Behind the Balance Sheet · Stephen Clapham's Podcast on Value Investing | Stockmarket Analysis | Equities

#44 The Think Tank Manager - Dan Rasmussen on Private Equity, Base Rates & Evidence‑Based Investing

·1 hr 12 min·4 clips

Dan Rasmussen calls “future nihilism” the idea that nobody can predict anything about the future.

1. Behind the Balance Sheet Episode #44 centers on Dan Rasmussen and his book The Humble Investor. 2. Dan Rasmussen is the founder of Verdad Advisors, the author of The Humble Investor, and a former investor at Bridgewater and Bain Capital. 3. The episode asks how an investor should think after accepting that future prediction is much harder than most models assume. 4. Rasmussen opens with the rat experiment where food appears 60% on one feeder and 40% on the other. 5. He contrasts the rats, which quickly adapt to the base rate, with Yale students, who try to find patterns in randomness. 6. That experiment becomes his setup for “future nihilism,” the view that nobody can predict anything about the future. 7. He says the book starts from that extreme premise and asks what follows for investment decisions. 8. Rasmussen argues that many Wall Street forecasts are worse than a simple mean forecast. 9. He says the error rate is high, the variance in forecasts is too big, and long-term predictions suffer from more uncertainty compounding. 10. He also says a lot of firms never build a systematic database of past predictions, so they never really learn what they are good at. 11. The host pushes back by saying he can forecast company profitability better than the market in some cases. 12. Rasmussen accepts that skilled people exist but says his concern is the average outcome across the market. 13. He rejects the capital asset pricing model for equities, arguing that volatility does not reliably translate into higher returns. 14. He gives oil as an example of an asset that is more volatile than stocks without offering higher returns. 15. Rasmussen says part two of The Humble Investor is about finding an edge after admitting how hard prediction really is. 16. He argues that the last 10 to 15 years were unusual because a technological leap in internet, cloud, SaaS, and mobile favored the largest technology firms. 17. He says those companies captured a disproportionate share of market profits because their scale and low marginal cost business models kept expanding. 18. Rasmussen adds that AI may change those business models because search and model inference are capital intensive and expensive to run. 19. The discussion is direct and analytic, with the host challenging Rasmussen on quarterly forecasting, value investing, passive flows, and the S&P 500’s concentration. 20. Investors who study valuation, forecasting, or passive flows will get the most from this conversation, while listeners wanting light market chatter may skip it.

As heard by us

A grounded, evidence first debate about what the market numbers can actually support.

Dan and the host spend the episode picking apart base rates, the limits of the data, and what market concentration can and cannot tell you. The discussion keeps coming back to value versus growth and the question of whether the biggest US technology companies can keep scaling…

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Why you'd press play

Press play if you want a skeptical market conversation about base rates and where the winners have really come from.

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