Ownership of a toll road like business is a lucrative opportunity. The upfront investment is large; therefore, competitors think long and hard about building another one. Once a toll road is built, the upkeep is small. The number of cars passing through increases every year, while the cost to let an incremental vehicle through is minuscule. Congestion can discourage additional cars. The owner can raise prices gradually over time. Therefore, toll roads provide a predictable, stable, cash flow stream for years and years to come.
President Eisenhower had an appreciation for the German Autobahn system and wanted to build a transportation network for the U.S. This desire gave rise to the Federal Highway Act of 1956 which led to the large-scale construction of the public infrastructure that we use to this day. Majority of this infrastructure is owned by Governments. While there are a growing number of public-private partnerships that large institutional investors could participate in, most infrastructure investments are out of reach for the individual investor.
Until now. The toll roads of the 21st century that are under construction today are digital. The fixed costs are still high, and the marginal costs are even lower. The thru-put capacity is virtually infinite. The good ones are built to last and ownership in these will be lucrative. Here is the best part – anyone can acquire pieces of these publicly traded toll roads through careful research.
Cloud infrastructure is a great example. As time marches on, more data and computing power move into the cloud. It is an inevitable trend. Due to the mega-scale economics of cloud infrastructure companies, the price plus convenience value proposition is attractive. This offering has turned a deliberation into an easy decision for small to large businesses to say goodbye to their own servers. Only 10-15% of total data has made its way into the cloud, but the transition is accelerating. A growing number of applications are being built on top of cloud infrastructure to solve business problems. The new pricing architecture is consumption-based, which makes it much easier to embrace.
Communication platforms are another type of digital toll road. We know that digital communication is here to stay. Businesses need to evolve to this new norm to acquire new customers, interact with existing consumers, or risk their own demise. More and more companies are building their own applications on top of these platforms tailored to their business needs. The larger the frequency of traffic, the more valuable it makes the underlying toll-road. There are many more examples.
Digital transformation is a top business priority. The digital traffic will rise exponentially over the next decade, which makes these 21st Century Toll Roads incrementally more lucrative than the ones of the past. The best part is – you and I can be owners in these toll roads.
This material does not constitute an offer or solicitation to purchase an interest in Latticework Partners, LP (the "Fund"). Such an offer will only be made by means of a confidential offering memorandum and only in those jurisdictions where permitted by law. An investment in the Fund is speculative and is subject to a risk of loss, including a risk of loss of principal. There is no secondary market for interests in the Fund and none is expected to develop. No assurance can be given that the Fund will achieve its objective or that an investor will receive a return of all or part of its investment.
This material contains certain forward-looking statements and projections regarding the future performance and asset allocation of the Fund. These projections are included for illustrative purposes only, are inherently speculative as they relate to future events, and may not be realized as described. These forward-looking statements will not be updated in future.
I am an investor and these are my personal thoughts on investing, behavioral finance, markets, and sports viewed through the prism of a Latticework