Contrary to conventional wisdom, the massive flow of capital into passive indexes and short-term systematic strategies has reduced the number of actors focused on long-term fundamentals. This creates price dislocations and volatility, offering alpha for patient investors.

Investors extrapolating future returns from recent performance is a more damaging force in markets than underestimating fat tails or the rise of passive indexing. This behavior of 'return chasing' hurts individual investors the most and leads to poor resource allocation.

Contrary to popular belief, the market may be getting less efficient. The dominance of indexing, quant funds, and multi-manager pods—all with short time horizons—creates dislocations. This leaves opportunities for long-term investors to buy valuable assets that are neglected because their path to value creation is uncertain.

The optimal level of diversification is the maximum you can achieve at a very low cost. Investors should stop diversifying when the marginal benefit is outweighed by significantly higher fees, such as moving from broad market ETFs (3bps) to private equity (400bps).

The asymmetrical nature of stock returns, driven by power laws, means a handful of massive winners can more than compensate for numerous losers, even if half your investments fail. This is due to convex compounding, where upside is unlimited but downside is capped at 100%.

Contrary to classic theory, markets may be growing less efficient. This is driven not only by passive indexing but also by a structural shift in active management towards short-term, quantitative strategies that prioritize immediate price movements over long-term fundamental value.

The extra return investors receive for taking on risk has compressed globally. For emerging markets, this premium is now negative at -1%, meaning investors are not being paid for the additional risk they're assuming compared to safer assets like government bonds.

The increased volatility and shorter defensibility windows in the AI era challenge traditional VC portfolio construction. The logical response to this heightened risk is greater diversification. This implies that early-stage funds may need to be larger to support more investments or write smaller checks into more companies.

A 50% portfolio loss requires a 100% gain just to break even. The wealthy use low-volatility strategies to protect against massive downturns. By experiencing smaller losses (e.g., -10% vs. -40%), their portfolios recover faster and compound more effectively over the long term.