Legg Mason’s Bill Miller on Net-based Businesses

Some great commentary from Legg Mason’s Bill Miller is available on the website from their recent investor conference.

The thing that is interesting about companies like Amazon, Yahoo!, eBay, and Interactive (all of which we own) is that they are free from the practical constraints that operate on real world companies.

If WalMart is going to expand its physical footprint by 8-9% a year, it must spend $12B a year to build a store, build distribution centers, make sure it has ways to move goods from one place to another, etc.

All of that capital runs into institutional constraints. For example in Germany, you can only be open a certain number of hours. In Tokyo, you can’t get land. In California, they’re mad at you because you hire illegal workers. Each part of the world has different issues.

These are limitations that have significant impact on the appropriate potential value of the business. So far it seems to be the case that these constraints do not exist for Amazon, Yahoo and the others. From a purely theoretical standpoint, their theoretical value could be far higher than any business we have seen before.

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