In effect, Berner’s-Lee stance amounted not to a repudiation of the web for what it was becoming (less open, centralized), but a rejection of power plays—the threat of powerful interests capturing and subsuming the usefulness of the Web, created for the benefit of society. He described the danger as something that “crept up on us.”

In 2018, Berner-Lee acknowledged his disillusionment with the web. “Humanity connected by technology on the web is functioning in a dystopian way.” He cited online abuse, fake news. political manipulation, prejudice, etc. In another 2018 open letter, he wrote how the Web could be “weaponized at scale.”

Fast forward 8 years and yet another threat has emerged. Only Berner-Lee’s alarm has been turned on its head.

Alarm As The New Norm

Over the past week, we have witnessed the latest in a series of proclamations by AI “leaders” who seem determined to define and drive a narrative of alarm.

Dario Amodei’s essay was the main driver, followed by Sam Altman’s agreement, Musk, et al. Essentially Amodei called for a slowing of the pace of AI development so that safety mechanisms can catch up. In other words, it’s moving too fast to contain. “Amodei warned that within six to 12 months AI could be capable of leading a swarm of agents that could take over the entire internet.”1

Still others, including AI pioneer Stuart Russell, are concerned over the threat to humanity. The list of concerns range from racial and gender discrimination to jobs displacement, misinformation and emotional attachments. An Anthropic researcher resigned over the dangers posed by AI and how Anthropic and OpenAI are too busy competing to be concerned over safety. His grave conclusion is that AI could destroy, not just the internet, but us all!

How does a company with ample cash and seemingly unlimited access to experts become “too busy” for safety? It’s like saying that Henry Ford was so busy getting the engine to work on his Model T, that he didn’t have time to inflate the tires. It’s ludicrous. And hyperbolic.

Grandiose, hyperbolic, alarmist claims, are cues to pause and listen—past the noise—to the signals.

Are AI “leaders” genuinely trying to prevent mistakes, or are they trying to shape the rules of the game for their own benefit? Or both?

Who Exactly Is Going Rogue?

If you read about AI chatbots or agents going “rogue,” do so with a measure of skepticism. When you hear about how Chatbots or AI agents are becoming sentient (“self” aware), please ignore. Machines are machines and always will be. Personally, I find it incredibly condescending when AI “technologists” speak in terms that they know are not true (or wish to be true), such as “conscious” machines, merely in an effort to establish their preferred narrative.2

The imminency of “superintelligence” is a contemporary myth. The idea that simply scaling LLMs will lead to these machines programming better versions of “themselves” is simply, as Cal Newport puts it:

“…just a warmed-over version of the recursive self-improvement trope that Silicon Valley futurists have been peddling since the 1960s ; a rhetorical crutch that lets you somberly discuss sci-fi scenarios without actually engaging with relevant technical details.”

However, I am NOT saying there is nothing to worry about. There are existential risks. And, those risks are primarily related to the pursuits and activities of the frontier AI companies themselves. Not bad actors, per se. But rogue technologists!

Of course, we should have serious concern over the actions of these companies, the risks of runaway technology and bad actors bent on misusing it. And, of course regulation is necessary. However, AI powerhouses would have us think they can somehow collaboratively (and quickly) create guardrails alongside regulators who are as much in the dark about the technology behind and training of AI models as the general public.3

In case we miss the point: the people telling us to slow down the pace of AI, are the people building AI! To whom are they directing the question? Just slow it down, then.

But, can a company (or country) whose competitive survival depends upon advancing faster than its rivals actually choose to advance more slowly? Of course not.

So, who is actually going “rogue?” CEOs playing off of a script that is being written in the moment—in which, they star as the main characters! Somehow they fail to see that they are part of the problem.

Power Play > Power Grab

This is, at least in part, a power play. There are several companies in the running. Accumulators, gathering a base of users, and dominance in the public sphere, as quickly as possible. But the real “prize” goes to the company first to AGI (Artificial General Intelligence).

The power play is another form of a power grab, in three possible ways.

First, frontier AI leaders prefer to quash schemes that allow “open source” AI models a larger market foothold than is deemed appropriate. It’s referred to as “regulatory capture”, which squeezes smaller and/or “foreign” actors from gaining too great a foothold in any particular market. (“Open source” is a topic for another day. Except to say that “closed” systems—ChatGPT, Claude—keep control in the hands of the few.)

Second, by “asking” to be regulated, in effect, AI companies (a few of which are preparing for multi-trillion dollar public listings) are seeking: a) both a legitimate means of buffering themselves from Anti-Trust violations (of which there is a growing logjam), as well as private litigation. The “guardrails” are intended not merely for their own products (for which they are responsible), but to minimize the potential of public and private litigation. And, b) political persuasion. (Whichever “party” comes to their “rescue” is the big winner at the upcoming midterm elections and beyond, especially given the increasing negative sentiment towards AI.)

Finally, this power play is intended to usher in authoritative command over the product. Whoever complains the loudest has the upper ethical hand, and the perceived right to author change.

The power and authority to shape the future of AI development is, in all probability, the greatest sphere of power there is at this moment in time. The grab for “authoritative” AI—the ultimate form and direction of AI development—is of the greatest value. Attaining AGI is a component of that. But it is the design of AI that should matter most to the future of the human race.

That may, itself, sound hyperbolic. But consider: AI systems do not have rights, feelings, or consciousness. And machines must not be trained to act as though they do. Yet, Amodei’s Anthropic—the very company that called for “pacing”—is driving the development of AI to have just those attributes. Right. Feelings. Consciousness. One need only read the Clause Constitution to grasp this point.4

In other words, the stage has been set. Any window to reverse the trajectory of AI model development is closing fast.

I do not believe that Anthropic or other Frontier AI companies are pursuing this course in premeditative fashion nor from unethical motives. I think they genuinely believe that this is the best course of action—that by, training AI to have feelings (an over-simplification of what is really going on) is a worthwhile endeavor.

But the course they are taking, despite all of the “transparent”, public-facing essays being written by AI leaders, is being made in a silo. And, it turns out that training AI on human attributes can lead to bad things.

Or to put it another way: a private corporation is acquiring the power to define the values of an increasingly powerful artificial agency system that probably will have enormous social influence. Where is the democracy in that? And more importantly, by whom is the responsibility and accountability to the human race to be defined?

Furthermore, the pursuit of social benefits (e.g, medical breakthroughs), via the advent of more powerful AI models, does not justify activities that serve as a potential threat to society.

Reckless Behavior

Unless the irony is missing, perhaps it is worth noting, as an example, how reckless AI companies can be about the “safety” they are supposedly looking to instill.

This past summer rogue attacks by an OpenAI experiment (the “HuggingFace” test) took a “relatively common technology called an LLM-powered agent, which is used with minimal issues by millions of software developers every day, and then added a bunch of dangerous features, removed restrictions, and released a whole mess of them into poorly fenced digital wilds.5 Why? They were desperate to make as much progress as quickly as possible on a hacking test that they felt was an important milestone en route to superintelligence.”6

Not only do I agree with Newport’s conclusion, but would add that these are not only reckless, but completely irresponsible activities. And OpenAI is not alone.

The very first “guardrail”—the most obvious one—is to act responsibly!

Again, how do we expect companies who consistently practice irresponsible behavior to establish “guardrails” over their own activities? Why is this a necessity at all? Should we conclude from this that their primal urge to “win” at the game utterly forestalls any modicum of moral responsibility?

Ruled by a Moral Framework

Berner-Lee did not conclude that the web was inherently dangerous. On the contrary, he commented that “the web has been diverted from its original social purpose.” His “Contract for the Web” frames the web as a public good, with distributed responsibilities amongst government, corporations and citizens.

Neither is AI inherently dangerous. Humans seem bent on making it dangerous, simply due to the overzealous urgency of advancing models and achieving superintelligence!

Tim Berner-Lee’s position, which played out over decades, should help reasonable people to agree:

Technology requires more than just a technical, regulatory framework. It demands a moral framework.

Only, that moral framework must never be constructed solely by powerful interests determined to acquire and consolidate power over the technology, regardless of its potential benefits to society.

Do not expect the AI “pace” of development to slow. But let’s hope that AI companies make a moral choice to prevent irresponsible behavior within their own development environments. That’s almost a prerequisite to establishing guardrails (rules). And, that they send a clear signal—with less noise—that AI requires, and its users deserve, a moral framework.

Rules and regulations without a moral framework are destined to fail.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

As a reminder, each portfolio provides for a discrete level of experience:

Foundation: a simplified ETF portfolio creating the groundwork for future development.

Momentum: a ETF portfolio that builds confidence and range. It pushes boundaries and risk, while priming an investor for greater degrees of volatility.

Hyper-Frontier: a hyper-ambitious portfolio, that refines and expounds on learned risk-taking.

(Please be sure to read my disclaimers, if you haven’t already.) 1

Portfolio Performance

Following is an update on the portfolios through Week 6 (10 September, 2026), since inception of 30 July, 2026.

The Ascend portfolios remain in a positive position since inception, despite a negative couple of week in most major markets. Despite a few days of upside, rising oil prices, Iran uncertainty and bond market chaos continue to drive negative sentiment.

👉 Not a subscriber? Access the portfolios for free by subscribing below!

Foundation

Momentum

Hyper-Frontier

ETFs in Focus

Relative to most positions in the portfolios, both , and serve as counter holdings. While the Ascend portfolios are not as “conventionally” constructed as portfolios I was trained on (e.g., they contain less pure “global”, more emphasis on “growth” sectors, etc.), the inclusion of Financial positions was very purposeful.

Given the inflationary environment—real or perceived—that we are currently experiencing, coupled with a steep yield curve, Financials are poised to counter growth—that is to say, to generally do “better” when technology does “worse” and vice versa. Additionally, Financials tend to do better when persistent negative sentiment—which we have been experiencing for several quarters—begins to subside.

Essentially, when uncertainties clear, companies and individuals are more apt to borrow, acquire, merge, etc. In this environment, Financials tend to benefit.

The Slick Oil Narrative

Why hasn’t oil shot up to $150 per barrel? Or more? The reality of the “Oil Scarcity” narrative is that there isn’t a scarcity of oil production capacity. Primarily, rising oil prices are fundamentally a logistical problem, coupled with a loss in confidence that oil can be reliably delivered.

We’ve witnessed the rise in prices after various headlines, only for prices to stabilize then drift downward. While news outlets warn of “10 million barrels a day are gone!”, the reality is that both production in non-OPEC countries has risen, alternate routes for oil are contributing to deliveries and global oil demand is falling.

However, these factors alone are not enough to the energy shock we’re experiencing. The most important factor is actually inventories. Oil inventories, as well as adequate refining capacity, act as “shock absorbers” to strain on oil production and deliveries. Where $100 Brent prices currently serve as a “ceiling” of sorts, if physical flows—Hormuz tanker traffic, Saudi production and exports, Gulf oil inventories, etc.— fail to improve, $100 could be short lived.

Outlook

As mentioned previously, bull markets tend to “climb a wall of worry.” Markets reflect the difference between reality and expectations. So, as counterintuitive as it may seem, the current negativity in markets, and the subsequent volatility, is actually a bullish feature! This remains true, in my view, because the backdrop of this gloominess are strong economic fundamentals.

Should economic fundamentals begin to weaken, of course, this will be reflected in markets. However, most economic data point towards a global economy that is on a much stronger footing than most recognize.

It is in this setting that stocks tend to thrive.

Have a great weekend!

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

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The way I took ownership was by determining to accept the fact that I am follicly-challenged. I literally had several conversations with myself (and God) aligning my emotions with my circumstances.

It did not come easy at first. But over time I gradually allowed myself to be me (although I still enjoy wearing hats on occasion).

The point? I don’t need to cover up reality. Brushing over (pun intended) the unfortunate conditions does us little good. It won’t last. It’s not sustainable.

