Facing Our Investing Fears

Jon Quast (0:02)

Facing our fears with the stock market, Motley Fool Hidden Gems Investing starts now.

Welcome to Motley Fool Hidden Gems Investing. I'm your host today, Jon Quast. I am joined by Rachel Warren and Matt Frankel. We're kicking off this spooky October with an episode filled with investor fears. We're going to be talking about bond yields and stocks that are plummeting. But first, we want to talk about risk factors. Every publicly traded company does include risk factors in their filings, and that includes the S1 filing. This is a filing that companies release right before they go public on the stock market. We got one from Anthropic that was a little bit over the top as far as the risk goes normally.

We don't have the full document, but the leaked version that is out there says that its technology poses a catastrophic or existential risk to humanity potentially. That's quite a doomsday scenario, and that actually gave us a question from our mailbag that was worth considering here at the top. This comes from a listener named Patrick. Given the recent S1 filing from Anthropic and how it paints a rather bleak picture of the risks for AI, I was wondering if we could have a little fun and dig into a few S1s from 10, 15, or 20 years ago. Maybe look at the S1s from Google, Amazon, or even MongoDB to see if they've been able to execute or come up against the risks that they've outlined and how they've navigated it.

We're going to bite on this. We're going to take a stroll down memory lane with some old S1s. We're going to not talk about MongoDB today, but let's talk about S1 risks from Amazon, Alphabet, and Meta. If you invest in any of these at IPO, you're doing quite well today. Matt, kick us off here with Amazon and its S1 risks.

Matt Frankel (1:53)

Yeah, I mean, Amazon is a great example of one that did list some scary risk factors. The question said 10, 15, or 20 years. I'm really aging myself because I remember Amazon's S1, and it was 30 years ago, almost 30 years ago. It happened in 1996 or 1997, I think 1997

But it warned of better funded rivals, and it specifically named Barnes and Noble and Borders. It also listed capacity constraints, system failures, risk factors. But solving those problems created what would eventually become AWS. So they're perhaps the best example of how a company navigated some quote, scary risk factors and really used it to their advantage.

Jon Quast (2:34)

It's almost hilarious to consider Barnes and Noble as an existential threat to Amazon now in hindsight. But indeed, at the time, it was a little bit like how is Amazon going to come up against this huge and powerful company, Barnes and Noble? It was able to do it.

It's kind of similar, Rachel, with Google and Microsoft. You know, Microsoft having that distribution and Google saying, hey, maybe they're going to be able to prevent us from growing in search.

Rachel Warren (2:59)

Yeah, I mean, it is kind of funny to think about now when we look at how much these companies have grown into the giants they are today. But, you know, the sort of often boring section of the S1, not so much in Anthropics case, the risk factor section, it can obviously as an investor tell you a lot about the business, help you really form your own risk thesis and by assessment of a particular company. Now, you know, there's a key point to be made here. There's obviously a fundamental difference between alphabet warning 20 plus years ago that Microsoft might crush a search engine and Anthropics warning, and it's filing that an autonomous AI model could pose an actual quote, existential risk to humanity. But the kind of key takeaway here is back in the day, alphabet or Google's core risk was structural. You know, they were a single revenue engine at the time, kind of at the mercy of desktop operating systems controlled by their rivals. And so, you know, a lot of the concern at that point was this idea that Yahoo, Microsoft could destroy Google, of course, that in fact was anything but the case. I do think what we see in the at least leaked version of Anthropix S1 filing, it is a different story, but you can certainly look back at time at a lot of fear mongering around past S1s that never in fact came to fruition.

Jon Quast (4:20)

Yeah, I can remember a time when I didn't see how Google was going to displace Ask Jeeves and I've certainly been proven wrong there. Matt, close us out here with Meta. Of course, it wasn't called Meta when it went public, it was called Facebook back then.