Investors in Enduring Growth: Matthew Brockman and Nic Humphries look back at 2022
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What was the overall outlook for software and technology growth in 2022?
I think it's all about this view we took twenty years ago that software was gonna be a tool for good and a tool for increased kind of productivity in a very wide variety of kind of jobs and and markets. And, you know, that's a trend that doesn't play out, you know, in five years or seven years, you know, it actually plays out over kind of multiple decades.
So welcome to the uh latest episode of the HG Orbit Podcast. Uh we're closing out twenty twenty two, so an informal conversation with my friend Nick Humphries who sat on this green sofa opposite me. So Nick, something of a turbulent year perhaps, twenty twenty two. What do you take away from it?
Well, first of all, thank you for inviting me onto uh Matthew Brockman's couch uh for a bit of year-end therapy. Um you're right, it's been a very, very good different year. I think from a uh software market point of view, you've got to really kind of split apart two quite different things that are happening. You've got kind of public markets and private markets that are in some ways doing quite different things. Um and so there's a big debate about valuations between those two markets right now. Public markets, of course, are the price of the marginal share that's trading. Um, and that's always going to move around incredibly frequently and in response to kind of the latest sentiment of the markets.
Private markets had the advantage of obviously being longer term, being able to look at longer-term trends, and often you're thinking about the value of a whole business, not the value of an individual share. So I think there's clearly a debate amongst everyone. About those kind of relative valuations, but there's clearly been a sell-off in the public markets, and obviously private markets tend to lag and are kind of corresponding to that kind of sell-off. So big differences between those two in some ways. Then you've also got big differences between profitable and unprofitable kind of tech and software businesses. And if you look back over a long period of history actually, over kind of fifteen years, there've always been
quite big differences in how people think about profitable and unprofitable kind of tech businesses. And it's in very rare periods where those two things essentially kind of are um you know there's a there's a premium everybody ignores unprofitability. Everybody says it doesn't matter whether you make profits or not. It happened in ninety nine and it's going to happen again for about a kind of fifteen month period I think between kind of like late twenty and and late twenty one. Um clearly We're no longer in that kind of abnormal period. So in a lot of ways where the markets have reverted to is kind of where it's been for most of the last ten or fifteen years and there's now a very big dissonance if you're not a profitable business anymore.
So beyond twenty three, how do you how do you see the very long term? I think it's all about the
View we took 20 years ago that software was going to be a tool for good and a tool for increased kind of productivity in a very wide variety of kind of jobs and markets. And you know, that's a trend that doesn't play out, you know, in five years or seven years. You know, it actually plays out over kind of multiple decades. And if you start to look at kind of S-curves of kind of cloud penetration into the end markets that we talk about, tax accounting, healthcare, insurance, etc. I think we're all pretty clear that actually we're on the upswing of the first part of the S curve. We're hit we're nowhere near hitting the c top end. So I'm still very, very bullish about the ability for what we do to be positive for the end industries in which we operate and
you've obviously got that existential question about, you know, is software doing good or is software cutting jobs out? I think we can see very clearly that, you know, the industries in in which our software kind of operates are not decreasing jobs, not decreasing employment. They're actually increasing jobs and increasing employment and there's a lot of data we've got to prove that over decades.
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Chapters
5 chapters
1
What was the overall outlook for software and technology growth in 2022?
0:06–7:02
2
How did public and private market valuations differ for tech companies?
7:02–11:23
3
Why do profitable and unprofitable tech businesses behave differently over cycles?
11:23–16:58
4
What long‑term S‑curve trends are driving software adoption across industries?
16:58–22:25
5
How is software increasing productivity and job quality in core sectors?
22:25–25:53
Speakers
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