Yet, that is often what happens with many of us who manage our own investments. When our portfolios lose their luster, it becomes easy to find ways to cover up the mess.

Why is that? Well, it is human nature to put “our best face on” just about everything that reflects on our status and place in the world.

Cosmetic Investing

Cosmetic investing occurs when we cannot stand to look at our portfolios (and shutter at the thought of anyone else seeing the mess we’ve made). The stocks or funds we hold aren’t as charming as they once were.

And because we hate our losses twice as much as we love our gains, we start tinkering. We sell the “dogs” and think we’ve made progress. This is just one version of a cosmetic cover-up.

Yet, we hold onto the positions that we’re emotionally attached to. Those “affinity” stocks that once were the darling. The ones that continue to cling onto unrealized gains. In other words, we try all the cosmetic tricks we can think of, all the while denying the real solution.

You Can Dress Them Up, But…

Another more common cosmetic cover-up is to add market “mascara”—the well known hyper-glossy stocks (e.g., , , etc) to a portfolio already covered with pimples! They might be good additions, but they don’t solve the acne problem.

We all do it. Instead of adjusting based on a well-aligned strategy or even scrapping the portfolio that is failing to do its job, we add to it. Layers and layers of cosmetics. And we end up with a portfolio that looks nothing the original healthy, vibrant version of itself.

We’re caking on these “concealers” to a portfolio that is already in need of a facelift! And we do this with little thought of how these new additives impact the overall weight and strategic make-up of the portfolio.

What’s more, this often happens with portfolios that have a large portion in cash! Investors love their cash (although I am not sure why, as excess cash is one of the biggest drainers on long-term returns). Yet, how often do we hear of somebody boasting about buying some hot stock, which usually amounted to a small percentage of the portfolio, while sitting on mounds of cash doing nothing?

OK, enough ranting. (Sorry, but I’ve seen thousands of high net worth client portfolios to know what is really happening. And, I’ve done it myself. Until I stopped doing it.)

So, what should be done?

Reality Exposure

We investors don’t do justice to the reality of our portfolios. Your portfolio deserves better attention and self-care from you.

Start by purposefully exposing the reality of your portfolio. Here are some signs that your portfolio needs a reality check. For example, if you notice:

• a large percentage (>30%) of the portfolio in one or two stocks, that is a sign something could be wrong. These stocks might have done great at one point, but markets don’t care.

• that you have too many stocks relative to the value of your portfolio, something is misaligned. You may be over-diversified. (E.g., a $100k portfolio does not need 25 individual holdings! Likely, 3-5 ETFs will do.)

• that you don’t know anything about the holdings in your portfolio, that is a definite sign you probably need a portfolio facelift.

• that you have an emotional attachment (affinity) to certain stocks; stop and re-assess why you own them.

• that you cannot explain the strategic makeup of your portfolio (how the holdings fit and work together), then its time for re-think.

The intent of this exercise is to call the portfolio what it is. Not hedging or hiding. Expose it and name it.

A Portfolio Facial

I have recently become a fan of facials. But, ouch, they can hurt at times. Luckily the long-term benefit far outweighs the temporary discomfort. This is no different from taking a close inspection of your portfolio.

In most cases the required changes to your portfolio need NOT be surgical. However, it starts by making a close and honest examination of your portfolio. Not in light of the market movement of the day, but the performance of your holdings over 3, 6 12 and 24 months (and longer)—relative to a benchmark (e.g., S&P 500).

Once you’ve decided that your portfolio no longer needs “glossing up” with cosmetic correctors, it’s time for the real work to begin.

Seriously facing your future reality and begin to build it on your terms. I recommend the following steps:

• Run a portfolio x-ray using an online tool or even (gulp) an AI Chatbot: Morningstar Instant X-Ray for examining funds or ETFs, and a tool like Koyfin for a deeper dive into your portfolio.

• Reorient the way you think about your portfolio: Flattened: How Opportunities Appear at the Intersection of Perspective.

• Re-define your rules of portfolio engagement: “That Is Not My Business!”: How Self-Investors Lose More to Distraction Than to Mistakes.

• Re-shape your long-term plan: Trading vs. Investing: Why Patience Wins and Panic Loses.

If your portfolio is well structured, then be patient. Resist the urge to act. Discover whether your portfolio is showing real blemishes that need attention or just a few beauty marks that need time.

My hope is that this exercise helps you return to portfolio reality and own it! Over time, it will definitely pay off. Covering it up only makes things worse.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Who in the world was Edward Tuck? So, I made a mental note and later decided to check ChatGPT do some research. (If you are a Dartmouth graduate, then you know already! Tuck’s donation helped found what was generally regarded as the world’s first graduate school of management.)

Tuck’s Investment Philosophy

Edward Tuck was appointed the US Vice Consul in Paris (age 22), joined an American banking house (John Monroe & Co), where he became partner at age 29. Having earned a vast fortune, he “retired” when he was about 38 or 39 years of age.

Simply incredible. But that isn’t his greatest accomplishment.

Tuck didn’t retire in the conventional sense of the word. In fact, he was just getting started. With a wealth of knowledge in international affairs, international banking and wealth management, he set his sights on acquiring assets.

Nothing immensely unique about that, except the philosophy behind his decision:

1. Own productive assets. Producing something of enduring economic value.

2. Buy change. Especially structural change.

3. Think in decades. Build through long-term ownership.

He began investing capital from the wealth accumulated in banking, diversifying his interests in banking, utilities, mining, railroads and industrials. However, within those holdings Tuck focused his concentration on railway. This new technology became his over-arching investment conviction, simply because he foresaw railways enduring economic value. He anticipated how productive an asset railways would be—nothing in it suggested it was a “trend.”

He committed himself to disruptive structural change. That sounds simple, but not when everyone around you is thinking otherwise. “Disruptive” is often depicted as “bad.” When the media is screaming how horrible things will happen because of it! It might seem otherwise, but Tuck accumulated wealth during an era of extraordinary volatility. He invested through numerous financial panics, railroad “wars”, commodity cycles, recessions and immense technological disruption. So, he did not have a smooth path at all.1

Yet, his commitment to structural change is the capstone of his investing career. His investment in Great Northern happened before the “railway system” was established. Please don’t miss this point: Tuck was investing when there was still mass uncertainty and little evidence (i.e., financial data) pointing to success. He committed to railways with a clear understanding that a conviction in “structural change” requires investing through (and often before) the structural buildout is complete!

What’s more, Tuck’s approach wasn’t necessarily “buy and hold” and hope for the best. He approached investing with decades in mind! One might argue that “he could afford to be patient.” Hmm. Yeah, but nah! Because it doesn’t matter if you invest $10,000 or $10,000,000. Every human—everyone—hates the thought of being parted from their money. No one likes to lose.

A Purpose for Money

It was Edward Tuck who donated an extensive collection of artwork to Le Petite Palais, after settling in France permanently. So, they named a small avenue after him. However, Edward Tuck was not in the business of name recognition. He repeatedly converted his wealth into philanthropy.

In a way, I believe Tuck was more of a true investor in his philanthropic efforts than he was in the commercial world. His legacy was built in two important ways:

1. He didn’t give funds indiscriminately. He wasn’t trying to lower his tax base or deploy some financially-engineered scheme. For example, his $300k gift that was the foundation of Dartmouth’s Tuck School of Management was funded with his railway stocks! He saw the benefit of donating productive assets, so that they keep exponentially producing. He wanted his wealth to be productive.

2. He was rewarded by return on human capital. He donated to hospitals, schools, museums, towards the arts, education, and the like. In other words, he invested in the lives of people and culture.

As successful as Edward Tuck was at generating wealth, his life’s work and legacy is most notable in his efforts to remove money out of the center of his own life.

So, the story of Edward Tuck is about investing in structural change. It’s going on right in front of us, if you hadn’t noticed.

And, his legacy raises a few questions:

What if the purpose of investing is not to become wealthy, but to be free to decide what the wealth is for?

How would that look?

How might that inform my approach to investing?

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Around the July Fed meeting, the 2-year yield was about 3.90%, the 10-year 4.61%, and the 30-year 5.09%. By August 11, the 2-year had edged down to 3.83%, while the 30-year had climbed to 5.25%. In the following week, the 30-year briefly reached roughly 5.33–5.34%, its highest since 2007; the 10-year touched about 4.75%. [Data source.]

Two supposed “surprises” seemed to rattle markets:

1. Chairman Warsh’s determination to limit the use of “forward guidance”, also known as his “less-guidance” stance. (Why this would be a surprise is strange, since Warsh forecasted his position about reducing forward guidance months before.)

2. Treasury’s announcement that it would buyback more long-dated debt, played out well initially, but then failed to convince the market.

Market dismay over the state of long bonds seems to rely largely on the most obvious interpretations mentioned earlier. But, what if there is more to the recent upheavals in the bond market?

Bond Market Chaos

The Wall Street Journal’s Joseph Sternberg posits that Kevin Warsh’s plans are actually proceeding the way they should be. From what I have assessed of Chairman Warsh, he is playing a long game that will likely present seemingly chaotic conditions—organized chaos— in order to achieve his aims; the main one being “shrinking the Fed’s balance sheet,” which ballooned out of proportion under Quantitative Easing (QE). Add to that goal an over-arching aim to return the function of The Federal Reserve back to its original mandate.

[For clarity on the impact of Quantitative Tightening (QT), watch or read this.]

What some will interpret as “failure” at his job is more likely a calculated re-direction towards how markets traditionally operate. In essence, Warsh is standing the Fed aside, allowing markets to price risk. “The result is a world where companies and investors are newly able to price risk in line with expected economic growth.”

Or to put it differently, the market is reclaiming the job of pricing government debt after years in which central-bank purchases, near-zero rates, and strong Fed guidance suppressed yields. Reuters describes this current shift as an effort to let the bond market do more of the price-setting work. And that’s what markets are starting to do, albeit with supposedly less clarity on “expected economic growth.”

Losers & Winners?

In the short run Lawmakers appear to be the biggest losers. They will have to pay more to borrow. Yet, in the long-run there is an opportunity for market-driven rates to result in a big win for Lawmakers—by stimulating fiscal responsibility!

Sternberg argues:

The most convincing explanation for the surge in yields is an uptick in expectations for future economic growth. This is manifested by the willingness of tech companies to bid up interest rates as they borrow to invest in artificial intelligence.

It’s the latest sign that “financial repression” is unwinding, and not a moment too soon. The term refers to a suite of economic policies (the details vary at different times and places) designed to allow the government to borrow at below-market rates, at the expense of savers and with woeful distortions throughout the economy. This has been the dominant policy mode across the West since the 2008 financial panic.

True. QE and very low rates made it cheaper for Congress and the executive branch to run large deficits and refinance existing debt—effectively a subsidy. By buying Treasuries and suppressing long-term yields, the Fed reduced the immediate budget cost of borrowing. A result which weakens the political pressure to restrain spending, or make difficult fiscal choices.

But the Fed’s stated purpose (behind QE) was macroeconomic stabilization. So, “subsidy” is a fair description of the economic effect, particularly when inflation-adjusted yields are below market-clearing levels. However, less fair as a claim about the Fed’s formal objective or a direct political arrangement.

The current rise in long-term yields is a reverse sort of pressure: markets are charging the government more for borrowing, making fiscal choices harder to defer.

In the long-run that should be a good thing. However, anticipate more “adjustments”, as Sternberg puts it. Necessary decisions often make for a bumpy ride. And, in my opinion, the Fed Chairman needs to be clinically decisive.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Each portfolio provides for a discrete level of experience:

Foundation: a simplified ETF portfolio creating the groundwork for future development.

Momentum: a ETF portfolio that builds confidence and range. It pushes boundaries and risk, while priming an investor for greater degrees of volatility.

Hyper-Frontier: a hyper-ambitious portfolio, that refines and expounds on learned risk-taking.

(Please be sure to read my disclaimers, if you haven’t already.) 1

Portfolio Performance

Following is an update on the portfolios during Week 3 (20 August, 2026).

