The big squeeze: when bottlenecks work to your advantage

Bottlenecks often act as constraints on growth, but companies that create funnels through them can gain pricing power and capture long-term value. Investment manager Mike Taylor reveals some of the companies he thinks achieve this best and how he spots such pinch points before they fully form. Mike Taylor is a Baillie Gifford partner, an investment manager in its Global Alpha Strategy and a co-manager of The Monks Investment Trust. In this conversation, he tells Short Briefings… host Leo Kelion about how bottlenecks can confer an advantage on companies that sit astride them. That includes those that serve a mismatch between supply and demand created by others, and those whose products and services create a new pinch point, which they control. In addition, he explains why mixing a cocktail of bottlenecks in his portfolios can deliver smoother growth for their shareholders. Portfolio companies discussed include: Medpace – the drug and biologic contract research organisation Games Workshop – the maker of the Warhammer tabletop battle games Tidewater – the provider of offshore vessels to the oil and gas sector Freeport-McMoRan – the mining company that produces gold and copper, among other minerals DISCO – the precision tools company, widely used in the semiconductor industry Samsung Electronics – the electronics conglomerate SK Hynix – the memory chip specialist Resources: Don’t Burn Your Boats: the case for selective AI investing Global Alpha Investment Strategy SPQR: A History of Ancient Rome Short Briefings on Long Term Thinking podcast archive The Monks Investment Trust Valuing scarcity in the age of AI Companies mentioned include: Amazon DISCO Games Workshop Tidewater Freeport-McMoRan Medpace NVIDIA Samsung Electronics Sandoz SK Hynix Timecodes: 00:00 Introduction 02:10 Investing inside and outside Baillie Gifford 03:55 Defining bottlenecks 04:45 How Medpace helps biotechs meet regulatory requirements 07:35 Founder-leader, August Troendle 09:30 Stress testing the bottleneck 12:00 Games Workshop creates its own pinch point 14:50 Shepherding Warhammer over the long term 17:45 Mixing bottlenecks to reduce volatility 20:05 Tidewater and the coming offshore vessel shortage 23:30 Freeport-McMoRan feeds the US’s copper needs 26:20 AI bottlenecks: silicon wafers and high-bandwidth memory 30:00 Enduring versus fleeting bottlenecks 31:25 Book choice Glossary of terms (in order of mention): Adenovirus: A common type of virus that can cause mild illnesses such as colds, sore throats or conjunctivitis, but can also be modified for medical uses such as delivering genes into cells. Gene therapy: A treatment that works by adding, altering or replacing genes inside a patient’s cells to treat disease. Clinical trials: Research studies in people that test whether a medicine, treatment or medical approach is safe and effective. FDA: The US Food and Drug Administration, the regulator responsible for approving medicines, vaccines and medical devices in the United States. Contract research organisation: An organisation that helps biotechnology and pharmaceutical companies run clinical trials. Private partnership: A business owned by its partners rather than by public shareholders. Supernormal profits: Profits above what would normally be expected in a competitive market. Supply side: The part of an industry concerned with how much of a product or service companies can provide. Demand side: The part of an industry concerned with how much customers want or need a product or service. Rate limiter: The factor that determines the maximum speed at which something can grow, expand or be produced. Novel therapies: New types of medical treatments, often based on recent scientific advances. Intellectual property (IP): Legal rights over creations such as brands, stories, characters, designs, patents or software. Free cash flow: The cash a company produces after paying the costs needed to run and maintain the business. Energy transition: The shift from fossil

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