Podcast Summary: Best of: The 'Humble' Investor Says Sell Private Equity, Sell US Tech, Buy Polish Small Caps

Podcast: Merryn Talks Money
Host: Merryn Somerset Webb (Bloomberg)
Guest: Dan Rasmussen (Founder, Verdad Advisors; Author, The Humble: How to Find a Winning Edge in a Surprising World)
Date: August 15, 2025

Episode Overview

This episode features an eye-opening conversation with Dan Rasmussen, founder of Verdad Advisors and author of the forthcoming book The Humble: How to Find a Winning Edge in a Surprising World. Merryn Somerset Webb and Dan explore why traditional market forecasts are almost always wrong, the dangers of consensus-driven investing, the folly of overconfidence (especially in US tech and private equity), and why overlooked markets like Polish small caps offer real value. The tone is direct, skeptical of financial orthodoxy, and grounded in behavioral economics and market history.

Key Discussion Points & Insights

1. The Fallibility of Forecasts (03:30–08:00)

• Forecast culture: Every year, markets are flooded with confident forecasts for returns, GDP, inflation, and more. Dan points out most of them are systematically wrong.
• Tetlock’s research: Even experts aren't better at forecasting than laypeople—the only difference is their overconfidence.
  • Quote: “Tetlock finds that experts in their fields are no better than non-experts at forecasting things ... The only difference is that they're more arrogant about it.” (04:33–04:52)
• Japanese companies' guidance: Even when forecasts are mandated, like in Japan, they are only about 50% accurate—no better than a coin flip.
• Extrapolation trap: Forecasts mainly project the recent past, which is why S&P target predictions cluster around last year’s numbers.
  • Quote (on growth forecasts): “Revenue on a one year basis is a little bit forecastable. And then everything else is total chance.” (08:24–08:35)

2. Why We Keep Forecasting (10:11–11:46)

• The Ken Arrow anecdote: Even knowingly wrong, organizations need forecasts for planning and psychological anchoring.
  • Quote: “‘The general knows that the forecasts are useless, but he needs them for planning purposes.’” (11:31–11:36)

3. Meta-Analysis and the Importance of Being Humble (12:00–14:52)

• Investing is about meta-analysis: It doesn’t matter if you’re right, but if you're more right than the crowd.
  • Quote: “Investing is not a game of analysis. It's a game of meta-analysis. It doesn't matter what you think. It matters what you think relative to what the market thinks.” (09:34–09:47)
• Discarding traditional models: Because the future is unpredictable, overreliance on complex models like DCFs or dividend discount models is futile.
  • Quote: “If you can't model your own bank balance ten years out, why assume you can for Coca Cola?” (13:47–14:09)

4. Human Psychology & Market Cycles: The Shipping Analogy (14:52–18:07)

• Competition neglect: In shipping, waves of overinvestment occur because owners ignore that everyone else is doing the same math. This is mirrored in current AI enthusiasm.
  • Quote: “Competition neglect ... is such a wonderful and relevant term to what's going on in AI, by the way, competition neglect.” (15:57–16:15)

5. AI Mania, Winner-Takes-All, and Investment Fashions (17:02–18:38)

• Overinvestment in AI: Dan sees a glut of capital chasing the next big thing—most will “incinerate capital.”
  • Quote: “Some of these things are just incinerating capital, right? They've got to be—probably all but one of them ...” (17:54–18:07)

6. Value Investing vs. Bubbles & Timing the Market (19:03–28:10)

• Why value still matters: Valuations remain the best barometer of optimism and pessimism. Long-term, stocks that are cheap outperform expensive ones—except in bubbles.
• Innovation waves & their aftermath: Innovators earn abnormal profits, but these don’t last; eventually popularity flips to mean reversion.
• Are we in a bubble? The pattern of “FANG” outperformance echoes the late 1990s. Bubbles can last for years—smart investors are typically much too early trying to call their end.
  • Quote: “All these great investors knew it was a bubble ... The only problem is ... [quotes are from] 1995 ... The bubble didn't burst for five years ... And I think that's the type of situation we're in now.” (26:19–27:15)

7. Passive Investing and Correlated Beliefs (28:10–29:47)

• The ‘herding’ problem: Passive funds concentrate investors in US large caps, risking correlated beliefs and systemic fragility.
• US outperformance is mostly optimism: About 75% of the S&P 500’s outperformance is due to valuation (sentiment), not fundamentals.
  • Quote: “75% of the US relative outperformance has come from valuation changes as opposed to revenue and profitability changes.” (29:32–29:47)

