With information now ubiquitous, the primary source of market inefficiency is no longer informational but behavioral. The most durable edge is "time arbitrage"—exploiting the market's obsession with short-term results by focusing on a business's normalized potential over a two-to-four-year horizon.

Capital has become commoditized with thousands of PE firms competing. The old model of buying low and selling high with minor tweaks no longer works. True value creation has shifted to hands-on operational improvements that drive long-term growth, a skill many investors lack.

The 'classic' VC model hunts for unproven talent in niche areas. The now-dominant 'super compounder' model argues the biggest market inefficiency is underestimating the best companies. This justifies investing in obvious winners at any price, believing that outlier returns will cover the high entry cost.

A crucial, yet unquantifiable, component of alpha is avoiding catastrophic losses. Jeff Aronson points to spending years analyzing companies his firm ultimately passed on. While this discipline doesn't appear as a positive return on a performance sheet, the act of rigorously saying "no" is a real, though invisible, driver of long-term success.

The typical 'buy and hold forever' strategy is riskier than perceived because the median lifespan of a public company is just a decade. This high corporate mortality rate, driven by M&A and failure, underscores the need for investors to regularly reassess holdings rather than assume longevity.

The era of generating returns through leverage and multiple expansion is over. Future success in PE will come from driving revenue growth, entering at lower multiples, and adding operational expertise, particularly in the fragmented middle market where these opportunities are more prevalent.

Corporate leaders are incentivized and wired to pursue growth through acquisition, constantly getting bigger. However, they consistently fail at the strategically crucial, but less glamorous, task of divesting assets at the right time, often holding on until value has significantly eroded.

The "takeout candidate" thesis often fails because corporate development teams at large firms won't risk their careers on optically cheap but unprofitable assets. They prefer to overpay for proven, de-risked companies later, making cheapness a poor indicator of an impending acquisition.

Seed funds that primarily act as a supply chain for Series A investors—optimizing for quick markups rather than fundamental value—are failing. This 'factory model' pushes them into the hyper-competitive 'white hot center' of the market, where deals are priced to perfection and outlier returns are rare.