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AcquiredComplexity Investing & Semiconductors with NZS Capital (Extended Cut)
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At a glance
WHAT IT’S REALLY ABOUT
NZS Capital explains complexity investing, resilience, optionality, and semiconductors today
- NZS Capital grounds its investing philosophy in complexity theory: markets and companies are complex adaptive systems with emergent behavior, making precise prediction unreliable and pushing investors toward adaptability and resilience.
- They run a barbell-like portfolio: a concentrated “resilience” bucket of durable compounders and a diversified “optionality” bucket seeking asymmetric payoffs, with occasional “root MOS” positions that combine both.
- A major lens is “non-zero-sumness” (NZS): favor companies that create more value than they take across customers, partners, employees, society—arguing this increases duration and long-term compounding.
- They apply these ideas to semiconductors as foundational “oxygen” of the information age, discussing TSMC’s ecosystem role, ASML/EUV, Moore’s Law’s evolution (packaging/chiplets), and key differences among Samsung, TSMC, Intel, and catalog analog players like Texas Instruments.
IDEAS WORTH REMEMBERING
5 ideasPrediction is a weak foundation in complex systems; adaptability is the edge.
Because markets exhibit emergent behavior, NZS emphasizes building portfolios and theses that can survive many futures rather than requiring a single precise forecast to be correct.
Resilience investing targets duration—steady compounding for decades.
They favor “set it and forget it” businesses (e.g., Microsoft, TSMC) with mission-criticality, switching costs, scale flywheels, and network effects, aiming for long runways more than near-term maximization.
Optionality investing is about asymmetry, not batting average.
In the optionality sleeve, it’s acceptable to be wrong often if a smaller number of winners deliver multi-bagger outcomes; portfolio construction is designed so failures don’t “torpedo” results.
Conviction often disguises overconfidence and sunk-cost bias.
They treat “high conviction” language as a cultural risk that can harden views and slow course-correction; instead they write theses down, define key leverage points, and encourage fast admission of error.
Power laws and fat tails break traditional risk models.
They critique Gaussian-based frameworks (Modern Portfolio Theory) using non-ergodicity examples: the “average” outcome can look positive while most participants go bankrupt, implying risk must be managed for tail events.
WORDS WORTH SAVING
5 quotesComplex adaptive systems are all around us... emergent behavior makes predicting useless in most cases.
— Brinton Johns
They found that about half the ants in the colony weren't doing anything... they're optimized around longevity... resilience.
— Brinton Johns
We named the firm NZS Capital... we're looking for non-zero sumness, so looking for a win-win outcome for all constituencies.
— Jon Bathgate
Valuations... force predictions. I have to believe a lot more at ten times sales than I do at ten times earnings.
— Brinton Johns
A recession is a terrible thing to waste.
— Brinton Johns (quoting TI CEO Rich Templeton)
High quality AI-generated summary created from speaker-labeled transcript.