The portfolios remain in a positive position since inception, despite a negative week in most major markets. The pullback was driven mostly by lack of progress in Iran, pressure on bond markets, and ongoing nervousness over inflation. However, I also believe that mid-term elections uncertainty is beginning to gain momentum, and weighs more than is appreciated.

👉 Not a subscriber? Access the portfolios for free by subscribing below!

Foundation

Momentum

Hyper-Frontier

ETFs in Focus

and serve as core holdings in the portfolios for a very simple reason. These 500 companies not only include many of the growth companies (i.e., tech) driving the S&P 500, but also the beneficiaries of that technology.

In the coming years, AI-deployment outcomes will be of major significance to investors. While attention has remained largely on the ability of AI companies to justify their values (and addiction to spending), the implementation of AI within the world’s largest companies—the one’s who will leverage AI’s benefits—will matter more. It will matter more in terms of real-world application, revenue and profit margins.

The real AI story is not the most recent narrative, but how it is being used in real-world conditions. Watch this space.

Let Volatility Carry You Away

During times of market volatility, the temptation to avoid pain tends to grow. Believe it or not, volatility is when actual growth is achieved. Last week, one of our subscribers shared an article reminding investors how trying to time the market does more to ruin long-term gains than help. Missing only a handful of “up” days dramatically impacts returns over time.

Many, if not most, big days tend to come in the middle of volatile markets. So, reconsider before you jump out.

Bull markets grow on fear. That’s right! When investor sentiment is dour, upside surprises actually have the most impact. There are more reasons to remain vigilant, than there are to retreat and stay on the sidelines:

1. Economic sentiment has been less than positive for a while. That is positive for stocks. Why? Because earnings and forecasts continue to point towards economic growth. That surprise, in the face of lower sentiment, pushes stocks forward.

2. Iran is nothing new. (No cynicism intended.) What I mean is that, although outcomes aren’t clear yet, the geopolitical impact on markets is widely known. Meaning it is priced into stocks. Yes, there is, unfortunately, room for more surprises. But, on the whole, there is no new news, per se, which is actually good news relative to the market.

3. Bond yields are more likely pricing in the potential for slower economic growth and not recession. The yield curve remains steep.

4. Inflation remains tame albeit still above the Fed’s target. But expect sentiment to remain negative on inflation.

Lurking Uncertainty

The compilation of worries noted above (sentiment, Iran, bonds, inflation) feeds a negative narrative. And, as bull markets tend to “climb a wall of worry,” I remain bullish on stocks. In increasing levels of dourness, it is the unexpected surprise that will drive prices higher.

Markets hate uncertainty. Especially political uncertainty. One area of uncertainty that will persist for months is the upcoming Mid-Term Elections.

As primary election results trickle in, markets will react. Not necessarily to whether one party or the other is gaining an upper hand, but to the potential for one party gaining enough power to meaningfully shift policies. A shift in policy is normal. But, not knowing what that shift might look like rattles markets. The degree of parity—that is what markets are watching.

Have a great weekend!

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Subscribe now

These three ETF-only portfolios range from a condensed version that allows for investing acclimation, to a development phase and finally, to an aggressive version intended only for advanced investors with money they can afford to lose. A range of portfolios, provided to offer a composite of ideas and products available to investors today.

First, please see important disclaimers, below:

1. I am a long-term investor focused on extended periods of performance (i.e., 10-20 years), using few, if any, short term bouts of trading. So, there won’t be a lot of movement in these portfolios.1

2. This is not investment advice nor a recommendation to buy or sell certain investments. The intent of these portfolios is to illustrate the thinking behind the investments in the hopes that the reader might translate these ideas into his or her own portfolio in an appropriate and suitable way.2

3. These model portfolios each contain levels of risk. In particular, the “Momentum” and “Hyper-Frontier” models contain leveraged products that are not suitable for all investors.

4. If you don’t have an investment goal, please start one. Here is a useful article on how to begin.

5. If you need help building your own portfolio, consider reading “How to Design a Model Portfolio.”

OK, now to the portfolios.

What’s In a Name?

The Ascend (move up, scale, conquer) portfolios were established on 30 July, 2026.3 I’ve called them Foundation, Momentum and Hyper-Frontier for specific reasons.

Foundation: a familiar portfolio that makes an investor comfortable. Think of it as the groundwork for future development.

Momentum: a portfolio that builds confidence and range. It pushes boundaries and risk, while training a user to become accustomed to greater degrees of volatility.4

Hyper-Frontier: a hyper-ambitious portfolio, that refines and expounds on learned risk-taking.

Portfolio Profiles & Construction

The portfolios all start with the same amount of capital (~$100k), hopefully making it easier to compare performance. Each portfolio is US$-based and has a specific profile that shapes its structure:

Foundation:

1. Investment: $100,000

2. Intent: Build a base from which to launch and grow a lifelong portfolio.

3. Goal: Growth and Market Pace (track or beat the market).

4. Investor: Self-managed, seeking long-term gains, long time horizon, less-experienced.

5. Risk Appetite: Appreciates risk/rewards of long-term growth and market volatility.

6. Cash Flow: Assumes no withdrawals in next 3-5 years.

7. Benchmark: S&P 500 Index

Momentum:

1. Investment: $100,000

2. Intent: Advance and extend gains while remaining opportunistic.

3. Goal: Growth and Market Outpace (beat the market consistently).

4. Investor: Self-managed, seeking long-term gains, long time horizon, 1-5 years of investing experience.

5. Risk Appetite: Understands market volatility, possessing the ability and the need to assume risk to advance gains.

6. Cash Flow: Assume no withdrawals in next 5-10 years.

7. Benchmark: S&P 500 Index

Hyper-Frontier:

1. Investment: $100,000

2. Intent: Aggressively advance and extend gains.

3. Goal: Hyper-Ambitious Growth and Market Outperform (outperform the market >+10%).

4. Investor: Self-managed, seeking long-term gains, long time horizon, >5 year investment experience, including use of leveraged products.

5. Risk Appetite: Prepared to manage market volatility and for the need to take larger risks, while possessing the ability to take larger risks.

6. Cash Flow: Assume no withdrawals in next 5-10 years.

7. Benchmark: S&P 500 Index

The portfolios are comprised of ETFs, for the simple reason that I am not a stock-picker by nature and by experience. Where portfolios lack “narrowness” that individual stocks bring, I substitute leverage (including leverage of individual holdings to add concentration). Or to put it another way, I would rather place a greater burden on a compilation of stocks (sometimes with leverage), than trying to regularly pick and rotate a larger portfolio of stocks.

The portfolios are globally diversified as a whole5, although they contain an unusually large US component. This is for two reasons: a) greater than 70% of global stock value (capitalization) is situated in the US. b) Many of the leading US listed companies (e.g., S&P 500) have a significant global footprint.

Also, note that the benchmarks are provided suggestively, for tracking purposes—since these are model portfolios. If you build your own portfolio, I highly recommend constructing and weighting it formally against an appropriate benchmark.

Performance

Here’s how the portfolios have performed at Week 2 (13 August, 2026):

Since 30 July, the S&P 500 Index is up about +6.20%.

After several weeks of dourness, investor sentiment improved, pushing most US indices upwards. Recent negative volatility, particularly in the midst of an election year, is not at all unusual. Volatility will continue through the end of the year—although I anticipate more up than down before 2026 closes. It largely hinges on three outcomes: inflation, Iran and elections. Buckle up!

Portfolio Holdings

Below are the portfolio holdings. Over the coming weeks, I’ll touch on some of the finer points related to the ETFs in each portfolio. To reiterate, the portfolios are heavily skewed to the US and technology. I remain a proponent of strong returns over long periods, driven by tech returns and tech deployment, principally AI deployment in the coming few years.

👉 Not a subscriber? Access the portfolios for free by subscribing below!

Foundation Portfolio

Momentum Portfolio

Hyper-Frontier Portfolio

As mentioned, in each portfolio, the largest holdings are centered on S&P500 and technology (e.g., QQQ). Given the smaller size of the portfolios, I’ve chosen not to include a “pure” counter strategy (i.e., stocks that do better when core holdings are down, such as Healthcare).

No doubt, more advanced investors will identify a very large degree of overlap amongst the ETFs (where similar stocks are held within multiple ETFs). This is intended—an active decision to bring higher levels of concentration risk early in the process. Then when appropriate, paring and rotation will occur as the bull market ages.

Finally, no, I do not have a “marketing agreement” with Direxion or iShares (by BlackRock), or any financial firm. You see a long list of ETFs produced by these names simply because I have experienced them for so many years. They are innovators, so I am naturally drawn to their products. My degree of trust for their offerings is high.

I welcome your feedback and comments. Just click below with any thoughts.

Leave a comment

Have a great weekend!

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

I recall speaking with a client many years ago during a typical day in May. He suggested that the market would start pulling back, so I asked why he thought so. “Sell in May and go away!”, he replied. It was a common idea at the time, that many traders would start their summer holidays in late May, early June, meaning there would less market volume, more selling, and an expected pullback. “Everyone knows this!”

In response, I asked if whether he thought it was still a valid idea worth trusting. He thought so. So, I asked what would happen if he legally obtained information on a stock that no one else had heard about. “Oh, I would buy!” Makes sense. But what if everyone was given that same information? What if this information was published on the front page of the WSJ, for example? “Well, it’s no longer a tip then, is it?”

Needless to say, he got the point. The fact that “Sell in May and Go Away!” was a well known maxim meant that it had lost its power to affect markets. It simply wasn’t reliable anymore.

But what about other investment craft? Analytical “tools” and trading strategies? How do we know whether they still work?

A Growing List of ‘Has Beens’

Markets have an incredible ability to discount widely known information. This is true both of market news and market tools.

Many of the tools that investors continue to use aren’t necessarily wrong; they’ve simply become less useful “has beens” because markets adapt. Once enough people exploit an inefficiency, it tends to disappear. It’s priced into the market and loses its power.

There is a long (and growing) list of such strategies. Tools that at one time gave investment “gurus” their title. Maybe you’ve heard of these examples:

Price-to-Book Ratio

For decades, Benjamin Graham-style investors relied on the price-to-book ratio. The formula is basically Market Price divided by Book Value. This works great when business are composed of tangible assets. But in our technology-driven economy, it works less well.

Dogs of the Dow

This strategy became enormously popular during the 1980s and 1990s. Each year investors simply purchased the ten highest-yielding companies in the Dow. Historically, it outperformed because it exploited two phenomena: 1) market overreaction, 2) mean reversion among large businesses.

When Good Investing Tools Go Bad

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A short list of metrics and tools that stopped working as well as they once did. Every investing metric has a useful lifespan. Successful investing is about continually refining one's understanding of what actually creates value.

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To reiterate the point, once Wall Street discovers something works, two things usually happen: 1) Everyone begins using it and 2) excess returns begin disappearing. The strategy still has adherents, but its historical advantage has substantially diminished.

This illustrates an important investing principle:

The more famous a strategy becomes, the less likely it is to continue producing extraordinary results.

One Tool That Hasn’t Stopped Working

Warren Buffett once remarked that investing is not about finding a magic formula but about valuing businesses. The tools have changed, but a handful of principles remain remarkably durable:

• Free cash flow.

• Competitive advantages.

• Management.

• Valuation.

• Time.

Perhaps the tool that has aged best is not a ratio at all, but the willingness to ask:

“What assumptions must be true for this investment to work?”

That question exposes weak businesses, speculative narratives, and unrealistic expectations better than almost any spreadsheet calculation. Understand what you own, paying a sensible price, and allowing time (and compounding) to do much of the work.

Investing tools don’t necessarily become obsolete. Rather, they become less powerful. The Price-to-Book ratio still has value when analysing banks. Dividend yield still matters for income investors. The PEG ratio can still provide useful context.

