Friedberg

You don't get to write it all down in the first year.

What Burry is arguing is that if you wrote it all down in the first year, your profit would go down and your business would look worse.

So when you make an investment that you can use over a period of time, unlike salary, when you pay someone a salary, you're paying them for the hours they're working that quarter, that year.

And so that money is an expense.

It gets recognized as paid out that period.

But when you make an investment in a building or a piece of equipment that you're going to use over time, you depreciate it, just to go through that principle again.

And so there's standards in GAP on how do you recognize the depreciation schedule?

What's the useful life?

And the useful life is when you're actually realizing return value from that asset.

Burry's point is incorrect.

On Twitter, he said, the idea of a useful life for depreciation being longer because chips for more than three to four years ago are fully booked.

confuses physical utilization with value creation.

That is incorrect.

There is value creation because they are generating revenue from those chips this year, six years later.

So there is, in fact, a useful life for that chip that has extended into year six.

And so it doesn't matter, and this is a part of the gap point that I wanted to bring up.

So what he's arguing is you should depreciate it over, say, three years, which means you're doubling the cost every year and that it's all written off in three years.

But if you did that, to give you a point of example, in Google's case, their total net profit would come down by roughly 10% to 12%.

So it's not like they're cooking the books and recognizing some massive delta in their profit by doing this.

The difference between three and six years is roughly 12% of their profit.