ValueLetters/playlists] 🔔 Subscribe to ValueLetters Listen to extended audio podcasts based on leading investment research probabilistic thinking and long term analysis across technology markets and capital allocation. #ArtificialIntelligence #GenerativeAI #BayesianAnalysis #BaseRates #MorganStanley #Mauboussin #TechnologyInvesting #AIInfrastructure #InvestmentResearch #ValueLetters

US Alternative Asset Managers Growth Moats and Industry Outlook 2025: Video Edition

This video is based on a Morningstar research report authored by Morningstar analysts and published as part of the Alternative Asset Manager Observer series in 2025. The audio provides a deeper and more detailed walkthrough of the structural forces shaping the US alternative asset management industry.The research describes the current environment as a golden era of growth for alternative managers, sharply contrasting with the challenges facing traditional active asset management. It focuses on elite firms such as Blackstone Apollo KKR and Brookfield, explaining how their economic moats are built on high switching costs specialized investment expertise and long duration capital commitments.A central theme of the report is the powerful demand tailwind coming from high net worth individuals and the potential expansion of private market strategies into retirement accounts. These trends could significantly broaden the capital base for alternative assets over the next decade and reinforce the dominance of scaled global platforms.Blackstone is highlighted as the leading industry pick due to its unmatched fundraising scale broad product diversification and ability to consistently launch new investment strategies across private equity credit real assets and insurance solutions. While the industry faces some fee compression and short term market volatility the emphasis on illiquid strategies and perpetual capital structures provides a more stable and resilient earnings profile than traditional retail focused funds.The report ultimately concludes that size diversification and platform depth will be decisive competitive advantages as investors increasingly seek non correlated returns and long term capital solutions.📈 Topics Covered• Why alternative asset managers are outperforming traditional firms• Economic moats built on switching costs and specialized expertise• Growth driven by high net worth investors and retirement capital• Competitive advantages of Blackstone Apollo KKR and Brookfield• Fee pressure versus earnings stability from perpetual capital• Why large diversified platforms are positioned to dominate long termSource reportMorningstar Alternative Asset Manager ObserverAuthors Morningstar Research AnalystsPublication date 2025https://www.morningstar.com/business/insights/research/alternative-asset-manager-observer?utm_source=link&utm_medium=referral&utm_campaign=linkshareExplore all ValueLetters playlistshttps://www.youtube.com/@ValueLetters/playlists🔔 Subscribe to ValueLettersWatch research driven videos based on leading investment papers market structure analysis and long term valuation thinking across public and private markets.#AlternativeAssets #AssetManagement #PrivateMarkets #Blackstone #Apollo #KKR #Brookfield #Morningstar #InvestmentResearch #CapitalAllocation #ValueLetters

US Alternative Asset Managers Growth Moats and Industry Outlook 2025

This extended audio edition is based on a Morningstar research report authored by Morningstar analysts and published as part of the Alternative Asset Manager Observer series in 2025. The audio provides a deeper and more detailed walkthrough of the structural forces shaping the US alternative asset management industry.The research describes the current environment as a golden era of growth for alternative managers, sharply contrasting with the challenges facing traditional active asset management. It focuses on elite firms such as Blackstone Apollo KKR and Brookfield, explaining how their economic moats are built on high switching costs specialized investment expertise and long duration capital commitments.A central theme of the report is the powerful demand tailwind coming from high net worth individuals and the potential expansion of private market strategies into retirement accounts. These trends could significantly broaden the capital base for alternative assets over the next decade and reinforce the dominance of scaled global platforms.Blackstone is highlighted as the leading industry pick due to its unmatched fundraising scale broad product diversification and ability to consistently launch new investment strategies across private equity credit real assets and insurance solutions. While the industry faces some fee compression and short term market volatility the emphasis on illiquid strategies and perpetual capital structures provides a more stable and resilient earnings profile than traditional retail focused funds.The report ultimately concludes that size diversification and platform depth will be decisive competitive advantages as investors increasingly seek non correlated returns and long term capital solutions.📈 Topics Covered• Why alternative asset managers are outperforming traditional firms• Economic moats built on switching costs and specialized expertise• Growth driven by high net worth investors and retirement capital• Competitive advantages of Blackstone Apollo KKR and Brookfield• Fee pressure versus earnings stability from perpetual capital• Why large diversified platforms are positioned to dominate long termSource reportMorningstar Alternative Asset Manager ObserverAuthors Morningstar Research AnalystsPublication date 2025https://www.morningstar.com/business/insights/research/alternative-asset-manager-observer?utm_source=link&utm_medium=referral&utm_campaign=linkshareExplore all ValueLetters playlistshttps://www.youtube.com/@ValueLetters/playlists🔔 Subscribe to ValueLettersWatch research driven videos based on leading investment papers market structure analysis and long term valuation thinking across public and private markets.#AlternativeAssets #AssetManagement #PrivateMarkets #Blackstone #Apollo #KKR #Brookfield #Morningstar #InvestmentResearch #CapitalAllocation #ValueLetters