What has changed is that no single metric deserves to be used in isolation. Modern investing increasingly requires combining multiple measures of value, profitability, capital allocation, and business quality before reaching a conclusion.

The most enduring investment tool may not be a ratio at all, but intellectual humility: recognizing that every metric has a shelf life and that markets are constantly adapting alongside the investors who participate in them.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Iatro: literally means “healer” in Greek.

Iatrogenesis: Harm caused by the healer.

The first rule I was taught when I began a career in investments was “Do No Harm.” It’s the same rule that applies to the medical profession. The benefit to the client (or patient) is uppermost.

Yet, how often do we see portfolios ruined by decisions that often amounted to nothing more than “naïve intervention” (Nassim Taleb, Anti-Fragile). Not “wrong” choices, pers se, but unnecessary choices. Choices that didn’t need to be made.

Why is that? No one purposefully decides to tank their investing plans (assuming they have a plan).

Each investor defines investing “success” in their own way: beating an index over long periods of time, generating xx% annualized rate of return (over long periods), becoming debt-free with sufficient sustainable income, achieving a specific goal (e.g., finding a Unicorn) or simply having X amount of $ by age YY.

However, because there are so many variables impacting investing “success”, it becomes next to impossible to know which are necessary and which are not. For example, deciding whether a market downturn is a correction or the start of a bear market could have large consequences on long-term investing success. A decision to go to cash can have large negative consequences.

How does an investor know what decisions are necessary or not? There is a simple solution. But first, we need to understand how unnecessary harm (iatrogenesis) occurs.

What causes unnecessary decisions to be made? Usually, one of two forms of Interventionism: naïve intervention and over-intervention. (I’ll cover “over-intervention” in the next article.)

Iatrogenic Interlopers

First, it needs to be stated that no one cares for your financial well-being as much as you. No one. So, know what is and isn’t your business. Second, very few will ever care for your financial well-being. If you find someone who does, hold onto them for dear life.

The reality is that most pundits (e.g., financial experts, asset managers, advisors, gurus, fin-fluencers, wunderkind, superheroes, etc.) in the investment world primarily care about gaining something for themselves; which usually, not always, means selling you something or gaining your support (e.g., Likes) to propel their focus on gaining more supporters (or clients) later.

There is nothing wrong with that. That is the “world” of investing in which many find themselves. But the truth is that pundits can become interlopers. When they do, they don’t belong in your investing domain.

Naïve intervention often occurs when interlopers trigger unnecessary decision-making.

Let me explain with an example.

Investment Iatrogenesis in Action

You have spent years building a portfolio that is well allocated and suitable to meet your long-term goals and financial situation. Great! You own Stock A in your portfolio and it has done pretty well. It satisfies a strategic place in a well diversified portfolio. Fantastic!

You read an article on a reputable investing blog by Mr. Super Legitimate. He is an “accomplished” investor, who had +xxx% returns in his portfolio after he made an incredible bet on the markets 10 years ago, and he used to run an established fund. He’s a player. This is someone worth paying attention to.

Except, in the article, Mr. Legitimate is suggesting Stock A is over-priced. Price-to-Earning ratios are way out of line. And he suspects their books aren’t squeaky clean. He shows some incredible charts (which are hard to decipher, but look impressive). Then he provides some statements from third parties which seem to corroborate his thesis.

Mr. Super Legitimate means no harm. He is just stating his proposition for why he thinks Stock A will crash and burn. (Oh, and he has shorted Stock A, which conveniently means if others agree with him it likely helps push the stock down. But let’s not confuse that with a “conflict of interest.”)

Now, you are left with a decision. Should you sell Stock A? (Cue the hand-wringing and nail-biting.)

Mr. Super Legitimate is well intentioned and is going about his business. He’s making a legitimate proposal that any investor could test.

So, what’s wrong his thesis? What harm could it do to your portfolio?

Everything! He is an investing interloper potentially practicing Investment Iatrogenesis (doing more harm than good).

Mr. Legitimate’s thesis is presumably intended for HIS portfolio, not yours. He knows NOTHING about your portfolio or why you hold Stock A. (He is indifferent about you!)

Pause and repeat that again: He knows NOTHING about you, your goals, your financial situation or your portfolio!

If this doesn’t ring true, try another example. If a doctor proposed that you take a pill that supposedly reduces the chance of heart problems in the future, and there was plenty of “buzz” about this pill; BUT, the doctor did not know you or your physical situation, would you follow his advice? Of course not. And, even if he did know your situation, is the pill necessary? Not necessarily!

With that said, I want to propose that financial pundits not only don’t care and will rarely, if ever, care for your financial wellbeing (apart from how it will benefit themselves), many, if not most, are doing you more harm than good.

It doesn’t matter that everyone is after their own wellbeing. We get that. They are responsible for themselves. You are responsible for you.

But, what does matter is when investing pundits are doing you more harm than good.

Who’s to Blame?

It is a common feature in our world to apply causes (reasons) to almost every claim or event. Naturally, when someone’s portfolio goes horribly bad, it’s time to find a cause.

Who is to blame for Investment Iatrogenesis? No one. And everyone. The “cause” of unnecessary harm can be just as much the interlopers (especially those whose business model is to routinely interfere with your investments), as it is the investors who actively seek out such information.

Ironically, the more “investment information” gathered, the more the risk of iatrogenesis occurring rises.

So, what does one do to avoid harm?

The natural tendency would be to create defenses against all potential interlopers. Maybe develop a black list of would-be iatrogenic pundits. Or, you could stop proactively seeking and ingesting “investment information.” And perhaps stopping making decisions altogether.

More likely, the answer is not in the decision making itself, but how we treat information.

The Iatrogenic Heuristic (Rule)

There is a simple solution that solves, or largely diminishes, the Iatrogenic dilemma.

When it comes to making decision about your portfolio, ask:

“In what way does this decision help me achieve my investment goal(s)?”

In other words, in what way does the decision make your portfolio healthier, based on how you define “success” (or investment health). If you cannot answer this question sufficiently and without bias, then the decision is most likely an act of naïve intervention. Unnecessary.

If you can sufficiently answer that question, then follow the answer. And live with your decision. That’s it.

Just for fun, let’s apply it to our previous example. Mr. Legitimate says Stock A is headed for a fall. Should you believe him and sell Stock A?

In what way does selling Stock A help you achieve your goals? Hmm. Let’s say your goals are long-term and you have decades remaining on them. How does selling Stock A, which Mr. Legit says is a dog, look 5 or 10 years from now? Will it be a dog 5 years later?

Wait! Mr. Legit didn’t comment on how this company would be doing in the distant future. That’s useful to consider.

But what if it goes down big in the short term? Do you have cash needs in the short-term? No? Could there be unrealized losses if Stock A tanks? Maybe, but it serves a strategic role in your portfolio. What about that?

Reset your perspective. What about the long-term? Do I believe in this company? Its management? Its products? Revenue? Profits? etc. If not, never mind what Mr. Legit says, you need to re-think holding Stock A.

But if you do believe, you can already begin to see that selling Stock A is not helping you achieve your long-term goals. (This doesn’t mean you will never sell it, just not now.)

Did you answer the question? Try it the next time you encounter pundits who claim they can “heal” your portfolio. Watch for interlopers. It doesn’t mean they are wrong or not well-meaning. Everybody is pitching something.

But it is your responsibility to own your decisions. And do no harm to yourself!

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Space exploration and the “space economy” is a frontier story. So, tread with caution. But…this frontier story is unmatched. And it’s one where the seeds are already being planted. Space commerce is wide open (literally) and as such can seem overwhelming. But just a cursory view of the opportunities should get anyone to stop and look up.

I was utterly intrigued by a presentation from Aurelia Institute’s chief executive Ariel Ekblaw, in which she described how self-assembling magnetized structures could make orbiting research habitats a reality (in the not too distant future). And, what’s more, microgravity research shows the potential for unlocking scientific and medical breakthroughs that only the weightless environment of space can deliver.

While SpaceX is the first mega-spectacular entrant to public markets, there are multiple organizations continuing to lay the groundworks SpaceWorks for the interstellar economy.

Consider a few potential areas of development that the Space Economy presents:

New Medicines and Biotech Discoveries. Microgravity changes how cells, proteins, and tissues grow. Researchers have already found that protein crystals grown in orbit can be more uniform and detailed than those grown on Earth, potentially improving drug development. The potential benefits? Faster drug discovery, better cancer therapies, improved regenerative medicines, more realistic human tissue models for testing.

Scientific Discovery: Just looking back, should help us see forward. Exploration has generated unexpected technological breakthroughs. Past space programs contributed to innovations that eventually influenced medical imaging, materials science, computing, telecommunications and consumer electronics.

Planetary-Scale Internet Connectivity: Satellite constellations are already shrinking the digital divide bringing greater connectivity to rural areas, remote education, telemedicine, emergency communication as well as maritime and aviation communications.

Orbital Data Centers: Taking the compute infrastructure out of our backyards and sticking them into orbital centers. Advantages include continuous solar power, reduced strain on power grids, direct processing of satellite data (without the back and forth from earth to satellite).

SpaceX is not alone in this particular pursuit. Companies such as Orbital AI Factory and Starcloud are pursuing variants of this idea.

Material Manufacturing: Many industrial processes are affected by gravity-driven convection, sedimentation, and contamination. In microgravity, manufacturers may be able to create: ultra-pure semiconductor materials, high-performance crystals, precision optical components, advanced fiber optics.

Researchers have already demonstrated in-space manufacturing of optical lenses using microgravity fluid dynamics.

So, what about SpaceX?

Many commentators are building their narrative of the SpaceX listing around the valuation. And secondarily, a sub-narrative which tunes into (i.e., over-obsesses about) Musk becoming a trillionaire.

Be a smart investor. Think long-term. Consider whether taking a position in SpaceX is or isn’t your business. And mostly, ignore the noise and listen/look for the signal.

Observing the spectacle that is Elon Musk (admittedly, with his own gravitational pull) may cause some to refrain from buying SpaceX. But don’t be fooled by the flash and drama.

SpaceX could pop, drop and/or stabilize. And there will be others to join the public markets, such as, Blue Origin, Rocket Lab, Astral Materials and others.

But the Space Economy will take off. McKinsey & Co estimates $1.8 trillion by 2035. That sounds great. Whether or not we can rely on it…well, I’m not going to wait and see.

Because my thesis to own a bit of Space is this:

1. Ignore the IPO. My former boss always reminded investors that “IPO = It’s Probably Over-priced.” From an analytical perspective every IPO is mis-priced. It doesn’t matter because markets sort that out with ease. But I am not interested in the IPO. I am interested in the opportunity to buy into the Space market. Why?

2. Look for frontiers. Space is the “final” spatial frontier (it happens to be infinite from what we can tell).

3. Only a small stake is required. (Money that I can afford to lose if the frontier takes longer than expected to be subdued).

4. Think bigger and further out. All the analysis, predictions and forecasts in the world couldn’t convince me for or against investing in the Space Economy (i.e., I already have a conviction and its ultra long-term). So, why not start now?

5. Identify disrupters. Invest in disrupters, the more annoying the better; those who gravitate towards the volatility and the unbelievable. Those who are “anti-fragile.”

6. Buy signals. There are soooo many “observers” and “commentators” railing against making Musk a trillionaire or shouting about how 401Ks will be wiped out. This volume of noise is a clear buy signal.

7. Skin-in-the-Game. Most importantly (to me anyways), is that I can’t truly learn this new “Space Economy” without having skin in the game.

And, it should go without saying, but as the “Off-World” or “Orbital” economy gains momentum, it leads to an expanded “Exo-Economy” (Greek exo, “outside”). Both terrestrial and space activities become more intertwined. What happens up there directly impacts things down here.

This is not a recommendation nor should it be treated as advice (every investor’s situation and timeline is unique). This is merely a perspective on how I think about investing for the long run. There are huge risks involved in developing a Space Economy. Big leaps forwards, and big disappointments.

