1/ Theory: One of the primary inefficiencies remaining in public markets is career risk. (Epistemic Status: Probably bullshit)
2/ Was listening to one of @patrick_oshag's pod with @BrentBeshore this morning. Brent has a "permanent equity" fund that buys small businesses.
3/ Brent mentioned that they were able to execute their strategy only because all their LPs were both the decision maker and the source of capital (all family offices IIRC).
4/ They couldn't do institutions b/c as soon as you introduced the principal/agent situation, their strategy was unpalatable as it created career risk.
5/ If you are managing someone else's money and you make a positive expected value investment, but it's contrarian and you get unlucky and it goes wrong, you're hosed from a career risk POV.
6/ Career risk exists because for the vast majority of the money in public markets today. (E.g. Most money is managed by someone other than the source of capital).
7/ So you have everyone managing other people's money pile into lower EV, or even negative EV investments, because they are optimizing for career risk, not absolute returns.
8/ If you are a money manager, the real risk is not losing money on Nvidia, it's someone else making money when you sat on the sidelines. If everyone loses money, that's fine. It's when just YOU lose money that career risk emerges.
9/ This creates a career risk arbitrage between the ACTUAL highest EV strategy and the PERCEIVED highest EV strategy.
10/ Obviously figuring out the actual highest EV strategy is hard, but the fact that NVDA doesn't have exposure to Bitcoin is shockingly obvious to anyone in the industry.
