The Fear of Good Times

When market and portfolio performances are as good as they are, rising relentlessly and almost indecently, the first feeling is not gratitude. It is dread. It is the curse of the investor who has seen cycles before: you cannot enjoy the climb. Every new high appears like a future correction in disguise. Every rally whispers reckoning.

The mind wanders in that silence. You begin to question your own thesis, at times to justify the new price levels and at others to support the urge to lock gains. The long-term holds feel brittle; the short-term trades seduce. You read Graham and hear the vanishing margin of safety, then read Soros and hear reflexivity. For every conviction you hold, you can find the ghost of a great thinker to support it. You can find another to tear it down. 

As a young analyst, somewhat obsessed with the equational purity of abstraction, I was fascinated by the weak scaffolding under almost every concept in portfolio theory and valuation. Beta. PEG. WACC. Each hides hairline cracks in its own algebra. Most of these rest on a strange mix of untidy mathematics and messy thumb rules. But their inventors and users were mostly honest about the impurities. They acknowledged the appropriations and approximations. The conversations around them created space for doubt, and their practitioners are provided with enough information to be aware of the limitations.

The one great exception, in what I have read over the decades, is the Sharpe Ratio and its peculiar measurement problem. Of all the ratios and rules, this is the one where I feel that the mathematical and conceptual compromises are the least discussed. This is worth brooding over. It is not just because we witness another quantitative fund wrestling with a regulator, this time in India. It matters because in this particular flaw, we may find an anchor for our own persistent dilemma.

A Table That Refuses to Sit Still

There has to be an old joke that the easiest way to improve a Sharpe ratio is to measure it less often. Unfortunately, I have not heard it. If it is a joke, it is the way the Titanic was a boat. True, but missing the scale of what it means. Let’s look at the table below. It is built on a rainy Tuesday. One ticker, one unbroken trend, all the way from the one‑second bar to the tidy annual mark. No fancy Monte Carlo. No curve fitting. Just arithmetic, based on certain assumptions.

A glance reveals the mischief. The act of measurement changes the thing being measured. The more frequently you look at a portfolio, the more volatile it will appear. The daily noise drowns out the long-term signal. A triumphant year can look like a terrifying series of daily lurches and drops.

In other words, volatility collapses much more slowly than returns build. The longer the lens, the kinder the math. A fund can look fragile on a daily sheet yet majestic in its annual report. Volatility is a function of time. The Sharpe ratio, that holy gauge of efficiency, can be gamed by looking away or changing the frequency of the NAV reporting!

Yet the table is only half the story. The other half is time itself. Noise flattens. Momentum accrues. Nothing mystical. Just compounding doing its quiet labour while our attention jumps from price headline to price headline.

Agents, Incentives, and an Oddly Placed Mirror

Now comes the awkward part. The mismatch between those who own the money and those who tend it. Pension funds think in decades. The people managing them think in quarters; their bonuses demand it. I say this without malice. I am a fund manager too. The mirror is already pointed at me.

This is not sophistry. It is the dirty secret of institutional investing. Pension funds, endowments, or intergenerational wealth should think in decades. Yet their agents, the allocators, the portfolio managers, the consultants, the committees, are linked to performance review cycles.

This is the agency problem in its most common form. A fund's structure demands a telescope. The incentives of its managers demand a microscope. To protect their careers, the agents go to extraordinary lengths to cut downside risk on an annual or quarterly basis, even before accounting for the intermediaries’ incentives to support high-margin products. One ends up hedging obsessively to seek the comfort of low volatility, even if it comes at the steep price of muted long-term returns. This is a tension a manager like this author, too, feels keenly. The pull between the portfolio's true needs and the human need to manage the immediate is a constant, quiet struggle.

Liquidity, Privates, and the Comfort of Darkness

There is another way to solve the problem, and that is by turning off the lights. Buy an illiquid asset, mark it once a quarter or maybe even a year, and call the silence stability. This is the allure of the private markets. It is a world without the daily ticker, without the constant, unnerving judgment of every macro news, corporate announcement, or swings of the public exchange. Private investments ensure that one is invested in businesses, and not other transient forces.

But darkness offers its own hazards. Illiquidity corrodes optionality. Valuations ossify into lore. By the time price finally speaks, the story may have wandered far from the neatly pencilled IRR. We believe that embracing illiquidity, resisting the temptation to sell, worked wonders in the Internet era. In the GenAI era, we need to retain the option to adjust our opinions on which innovations are effective and for how long, given that no innovation trend is assured for more than a handful of quarters at best. 

Innovation’s Roar Against the Ticker Tape

Back to our world of public markets, when you stare at prices tick by tick, you see only noise. When you measure performance day by day, you invite madness. The Sharpe ratio table above reveals an uncomfortable truth: volatility is not a property of the asset; it’s a property of your gaze.

Let’s lift our gaze. Out there, the world is sprinting. Web traffic is down by a third, not because people read less, but because answers arrive before the question fully forms. Generative AI now orchestrates half the product recommendations on the internet, and a quarter of travel bookings start with a chatbot. Governments, not just hyperscalers, are pouring hundreds of billions of dollars into data-center infrastructure. Money that once paved highways now paves inference lanes.

As consumers, what we buy, how we buy it, and even why we buy it is being rewritten. A decade from now, 10-20% of global consumption could be in products and services that barely exist today. The world around us is changing at a speed that is difficult to comprehend. It is not our intention here to repeat the refrains sung in every journal and presentation. But there are shifts occurring that are often under-discussed in their magnitude. Every major number hinted at in this section would have been a revolution on its own. Here, they are happening simultaneously and building on each other.

Not just the Internet is in flux or collectively global consumers, corporates, and governments are spending on a new sector like nothing ever seen, but the capabilities and use cases continue to explode in a way unimaginable even a few months prior. Cars are delivering themselves. The skies are witnessing the first flying taxis. Machines can talk in human languages and process vision perfectly: these feats are so staggering that after Elon Musk, Jensen Huang has also felt the need to state that Robotics could become the biggest industry humanity has ever built.   

One can keep going breathless about the potential in diagnostics, or drug discovery, or in climate management, or in material sciences, or in finance. The opera approaches its crescendo. The world is forging tools so powerful they change the ask of humanity itself. We can chase every candle‑wisp of price volatility, or we can learn to breathe through it. The real risks are not recurring double-digit market corrections every few quarters. The real risk is dedicating one's attention to managing them and, in the process, straying away from truly historic real-world transformation.

Coda: Learning to Blink Slowly

In the end, I am as mortal as the next price‑addled soul. I will refresh the screen again tonight, against my better judgment. To watch the ticker is to be human. To feel the pull of fear and greed as prices dance across a screen is a natural, unavoidable part of this endeavor. It is a reminder that we are not machines.

The difference, I hope, is that afterwards I will close the laptop and pick up the research note on generative proteins, or the press release for another gigawatt data corridor.

That small act of blinking slowly is our edge. We count raindrops, yes, but only to remind ourselves there is a flood. And when the next correction arrives, we will try to remember that the water was already rising long before the first alarm sounded. If we do that, perhaps the Sharpe ratio, the quantum quibbles, the agent dilemmas will all fade into their rightful place: useful anecdotes, not tyrants.

Our task is not to be perfect market timers. It is to be a steadfast partner in the future being built today. It is a commitment not just to a thesis, but to an era of change so profound it will be studied for centuries. To be granted a front-row seat to this transformation is a privilege. To have the resolve to see it through, beyond the daily static and the siren song of the ticker, is our most fundamental duty.

And with that, dear reader, I leave you the silence between ticks. May it be long enough to hear the future roaring in.