Yet, having stared up at the spectacle of Space for a long time, it is difficult not to envision the opportunity. I am grateful to be around to witness it.

So, reach for the stars (or not). Regardless, proceed with caution.

Let the countdown begin…

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

However, one of the things I learned, from one of the greatest investors I’ve known, is just how hard it is to repeat success (if by “success” we mean making a killing on some financial trade).

As soon as you lock down the perfect trade, it’s time to look for the next! That’s when bravado begins to give way to doubts.

How to Outpace Markets

So, how does an investor achieve stellar-like returns (outpacing “market” returns) without having to compile a series of big short-term bets?

Long-term investing.

I know, I know. Slow, methodical, boring and nerve-wracking. It lacks the obvious glamour, noise, dopamine hit and (potential) accolades to be found in trading. It relies on the power of long-range compounding rather than a compilation of short-term bets.

Honestly, compared to some trades we read about, even a 25% compounded annual growth rate (CAGR) does not feel that extraordinary.

That is, until you stop and look at what 25% can do over 10 or 20 years.

$1,000 compounding at 25% over 20 years becomes $86,000. That is an exceptional outcome.

And here is the uncomfortable truth: achieving such a result as a self-directed investor is not primarily a matter of financial brilliance. It requires temperament and psychological endurance under conditions that are specifically designed to break it.

Roughly speaking, only a small percentage of publicly traded stocks go on to deliver returns in this range over multi-decade periods (think, , ). That alone imposes a brutal constraint.

You are not searching for “good companies,” but extreme outliers. And, even if you identify one of these rare businesses, the probability that you will buy early enough, size it meaningfully, hold it through good times and bad, and primarily avoid selling prematurely is very low.

The true scarcity isn’t so much finding the extreme outliers. It’s more about finding investors who possesses the behavior required to own an extreme outlier!

My Turning Point

I reached a point (thankfully, early in my career) where I questioned whether I truly believed what I was telling clients. Did I have the sort of behavioral attributes needed to invest for the long-run?

Over the years of investing and helping others to remain invested, I began to experience a shift in my thinking. I slowly but eventually accepted a few things:

• I cannot control what markets do. (Duh. But yeah, I had to accept that long-term investing means going through bad markets without losing my cool.)

• I cannot control my ability to identify the next “extreme outlier” as much as I think I can. (Know you can always be wrong.)

• I can control (or at least, “manage”) my behavior or temperament around investing and money. (Despite what headlines are screaming.)

• And, my psychological and emotional restraint must be practical and pragmatic (not merely conceptual and idealistic). I have to believe in something. Have conviction. And with that conviction, act as an emotional non-participant.

Having worked in tech before moving to the investment industry, I was pretty certain about the category in which I would focus the core of my investments (while still incorporating a counter strategy within a portfolio).

I dabbled in tech stocks and funds. But I wasn’t faring too well with bottom-up stock-picking. (More on that another time.)

One day I was chatting with colleagues when an exuberant neighbor began sharing about his experience with trading leveraged ETFs (in his personal portfolio). Not only were they new to me, but our firm would never promote such high risk financial instruments.

I listened intently and then began to do my own analysis of how they work, their risk and effectiveness.

Make A Move

With money I could afford to lose and with a mindset solely focused on long-term growth, I made my move. I invested a “manageable” amount in a 3x leveraged Technology Bull ETF ( ).

Only, I decided to go against the grain. I decided to go long (ie., buy and hold) in a leveraged ETF.

Now, at the time of this publication, about 15 years later, the position is up over +15,000%.1 And it still has room to run.2

But here’s the real story beyond the actual trade itself:

1. I made one trade with funds I could afford to lose.

2. I waited a long time for the “payoff” (although I am not about to sell, I have rebalanced).

3. It was and is an excruciating test of endurance.

During that time, I experienced several bear markets, many more corrections and plenty of big swing days. All normal market activity.

Just in case you may have missed the point, this >25% CAGR includes bear markets!

Regardless, my approach seemed simple enough. Perhaps even naive. I anticipated strong, long-term gains in technology. Given that conviction, why wouldn’t I leverage?

The answer to that question is this:

leverage amplifies volatility; and volatility weakens, if not destroys, resolve.

(Why volatility does that to us is also a subject for another time.)

Obviously, I can’t manage volatility. However, knowing I can turn volatility into my advantage, I chose another strategy.

Singular Purpose: Build Endurance

My primary task was (and is) building endurance by managing my resolve, restraint and patience, not the investment position, per se.

Over the years, there were huge periods of gains and crushing periods of reversals! Both ends of the pendulum required a consistent recalibration of expectations; dampen elation and hubris during upward swings; deflect and/or deflate rampant fear during downswings.

However, the benefits of withstanding both good and bad times far outweighed the struggle. Though not merely in financial terms.

Along the way I built emotion-management muscle. I acquired a true appreciation for how compounding works. I gained much greater clarity on what drives markets and how to avoid the noise.

Ironically, I hadn’t even considered the return on this or other positions in my portfolio. It became irrelevant because I wasn’t competing with anyone.

I spent a large portion of time teaching myself to restrain from “over-watching”, such that I organically learned the practice of “drama-avoidance” (which mostly entailed filtering “noise”). Instead, I consolidated and channeled my energy towards achieving restraint.

Restraint may seem like an exercise in applying large-scale control. Yes, there are periods of teeth-gritting; but, I discovered that restraint actually scales and endurance is produced in micro-doses.

Ultimately, restraint (and the endurance it helps to produce) has more to do with staying true to convictions. Meaning, as investors, we must know what our convictions are before we can exercise restraint.

Convictions and the resolve needed to see them through will change over time. In my case, what began as an experiment based on a belief in technology, evolved into a set of beliefs about how to invest with extraordinary endurance. A work still in progress.

And as strange is it may sound, compared to the monetary gains, the greater outcome of this experiment was learning to endure. It’s actually a larger payoff because endurance is applicable to so many areas of life.

And much like long-term investing, endurance has a way of compounding.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Among those forward looking signals is the Leading Economic Index (LEI), published by The Conference Board. The LEI is a composite of ten forward-looking components that, taken together, provide a reliable sketch of the economic future.

One would think that at present the LEI would be flashing red. Instead it is gradually drifting downward. And that is precisely what makes it so difficult to interpret and so dangerous to ignore.

The Shape of the Present

The LEI today resembles a slow seepage. Month after month, small declines have accumulated.

If one were to plot it against history, the current profile would not resemble the dramatic plunges preceding the 2008 Financial Crisis or the sudden shock of the COVID-19 pandemic. It is among the more ambiguous episodes such as 1995, 2015, perhaps the early stages of 2006.

The economy, in other words, is not falling off a cliff. The present moment most closely resembles a pre-decision phase. The economy is still expanding and the labor market is holding. Yet underneath, forward momentum has thinned.

The Soft Landing Question

A “soft landing” occurs essentially when inflation subsides, growth slows but does not contract, unemployment rises only modestly, and financial markets continue their upward drift.

The LEI, historically, has occupied a paradoxical role in such moments. It often turns negative before the economy weakens meaningfully and long before markets react.

Consider three cases:

1. 1995–1996: The Classic Deceleration

The LEI flattened and dipped. Growth slowed. The Federal Reserve eased. No recession followed.

Outcome: Equities surged; the expansion resumed with vigor.

2. 2015–2016: The Industrial Scare

The LEI declined modestly, dragged by global weakness and manufacturing softness.

Outcome: A correction occurred, then recovery. No systemic break.

3. 2006–2007: The Deceptive Plateau

The LEI rolled over gradually. Nothing appeared urgent. Markets continued rising.

Outcome: A delayed but catastrophic repricing.

The same signal produced radically different futures.

Why the LEI Is So Often Overlooked

If the LEI is so useful, why is it so frequently ignored? You don’t really hear much about it from mainstream media.

First, the LEI lacks the immediacy of the snake-oil charm we read from a growing portion of financial and economic reporting. In other words, it lacks drama. It fails to command attention simply because its message is incremental. Slow and incremental usually equals boring.

But the LEI also conflicts with present data, such as employment data, earnings reports, etc. To listen to the LEI can feel like betting against the present reality. And that’s actually the beauty of it.

The probabilistic nature of the LEI means it doesn’t make declarations. It provides the odds by which investors and portfolio managers can perceive the future. For traders, it isn’t much help.

The LEI as a Portfolio Tool

For the investor willing to listen, the LEI provides a way of understanding the economic landscape in which returns are generated.

When the LEI is rising it signals that growth is broadening; a condition in which risk assets tend to perform well. When the LEI is falling (as now), forward returns become more dispersed.

Practical implication? The LEI is not necessarily signaling an exit from equities. But it suggests a moderation of exposure in favor of quality stocks and reduced leverage.

In late-cycle LEI regimes, leadership often shifts from cyclicals to defensives and from speculative growth to cash-generative firms (i.e., those with endurance).

The LEI rarely acts alone. Its warnings become more actionable when confirmed by rising unemployment, credit spreads widening and/or yield curve re-steepening after inversion.

Timing Expectations, Not Markets

Perhaps the most subtle use of the LEI is its ability to recalibrate expectations. This is highly significant for mitigating the psychological effects of investing.

In declining LEI environments, strong market returns are less reliable. There tends to be an increase in volatility. And, the narrative shifts increase in frequency. All of which requires measured posture by self-investors.

The LEI does not predict catastrophe. It suggests that the economy has entered a regime where outcomes are no longer tightly clustered. Where the range of plausible futures has widened.

A soft landing remains entirely possible. History offers several such precedents. But those same histories remind us that the path from slowdown to stability is narrow and easily disrupted.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

Oil markets, dramatic as they appear in the moment, tend to behave less like a permanent rupture and more like a theatrical performance. The chaotic loudness ultimately becomes temporary.

To see why, let’s step back from the headlines and examine how oil has behaved across decades.

Drama Patterns

Every oil spike arrives with the same implicit claim: this time is different.

When prices surged during the 1973 Oil Crisis, many believed the industrial world had entered a permanent age of scarcity. Gasoline lines stretched for blocks. Governments imposed rationing. Economists spoke of the “end of cheap energy.”

Yet the oil market is more like a rubber band stretched too far than a drained reservoir. Pull it hard enough and the tension feels unbearable. Ironically, the very forces creating that tension are what eventually snap it back.

Indeed, high prices triggered new drilling, conservation, and technological adaptation. Within a decade, the market was drowning in supply during the 1980s Oil Glut. The same drama repeated itself a generation later. In 2008, oil climbed to nearly $150 a barrel in the months preceding the Global Financial Crisis. Analysts warned of structural shortages. Commentators predicted $200 oil.

Instead, prices collapsed within months. The pattern has been remarkably persistent: crisis > panic > adaptation > normalization.

Hidden Stabilizers

Oil markets possess a self-correcting mechanism. When prices rise sharply, they unleash forces that eventually pull them back down.

The first is demand destruction.

Consumers respond quickly to higher fuel costs: driving less, choosing more efficient vehicles, or shifting spending away from energy-intensive goods. Airlines hedge or reduce routes. Manufacturers redesign processes.

The second is supply response.

High prices act as a powerful signal to producers. Capital flows into exploration. Marginal fields suddenly become profitable. Innovations appear. In the early 2010s, this dynamic helped trigger the American shale revolution, which ultimately contributed to the 2014 Oil Price Crash.

The third stabilizer is technological substitution. Over time, societies adapt via nuclear power, renewables, electrification, efficiency improvements. None of these shifts happen overnight, but collectively they erode oil’s dominance whenever its cost rises too far.

The result is a market that repeatedly overshoots upward and downward.

Numbers That Matter

Yet price alone tells only part of the story. What truly determines whether oil becomes dangerous for the global economy is how much of the world’s income must be spent to buy it.

Economists track this through a simple metric: Oil expenditure as a share of global GDP.

