Focusing only on trendy sectors leads to intense competition where the vast majority of startups fail. True opportunity lies in contrarian ideas that others overlook or dismiss, as these markets have fewer competitors.

Unsexy markets like plumbing or law have less competition, higher profit margins, and customers who are more receptive to expertise. This creates an environment for faster growth, akin to driving on an empty road.

As the PE landscape became saturated with generalist firms, differentiation became crucial. Sector-specialist firms gained an edge by leveraging deep industry knowledge to win deals, often without offering the highest price. This hyper-focus, born from necessity, creates a durable competitive advantage.

Industries widely considered "terrible businesses," like restaurants, often signal opportunity. The high failure rate is usually due to a low barrier to entry and a lack of business acumen among participants. A disciplined, business-first approach in such an environment can create a massive and durable competitive advantage.

Long-term returns are a function of capital supply and demand. Hyped areas like AI have a surplus of capital, competing returns down. True opportunities lie in being the "one banker for 1,000 borrowers"—investing in areas starved for capital, where your money commands a higher expected return.

Resist the common trend of chasing popular deals. Instead, invest years in deeply understanding a specific, narrow sector. This specialized expertise allows you to make smarter investment decisions, add unique value to companies, and potentially secure better deal pricing when opportunities eventually arise.

In a generalist model, learnings from one industry rarely transfer to the next. Sector specialists benefit from compounding knowledge, where every lesson from one deal is directly applied to the next. This accelerates expertise and creates a powerful, self-reinforcing playbook for value creation.

In private equity, capital is the ultimate commodity. The most effective way to differentiate is through deep, singular industry specialization. This expertise generates inbound deal flow, allows for unique value-add post-acquisition, and creates a memorable brand that resonates with sellers.

Unlike venture capital, which relies on a few famous home runs, private equity success is built on a different model. It involves consistently executing "blocking and tackling" to achieve 3-4x returns on obscure industrial or service businesses that the public has never heard of.