WATCH THE PERIPHERY
How the Edges Shape the Center
“Watch the periphery.” I say it frequently. And while I’ve explained its meaning before, it’s the mantra that generates the most questions. Simply, it’s situational awareness: closely observing what’s happening at the edges to better inform the decision at the center. Widening your lens doesn’t dilute the decision—it sharpens it.
In the past, change moved slowly where disruption felt theoretical and “on the come”—a distant risk that often took decades to matter. I lived this firsthand early in my career. As a example, Netflix was founded in 1997 with a day-one vision of an internet distribution model. Yet, it still took fourteen years to finally kill Blockbuster. Along the way, investors had ample time to react. Time to debate. And Blockbuster’s management had a lifetime to pivot. Sadly, it never did.
Today that luxury no longer exists. Ten years now collapses into ten months.
Transformational change is accelerating, and the forces driving it don’t ask for permission. Change is no longer incremental—it’s compressive. The distance between signal and outcome has collapsed, and the forces that matter most now often sit outside the company’s control. Whether you’re allocating capital as an investor or deploying it as an operator, outcomes are increasingly shaped by what starts at the edges. Industries and business models are no longer evolving at the margin; they’re being reshaped outright. Some opportunity sets expand. Others compress. Entire paths quietly disappear.
The hard part? Much of what we see is truly noise. Innuendo. FUD. But much of it isn’t. Those forces might be early, but dismissing the winds of change because the storm seems too far on the horizon is a death sentence. Eventually—and likely faster than you think— that storm is gonna land. Your job is to truly identify whether it’s simply noise in the distance that’ll dissipate, or a rich signal that’s about to blow your door down.
In this environment, while excellent company-level underwriting is still mandatory, it’s no longer decisive on its own. This is especially true in the public markets. What determines outcomes now is structure. Who sets the rules. Where capital can and can’t flow. Which behaviors are subsidized, constrained, or quietly made obsolete. These dynamics don’t show up cleanly in stale 10-Ks, models, or sell-side notes. They emerge at the edges—and by the time management and analysts fully engage, it’s often too late. If the Netflix–Blockbuster battle were playing out today, Blockbuster would’ve hit the wall before it even knew what hit it. See software today.
Since this Substack will always apply the subject at hand to cannabis, it’s worth level-setting why the periphery matters here too. Washington matters—clearly—and the firehose coming out of D.C. often preludes downstream impacts to our sector. Unlike AI or robotics, cannabis isn’t an exponential technology story. But to reemphasize a foundational part of my thesis, cannabis is a consumer story. And that consumer is being reshaped by transformational forces that start at the edges: greater control over personal health and longevity is driving substitution away from alcohol and certain Rx alternatives, while distrust of institutions and the rise of populism reinforce cannabis’ long fight to get government out of our lives. Different forces, same direction. You get the idea.
Last Sesh, I said I’d go deeper on the peripheral assumptions shaping how I deploy capital. Whether it’s investing across cannabis and CPG professionally, or allocating active capital through my SAFETY, SPIFFS & STUPIDITY framework personally, think of this as the “sausage-making” behind those decisions. This is the periphery work. And in this market, it’s no longer optional. It’s table stakes.
So grab your tray, roll up a fat J — and let’s go thru the assumptions that matter.
To be clear, each assumption could be their own SUNDAY SESH—perhaps I’ll dive deeper—but if you’ve been following me for a while across platforms you’ll understand how I’ve come to these conclusions with hard-data—and lived experiences—to back them up:
1. Beta (Still) Scares The Shit Out of Me
Passive investing works over long arcs, but market-cap-weighted beta has quietly become a concentrated trade where ~40% of the S&P500 continues to plow more capital into the Mag7 driven by one singular AI narrative. When narratives wobble, the same machine that forced capital in will force it out—and crowded momentum won’t absorb shocks gracefully.
Yes, beta still scares the shit out of me. That was on full display last week. That doesn’t mean I don’t own it. I do—mostly in passive 401Ks and long-duration vehicles that are structurally hard to move. But for the foreseeable future, every incremental dollar of capital at risk will not be invested in beta. You can do better.
2. Humans Can’t Think Exponentially
Markets consistently misprice exponential change because humans anchor to linear intuition. We rely on forward earnings multiples to assess “cheapness,” but when businesses compound (or shrink) exponentially, there will always be moments when companies look stupidly cheap and stupidly rich at the same time. I said it last Sesh, but I stand by my high conviction that this year we’re going to see constant paranoia and exuberance. Often, this will occur in the same sector. That’s why I firmly believe that calling quarters vs. years will matter a lot more this year. Result? More nimbleness. More volatility. And by extension, that often means more mispriced convexity.