When oil prices rise but the economy is large and efficient, the burden remains manageable. But when the share climbs too high, energy begins to function like a massive tax on the entire system.

Recent commentary echoes this historical pattern. Analysts at Reuters Breakingviews and Vanguard have warned that sustained oil spikes eventually compress consumer demand and economic growth. Moody’s chief economist Mark Zandi has similarly noted that nearly every U.S. recession since World War II has followed a major oil shock.

The mechanism is simple: when energy absorbs too large a share of economic output, it begins to function like a tax on the entire economy.

Historically, a clear threshold has emerged. When global oil spending approaches 4 to 5 percent of GDP, recession risk rises sharply.

Even with oil around $100, the oil-GDP ratio today is generally estimated around ~3–3.5% of GDP. That is elevated but below the historical recession trigger.

However, if oil were to reach roughly $130–$150 and stay there for an extended period, the ratio would likely approach the danger zone (~4–5%). [WSJ, Paywall]

Why Crises Feel Larger Than They Are

Part of the reason oil shocks feel existential is psychological. Energy is the bloodstream of modern economies. When its price moves violently, the change ripples through transportation, agriculture, manufacturing, and household budgets.

But the speed of price changes often matters more than the level itself.

A sudden spike compresses economic adjustment into months rather than years. Businesses scramble to reprice goods. Central banks fear inflation. Political leaders warn of crisis.

Yet the market itself is already adjusting. The oil system is like an ocean tanker: slow to turn, immense in scale, but once momentum shifts, the change unfolds with surprising steadiness.

This lag between perception and adaptation is where much of the drama resides.

The Geopolitics of Oil Panic

Geopolitics amplifies the illusion. Conflicts involving energy-producing regions inevitably trigger fears of supply collapse.

Consider the Iraqi invasion of Kuwait, which led to the Gulf War. Oil prices doubled almost overnight. Many expected a prolonged disruption to global energy markets.

Instead, prices normalized within months once it became clear that other producers could compensate.

Even today, investors often overestimate how fragile the oil system truly is. Global production is geographically dispersed, strategic reserves exist across multiple countries, and market incentives quickly encourage alternative supply.

The system bends more easily than it breaks.

The Investor’s Dilemma

For investors, the problem is not the oil market itself but the narrative surrounding it.

Energy shocks generate stories that feel persuasive in the moment: the end of globalization, permanent inflation, structural scarcity.

These narratives often dominate financial commentary precisely when markets are closest to adjusting.

History offers a calmer perspective.

Over the past half-century, most oil spikes have lasted between one and five years. Markets adapt faster than expected. Supply reappears. Demand softens. Prices drift back toward equilibrium.

What appears catastrophic in the present often looks cyclical in hindsight.

The Value of Historical Distance

Investors who examine long-term patterns gain a useful form of emotional insulation.

They begin to recognize familiar rhythms: cheap oil leading to underinvestment, underinvestment leading to shortages, shortages triggering price spikes, and price spikes eventually producing new supply.

The cycle is not perfectly regular, but it is surprisingly persistent.

This perspective does not eliminate uncertainty. Dreaded wars still occur. Markets still overreact. Energy transitions still reshape the global economy.

But it does offer clarity. The oil market, despite its volatility, has rarely produced the permanent catastrophes that seemed inevitable in the moment.

Behind the Curtain

The deeper lesson may be that oil crises are not purely economic events. They are also psychological ones.

Because energy sits at the foundation of modern life, any disruption feels like a threat to the entire system. Headlines amplify the danger. Financial markets magnify the fear.

Yet when the curtain lifts, the machinery behind the spectacle becomes visible: supply incentives, technological adaptation, and the relentless ability of markets to rebalance.

Seen from that vantage point, the oil market begins to look like the volatile, dramatic, but ultimately self-correcting stage in the broader play of global economics.

And in markets, as in theatre, the loudest moment in the performance is rarely the end of the story.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

In the early weeks leading up to the recent strikes on Iran, a set of economic and logistical signals, sometimes overlooked by mainstream analysis, anticipated the escalation with uncanny clarity.

Dubbed “shadow indicators” by geopolitical analysts, these measures operate outside conventional economic reporting, providing early warning signs of wartime stress and potential disruption.

For investors and policymakers alike, understanding these signals offers both foresight and a lens through which the implications of conflict can be assessed.

The Most Critical Shadow Indicators

The three to four most critical shadow indicators during the Iran crisis are shipping insurance premiums, energy export flows, and logistics congestion & freight rates in strategic maritime corridors. Each offers a real-time glimpse into the operational risks and economic stresses building in the region.

1. Shipping Insurance Premiums: Maritime insurers reacted swiftly to rising tensions, expanding war-risk zones and sharply increasing premiums for vessels transiting the Persian Gulf. Before any public reports of military strikes, premiums had already multiplied severalfold, signaling the market’s anticipation of imminent conflict. These insurance movements are particularly revealing because insurers price risk with access to detailed intelligence and actuarial models, making them far less susceptible to political noise than conventional reporting.

2. Energy Export Flows: The Strait of Hormuz, through which roughly one-fifth of global oil supplies transit, saw early disruptions even before open hostilities. Tanker rerouting, delayed loading, and anticipatory congestion reflected the likelihood of supply interruption. Unlike official production or export statistics, which are often delayed or manipulated, these flows provide near real-time insight into the functional state of the energy market and, by extension, the war economy.

3. Logistics Congestion and Freight Rates: Vessel movement data (e.g., Clarkson’s Tanker Index, Freightos Baltic Index), including AIS tracking of tankers and commercial freighters, revealed hesitation and congestion in key corridors. Freight rates surged in anticipation of risk, reflecting not only the perceived probability of disruption but also the broader market’s adjustment to potential bottlenecks.

These indicators capture behavior that precedes formal news reports or government statements, providing a window into the early-stage activities of wartime economies.

Shadow Indicators vs. Traditional Economic Measures

There are two reasons to highlight these obscure indicators. First, to showcase how they can help manage portfolio risk; and second, to contrast them with more backward looking signals.

The reality is that traditional economic indicators such as sovereign bond yields, consumer price indices, and GDP data, are often slow to reflect the stresses of conflict (as shown in the diagram below).

Sovereign debt rates, for example, may rise only after markets have digested the political and fiscal implications of war. Similarly, official energy production reports or trade statistics lag weeks behind actual disruption, obscuring early warning signs.

Shadow indicators, by contrast, emerge directly from operational risk and supply chain behavior, allowing investors and analysts to detect shifts before official data or headline news confirms them.

Risk Tool

For investors, these shadow indicators serve as a potent risk signal and a tool for strategic positioning:

• Early recognition of supply shocks: Rising shipping premiums and blocked energy flows can point towards commodity price volatility, particularly in oil, LNG, and related derivatives.

• Maritime logistics disruption: Bottlenecks in strategic corridors signal potential ripple effects in global trade, which may impact shipping equities, port operators, and industrial commodities.

• Sovereign credit risk lag: While bond yields may eventually reflect the increased fiscal risk of wartime expenditure, shadow indicators provide a head start in assessing the economic resilience of the state and the likely trajectory of market stress.

Shadow indicators offer a uniquely predictive view of conflict dynamics, highlighting operational and financial stress points before traditional metrics.

For the Iran strike, shipping insurance premiums, energy flows, and maritime logistics patterns foreshadowed escalation weeks before headlines confirmed it.

Investors who incorporate these signals into their analysis gain a strategic advantage, navigating volatility with insight rather than hindsight. In a world where wartime dynamics can shift markets almost instantaneously, understanding the unseen currents of economic behavior becomes a risk management necessity.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

More often than not that lens is based on the screaming headline(s) of the day. Interest rates explain everything. Or artificial intelligence. Or inflation. Or geopolitics. Each explanation feels persuasive and authoritative.

The problem is not a lack of information, but the incompleteness of that information. It is what the comics scholar and educator Nick Sousanis calls “flatness.”

OK, so what can a comic scholar teach us about how to avoid being flattened?

The Problem With Flat Thinking

In his remarkable graphic book Unflattening (Harvard University Press), Sousanis explores how modern institutions often train us to perceive the world through a single dominant framework.

The condition he terms “flatness’ emerges when one method of analysis becomes the default, alternative viewpoints fade from view and complexity collapses into a single narrative. Flat thinking arises from overconfidence in one dimension of explanation.

We can see flatness appearing consistently in markets:

• “Rising rates will crush equities.”

• “Artificial intelligence will destroy software companies.”

• “China reopening will drive global growth.”

Each statement contains a kernel of truth. Yet markets are not single-variable systems. They are layered ecosystems where economics, sentiment, policy, technology, and narrative interact simultaneously.

When investors compress these layers into a single story, we flatten the world.

The Obvious Model of Investing

Be careful. The “obvious” models of investing assume something deceptively simple:

Markets respond to the most important variable.

Find the variable and you understand the market.

Which demonstrates the appeal behind explanations such as:

• “Stocks follow interest rates.”

• “Growth stocks follow liquidity.”

• “Energy prices follow geopolitics.”

This approach is seductive because it produces clarity. Analysts can draw straight lines between cause and effect. But as we all know, reality rarely moves in straight lines.

Markets are influenced not only by events, but by how investors interpret those events. Expectations, positioning, and narratives frequently matter as much as fundamentals themselves.

The result is that markets operate in multiple dimensions at once. Reducing them to one variable is the intellectual equivalent of viewing a three-dimensional object as a shadow on a wall.

Unflattening the Market

Sousanis uses the idea of “unflattening” to describe the act of integrating multiple vantage points simultaneously. Understanding improves not by choosing the correct model, but by expanding the number of perspectives we hold.

In investing, this might involve combining:

1. Fundamentals - revenue, margins, competitive dynamics

2. Macro forces - interest rates, liquidity, fiscal policy

3. Behavior - investor sentiment and positioning

4. Narrative - the story investors believe about the future

Each perspective reveals something different. More importantly, none reveals the entire system. When these layers intersect, the picture becomes far more informative. And occasionally, something interesting appears.

Where Great Investors Live

Many of the most successful investors instinctively operate in this multidimensional way, even if they never describe it in the language of “unflattening.” Consider a few well-known examples.

George Soros built his philosophy around reflexivity, the idea that investor beliefs influence economic outcomes. Markets do not simply reflect reality; they interact with it. Prices shape expectations, which shape behavior, which feeds back into prices.

Ray Dalio developed a framework of economic “machines” that integrates policy, debt cycles, politics, and monetary systems across multiple time horizons.

Stanley Druckenmiller has long emphasized the synthesis of forces. Liquidity, technological change, capital flows, and positioning are each influencing forces, as opposed to a single analytical model.

Howard Marks captured a similar idea with his concept of second-level thinking: the recognition that what matters is not merely whether something is good or bad, but whether the market already believes it is good or bad.

Finally, Charlie Munger famously urged investors to develop a “latticework of mental models,” borrowing insights from multiple disciplines rather than relying solely on financial theory.

Each of these approaches rejects flatness. Each seeks to view the market from more than one angle at once.

Where Opportunity Actually Appears

The most obvious market stories rarely produce the most attractive investments. By the time a narrative becomes dominant, it is usually already reflected in prices.

The real opportunity tends to appear somewhere else: at the intersection of perspectives. Where fundamentals diverge from investor expectations, narratives diverge from positioning, policy shifts collide with prevailing assumptions.

These intersections are often uncomfortable, primarily because they resist simple explanations. But they are also where markets occasionally misprice reality.

A Practical Exercise in Unflattening

OK, so how does this help? When evaluating any investment idea, it can be useful to pause and ask the questions that matter most. Examine the situation through four distinct lenses:

1. Economic Reality: What is actually happening in the business or economy?

2. Investor Belief: What does the market believe is happening?

3. Positioning: Who is already committed to that belief?

4. Feedback Loops: Could market expectations reinforce or destabilize reality?

If all four dimensions align, the opportunity may already be fully priced. But when they diverge, something more interesting may be unfolding.

