One of the arguments we have had from the very outset of this newsletter is that investors - even professional investors - consistently underrate the amount of "churn" in financial markets.

By "churn" we mean that the companies that seem to be unassailably large and wealthy and powerful today are replaced early and often by other, even more awesome firms.

Competition is tough!

This is especially case at the very top of the market. Day-to-day these companies seem unstoppably big and powerful but the reality is that they are constantly under attack and at real risk being torn down and replaced by other, bigger and better enterprises.

As the famous saying by Silicon Valley's iconic Andy Grove remind us: only the paranoid survive.​

(he was sadly right, his own company, Intel, didn't sufficiently follow his advice has been totally dethroned atop the semiconductor industry as well as the stock marker. Its market cap is $183 billion compared to Nvidia $1.8 trillion.)

That is the magic of capitalism, at least when it is healthy. The biggest Americans companies even just 10 years ago are no longer the biggest today. That is the power of competition.

Our argument about this has had two main prongs:

1. ​This is why it is best to stay safely and stably invested in a low fee broad based index fund.​

2. ​To not-so-gently push back against some of the lazy hand wringing about certain companies "dominating" both markets and modern economy and society.​

On the first, even the professionals find it very hard to predict what and when a company could begin to lose its position among the market leaders. This makes the idea that an amateur retail investor can keep track of dozens (hundreds!) of companies very unlikely.

Hence the Pebble position of: invest in a slightly modified index fund with Pebble. This lets you keep track of what you don't like and sleep soundly in the knowledge that you own what you want and junked what you hate.

On the second point, there is a lot of agonizing - and politicizing - that certain companies, especially of a technological bent, will be able to maintain their domination for all time as "oligopolies."

We have pointed out that even Meta (Facebook) and Alphabet's (Google) supposed "duopoly" over online advertising didn't even last half a decade much less a decade.

You can read that piece here.

It is usually at this point we post this incredible video that graphically shows the change in the leadership of the S&P 500 every year from 1980 to 2020 (by market cap):

A few notes:

• In 2000 GE was in the top 10 companies. Today it isn't even in the top 50!

• In 2010, Meta was called Facebook and it wasn't public, today it is an economic and stock market giant.

• People used to write books about how awfully monopolistic and pervasive Exxon Mobile was. Now it is not just not a market leader but people are writing books about how it will disappear in ten years (they are wrong but so what, they are usually wrong).

• etc. etc.

The big point is still just how much rapid change occurs in the stock market. When you stop and take stock it can be pretty stunning. Over the short term these companies seem ever present and domineering but very quickly they are often supplanted by new and even more dynamic rivals.

As the Japanese like to say: business is war!

Just picking somewhat at random over the the last few months:

• Microsoft surpassed Apple as the largest company in the S&P 500.

• Meta soared back up the ranks adding hundreds of billions of market cap and going from being worth $5-600M to now being worth somewhere between $1.1 and 1.2 trillion

• And a new entrant has suddenly cropped up in the top 10 companies for the first time.

The latter is Eli Lilly - the American drug maker and the proud owner of the new blockbuster drug, Ozempic.

Eli Lilly has is now worth well over $700 billion market cap and is doing around $40 billion in annual pharmaceutical sales.

That is a stunning amount. To put it in context that is roughly the revenue of Tesla and they sell cars, not tiny pills.

The only thing more impressive is, despite that huge size, the company's sales are growing at a 25-30% clip per quarter. Those are Microsoft Azure-cloud computing-type crazy numbers.

What is also notable is there is every sign that this amount of revenue will continue to grow and could easily far surpass the current level very swiftly in the months and years to come.

In other words, this is unlikely to be a flash-in-the pan type success. Eli Lilly may be a new entrant but it could sit at the very top of the stock market for some time.

The reason for this is twofold:

• Ozempic and drugs like it must be taken in perpetuity, at least if you want to keep the weight off. In other words, as with statins and other massive blockbuster drugs there is no stopping.

• It is an incredibly expensive drug and most suited for very wealthy, very obese countries like the US. However and unfortunately, the rest of the world is eating-like Americans and therefore looking-like Americans.

This is sad and a terrible development for global waistlines and global health but it is very good news for Eli Lilly sales.

There is broader support for the long term tenancy of Eli Lilly in the group of largest publicly traded companies. As the earlier video makes clear, it can be hard to permanently crack the top 10 companies but once an enterprise does, they often stay around for some time.

Eli Lilly may not be a tech company in the way many investors think about them but it is most certainly a highly sophisticated concern. It’s drugs require incredibly amounts of expensive technical research and development and it sits at the very pinnacle of a hugely complex and highly regulated field.

This adds tremendous amounts of cost and political pressures but it has unexpected benefits as well. In some ways, Eli Lilly is a tech company but with better legal protection.

For instance, the pharmaceutical giant also has a huge moat - in the form of patent protection AND also a drug that has received FDA approval. This may be a different moat from a Google or an Amazon but in some ways it is safer.

It is very difficult to alter the legal system of patent protection without risking a lot. Furthermore, there are many constituents, and not just drug companies, that will fight any change. That is also the case for the lengthy, expensive and very complex process of receiving FDA approval but even more so.

There is a lot of political pressure to regulate the big tech companies. The positive for Eli Lilly is: they are already highly regulated!

This fact is costly and annoying but it also protects them from scrappy starts ups. It takes billions and billions to find and shepherd a drug into commercial use and that along with the patent system keeps Eli Lilly - and Eli Lilly investors - nice and warm on even the coldest winter evening.

Unlike Google's supposed ad monopoly - now under threat from competitors like TikTok and also new products like Chatbots - Eli Lilly already has the state and legal on its side. That has downsides but it generally protects incumbents at the expense of competition and the plucky little guy.

We might regret those facts in general but, more narrowly speaking, as stock holders we might approve and we will certainly enjoy them.

What is Eli Lilly's gain is yours, as well.

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