3. Convexity Perpetually Mispriced
Convexity simply means non-linear outcomes—small inputs producing outsized results. Textbooks reduce it to options and volatility math, but that misses the point. I’m talking about structural convexity, created by incentives, positioning, and narrative risk. Professional investors aren’t paid to be early or last out, so capital clusters around consensus until it doesn’t. The result is “air pockets”: companies left for dead alongside companies that can’t do anything wrong. When the narrative breaks, price doesn’t adjust smoothly — it snaps, violently, in both directions. That’s why I’m drawn to “spiffs” that behave like an “option on an option” — where the cost to hold is trivial relative to the potential payoff. I’m fine owning something that does nothing for two years if there’s a real chance it eventually rips faces off. Opportunity cost in investing is simply overused. See cannabis.
4. Don’s Running It Hot
Yes, Don is still going to run it hot. Been saying this forever. Let’s not forget why: we can’t outrun our debt, we can’t balance our budget (regardless of who’s president or in Congress), and we can’t afford to take our foot off the AI gas to compete with China. Hard truths. Therefore, policy is pulling demand forward — and near-term growth will likely surprise to the upside, especially in infrastructure, re-shoring, and national security. That’s why I’ve tilted heavier on industrials, energy, materials and mining as you saw last Sesh. Don’t let the new Fed chair confuse you.
The irony? Much of what’s being funded is structurally deflationary. The cost of information, services, and eventually labor is collapsing. Moreover, parts of “GDP” will start to disappear. Like paying your lawyer $750/hr to read an NDA that can easily be digested in seconds. Similar to inflation (see below), our archaic GDP benchmark blasted on CNBC won’t be the future benchmark. Be careful of this narrative in 2026.
5. Scarcity Beats Abundance
Technology keeps deflating information and services, but the real constraint isn’t software—it’s physics. Energy, chips, land, water, permitting, metals, housing, and healthcare can’t scale exponentially. Capital flows where supply can’t respond overnight, because scarcity, not narratives, sets the clearing price. In 2026, you MUST focus on bulletproof, scarce assets. Anything that can get replaced will be, or will be questioned. While there will be "air pockets” especially in left-for-dead companies (see #3), the hurdle rate for structural losers will remain exceptionally high. Quality first, always.
6. Inflation Isn’t Gone — It’s Mismeasured
I’m tired of economists and officials hiding behind CPI like it’s gospel. Has your life gotten cheaper? Housing? Healthcare? Energy? Insurance? Services? CPI misses the inflation people actually feel. Yes, Trump’s agenda is trying to lower costs—credit card caps, housing relief, gas at the pump. Some of that helps at the margin. But zoom out and the picture is clear: the cost of the things that matter continues to inflate relative to wages and the dollar. Similar to point #5 above, it’ll be critical to focus on the companies that outrun and outprice inflationary forces.
7. The U.S. Is No Longer a Frictionless Safe Haven
This is the uncomfortable one. Global investors are slowly—but visibly—re-pricing U.S. risk assets. Not abandoning them. Not panicking. But questioning the assumption that the U.S. is the default safe harbor.
Look at the dollar last year. Look at U.S. equities versus other markets. The cracks aren’t catastrophic. But they’re real. Layer on protectionist approaches, then it becomes increasingly clear that every country’s priority is looking out for itself.
When confidence erodes at the margin, capital looks for alternatives. Capital isn’t fleeing the U.S., but it is questioning it. Exploding debt, long-duration risk, and diminishing returns mean confidence is eroding at the margin—and marginal capital sets prices. I standby my high conviction view that bulletproof dividends paid by bulletproof, growing companies are safer than 30 year treasuries. See XOM.
8. Fiat Is Dying
Global money supply is expanding again. You can argue about M2 as a tool, but directionally it still tells a story. While off to a horrendous start, it wouldn’t surprise me if Bitcoin is the best-performing asset class in 2026. And if it isn’t, I’m still comfortable allocating dollars to it over time. As AI becomes more agentic and tokenization accelerates, Bitcoin isn’t just a bet on the future. It’s a bet that the dollar’s purchasing power has seen its best days. It’s also a hedge against narrative whiplash in risk assets. I’ve said it before and I’m not bluffing: I buy Bitcoin every day. Not because it’s a trade. Because it’s duration.
You don’t need to agree with these assumptions. You just need to be honest about whether you’re underwriting them—intentionally or by default. In markets like this, structure decides outcomes long before narratives catch up.
Watch the periphery.
Onward,
SUNDAY SESH
👀