Quantum Computing Market Outlook Technology Challenges & Investment Risks

This extended audio edition is based on a December 2025 research report by a Technology Observer at Morningstar, providing an in depth analysis of the emerging quantum computing market and its long term investment implications.The report estimates that quantum computing could ultimately represent a 200 billion dollar annual market at maturity. However, it emphasizes that commercialization remains in its infancy and that meaningful adoption will likely unfold over decades rather than years. Investors are cautioned to maintain a long term perspective and to separate technological promise from near term financial reality.A major focus of the analysis is the significant technical challenge of reducing error rates and scaling qubits reliably. The report highlights how large cloud and platform providers such as IBM, Microsoft, and Alphabet are strategically positioned to lead the industry through a platform based model that integrates quantum computing as a service. This approach allows customers to experiment with quantum capabilities without owning hardware, reinforcing the dominance of existing cloud ecosystems.Early commercial applications are examined, particularly in chemistry and pharmaceutical research, where quantum simulations could meaningfully improve molecular modeling. At the same time, the report warns that publicly traded quantum pure play companies often exhibit extreme valuations, limited revenues, and fragile financial structures, making them highly speculative investments at this stage.The audio also introduces the foundational concepts of quantum mechanics that underpin the technology, including superposition and entanglement, helping listeners understand both the power and the complexity of quantum computing.📈 Topics Covered• The long term market potential of quantum computing• Why commercialization remains early and uncertain• Technical challenges in error reduction and qubit scaling• Platform strategies of IBM, Microsoft, and Alphabet• Early use cases in chemistry and pharmaceuticals• Valuation risks of quantum pure play companies• Core quantum concepts including superposition and entanglementSource reportMorningstar Technology Observerhttps://www.morningstar.com/business/insights/research/quantum-computing-observer?utm_medium=referral&utm_campaign=linkshare&utm_source=linkExplore all ValueLetters playlistshttps://www.youtube.com/@ValueLetters/playlists🔔 Subscribe to ValueLettersListen to extended audio editions based on leading investment research, business analysis, and long term thinking across technology, markets, and capital allocation.#QuantumComputing #Morningstar #TechnologyInvesting #FutureOfTechnology #LongTermInvesting #CloudComputing #IBM #Microsoft #Alphabet #AIandQuantum #ValueLetters

Competitive Advantage Period CAP Michael J. Mauboussin 1997

This extended audio edition explores key insights from a foundational research paper on the Competitive Advantage Period CAP, a critical yet frequently overlooked driver of long term corporate valuation and shareholder returns.The research challenges the traditional reliance on accounting metrics and short term financial ratios, arguing that they fail to explain why certain companies generate exceptional value over time. Instead, CAP focuses on the duration for which a company can sustain returns on invested capital above its cost of capital, identifying the length of excess returns as the true economic engine behind valuation.By shifting attention from near term earnings growth to long term competitive durability, the CAP framework explains the X factor embedded in stock prices. Companies that can protect their economic advantages over extended periods can command substantially higher valuations even when headline growth appears modest.The audio illustrates these ideas through well known examples such as Microsoft and Intel, showing how extending assumptions about competitive dominance significantly increases intrinsic value and market capitalization. These cases demonstrate that valuation depends not only on how much a company earns, but on how long it can continue earning more than its cost of capital.The episode also explains how investors can assess CAP in practice by examining industry structure, barriers to entry, competitive dynamics, and strategic positioning. This approach provides a more economically grounded framework for long term valuation, capital allocation, and investment decision making.📈 Topics Covered• What the Competitive Advantage Period CAP represents• Why accounting metrics miss long term value creation• Excess returns versus earnings growth• How CAP drives intrinsic value and market capitalization• Microsoft and Intel as valuation case studies• Industry barriers and competitive positioning• Applying CAP to long term investment analysisSource reportCompetitive Advantage Period CAP[https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/cap.pdf](https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/cap.pdf)Explore all ValueLetters playlists[https://www.youtube.com/@ValueLetters/playlists](https://www.youtube.com/@ValueLetters/playlists)🔔 Subscribe to ValueLettersListen to extended audio editions based on valuation frameworks, academic research, and long term investment thinking drawn from leading investors and financial scholars.#CompetitiveAdvantagePeriod #CAP #CorporateValuation #ValueInvesting #EquityResearch #ROIC #CostOfCapital #LongTermInvesting #EconomicMoat #InvestmentAnalysis #FinancialEducation #ValueLetters #Mauboussin