Losing the Advantage

October 24, 2025

There’s a story about a fisherman and a businessman. The businessman, strolling along a quiet beach, sees a fisherman resting beside his small boat. “Why aren’t you out fishing?” he asks. The fisherman replies, “I’ve caught enough for today.” The businessman, puzzled, says, “If you fished more, you could buy another boat. Then a fleet. Then retire and relax.” The fisherman smiles. “What do you think I’m doing now?”

In investing, as in life, we tend to believe that progress lies in more—more data, more technology, more leverage, more speed. Yet somewhere along that path, “more” stops being an advantage and starts becoming noise. The markets have a way of transforming every discovery into a commodity. An insight that once conferred a clear edge becomes widely known, widely copied, and ultimately neutralized. The moment something works too well, it stops working.

Half a century ago, an analyst might uncover opportunity simply by reading the footnotes of an annual report that others ignored. Today, algorithms devour every filing the instant it appears. What once took intuition now takes infrastructure. But when everyone has the same tools and the same access, having more information doesn’t necessarily mean making better decisions. The advantage shifts from what you know to how calmly and rationally you use what everyone knows.

The market is an ecosystem—self-correcting, adaptive, evolutionary. Every profitable niche draws imitators until the profits are competed away. It’s the irony of success: the better something works, the more it invites its own demise. And so the edge migrates—not toward speed or scale, but toward interpretation. If everyone can see the same facts, the differentiator becomes judgment.

Howard Marks once described this as “second-level thinking.” The first-level thinker asks, “Is this a good company?” The second-level thinker asks, “Is it a good company that everyone already knows is good?” That small leap—from the absolute to the relative—is where advantage still lives. The world is filled with bright, data-driven investors, but not all are wise. Wisdom lies less in calculation than in temperament: the ability to stay patient while others react, to act while others hesitate, and to remember that volatility is not risk unless you make it so.

The paradox of progress is that efficiency destroys inefficiency, and with it, opportunity. The rise of passive investing illustrates this. Decades ago, indexing was an academic curiosity; now, passive funds hold more than half of U.S. equity assets. When capital moves mechanically, prices tend toward the average rather than the insightful. Ironically, that very efficiency may one day restore advantages to those still willing to think independently—but only if they think differently, not louder.

In physics there’s a concept called entropy, the tendency of systems to drift from order toward disorder. Markets experience a similar entropy: every edge discovered, every anomaly arbitraged away, every inefficiency exposed. But just as physical entropy creates cycles of renewal, market efficiency eventually breeds its own inefficiencies—because when everyone believes the market is efficient, someone, somewhere, stops paying attention.

The greatest investors didn’t seek constant advantage; they sought enduring perspective. They understood that in a world obsessed with immediacy, calm itself becomes an edge. Early in our careers, many of us are like that businessman on the beach, eager to optimize, expand, and outperform. But over time, if we’re fortunate, we begin to see the fisherman’s wisdom: that not every advantage is visible, not every improvement is progress, and not every victory requires motion.

Perhaps the ultimate edge is learning to live without one—to accept that advantage is transient, cycles are inevitable, and success is more about process than outcome. When the game becomes too efficient to win, maybe the right move isn’t to play harder, but to play wiser—to seek clarity rather than certainty, perspective rather than prediction.

Edges fade, fashions change, and insights decay, but character endures. Who can think clearly amid confusion, who can remain steady when others are unsettled, who can let go of the need to always be ahead—that investor may be the one who, paradoxically, never really loses the advantage at all.