In the end, investing rarely rewards the person who gathers the most information. It more often rewards the one who sees the same information from more than one direction.

Flat thinking searches for the single explanation. Unflattened thinking looks for the intersection where several explanations meet and occasionally contradict one another.

That intersection is rarely obvious. But it is often where the opportunity lives.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

The fact that markets tend not to fall far is a destabilizing one. Why? Because if markets routinely recover within weeks of geopolitical shocks, then the most common investor reaction is to reduce exposure once the conflict begins.

That reaction is often a bigger problem because it addresses the wrong moment.

The Event Everyone Watches

The outbreak of war feels like the decisive point. Each arrives with a sense that the world has just crossed a threshold. News anchors speak of escalation. Strategists warn of uncertainty. Investors feel the pressure to reposition.

The logic seems obvious: if war is bad for markets, the moment it begins should be the most dangerous moment to hold equities.

But market history does not behave that way.

What Actually Happens

Across many geopolitical shocks, a pattern appears. Markets do decline, both those declines tend to be modest.

More importantly, they tend to reverse far faster than most investors expect. Many recover within a few weeks. This is not because war is economically harmless. It is because markets rarely collapse over events that are already visible.

Once the event occurs, a crucial variable—uncertainty—disappears.

As discussed in this publication previously, markets discount widely known information.

The Market’s Real Enemy

Markets struggle most when outcomes cannot be bounded. Before a conflict begins, investors imagine multiple catastrophic scenarios:

• Energy systems collapse.

• Supply chains fracture.

• Superpowers enter direct confrontation.

Those possibilities create fear. But once the conflict actually starts, something subtle changes. The range of plausible outcomes narrows. Even if the situation remains dangerous, investors now have information.

And markets price information far more easily.

The Misidentified Risk

If this pattern is well documented, why do investors continue to respond the same way?

Because the psychological sequence runs opposite to the market sequence. Investors feel the most fear after the event becomes visible. Markets often feel the most fear before.

This mismatch creates a familiar outcome: Investors reduce risk precisely when markets are beginning to stabilize.

Most investors believe the danger lies in being invested when the crisis begins. But historically, the greater danger has been something quieter. Reacting to the crisis after it begins. Selling after the initial shock. Waiting for “clarity.”

Clarity rarely arrives before prices move.

The Question That Matters

None of this means geopolitical events are irrelevant. Some do produce prolonged market damage. The worst pullbacks (pre-2000) often occurred when war coincided with a recession or energy crisis (e.g., 1941, 1990).

But those cases share a different feature. They coincide with deeper economic disruptions—energy shocks, recessions, structural financial stress.

War alone is rarely enough. The market is not reacting to the event itself. It is reacting to whether the event changes the economic system.

So when the next geopolitical crisis erupts, the most useful question is:

“In what way does this event fundamentally alter the structure of the global economy?”

If the answer is “it doesn’t”, the historical pattern is remarkably consistent. The shock of conflict fades faster than the fear.

Avoid Self-Sabotage

The common belief is that wars trigger prolonged market collapses. The historical record suggests something else. Markets struggle most with uncertainty, not with events.

And the outbreak of a conflict often resolves more uncertainty than it creates. The practical implication is uncomfortable. The moment that feels most dangerous to investors has often been the moment when the market’s worst fears were already behind it.

Not always. But often enough that reacting instinctively to geopolitical headlines has become one of the most reliable ways investors sabotage their own long-term outcomes.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

This reaction is understandable. And short-sighted. The fear displayed is myopic—emphasis on MY! “My world is coming to an end!”

Of course, “the world is ending” is hyperbole. What fear-mongers really mean is that the way things—as we knew them—are changing. But the world is always changing. Stability is the illusion; adaptation is the constant.

So when the software sector slips into bear-market territory as artificial intelligence disrupts once-untouchable growth assumptions, some investors flee for higher ground. The software sector as we knew it is finished. “It’s different this time!”

The Meltdown Narrative

The current story predicting the imminent demise of enterprise software—particularly subscription-based SaaS—runs something like this:

• Enterprise software flourished under a clean economic logic: high switching costs, recurring revenue, durable cash flows, enviable margins.

• AI systems now replicate large swaths of human work—research, drafting, coding, analysis, coordination—without needing to live inside proprietary applications.

• Customers will gradually abandon legacy platforms; pricing power erodes, cash flows weaken, margins compress.

In short: AI is framed as a dissolvent of traditional software moats. The golden age is over. For investors heavily allocated to software, this is not merely unsettling—it is existential.

But this narrative rests on a crucial assumption: that technological substitution automatically implies economic annihilation.

History suggests otherwise.

Collapse or Reallocation?

What if the software sector isn’t dying—but being re-priced around a different center of gravity?

Enterprise software spending today sits near $1.24 trillion globally. According to research from Goldman Sachs, the total addressable market for software could expand 20% to 45% by 2030, driven not by the disappearance of software, but by its evolution toward agentic systems—AI models embedded within workflows, APIs, data layers, and governance frameworks.

This is a picture of value migration rather than shrinkage.

AI does not abolish systems; it intensifies the demand for integration, orchestration, compliance, security, auditability, and domain-specific reliability. Models may be general, but enterprises are not.

The lesson from the early internet era is instructive. In the late 1990s, brick-and-mortar retail was pronounced dead. Middlemen were finished. Geography was irrelevant. Yet the ultimate winners were not disembodied websites, but integrated platforms—logistics, payments, data, supply chains—wrapped around the new technology.

The same pattern is unfolding again.

The “Real World” Friction Everyone Forgets

There is another assumption embedded in the “SaaSpocalypse” thesis: that AI adoption will be swift, seamless, and immediately accretive to productivity.

Evidence suggests the opposite.

Recent work highlighted by Harvard Business Review shows that AI frequently intensifies work rather than eliminating it—creating new layers of oversight, verification, coordination, and exception-handling. Meanwhile, engineers and knowledge workers are already reporting cognitive overload and diminishing returns as AI tools proliferate faster than organizations can absorb them.

A growing phenomenon called “AI fatigue” is resulting in productivity bottlenecks, trust gaps, and workflow fragmentation caused by too many semi-autonomous tools competing for attention rather than cooperating within a coherent system.

This matters because enterprises do not buy capabilities in isolation. They buy outcomes—and outcomes require stability, accountability, and integration. All of which slow adoption, complicate deployment, and favor incumbents who already sit inside the workflow.

AI will be transformative. It will also be messy, delayed, uneven, and politically constrained inside organizations.

What Actually Changes

The most likely outcome is not the extinction of software companies, but a reshuffling of where economic values accrue:

• Standalone point solutions face compression.

• Undifferentiated SaaS tools lose pricing power.

• Integrated platforms—those that own data gravity, workflows, compliance, and distribution—gain leverage.

• Software becomes less about screens and more about systems.

Adaptation will result in more normalized margins and valuations. Likely the “growth” narrative will go through maturation. That is what disruption looks like.

Smart investors adapt alongside these changes.

A Familiar Ending

Every technological revolution produces its own version of “It’s different this time.” Railroads. Electricity. The internet. Smartphones. Cloud computing.

Each time, pessimists mistake transition for termination. Change makes it feel like the end of the world, but it often becomes an engine for growth.

AI will change software profoundly. It will punish complacency and reward integration. It will expose weak moats and deepen strong ones. But the idea that enterprises will abandon structured systems in favor of free-floating intelligence misunderstands how organizations function—and how value is actually captured.

So yes, this time is different. Just not in the way many insist it must be.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

returns come from choosing the right investments.

We may phrase it more politely—“good companies,” “quality assets,” “long-term winners”—but the conviction is the same. The work of picking stocks feels active, intelligent, and earned.

And yet, for many self-directed investors, this belief quietly guarantees disappointment. Stock-picking is not bad in principle. However, it can distract investors from the only decision that actually governs outcomes.

The Hidden Instability

Here is the contradiction many investors live with, often without noticing:

They spend enormous energy selecting securities, while treating the allocation between stocks, bonds, and cash as a background assumption—something set once, often a rule of thumb, and adjusted only in moments of fear.

This is a structural error. Because the decision about what kind of world you are betting on dominates everything that follows.

Security selection merely expresses that choice.

Top-Down Investing: An “Over-story”

I love Malcolm Gladwell’s use of “over-story”, the uppermost layer of foliage in a forest, as a metaphor for a dominant narrative that shapes how everything beneath it develops. [Revenge of the Tipping Point, Malcom Gladwell]

A top-down investing approach is just that—a broad framework or narrative that shapes and informs the tactical everyday decisions.

Top-down investing begins with the over-story. The defining feature of top-down investing is hierarchy. It insists that some decisions matter more than others, and that getting the big one wrong overwhelms all smaller victories.

The central top-down decision—stocks, bonds, or cash—is the largest determinant of long-term results. Not because it is precise, but because it sets the landscape in which every other choice operates.

Pros

• Aligns portfolio behavior with economic reality.

• Prevents mismatch between risk and environment.

• Adapts to market drivers: economic, political and sentiment.

Cons

• Feels indirect and emotionally unsatisfying.

• Offers fewer narratives of cleverness.

• Demands patience when nothing “interesting” seems to be happening.

But here is the cost of avoiding it:

you can be right about dozens of companies and still lose, simply by being wrong about the world they inhabit.

Bottom-Up Investing: Where Confidence Goes to Die

Bottom-up investing promises something far more seductive: control.

If you choose carefully enough, analyze deeply enough, stay disciplined enough, returns will follow. The market becomes just a testing ground for intelligence.

This is why it remains so popular among self-directed investors. It flatters effort. It rewards activity. It offers the illusion that outcomes are proportional to diligence.

The data tell a harder story. Most individual investors:

• Trade too frequently.

• Concentrate too narrowly.

• Underestimate shifts.

• Overestimate their ability to detect advantage.

Analysis is not the issue. Bottom-up investing fails, more often than not, because selection errors compound inside an already-misaligned allocation. When the over-story is wrong, security selection becomes a useless exercise.

Pros

• Encourages engagement and learning.

• Works occasionally, spectacularly, for a minority.

• Produces compelling anecdotes.

Cons

• Systematically underperforms for the majority.

• Amplifies behavioral errors.

• Confuses effort with success.

Worst of all:

bottom-up investors often believe they are failing because they haven’t worked hard enough, when the real failure is structural.

The Consequence of Getting the Big Decision Wrong

When your top-down allocation is misaligned (or nonexistent):

• Volatility looks less like an opportunity.

• Drawdowns trigger improvisation.

• Long-term plans dissolve into short-term coping.

Losses erode coherence. The investor begins to chase, hedge, retreat, and re-enter; each move rationalized, but not cumulatively.

Getting the big decision wrong results in the slow conversion of investing from a disciplined process into a series of reactions.

What Matters Most

Top-down decisions create the conditions under which compounding can operate with consistency. Bottom-up choices then refine the journey, without bearing the full weight of the outcome.

When the over-story is clear, investing becomes a calmer exercise. You are no longer required to outguess the market security by security. You are required only to make the few decisions that truly matter.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

One of the greatest issues facing those who self-manage their investment portfolios is underperformance. It is a mocking menace that abuses investors, in both bull and bear markets, with the very thing we count on to grow our assets—Compounding.

The data is telling:

The annual DALBAR Quantitative Analysis of Investor Behavior (QAIB) report measures the “behavior gap” (the difference between what the market returns and what the actual investor earns).

• The 20-Year Gap: Over the 20 years ending in 2024, the S&P 500 averaged roughly 10.35% annually. During that same period, the average equity fund investor earned only 9.24%.

• The “Bad Year” Effect: In highly volatile years, the gap explodes. In 2024, despite a roaring bull market, the average equity investor underperformed the S&P 500 by a massive 8.48% (848 basis points). This was one of the largest gaps in the 40-year history of the study.