8. International Opportunities – Why the UK, Europe, and Poland? (30:29–34:49, 45:24–45:44)

• Europe is cheap and high-quality: UK and European stocks are ignored, cheap, and home to high-return, well-run businesses.
  • Quote (on Europe): “You're not just buying really cheap companies, you're buying really cheap, really well run, really high return on asset business.” (33:07–33:15)
• Poland & Eastern Europe: Overlooked and thinly-traded, but with strong leverage to geopolitical peace and upside if sentiment shifts.
  • Quote: “You have to buy small caps, but I think it's quite attractive.” (45:39–45:44)

9. Private Equity: The Dangers of the “Diversifier” Myth (35:49–41:33)

• PE is not a true diversifier: It’s just leveraged micro-cap equity, now mainly in overvalued tech, with risk disguised by infrequent marks to market.
  • Quote: “You're looking at equity that's subordinated to very high interest rate debt ... reflective of the underlying risk.” (36:56–37:19)
• Valuations make no sense: Private equity now trades at premiums to public markets for higher risk, less liquidity.
  • Quote: “Why should I pay more to have a higher risk ... that I can't buy and sell every day? Why should that be more expensive? It just boggles the mind.” (38:50–39:05)
• PE holdings are far smaller than their portfolio weights suggest: They represent only 2-4% of companies by revenue but sometimes take 40% of institutional portfolios.
  • Quote: “To have 40% of your assets and 2% of the company and 2% of the revenue share of the companies ... seems completely insane.” (39:19–39:48)

10. Gold (and Bitcoin) in Portfolios (41:33–44:49)

• Gold is a vital diversifier: Useful when inflation is a risk, as it is anti-correlated with bonds.
  • Quote: “If you're worried about inflation, you should have more gold and fewer bonds ... gold has to be a tool that you're using ... it ... gives your portfolio more degrees of freedom.” (42:06–43:12)
• Bitcoin isn’t digital gold: Its volatility is like micro-caps, not bonds or gold, and its price is driven by speculation, not correlation to inflation or real economic events.
  • Quote: “Bitcoin has the volatility of the NASDAQ or micro caps ... It's very correlated with Robinhood stock. Right. It's correlated with any type of gambling activity ...” (43:26–44:13)

11. Reading Recommendation (46:19–46:54)

• Unexpected pick: Dan recommends History of the Conquest of Mexico by William Prescott (1830) as the most fascinating book he’s read recently.

Notable Quotes & Memorable Moments

• Forecasting humility:
  • “Our forecasts are really bad. We really don't know much about the future. And the farther into the future we try to peer, the worse we get.” (04:52–05:01)
• On investing in bubbles:
  • “Value investing ... just doesn't work during a bubble.” (26:03)
• On private equity hype:
  • “Private equity ... has become a highly levered bet on micro cap software companies and also very expensive.” (38:05–38:17)
• On where to look now:
  • “I actually love the UK and Europe … There's actually a lot to be excited about right now. It's just not where other people are looking.” (30:39–30:54)
• On Poland:
  • “Polish small caps have never come up on this podcast before ... Make your money out of Bitcoin.” (45:44–45:55)

Timestamps for Key Segments

• Forecasts & their flaws: 03:13–10:11
• Why we make forecasts (Ken Arrow story): 10:11–11:46
• Meta-analysis & humility vs models: 12:00–14:52
• Shipping analogy & AI overinvestment: 14:52–18:07
• Bubble dynamics and value investing: 19:03–28:10
• Passive investing, correlated risk: 28:10–29:47
• International & Polish value: 30:29–34:49, 45:24–45:44
• Private equity critique: 35:49–41:33
• Gold, Bitcoin: 41:33–44:49
• Reading recommendation: 46:19–46:54

Conclusion – Actionable Takeaways

• Be humble; you (and the experts) can’t forecast the future.
• Steer clear of hype: Avoid overvalued US tech, AI bubbles, and leveraged private equity.
• Look where no one else is looking: UK, European, and Polish small caps are Dan’s top picks.
• Rely on value and behavioral contrarianism: Seek out pessimism and shun the consensus.
• Diversify thoughtfully: Use gold, not Bitcoin, as a hedge against inflation and as true portfolio ballast.

Further Info:

• Dan Rasmussen on Twitter/X: @verdadcap
• Book Link: The Humble: How to Find a Winning Edge in a Surprising World (out Feb 2026)
• Host: Merryn Somerset Webb (@merrynsw)

[End of Summary]