The concept of "Nihonjuron," the theory of Japanese uniqueness, was used to rationalize extreme asset valuations that defied Western financial logic. This cultural narrative created a national blind spot, allowing investors to believe that traditional fundamentals didn't apply to Japan's seemingly superior economic system.

While international markets have more volatility and lower trust, their biggest advantage is inefficiency. Many basic services are underdeveloped, creating enormous 'low-hanging fruit' opportunities. Providing a great, reliable service in a market where few things work well can create immense and durable value.

When asked why investors stick with US assets despite clear risks, Jeff Gundlach's answer is "Habit." He explains the psychological difficulty of abandoning a winning strategy, even when the underlying paradigm has shifted, keeps investors over-allocated to past winners.

Historically, US earnings outgrew the world by 1%. Post-GFC, this widened to 3%. Investors have extrapolated this recent, higher rate as the new normal, pushing the US CAPE ratio to nearly double that of non-US markets. This represents a historically extreme valuation based on a potentially temporary growth advantage.

A truly passive portfolio would own all global financial assets in proportion to their market value. However, this is impossible because many assets, like government-held bonds or restricted foreign stocks, are not available to public investors, making every real-world index fund an active bet.

Post-mortems of bad investments reveal the cause is never a calculation error but always a psychological bias or emotional trap. Sequoia catalogs ~40 of these, including failing to separate the emotional 'thrill of the chase' from the clinical, objective assessment required for sound decision-making.

For global expansion, view countries as having unique attributes like players on a sports team. Outsized returns come from matching your business to a country's inherent 'raw material' strengths—such as leveraging the US for its market liquidity, or Australia for its abundant land and sun for solar projects.

Countries like Poland, which transitioned to capitalism relatively recently, are under-followed by global investors. This creates opportunities to find "boring compounder" stocks, such as supermarket chain Dino Polska, at attractive valuations. These businesses are often run by outsider CEOs and are insulated from global hype cycles like AI.

Bridgewater's Co-CIO argues the winning formula of the last 15 years—concentrating capital in US equities and illiquid assets—is now a dangerous trap. He believes most investors have abandoned diversification because it hasn't worked recently, creating a risky setup that calls for a globally diversified portfolio.