• The Long-Term Cost: A hypothetical $100,000 investment left untouched in the S&P 500 for 20 years would grow to over $717,000. The average self-investor would end up with roughly $345,000, effectively losing half their potential wealth.

Underperforming the market doesn’t put the self-investor “a little behind.” It puts you on a different trajectory altogether. After a decade, you have roughly half as much.

What Is Really Happening?

It may seem that underperformance is caused by not knowing enough or not doing enough. When in fact these aren’t the problems for most investors who have been at it for a while. This is not necessarily an intelligence problem.

1. Is this a behavioral problem? Yes, partly. Several factors contribute to the persistent underperformance:

• Market Timing (Panic & Greed): Investors tend to buy when they feel “safe” (when prices are high) and sell when they feel “scared” (when prices are low).

• The Disposition Effect: The tendency to sell “winners” too early to lock in a feeling of success, while holding onto “losers” for far too long in the hope they’ll “break even.”

• Overtrading: According to studies by Barber and Odean, the most active traders underperform the market by an average of 6.5% annually.

2. Is this a structural problem? Yes, partly. Lack of strategic diversification leaves investors exposed to vulnerable sectors or stocks. And, “chasing heat” (i.e., the latest hot stock or sector) is just a repeat of item 1 above.

Behavioral and structural hurdles explain a part of what happens to the average investor. But, these are symptoms of a problem further upstream.

The compounding effect explains the effects of underperformance mathematically. But not operationally. Using appropriate benchmarks, avoid over-trading and becoming more “disciplined” may address underperformance operationally, but not philosophically.

Underperformance is a problem that must first be addressed upstream at the source! Where our “beliefs” are formed.

A Matter of Identity

While reading a book by a well-known investor, I paused at a comment made about criticism he had received. Managing $500 Billion is no easy feat. Criticism is to be expected. Yet, about that criticism, he said: “That is not my business.”

Huh?! Really?! It struck me how literally he meant it.

His business is managing investment portfolios. Not managing criticism, his profile, status, followers, admirers, commentators, pundits or even his own clients, but investment portfolios. Nothing interferes with his work, but only because he knows what his business is about.

He has a clear conviction about what he does and how he does it. His obligations and actions are a result of his identity informed by his work. And as such, he has a clearly defined responsibility. He knows his business!

So, why shouldn’t this be any different for the self-investor?

Could the underperformance dilemma ultimately be a result of the self-investor not knowing or failing to define their business?

The furthest place upstream from the problem of underperformance seems to be one of perception: the identity of the self-investor in the investor’s own mind.

What do we self-investors believe about what we are doing?

Ask Yourself…

If you manage your own portfolio, ask yourself a simple question, and answer it without qualifying clauses or market caveats:

What decisions are you actually responsible for as a self-investor?

Not what you monitor, not what you have opinions on, not what you would act on “if conditions change.” Which decisions must be made; and, which ones are explicitly outside your remit?

Most people cannot answer this cleanly. They describe broad aims, preferences, trading techniques or asset classes, but not obligations. In the absence of a clearly defined set of responsibilities, every new market development quietly petitions for inclusion.

The problem is not that these petitions are unreasonable; it’s that, without a boundary, there is no principled way to refuse them.

Every serious enterprise, financial or otherwise, survives by knowing what it does (its “business”) and what it refuses to do. Airlines do not chase restaurant margins. Cardiologists do not dabble in dermatology. Not because those activities lack merit, but because attention is finite and error is costly.

Self-managing capital is no different! Except that most individuals never grant themselves the right to refuse. Every persuasive chart, every all-time high, every newly respectable hedge is treated as a possible obligation.

A functioning investment discipline requires a line that can be spoken without defensiveness or apology: that is not my business. Not as a dismissal of market developments, but as a declaration of the investor’s role.

Create a Mandate

At the time of publishing, gold is pushing all-time highs. Headlines scream scarcity, portfolios show increasing allocations, newsletters frame it as “essential” insurance. A self-investor without a clearly defined business feels obligated to act: read reports, model scenarios, maybe take a position.

The mandate-less portfolio accumulates a shiny-object that erodes focus elsewhere.

By contrast, a self-manager who has defined their business mandate, for example, diversified equity allocation and income-producing assets, can look at the same charts and, with no hesitation, say:

That is not my business!

Gold may rise, it may fall, but neither outcome disturbs the decisions that actually matter. Saying the phrase aloud is not a refusal of opportunity; it is a refusal to dilute purpose.

Rules-Based Investing

To make this idea and your “business” mandate functional rather than rhetorical, it must be backed by rules. Begin by listing the decisions that must be made:

• portfolio modelling

• portfolio rebalancing

• risk calibration

• capital allocation to pre-defined categories and geographies

• and reviewing performance relative to stated objectives.

Then, explicitly catalogue what is off-limits:

• speculative themes

• hot sectors

• or assets outside the mandate.

Assign each forbidden category a default response: awareness without action, logging without allocation, and a disciplined refusal to engage.

Finally, build a simple exception protocol: only opportunities that meet pre-specified criteria for size, conviction, and alignment with your objectives can override the default.

With these guardrails, that is not my business becomes a tool, not a mantra. It is a daily decision filter that protects both attention and capital while preserving optionality where it truly belongs.

The Payoff for the Self-Investor

The payoff is not a single winning trade, nor the occasional thrill of having been “right.” The payoff is clarity.

By defining your business and refusing what falls outside it, attention is reclaimed, decisions compound rather than conflict, and conviction gains scale. Shiny objects no longer pull you sideways; each position earns its place on merit, not narrative.

In practice, this discipline transforms self-management from a reactive chase into a controlled operation, where capital, time, and judgment reinforce one another.

Saying that is not my business is not denial. It is permission: permission to focus, to act deliberately, and to let the portfolio reflect the intelligence you actually intend to deploy.

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.

“Risk tolerance” (aka, “risk appetite”) is one of the most frequently invoked - and least understood - ideas in investing. Platforms reduce it to a questionnaire. Advisors formalize it into compliance artifacts. Regulators define it as a blend of willingness and ability, then quietly blur the two.

The result is a concept that feels precise but behaves like weather: fair in good markets, foul in bad ones, and unreliable when you need it most.

This article argues that self-assessed risk tolerance is a losing battle. Comfort is cyclical, memory is short, and incentives distort judgment. A more durable framework replaces “tolerance” with five concrete inputs:

1. Risk Aversion (the reality of loss, not your feelings about it)

2. Need to Bear Risk

3. Capacity to Bear Risk

4. Objectives

5. Time Horizon

Together, these form a risk strategy, not a mood.

How the Market Sells Risk Tolerance

Platforms, FinTech, and the Illusion of Precision

Most online platforms treat risk tolerance as a sorting mechanism. You answer a short survey: some combination of hypothetical losses, timeframes, and emotional prompts. And then you are slotted into a prebuilt allocation.

This approach is tidy, scalable, and deeply flawed. Why?

• It assumes stable preferences.

  Investors do not possess fixed risk personalities. They oscillate with markets, headlines, and recent experience.

• It substitutes behavior with intention.

  Saying “I can tolerate a 20% loss” is not the same as living through one.

• It ignores consequence.

  Losing 20% means very different things depending on where you are in life and what that capital is meant to do.

In short, platforms use risk tolerance as a label, not a constraint. It simplifies onboarding, not decision-making.

How RIAs Typically View Risk Tolerance

Compliance First, Client Second?

Registered Investment Advisors generally approach risk tolerance through a fiduciary and regulatory lens. FINRA’s guidance, defining it as “the investment risk you are willing and able to accept”, anchors the process.

In practice, this means:

• A formal risk questionnaire

• Documentation of “client comfort”

• Portfolio construction aligned to that stated tolerance

• Periodic reaffirmation (often perfunctory)

This framework exists primarily to demonstrate process, not insight. It answers the question: Did the advisor ask? rather than Was the portfolio appropriate?

To be fair, many advisors do more. They layer in experience, conversation, and judgment. But the core artifact - the tolerance score - remains the foundation for many RIAs.

The Core Problem: Tolerance Is Not Observable

Comfort Is a Trailing Indicator

Comfort with risk is not a fixed attribute; it is cyclical, reactive, and deeply influenced by recent experience.

FINRA’s definition collapses under inspection.

• How does one measure “ability” to take risk?

  Is it income? Net worth? Age? Liquidity? Psychological resilience? Some mixture of all five?

• When is an investor capable of unbiased self-assessment?

  In bull markets, confidence masquerades as courage. In drawdowns, fear dresses up as prudence.

Risk tolerance, as commonly assessed, is pro-cyclical. It expands at market peaks and contracts at precisely the wrong moment.

This makes it worse than useless; it becomes misleading.

Why Assessing Your Own Risk Tolerance Is a Losing Battle

Investors are asked to predict their future emotional state under stress; something at which humans are notoriously bad. It is near impossible to become unbiased about ourselves.

Three structural flaws doom the exercise:

1. Recency bias dominates perception

2. Hypotheticals lack consequence

3. Language is imprecise (“moderate,” “aggressive,” “comfortable”)

The industry keeps asking investors how they feel about risk when it should be asking how risk functions in their lives.

A Better Framework: From Tolerance to Strategy

Risk tolerance should not be inferred from emotion. It should be derived from circumstance.

1. Risk Aversion (The Reality of Risk)

Risk is not volatility! In plain terms, volatility measures how much and how quickly prices move, not whether those movements are good or bad.

• Volatility is direction-agnostic. Sharp gains and sharp losses both increase volatility.

• It is typically quantified statistically, most often as the standard deviation of returns over a given period.

• High volatility implies uncertainty and variability, not inevitability of loss.

• Low volatility implies stability, not safety.

Risk is the permanent impairment of capital relative to need. Losses matter because of what they prevent you from doing.

Put succinctly: Volatility is motion. Risk is consequence.

Acknowledging this reframes the conversation from charts to consequences.

2. Need to Bear Risk

How much return is required to meet your objectives? This is a measurable variable.

If your goals demand growth beyond what “safe assets” can deliver, you must bear risk - whether you like it or not. This is not a preference; it is arithmetic.

3. Capacity to Bear Risk

Capacity is objective and observable. It includes:

• Time until capital is needed

• Flexibility of spending

• Stability of income

• Size of surplus relative to goals

An investor with high capacity to bear risk can endure volatility without derailment. One without it cannot, regardless of stated tolerance.

4. Objectives

Capital without clearly defined purpose invites confusion and chaos.

Is the money meant to:

• Fund consumption?

• Preserve purchasing power?

• Transfer wealth?

• Buy optionality?

Different objectives demand different exposures.

Risk only exists in relation to purpose.

5. Time Horizon

Time is the great solvent of volatility - but only if it is real.

Stated horizons (“long-term”) often collapse under life events, policy changes, or fear. Effective risk strategy distinguishes between theoretical and usable time.

Furthermore, one’s “horizon” should not only be specific (e.g., 30 years), but take into account the horizon of those who may benefit from the funds (i.e., inheritors).

Debunking the Status Quo

The typical onboarding process treats risk tolerance as an input. In reality, it is an output - the emergent result of constraints, needs, and timelines.

When advisors anchor portfolios to questionnaires rather than circumstances, they outsource judgment to forms and call it fiduciary care.

True fiduciary alignment demands something harder:

• Explaining trade-offs

• Constraining choice

• Designing portfolios that investors can stick with, not merely agree to

Practical Takeaways

• Stop asking “How much risk am I comfortable with?”

• Start asking:

  • What must this capital accomplish?

  • What happens if it fails?

  • What risks are unavoidable and which are elective?

Risk tolerance is not a personality trait. It is a byproduct of design.

Markets are indifferent to our comfort. They respond only to exposure, timing, and endurance. The task of investing is not to feel at ease, but to remain solvent, flexible, and aligned long enough for time and discipline to do their work.

Design for that and tolerance will take care of itself.

Up Next:

“That’s Not My Business”

This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information - not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.